The 4th Global Conference on Creative Entrepreneurship, Kuala Lumpur, 28 May 1994
Come January 1995, barring unforeseen circumstances, the World Trade Organization will come into being. Under the new regime overseeing global trade, not only will competition on the global marketplace be stiffer, each member nation is also expected to roll back its protection of domestic industries. Naturally, as a trading nation, the 18th biggest in the world, Malaysia will have to strive much harder even to maintain her present position. But to maintain is not enough. We have to aim at increasing our economic presence internationally to sustain our target growth of an average of 7 percent per year until 2020.
Malaysia is so dependent on international trade for its prosperity because the size of our domestic market is small relative to the quantities that we need to produce to sustain our income levels, and to eradicate hardcore poverty. Yet, the mere fact that we have the ability to produce in quantity does not assure marketability, let alone profitability. Thus the problem for an economy like Malaysia boils down to two key factors: productivity and competitiveness.
It has been argued by Professor Krugman of the Massachusetts Institute of Technology (in the journal Foreign Affairs) that finance ministers should not bother too much about the competitiveness of an economy. Nations, according to him, are quite unlike companies. While it is legitimate and, in fact, absolutely essential that companies worry about the competition from their rivals, for countries to think and speak in terms of competitiveness can be a "dangerous obsession."
Perhaps Professor Krugman may be right in the case of a huge domestic market like the United States. The external sector of their economy is relatively small as a proportion of the GDP, less than one-tenth. But for Malaysia, whose external sector is more than one half of the GDP, the question of our international competitiveness is anything but trivial.
These problems of the Malaysian economy will of course remain the major concern of government in the coming years. Increasingly, however, it will also become the concern of the private companies, in line with our objective to trim down the public sector by progressive privatization of business- related government agencies. After all, privatization was meant not only to reduce government spending, but more importantly to tap the entrepreneurial potential of the nation to the full.
Like most developing countries, we had inherited the public sector largely as a colonial legacy. In the early decades after Independence, it tended to grow because the private sector was too fragile to play a bigger role in national development. At the same time, until quite recently, the size of the public sector had simply to be expanded to accomodate the high rate of unemployment, and underemployment, and in pursuit of social objectives. Nevertheless, we have always maintained a strong belief that for an economy to grow and thrive, we have to release the entrepreneurial energies of our society. It was a matter of deciding on the right timing for such a move, given the specific nature and conditions of the country and its people. Privatization has proven a boon to Malaysia. We can safely say that our prodigious rate of economic growth in recent years is owed to the rejuvenated spirit of entrepreneurship, people who have taken up the challenge of the new realities, domestically and internationally.
In this regard, however, we should introduce a note of caution. Private corporations as well as bureaucracies tend towards rigidity and a lack of desire to innovate as they become more established. No organization can thrive unless the enterpreneurial spirit is constantly renewed or revived. Giant corporations that have lost their entrepreneurial spirit often become a burden to the tax payer. They will finance lobbies instead of investing in R and D to shelter themselves from competition. It is these beleaguered corporations who whip up protectionist sentiments. It is not enough that their domestic markets be protected, they continuously prompt and prod their governments to pursue export protectionism, to force foreign governments to establish numerical targets in purchasing their products.
Entrepreneurship in the true sense of the word must result in increased efficiency, productivity and competitiveness. It must add to the wealth of the country, and increase the supply and the range of choice of goods and services to the consumer. Entrepreneurship cannot be equated simply with risk-taking, or with the creation of ventures that are dubious in nature, or with the activities of paper shuffling, powered by greed, that we witness time and again in the business and financial sector. The perversion of human ingenuity that often creates an orgy of unrestrained speculation, transmigrating through time and place, is the very opposite of entrepreneurship.
For a young and booming economy like Malaysia, it is essential that we get our fundamentals right and to hold on to them tenaciously. Our economy must be built upon productivity and competitiveness and resist the temptation of creating bubbles. Speculators will be there, and one must always be on one's guard. Speculators, as Lord Keynes said, may do no harm as bubbles on a steady stream of enterprise, but the position is serious when enterprise becomes the bubble on a whirlpool of speculation.
The spirit of entrepreneurship I have been referring too must be present in all sectors of the economy in order for all of us to thrive. Dynamism, creativity, innovativeness, the ability to deal with new realities and challenges are needed not only in business, but also in other domains -- in politics and government, in our educational and research institutions, in the arts and culture.
Thus, for a country to be productive as well as competitive we need to foster the spirit of entrepreneurship and increase our pool of entrepreneurs. As we deregulate the economy more and more, our industries will be exposed to greater outside competition. The more we reduce the public sector, the greater will be the role of the private sector and the greater will its responsibility be in the future development of the nation, and indeed the entire region. Only entrepreneurship, and the ability to thrive upon, and not merely cope with, new challenges, will ensure our long- term sustainability.