OBG talks to Nor Mohamed Yakcop, Minister in the Prime Minister’s Department, Economic Planning Unit

Interview: Nor Mohamed Yakcop

Is economic weakness in the EU and the US affecting Malaysia’s ability to achieve the goals set by the Economic Transformation Programme (ETP)?

NOR MOHAMED YAKCOP: Our open and trade-oriented economy is not immune to external weaknesses, but overall the ETP has contributed to healthy growth rates in 2012, with a noticeable rise in private sector investment. This is a confirmation that the public-private partnership (PPP) model is working. The PPP Unit of the Prime Minister’s Department is in the process of negotiating 57 projects, covering a number of sectors such as tourism, commercial and mixed development. The total economic contribution of these projects is around RM51.5bn ($16.6bn).

Based on Malaysia’s experiences to date, which economic policy measures have best supported growth in productivity?

NOR: The current policy focus has been on soft as opposed to hard infrastructure, especially in terms of education, research and innovation. The main goal of the ETP is to unleash the potential of private sector in Malaysia. We see plenty of room for productivity to increase among small and medium-sized enterprises (SMEs), which still lag behind large corporations in terms of their value added.

Larger corporate entities have a natural advantage of critical mass and technology, but SMEs can still improve their productivity through innovation, efficient management and the development of higher value-added services and products.

The government can help by removing structural bottlenecks such as transportation. For this reason, it has decided to invest in mass transit projects in the Klang Valley, which will help to reduce the traffic problems that have weighed on productivity.

Finally, we are also in favour of an increase in the active participation of women in Malaysia’s national economy. Recent surveys have shown that fewer than 50% of our women aged 15 to 64 participate in the national workforce. By comparison, 65% of this population has attended university.

To what extent is so-called brain drain a challenge in Malaysia? How are government policies helping to reverse this trend?

NOR: First of all, I am in favour of free movement of labour and think there is nothing wrong that Malaysian talent is in demand overseas. This is encouraging and we think at some point we will benefit from their overseas experience when they decide to come home. The challenge for us is to offer an attractive environment for Malaysian professionals living abroad to return to this country. To this end, the government has been pursuing a number of programmes to make it easier for Malaysians to find more rewarding opportunities in the domestic market.

For instance, the government now allows companies to make applications to recruit Malaysians abroad under the returning expert programme (REP). In the past, individuals were responsible for their own applications. The shift towards REP will help to close the talent supply-demand gap, and we think as many as 1000 new applications will be submitted in 2012.

Do you share the view that the key to research and innovation is the free flow of human capital and ideas across national borders?

NOR: We already have a track record in embracing technology, innovation and open to inflow of foreign capital. Having benefitted from a rapid pace of industrialisation and growth, Malaysia has realised that it needs to innovate its way out of the so-called middle-income trap. We believe we can build on our manufacturing and engineering strengths in the electronics and electricals sector, as well as the automotive industry, to move up the value chain. The ETP and entry point projects will play a key role in setting investment in motion, but we believe it will be up to the private sector to drive new growth forward.