The government's decision to liberalise 27 services sub-sectors by removing the 30 per cent Bumiputera quota on equity ownership in health and social services, tourism services, transport, business and computer industry and related services has been widely lauded.
One context of the decision is that the 27 services sub-sectors form part of the 160 sub-sectors for trade liberalisation under the World Trade Organisation (WTO) which enables Malaysia, through its trade policy, to enjoy market access.
Another context is that the decision will catalyse more investments into these services sub-sectors. This is a good thing since the salutary effect is greater economic activity and, employment opportunities.
Just to underline the significance and, potential positive impact of the decision, let us all understand that the services sector contributes to a whopping 47.6% to the Malaysian GDP. The services sector attracted RM47.8 billion investments in 2008 when compared to RM66.4 billion in 2007.
Clearly, this decision is a rational one.
This move and, impending moves to liberalise equity ownership in the financial services sector, will have the effect of unshackling the competitive spirit.
Malaysians cannot hide under the tempurung forever.
It won't be just the Malay community that has to compete in the wake of the liberalisation process. Every other Malaysian community will have to compete.
Just take the logistics sector as one example. Whether a Malaysian logistics company is owned by a Malay Malaysian, Chinese Malaysian, Indian Malaysian or any Malaysian, that company like all other Malaysian company will have to face the global juggernauts that will set up shop in Malaysia. The foreign logistics companies will be offering a one-stop logistics solution. For many years now, it is the international courier companies that have given Malaysians a glimpse of this liberalised and globalised future. The time has come to face the competitive reality.
This is a good thing. Certainly, there will be adjustment pains. But, in the end, we will all be better off for it.
pix from here.
If you don't believe me, just watch The Biggest Loser on tv. As the cliched phrase goes, No pain, no gain!
Just to underline the significance and, potential positive impact of the decision, let us all understand that the services sector contributes to a whopping 47.6% to the Malaysian GDP. The services sector attracted RM47.8 billion investments in 2008 when compared to RM66.4 billion in 2007.
Clearly, this decision is a rational one.
This move and, impending moves to liberalise equity ownership in the financial services sector, will have the effect of unshackling the competitive spirit.
Malaysians cannot hide under the tempurung forever.
It won't be just the Malay community that has to compete in the wake of the liberalisation process. Every other Malaysian community will have to compete.
Just take the logistics sector as one example. Whether a Malaysian logistics company is owned by a Malay Malaysian, Chinese Malaysian, Indian Malaysian or any Malaysian, that company like all other Malaysian company will have to face the global juggernauts that will set up shop in Malaysia. The foreign logistics companies will be offering a one-stop logistics solution. For many years now, it is the international courier companies that have given Malaysians a glimpse of this liberalised and globalised future. The time has come to face the competitive reality.
This is a good thing. Certainly, there will be adjustment pains. But, in the end, we will all be better off for it.
pix from here.If you don't believe me, just watch The Biggest Loser on tv. As the cliched phrase goes, No pain, no gain!
2 comments:
I'm just surprised by the want of public outcry, I mean, this is BIGGER than the opening of 10% of UITM intake proposed by Tan Seri Khalid Ibrahim...ok I answered my own question.
De minimis,
That is a very positive article you have written to "Challenge" all the Malaysian Businesses to "Walk their Talk" with Globalisation on a "Level
Playing field"....
To better prepare themselves to face "Global Realities"....
The Ocean of "Big Boys" surrounded by "Man eating Sharks"....
Time has come for all our Bolehland's "Jaguh Kampungs" with their Ketuanan & NEP mindset....
To FACE the "TRUTH"....
Bro, I would also like to share this interesting article with you & your readers....
http://futurefastforward.com/component/content/article/1504
The Upside-down World of John Maynard Keynes - By Mark Thornton (25/4/09)
Mark Thornton
Friday, 24 April 2009 16:03
23 April, 2009 Mises daily
John Maynard Keynes often employed flowery language like "animal spirits" and "liquidity trap" to describe things he did not understand. He was, after all, more of a bureaucrat than an economist. In fact, he would best be described as an anti-economist because he eschewed things like supply and demand and held the opinion that government could run the economy.
So, for example, he could not understand why people would invest resources in risky adventures that helped keep the economy growing at full employment. He therefore substituted "animal spirits" for the profit motive. These spirits allow entrepreneurs to proceed with a naïve confidence and to set aside concerns over losses. Similarly, the failure to invest was also a psychological problem that he dubbed the "liquidity trap." This trap occurs when investors seek liquidity in cash and when monetary policy — in terms of cutting interest rates — no longer produces an increase in investment.
The problem with Keynes is that he thought that if entrepreneurs lose their collective nerve, the government should socialize investment, prop up demand and employment, and provide assurances to drive the economy back to full employment. He did not understand how the economy works so he could not understand how the economy corrects itself once a contraction occurs.
The problem for us is that Bush, Obama, Geithner, and Summers are all following the Keynesian playbook, with Nobel laureate Paul Krugman serving as head cheerleader. If instead we just allowed the free-market process to work, the economy would likely have already bottomed; companies like AIG would be emerging from bankruptcy and the unemployment rate would be dropping instead of continuing to rise.
