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PRESIDENT'S MESSAGE

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Addressing the Socioeconomic Risk by Unshackling 'Economic Rationing'.

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Malaysia is a 'paradise on earth'. We are a coveted nation throughout history because of our natural resources, biodiversity and strategic location. 

 

But today, many are struggling to make ends meet. According to a UN study  in 2019, our real poverty rate stands between 16-20%. Income disparity and youth unemployment are high.  

 

As an oil-exporting nation, we became a net importer of refined oil since 2008 and crude oil since 2014.  Federal agglomeration of state resources since the introduction of the Petroleum Development Act in 1974 has not met targeted objectives. Until recently, most of our oil-producing states  were the poorest states. After 63 years of independence, we are still polarised.  


Despite our rich culture and biodiversity, our tourism sector is almost stagnant. We have had more tourist arrivals than Thailand  until 2012. Today, they have 50% more tourists than us. 
 

The Economist ranked  us 74th in natural resources resilience. We are ranked 3rd highest in number of endangered species.  Deforestation is eroding Malaysia's reputation. Our palm oil industry is facing trade restrictions  in the EU due to environmental issues.
 

Our strategic location at the chokepoint of the East-West maritime trade route would have easily made us the global logistical hub. Instead, Singapore managed to outdo us in shipping and ports industry. Our economy is smaller than our immediate neighbours Singapore, Thailand and Indonesia. Our GDP per capita is ranked   81st in the world.
 

I have spent 20 years observing the interplay between social, economic and political systems by plying my trade in professional services, technology development, cultural forums, regulatory framework development and political consulting. 

 

I conclude that the root to our national predicament lies in our short-sightedness. Our leaders and capitalists always resort to 'quick-wins' and 'low-hanging fruits' by pursuing natural resources, rent-seeking and creating jobs that have little meaning and no lasting impact. We neglect technological pursuits because it is a long road. We end up being a low-cost provider in the global supply chain.
 

Arts and cultural development are put on the back burner because we don't see significant economic benefits. We failed to see that cultural expression is a highly valuable input to the innovation process. Our 450 higher learning institutions are churning tens of thousands of art graduates every year. Just the 20 public universities are already producing more than 10,000   art and humanities graduates in 2018. And we don't know where to place them.

 

We developed industrial parks to attract FDIs but we were lackadaisical in pursuing technology transfers.  Instead, we kept offering foreign investors easy access to our natural resources and cheap labour like any resource-based economy. When we launched mega-projects, we hired foreign firms to build them for us and we paid them with our oil money. Over time, Malaysia has plenty of great assets with low utilization. Hence, our relatively low GDP.
 

The solution to our national predicament is creativity, proper planning and implementation. But our leaders and capitalists  are poor   in them. Consequently, we have little technological successes, our policies could not keep up with global developments and our public programs lack traction. 
 

Due to weak visions and resolve, our economic pie has been constrained. Leaders could not figure out a way to unlock our full potential and resorted to 'economic rationing', stifling growth and opportunities. Political narratives pivot around community rights and divisiveness.

Many national decisions were based on political   needs. Leaders and capitalists became extremely wealthy when majority of people are struggling. This attitude stems from the belief that current ways are the quickest way to gain wealth and power. 

What if there exist cleaner and better ways to significantly prosper everyone? Unleashing our economy with a 10% annual growth would more than double our GDP within 8 years. But how can we achieve such a mountainous, seemingly impossible mission? We could create special economic sectors like the way China created Special Economic Zones. 
 

We go back to our three key strategic advantages - natural resources, biodiversity and our strategic location in the maritime trade route. This is how we can leverage on our strengths:


Natural resources. Extraction of minerals affects the environment and negatively impact our second strategic advantage - biodiversity. We may risk future sanctions in a world of growing awareness in sustainability. We can continue mining for example, but also venture into mine reclamation and rehabilitation in a big way, It will not only mitigate environmental degradation but increases our reputation and competitive edge. We can develop sustainable certification of mining products and services. This will get us past the walls of non-tariff measures. We can also expand our supply chain along our key mining products and enhance our material sciences and innovations along these minerals. Research universities can be assigned to specialize in selected areas. This can be a huge job creation initiative.

