Malaysia 2020 Is Not A Vision, It's A Dream

The study of economics also encompasses poverty, income inequality and wealth distribution which is directly tied to two major things: human capital and a nation's productivity level. How does one define human capital? I tie it with scarcity. Here's a simple picture to begin with. How much skill does it need to man our national favourite "Old Town" like kopitiams? that you see ubiquitously (not scarce/rare) in most major cities in Malaysia. At most RM5/hour. Compare this with engineers RM30+/hour, doctors and lawyers RM50+/hour. Professionals are scarce, standing there manning the shops are not, any human who has two legs can do the job. Hence poverty is directly linked to absence of human capital. Take India for instance, it is not a poor country, it has a booming middle class but it's poverty rate is still high. According to 2010 data from the United Nations Development Programme, an estimated 37.2% of Indians live below the country's national poverty line. The problem lies in education or a lack of developing basic skills. You see India's illiteracy rate as detailed by the board of census from India is at a staggering 24.4%!! For that education matters, it matters a lot. 

Construction a big contributor. Services which comprise 50% of our GDP should be in the driving seat!

An economy of a country booms by growing its GDP. A bulk of our GDP growth in 2012 is from GTP via the construction industry, in fact at 5.6% is the highest contributing sector surpassing services at 4.9% [source: as above]. A healthy economy does not necessarily mean a base of growing human capital, we have to look deeper. You cannot turn "penjaga kerata or Ramli burger flippers" into professionals even when the economy is healthy, only investments into human capital can do that. Name me one developed country/high income nation that does not have a big pool of human capital? Neither does having plenty of natural resources mean nation can be high income. Take a big look at most countries in Africa, they are rich in resources but are not rich themselves. In reality, there's a striking correlation between a country's level of human capital and it's economic well-being; e.g. Japan, Switzerland, Hong Kong (which used to be apart from China) and Singapore just to name a few. Malaysia's labor market can't do that much for graduates with lack of skills or dry of basic knowledge. There is no way you can force private enterprises to hire anyone and here lies our humongous civil service. The global economy as of 15 years ago favours skilled workers highly as the shift to using computers infiltrates almost every sector of the economy and we need people who are intelligent to have those skills and to learn new skills at the time on the job.

As you can clearly see, we depend a lot on construction. E.g. Big projects like the MRT and River of Life in KL. 

Growing too slowly to hit Vision 2020. Why are less productive "developing countries" growing at a faster rate than us? Note that the top are all "developed countries".

Levels of productivity are inextricably linked to how much human capital there is. Take this: Why would MNC (multinational corporations) like Samsung continuously build factories in Malaysia when it can be a lot cheaper say in an emerging market such as Vietnam? The answer is productivity. Most of Malaysians can compete against a Vietnamese peasant who earns say 1/4 of our salary because we are better educated, better trained and have better supporting infrastructure. The term "outsourcing" only has context when a company deems that it is cheaper to produce of X or half of X with say 1/20 or 1/20 relative to our salary. This is a clear example of sport shoes where it is now exclusively being produced in countries like Thailand, Indonesia and Vietnam. A nation's productivity levels depends on many factors ranging from development expenditure (infrastructure, education), better government institutions (regulatory, anti-fraud, tax structures) and innovation. Unknown to many, productivity also affects birth rates because as your RM/hour earnings go up, your time becomes more expensive so we indirectly spend less time raising children. These people now invest in the qualify of their children and not quantity. Singapore is a good example with birth rates now at near 1 levels, well below the replacement rate of 2.1 [source: star publications] hence they depend a lot on attracting highly skilled workers from abroad such as Malaysia! This explains a lot of things: high income nations have slow population growth rate if not negative like Japan, Chinese in Malaysia have the lowest birth rate among the 3 major races, Africa has many malnourished kids.

The problem I see with Malaysia:
1. We attract "mainly" low skilled workers; construction laborers.
2. We have an exodus of highly skilled workers and is growing by leaps and bounds; migration problem.
3. Our only saving grace today is that we are "cost-competitive" (not increasingly productive), using more or less of the same headcount with the slowly rising wages to produce X for the next couple of years.
4. Money from our national budget goes to the wrong place; operating expenditure 70% and development expenditure only 30% as of 2011.
5. Education sadly is not given a national agenda. Syllabus gets change whenever we change our education minister.
6. I personally do not trust the 3% unemployment number which has been at the same level for a decade. *I have no data to back my distrust except for rising crime.

The world now demands for ever higher levels of human capital which translates to better wages and higher levels of productivity. This is the only thing that separates high income nations and the have nots. We need a country that gets this right and schools/colleges/universities that produces the right stuff. Having said so, we have nothing on the right lane. We should forget about Vision 2020. Take education and you need a generation to fix it and the fruits of that seed can be seen in countries like South Korea and Taiwan which started back in the 1980s.

On a side note, this topic also explains another recent wave of events. [source: a book titled "handbook of crime correlates"]
Higher total socioeconomic status (usually measured using the three variables income (or wealth), occupational level, and years of education) correlate with less crime. Longer education is associated with less crime. Higher income/wealth have a somewhat inconsistent correlation with less crime with the exception of self-report illegal drug use for which there is no relation. 

Higher parental socioeconomic status probably have an inverse relationship with crime.
High frequency of changing jobs and high frequency of unemployment for a person correlate with criminality.
Somewhat inconsistent evidence indicates that there is a relationship between low income, percentage under the poverty line, few years of education, and high income inequality in an area and more crime in the area.
The relationship between the state of the economy and crime rates is inconsistent among the studies. The same for differences in unemployment between different regions and crime rates. There is a slight tendency in the majority of the studies for higher unemployment rate to be positively associated with crime rates.