Institutional defect?
Pardon me for the apparently ominous title for this entry.
But this news definitely do not do any better for Malaysia’s image, currently under a close public scrutiny with numerous graft cases reported in the media, some of it involving persons of high ranking, people holding the public office, and politicians form both sides of the divide, as well as the mismanagement in the public funds as in the recent national audit report, and not to forget the PKFZ fiasco, recently-closed Lingam case, etc etc.
Excerpt from the Global Competitiveness latest 2009/10 report by World Economic Forum:
Malaysia (24th) drops three positions, essentially as the result of a much poorer assessment of its institutional framework. In this area, every indicator has been exhibiting a downward trend since 2007, causing Malaysia to tumble from 17th to 43rd position in this dimension in just two years. Security is of particular concern (85th, down 25 ranks). According to the business community, the potential of terrorism (97th) and crime (95th) both impose significant business costs. Also of concern is the budget deficit, which increased in 2008, amounting to almost 5 percent of Malaysia’s GDP.
Yet in most other dimensions it scores high, particularly in those factors at the top end of the value chain, namely business sophistication (24th) and innovation (24th). Expectations are high for a country that averaged an impressive 7 percent growth per year between 1990 and 2000 and a healthy 5 percent since then. Mirroring this economic success, Malaysia has featured prominently in the competitiveness rankings ever since its first inclusion in 1994. Indeed, it remains the most competitive Stage 2 (efficiency-driven) country.
To maintain its competitive edge, Malaysia now needs to prepare its conversion into a knowledge-based, innovation-driven economy. Improving both the quantity and quality of higher education (41st) and boosting technological readiness (37th), particularly ICT penetration, would serve this effort well.
A closer look at the components of institutions assessed, only three out of 19 institutional paramaters (i.e. parameter number 7, 8, and19) that Malaysia scores a relatively good ranking which could be labeled as having competitive advantage, while the rest are not (competitive disadvantage). The parameters (ranking in bracket) are as the following:
- Property rights (40)
- Intellectual property protection (37)
- Diversion of public funds (48)
- Public trust of politicians (33)
- Judicial independence (53)
- Favoritism in decisions of government officials (37)
- Wastefulness of government spending (23)
- Burden of government regulation (15)
- Efficiency of legal framework in settling disputes (36)
- Efficiency of legal framework in challenging regs (40)
- Transparency of government policymaking (30)
- Business costs of terrorism (97)
- Business costs of crime and violence (95)
- Organized crime (83)
- Reliability of police services (48)
- Ethical behavior of firms (44)
- Strength of auditing and reporting standards (43)
- Efficacy of corporate boards (25)
- Protection of minority shareholders’ interests (23)
While other areas of assessment yield positive outcomes, Malaysia’s insitutional framework apparently need a major revamp and warrant a serious attention from the policy makers.
