Remarks by the Country Director at the Malaysia Economic Monitor (June 2014) Launch

Your Excellency, Ladies and gentlemen, Good afternoon.

This is the 10^th edition of the Malaysia Economic Monitor. So, hopefully,  most of you already know what’s in the report, which allows me to not talk about the report, but about what all of you really want to hear about: football and, in particular, the World Cup.

Now, let us together discover the connection between this 10^th Economic Monitor and football, between football and trade. Let’s ask: What makes a competitive football team? And what makes for trade competitiveness? I would like to focus on three ingredients in football and in trade: the right, highly productive skills in the right places; the rules and regulations; and mobility and open access to skills.

First, a great football team matches its positions with the right talent. Much of this talent is honed through extensive training. The players also have to play smartly – the coach spends a lot of time watching other teams’ games and strategizing with the team.

In the trade arena, the players are your entrepreneurs, new and old, small and large. To become more competitive, your players need to make and export more knowledge-based goods and services.

Exports of services in Malaysia have a huge potential, especially those modern services like health, education, professional services, oil and gas services. In manufacturing, there is room for doing more of the higher-value added tasks, like design, research and development. For example, Malaysia assembles integrated circuits, the chips of which go into computers and mobile phones. It could do more of the design of the chips, or fabricate the high-value silicon wafers that go into it.

To realize the potential of your trade team, your local players will require the right skills. This means: training is needed, building skills, and addressing the apparent mismatch between the skills produced by the education system and those demanded in the labor markets.

Basic education is important – that was the theme of our previous economic monitor. But it’s also important to find more ways to bring Malaysian firms and universities together to enhance the quality and content of higher education. According to a survey that was done for this Economic Monitor, in partnership with TalentCorp, only half of the companies offer structured internship programs. These programs can help expose university students to a variety of career paths and help them develop the requisite “soft skills”.

Second, football requires rules. It’s important to have rules.  The rules must ensure a vigorous yet fair contest between the two teams and protect the health and safety of the players. The rules have to be the same for all teams.

In trade, these rules are regulations that affect the ability of firms to access foreign markets, in both goods and services. These rules mostly have valid policy objectives, but they also to limit trade. In services, for example, there are regulations about foreign equity limits for a firm that wants to provide services locally. There are also so-called ‘behind the border’ regulations such as requirements that retail stores open in under-served areas, or that they employ a certain number of local workers. In manufacturing, there are important licensing requirements, consumer protection goods, and health regulations.

Here is one example from my home country. I am from Munich, Bavaria, where we have not only Bayern München, our great football team, but also great beer. Now, in Bavaria, we have something called the “Purity Law” for beer, which requires that only three ingredients may go into beer: water, barley and hops.  Bavaria therefore restricted the sale of beers that contain any other ingredients. Bavarians claimed that the Purity Law had health benefits. Do we believe that?  We will never know for sure. Ultimately, the European courts ruled that Bavaria had to allow competition and the import of pure as well as non-pure beers into Bavaria, letting consumers choose among them.

To be sure, there are reasons for proper health regulations, and most such rules, such as phytosanitary standards in food processing, are good rules and make a lot of sense. Often the issue is not that there are rules, but rather the specific way in which the rules are structured and the application of the rules. What’s important is to strike the right balance and make sure that the rules keep everybody safe—the players and fans in football, the firms, workers, and consumers in trade—healthy and safe, but also encourage competition to offer fans and consumers the widest possible choice and the best value.

Third, football is a great example of the importance of the mutual recognition of professionals. Everyone recognizes a great player, and it doesn’t matter where they learnt to play. My team, