• Madani Sahari

Tech Learning Curve Needed

The issue of Malaysia’s economy, in particular the escape from lower and middle income traps, has been discussed for a long time, perhaps more than a decade or so.

No doubt there are numerous issues to address at hand. While we have been successful in improving our national income streams, it has led to new issues such as social equity of wealth, urban versus rural gaps in opportunities and distribution of employment opportunities.

While immediate government economic stimulus is a low hanging fruit to implement, it is also important that we are careful of long-term consequences of seemingly obvious solutions that may have hidden ramifications, where the effects appear long after the implementation. For example, a sudden increase in wages may be a welcome and popular thing to do, but may work counter-productively in the long run if it does not result in increased productivity.

This is simply because the increase in standard of living is related to the purchasing power and not the nominal value of one’s income per se.

A healthy increase in wages is a factor of productivity and sellability. The employee increases his or her compensation through the increase of volume, value or quality over the same given amount of time of work.

At the same time, the employer (which in essence runs an organisation that provides volume, value or quality) must be given market access to sell his or her product or services in order to compensate the company, in turn compensating the employees that have contributed to the development and production.

While it is an obvious equation, the valuation of activities leading up to the above example is usually in question. When there is a sudden force of wage increase without any accountability to the productivity of work or the market value of the organisation, the increase in wages does not lead to an increase in purchasing power in the long run.

Before the wage earner can enjoy his extra income, the increase in labour cost — a direct result from the wage increase — has added cost to the production, and has created a chain reaction in other wage brackets adjusting to the market forces. The result is an increase in labour cost, production cost, followed by an increase in selling price — with no new improvement to the value of services rendered. When there is a sudden realisation that nothing extra can be bought despite a wage increase, the cycle will restart once again.

The next question is clear — what do we do to increase purchasing power?

Without attempting a “one size fits all solution”, the basic principle is straightforward — we either spur opportunities to increase value or increase creation.

It is for this reason we see national level visions and policies that allow for such opportunities for personal, business and market development — so that we have the space to open new businesses, fill in jobs and meaningfully participate in technology as a creator, not a consumer.

One such policy would be the revised National Automotive Policy that will be announced soon.

Three decades ago one would need very expensive technology to create new technology. Today, a laptop is no longer a prized commodity, but the knowledge and skills in creating new products are golden. Facebook, Grab, Microsoft Office, Google, the coding behind iPhone, Android and the Sophia robot were done on laptops we can afford. 

The reason for their success was not higher level of opportunities, but a strong will to venture into value activities that nobody dared to do, or perhaps resisted and laughed off at the time.

After all, that is the very basis of invention — to create a solution to a problem that nobody realised they had. That is true value.

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