Making Sens - New growth engine needed

IF THE Malaysian economy is a car, its old engine of growth – exports of goods and services – is now close to stalling, the World Bank's short-term forecast issued earlier this month suggests.

In October 2016 the World Bank trimmed, by 20 basis points, its estimated growth for the Malaysian economy to 4.2% this year – slower than the 5% expansion recorded last year.

Growth is likely to be an equally tepid 4.3% next year and 4.5% in 2018. If these predictions materialise, the Malaysian economy's short-term outlook appears uninspiring.

Previously the powerhouse of Malaysia's economic growth, exports of goods and services have lost their dynamism, the World Bank data shows.

Lower prices of oil and palm oil as well as softer demand for manufactured goods are expected to cause exports of goods and services to contract by 1% this year.

Although exports of goods and services will turn positive in the next two years, growth will remain anaemic; 2% next year and 3.5% in 2018.

Admittedly, Putrajaya has already identified several new engines of growth encapsulated in the 12 National Key Economic Areas (NKEA) in the Economic Transformation Programme.

Instead of focusing on manufacturing goods, attention has shifted to the services sector. While the 12 NKEAs are a step in the right direction, one enduring problem is the gap between bold policy conception and haphazard implementation.

An excellent example is tourism, which includes those visiting this country for educational and health purposes.

The Higher Education Ministry's target is to increase the number international students to 200,000 by 2020 – a sharp jump from the 151,979 international students studying in this country last year.

Although 882,000 tourists came to this country for health care in 2014 this was 1% higher than the previous year. Moreover, Malaysia's 3% share of Asia-Pacific medical tourism is dwarfed by Thailand's eyeball-popping 50% portion.

Scheduled to be tabled in Parliament tomorrow, Budget 2017 could contain tax and other incentives as well as expenditure allocations aimed at turbo-charging growth in tourism receipts.

Fiscal measures alone may be insufficient. What is needed is a revamp of Malaysia's tourism eco-system.

According to World Tourism Organisation (WTO) data, 25.7 million tourists visited this country last year – well behind China's 56.9 million tourists but slightly less than Thailand's 29.9 million and Hong
Kong's 26.7 million.

A major constraint to attracting more tourists to this country is flights. While flights connecting Kuala Lumpur to East Asian capitals are plentiful, connections between Penang, Malacca, Sabah and Sarawak and second tier Chinese cities like Guangzhou, Hangzhou and Jinan are either sparse or non-existent.

Another potential bottleneck is visas. Although the process of applying for visas has been eased significantly for China tourists, competing countries like Indonesia and Thailand offer visas on arrival.

Yet another off-putting factor is the KL International Airport (KLIA).

Apart from two breakdowns in the aerotrain on April 8 and May 14 this year that affected hundreds of travellers, another frequent source of complaint is the long wait at immigration counters.

This could be resolved by reorganising the queuing system. Instead of tourists forming a single line and being channelled to any immigration counter that is available – as in Hong Kong – tourists in KL have to decide which queue to join.

Additionally, immigration staff that deal with Malaysian travellers are often free but don't help to process foreigners – unlike the norm in Singapore and several other countries.

Furthermore, as I have suggested previously, immigration staff should be rostered based on the number of flights and passenger arrivals.

This suggests the problem isn't lack of immigration staff but their inefficient deployment.
If Malaysia hopes to attract more educational and health tourists, it shouldn't attempt to duplicate what educational institutions and hospitals in Singapore and elsewhere offer.

Instead, Malaysia should aim to provide unique differentiated health and educational services.

To facilitate the growth of the Asean Economic Community (AEC), Malaysian colleges and universities should offer courses on regional history, language and culture, the economy and business structures.

How can closer linkages within the AEC be forged amid a miasma of ignorance about neighbouring countries' history and businesses?

While US-based Walmart is a name familiar to many Malaysians, how many are aware that Matahari Department Store is the biggest retail chain in Indonesia?

Additionally, will regulators allow Malaysian universities, colleges and institutions to proffer one to three-month business management courses that will enable highly-paid expatriates to operate more effectively in this region?

Similarly, Malaysian hospitals should consider setting up treatment centres offering traditional medicine while a related growth area is manufacturing international standard traditional herbal supplements.

A multi-cultural country, Malaysia is rich in herbal cures from the multiplicity of ethnic groups.

In short, instead of continually looking west, Malaysia should refocus its attention eastwards.

Opinions expressed in this article are the personal views of the writer and should not be attributed to any organisation she is connected with.

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