etheorist in his usual austere and direct clarity in his Economic Policy blog has made a very pertinent observation on the way in which Malaysia's economic performance should be measured. There is a fundamental difference between the items that are used to estimate the Gross Domestic Product (GDP) and the items used for Gross National Product (GDP). Which is the more relevant measure of the true contribution of Malaysian businesses and enterprises? GDP measures every economic activity within Malaysia, whether by Malaysians or by foreign investors.
The concern here is that Malaysia's investment policies of attracting foreign direct investments (FDI) have given Malaysia's economic managers and, Malaysians, a false sense of comfort and security that, as a nation, we are progressing very well. This may cloud over the low skills and low wage regime that we have in place at present.
This post is timely and, it is highly relevant, not just for economic planners but, also for the rest of Malaysia as we all are trying to figure out how to improve our individual and collective lot. Read on:
Is Malaysia's GDP losing out to GNP?
GDP measures the output produced in Malaysia, regardless of whether by locals or foreigners.
In trying to boost GDP, we have invited FDIs and foreign workers to Malaysia to invest and to work.
We have built massive infrastructure for these foreign investors and foreign workers to use - for them to make a profit and for them to earn a wage.
The whole purpose is to boost the "economic growth" as measured by GDP.
But I can tell you, a priori, that GNP may or may not be growing under the present circumstance as fast as GDP.
You have to net out foreign profits and foreign wages from GDP to get GNP.
GNP measures incomes that accrue to Malaysians, whether at home or abroad.
To be fair, therefore, we must add the incomes of Malaysian firms and Malaysians abroad to get a proper GNP.
Now, we have grown local Malaysian firms to become large so that Malaysia becomes too small for them and they have to get jobs from abroad.
(What happens to the strategy that Malaysian firms, when made large, will be able to reinvest in Malaysia and regenerate growth at home? Could it be that their lack of ability to innovate is forcing them to do the same stuff elsewhere - having learnt the tricks of dealing with politicians at home?)
Of course it is good that Malaysian firms can do well abroad and create jobs abroad - but that does hollow out the local economy - when we do not invest at home - why? - because the investment climate at home is not so good any more - because easy money is no more?
For accounting purposes, we can require Malaysian firms to declare their global income and add that to our GNP.
For Malaysians abroad, I am not so clear.
It has to do with how we treat fellow Malaysians who have decided to work abroad.
If they take up a PR or a foreign citizenship, Malaysia seems to be very happy to "get rid" of them.
If that is the case, then we may not technically be correct to include the earnings abroad of fellow Malaysians who have decided to make a foreign country their home - although they may each feel every inch a Malaysian in their hearts.
In the meantime, we seem to be quite happy to trade our well-educated multi-lingual born-and-bred Malaysians for illiteral foreign unskilled labourers.
We seem to have traded off our middle class for a low-class manufacturing sector and basic services sector that relies on cheap third-world labour.
As we now stop the inflow of illiteral labour, are we changing our policies to bring back our talented professionals?
For 1Malaysia to work, we may have to redefine Malaysians.
The concern here is that Malaysia's investment policies of attracting foreign direct investments (FDI) have given Malaysia's economic managers and, Malaysians, a false sense of comfort and security that, as a nation, we are progressing very well. This may cloud over the low skills and low wage regime that we have in place at present.
This post is timely and, it is highly relevant, not just for economic planners but, also for the rest of Malaysia as we all are trying to figure out how to improve our individual and collective lot. Read on:
Is Malaysia's GDP losing out to GNP?
GDP measures the output produced in Malaysia, regardless of whether by locals or foreigners.
In trying to boost GDP, we have invited FDIs and foreign workers to Malaysia to invest and to work.
We have built massive infrastructure for these foreign investors and foreign workers to use - for them to make a profit and for them to earn a wage.
The whole purpose is to boost the "economic growth" as measured by GDP.
But I can tell you, a priori, that GNP may or may not be growing under the present circumstance as fast as GDP.
You have to net out foreign profits and foreign wages from GDP to get GNP.
GNP measures incomes that accrue to Malaysians, whether at home or abroad.
To be fair, therefore, we must add the incomes of Malaysian firms and Malaysians abroad to get a proper GNP.
Now, we have grown local Malaysian firms to become large so that Malaysia becomes too small for them and they have to get jobs from abroad.
(What happens to the strategy that Malaysian firms, when made large, will be able to reinvest in Malaysia and regenerate growth at home? Could it be that their lack of ability to innovate is forcing them to do the same stuff elsewhere - having learnt the tricks of dealing with politicians at home?)
Of course it is good that Malaysian firms can do well abroad and create jobs abroad - but that does hollow out the local economy - when we do not invest at home - why? - because the investment climate at home is not so good any more - because easy money is no more?
For accounting purposes, we can require Malaysian firms to declare their global income and add that to our GNP.
For Malaysians abroad, I am not so clear.
It has to do with how we treat fellow Malaysians who have decided to work abroad.
If they take up a PR or a foreign citizenship, Malaysia seems to be very happy to "get rid" of them.
If that is the case, then we may not technically be correct to include the earnings abroad of fellow Malaysians who have decided to make a foreign country their home - although they may each feel every inch a Malaysian in their hearts.
In the meantime, we seem to be quite happy to trade our well-educated multi-lingual born-and-bred Malaysians for illiteral foreign unskilled labourers.
We seem to have traded off our middle class for a low-class manufacturing sector and basic services sector that relies on cheap third-world labour.
As we now stop the inflow of illiteral labour, are we changing our policies to bring back our talented professionals?
For 1Malaysia to work, we may have to redefine Malaysians.
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