The market process was curtailed just a few months into this contraction and — over the last 15 months — has been almost wholly replaced with government intervention. Many of the interventions have been rightly described as "unprecedented" in that they are completely untried. This means that neither market participants nor policy makers have experience with them — and it shows.
This slew of interventions has been disorderly. Many interventions, like the takeover of AIG, were total surprises, causing volatility in stock markets. Moreover, these interventions have been extremely large and wide ranging in scope. Measured in dollar terms, the money "allocated" totals over $12 trillion by one account.
Ironically, by adopting the Keynesian position that we have lost our "animal spirits" and are suffering from a psychological problem of fear, the government has undertaken extreme policy changes that greatly undermine the profit motive. Entrepreneurs are no longer looking for new profit opportunities in the economy. Instead, they are more likely either trying to preserve their capital or lining up for a government bailout.
Preservation of capital requires that you place your wealth in low-risk assets like government bonds, cash, CDs, and gold. So people are saving more and paying down debt to protect themselves, but in Keynesian terminology, we have fallen into the very dangerous liquidity trap.
For Keynes, the liquidity trap occurred when frightened consumers attempted to save more and consume less. He reasoned that less consumption would hurt businesses and production and therefore put businesses and labor at risk. These lower incomes would mean, in turn, that the attempt to save more would actually result in a much worse economy.
The liquidity trap is really about hoarding and saving. While hoarding has a bad name among economists, it actually is a very good thing. Typically, people do not hoard resources irrationally or for no reason; they hoard as a way to protect themselves from dangerous situations. Depression, inflation, war, and other calamities are typically what cause people to hoard.
Not only does the increased saving help the economy, but hoarding is actually a good thing because it helps facilitate the process of deflation and deflation helps bring about recovery. If people reduce consumption (demand) then prices fall, particularly in the early stages of production. As all types of resources and goods are becoming cheaper, including labor, the purchasing power of every hoarded dollar increases.
All the prices that were bid up during the boom — particularly land, capital, and various asset classes — are thus reset at lower levels. Debt is liquidated and savings are restored and the prospects for a return to prosperity emerge, first among producers and then by consumers.
Therefore hoarding speeds up deflation and deflation speeds up the correction process.
But Keynesians are afraid of this process because they don't understand how it leads us back to full employment and economic growth. I have named this fear apoplithorismosphobia.
Joseph Salerno has shown that there is no theoretical basis for this fear and Greg Kaza has shown that there is no empirical basis for this fear. Ironically, it is Keynesian policies, such as bailouts, stimulus packages, and inflation that should be feared, because they can threaten our animal spirits for profit and leave us stuck in the liquidity trap for many years.
Hoarding eventually fixes most balance sheets, but in a Keynesian-dominated economy, it takes an extremely long time. During the interval, people can become permanently jaded about the market and investing. They may become permanent hoarders.
This is what happened to many Americans who lived through the Great Depression. Frugality and thrift, while admirable, became a kind of psychological scar they wore for the rest of their life.
Keynesian-style policies have resulted in disasters such as the Great Depression, the
"stagflation" in the United States from 1970 to 1982, and the aftermath of the Japanese Bubble. Each lasted more than a decade.
It would be far better to allow for an unobstructed free-market correction process. With no government safety net or bailouts, there would be more hoarding, faster deflation, more bankruptcy, and a speedy return to prosperity.
While bankruptcy sounds horrible, it is actually a wonderful and orderly process. First of all, it fixes balance sheets quickly. It also provides an opportunity to remove current owners and administrators who operated businesses in a risky fashion. No need to worry about bonus questions here! Some bankrupt firms will go completely out of business and their resources will be auctioned off to other entrepreneurs at very low prices.
I would imagine that the dozens of startup firms working to bring electric cars to market would love the opportunity to buy an auto plant in Michigan for pennies on the dollar. Other firms will remain in business with most workers keeping their jobs, but bankruptcy reduces debt and cost and provides an opportunity to renegotiate contracts and wage rates.
The resulting environment after bankruptcy is one of new owners and operators with far less debt who have not had their "animal spirits" crushed. Firms would have less debt and therefore lower cost structures. Some consumers would be flush with hoarded cash and have an opportunity to buy at much lower prices. The economy enters recovery mode and can quickly attain full employment and economic growth. Most importantly, by not bailing out the losers, there is no moral hazard that entrepreneurs will believe they can rely on bailouts in the future.
Because they do not understand how the market works, Keynesians think this is a fantasy. But if you follow the Austrian recipe of allowing liquidation of bankrupt firms and debt, allowing prices to fall without monetary inflation, not propping up employment or subsidizing unemployment, and not discouraging hoarding, you will end up with the quickest possible recovery and minimize the magnitude of economic pain.
Mark Thornton is a senior resident fellow at the Ludwig von Mises Institute in Auburn, Alabama, and is the Book Review Editor for the Quarterly Journal of Austrian Economics. He is the author of The Economics of Prohibition and co-author of Tariffs, Blockades, and Inflation: The Economics of the Civil War.
Cheers.
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