Biodiversity. Most human inventions are based on natural systems. Our world-class tropical biodiversity is a haven for scientific discovery and knowledge development. The opportunities to build observatory labs, communication systems, environmental content, conservatory framework and eco-tourism are unlimited. This can be our key scientific and knowledge pursuit. New commercial applications will be followed by job creation. Moreover, sustainability reporting is gaining momentum globally and we can be a leader in tropical sustainability rating and solutions. We can develop world-class environmental engineering, consulting services and environmental standards. Biodiversity is our golden ticket.

Strategic location at the East-West Maritime Choke Point. Our potential as a transshipment hub is tremendous. If we could develop processes to add value to global supply chains through faster delivery, better packing and packaging, added quality control and more sophisticated banking, Malaysia would be a global trading super-hub. We can be the centre of excellence for logistics and trading. Distributed autonomous organization (DAO) can be pursed as a policy to induce trade and attract entrepreneurs. An expanding trading hub will attract more visitors that will in turn boost tourism. Meantime, we can aggressively pursue cultural and community assets to significantly expand our tourism and sub-urban economy. They offer plenty of job opportunities. 

Technology and Innovations. Limitless amount of technologies can be pursued to enhance our 3 key strategic advantages above. Sensor, data and A.I. technologies can be the base for all technology pursuits. Machines and automation can be made to work and increase wealth distribution to our people. It will create many high-quality jobs for our intellectual community. What do we do with the lower income group? The concept of universal basic income (UBI)   can be an option to finance welfare needs and social security. This is not too far fetched as UBI was a campaign theme for one of America's presidential candidates. 

 

Next, we need to postively reform the governance political machineries. If our political machineries are converted into social  enterprise-like vehicle with adequate funding and employment, inherent patronage   can be 'democratized'. Fair compensation for political officeholders would not be an issue if economic rationing is uplifted and special economic sectors launched to give renewed hope and opportunity to the masses. Fairly-compensated party machineries and self-sustained social enterprises can better fulfill national aspirations.
 

So where do we start? We start by coming together and leverage upon our collective strengths. We circumnavigate  around bureaucrats who are perpetually engaged in territorial wars. We resist 'quick-win' deals that shore up temporary results but no lasting impacts. We manoevre and tug lagging agencies stricken by unimaginative Boards and Committees. We sidestep naysaying industrialists and seize the opportunities arising from their heedlessness. We keep investors and banks excited by resisting credit and cumbersome due diligence until we have shown results. 
 

Next, how do we fund these 'big' projects? High-impact socio-economic projects with no lucrative physical development are often put on the back burner because the government could not justify their return-on-investment (ROI). Big intellectual assets development never took off because bankers want collaterals and VCs want guarantees. 'Business unusual' creates discomfort for investors because they have no past revenue trends to model upon. This is one of the key reasons why innovation cannot thrive in Malaysia. Our money men have not learned how to bank on ideas and intellectual properties. 

This is how we will fund these ambitious projects. The intellectual community can gather and become a member of the SCRP platform to contribute time and expertise. They invest (literally) by working on our socioeconomic projects. SCRP will start with 20 projects. In return, they will earn their IP share based on the proportion of their contribution to a project. IPs can be measured at cost or valued based on future earnings. These IPs will eventually generate commercial returns in the form of dividends or capital gains. They would automatically attract investors, providing an exit strategy. Successful projects can also be converted into enterprises managed by key contributors. In fact, investors may come in earlier when they start to see potential winners.

