Malaysia focuses on a hi-tech economic future
- 1 September 2011
- From the section Business
Malaysia's central bank is forecasting economic growth of between 5% and 6% this year, which in the current global climate is better than other economies in South East Asia.
But the government wants the economy to pick up speed or risk missing its target of becoming a developed nation by 2020.
Malaysia's economic performance has been "relatively sluggish" over the last decade, a government report stated. It blames this poor performance on low labour productivity.
The problem was identified more than a decade ago when the country began to face stiff competition in exports from low wage countries like China.
At that time, Malaysian leaders said they had to move towards a knowledge-based economy. This led to the construction of a hi-tech city near Kuala Lumpur called Cyberjaya.
Billed as the "Silicon Valley of the East", this was the first city to be fully connected with high-speed internet using fibre-optic cables.
Officials also hoped that tax incentives and an English-speaking workforce would lure foreign companies to help turn Malaysia from a low-cost to a hi-tech producer.
US computer maker Dell was one of the companies that took up the offer.
Pang Yee Beng, managing director of Dell Cyberjaya, says it makes sense to be based there.
"Ultimately we are looking for a place where we can get consistent service in terms of IT infrastructure," he says.
"We needed a place where politically or security-wise it was stable, and then when you set up a complex facility like this you really need government support to make it happen."
Today, Dell's operations in Cyberjaya include a customer call centre and a technical support team for its global operations.
The four-storey complex sits in the same cluster as other multinational companies like IBM, Hewlett-Packard and AMD.
But critics say Cyberjaya hasn't become the success that Malaysian leaders had in mind.
An advisor to the Cyberjaya project, TJ Singh, says the government originally wanted to attract innovative global giants who could in turn mentor Malaysian companies, especially in the area of software.
"What they wanted were local companies that were world class," says Mr Singh.
But that didn't happen. Mr Singh says more and more multinational companies took advantage of Cyberjaya's cheap land and set up back offices for their global operations.
It has succeeded in creating a big service industry, says Mr Singh, but not exactly the type of innovation that government leaders wanted to take place in Cyberjaya.
Analysts say many companies end up doing their research and development overseas, partly because they cannot find the right talent.
In 2010, a World Bank report estimated that about one million Malaysians were living abroad. A third of them are well educated and mainly ethnic Chinese and Indians.
Economists with the World Bank say ethnic minorities feel discriminated against by the government's preferential policies for the Malays.
Malaysia practices affirmative action for the Malay-majority, granting them priority in university scholarships and government jobs. These are efforts to redistribute wealth to the Malays, who are historically poorer than other ethnic groups.
But in a bid to help Malays catch up, Malaysian politicians have also flip flopped on the language of instruction for sciences and maths, switching from Malay to English and then back again.
Opposition lawmakers say the education system has been politicised and makes it hard for its graduates to compete globally.
But there are also other reasons that Malaysian students want to leave.
"When I graduate I want to work overseas because I can earn much more with the exchange rate," says Lew Pei Yen at the Multimedia University.
The campus is built in Cyberjaya and designed to train and feed its graduates directly into the companies based in the hi-tech city. But most students I spoke to are eager to gain international experience.
It's certainly a challenge that the Rashid Mat says it is not easy to overcome. He is with Cyberview, the government company overseeing Cyberjaya's development.
But he maintains that Cyberjaya is a success.
"Research and development is not the core activity done here at the moment but we have not reached our full potential yet," says Mr Rashid.
He adds that Malaysia still has a lot to offer multinational investors.
"Our advantage is that our multilingual skills, and the talent we have here, is more globally accepted because of our multicultural mix," he says.
Prime Minister Najib Razak has ambitious plans to more than double the gross national income per capita to $15,000 (£9,300) over the next decade by creating 3.3 million higher-paying jobs.
As part of that, the government has continued to invest in more building projects in Cyberjaya. It hopes to build more cybercities across the country to attract the type of companies that will stem the exodus of workers.
At the same time the government has set up a talent agency to recruit Malaysians back.
But some analysts say fundamental changes are needed, like abolishing race-based policies and practising meritocracy in the economy.
Otherwise, they warn that there may not be enough talent left to help Malaysia realise its goal of becoming a developed nation by 2020.