Work contributions can be digitized as data and stored as digital assets. They can become an asset class.   As such, t
hey carry real value and can be traded in the future for quicker exits for contributors. The same concept can be introduced to the masses - storing IPs in a digital asset that has value. Where do they 'hunt' for these data? They can extract them from their local surrounding. Anything that can be detected with human's five senses, can be digitized. There are more than 200 towns in Malaysia and each has its own success stories and hence, valuable data. They can be harvested and converted into wealth for member of the community. Data is the reason why Google, Facebook and Amazon each  carries a market value the size of Malaysia's annual GDP.

Once they gain wider adoption, digital assets can become a medium of exchange for goods and services. It has more intrinsic value than paper money. Digital assets are also more secure.
 

Join us. SCRP is a multidisciplinary collaborative platform focusing on sustainability, risk and innovation. Our mission is to overcome socioeconomic risks by designing high-impact projects, manage contributions and commercialisation these IPs in a responsible manner. Contributors in the SCRP ecosystem develop plans, proposals, systems, documentations and generally, soft assets (IPs) that would eventually dock with 'hard' public assets to prune and boost their utilization. What is unique in this ecosystem, is that no debt is created even as economic activities take place. The intellectual community is coming together to lead in national transformation. 

I call upon Malaysian scientists, fellow professionals, industry and government leaders to join me in breaking the shackles of the Malaysian economy. In every crisis, there is an opportunity. The recent pandemic presents a once in a lifetime opportunity for us to set things right.
 

Let's work together to create a more resilient and sustainable future.


WINSTON PENG

President

22 July 2020

 

Footnotes:
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  1. Malaysia's poverty levels far higher than reported, U.N. expert (23 Aug, 2019), Reuters, [https://www.reuters.com/article/us-malaysia-poverty/malaysias-poverty-levels-far-higher-than-reported-u-n-expert-says-idUSKCN1VD0L6]. Also see  https://www.thestar.com.my/news/nation/2020/07/06/un-report-malaysia039s-national-poverty-line-does-not-reflect-reality-needs-revision

  2. Govt reveals M'sia net importer of crude oil, petroleum products since 2014 (21 Jan, 2015). The Star, [https://www.thestar.com.my/business/business-news/2015/01/21/clearing-the-air-treasury-sec-gen-malaysia-net-importer-of-crude-oil-petroleum-products-since-2014/]

  3. Oil royalties: 'Sue Federal, scrap Petroleum Act', (19 Nov, 2019). The Daily Express. [http://www.dailyexpress.com.my/news/143539/oil-royalties-sue-federal-scrap-petroleum-act-/]

  4. Trading Economics. March 2020. [https://tradingeconomics.com/thailand/tourist-arrivals]

  5. The Economist. 2019 Global Food Security Index. 

  6. IUCN Red List by Country - Table 5, (19 Mar, 2020).

  7. Unearthed, Greenpeace, (18 March, 2019) [https://unearthed.greenpeace.org/2019/03/18/palm-oil-indonesia-malaysia-biofuels-eu/]

  8. Worldbank, 2018. [https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?most_recent_value_desc=true]

  9. Malaysian Educational Statistics 2018, Ministry of Education Malaysia (ISSN : 1985-6407)

  10. 'The State of the Nation: Stumbling blocks to higher tech innovation in Malaysia', The Edge Malaysia Weekly (Nov 28 - Dec 4, 2016). [https://www.theedgemarkets.com/article/state-nation-stumbling-blocks-higher-tech-innovation-malaysia]

  11. OECD Reviews of Innovation Policy: Malaysia 2016, pg. 217

  12. Edmund Terence Gomez, Jomo K. S., Malaysia's Political Economy: Politics, Patronage, and Profits (1999), Cambridge University Press.

  13. Coronavirus fallout revives talk of 'universal basic income', New Straits Times (25 Mar 2020). [https://www.nst.com.my/world/world/2020/03/578113/coronavirus-fallout-revives-talk-universal-basic-income]

  14. Personal Data: Emergence of A New Asset Class, World Economic Forum (2011)

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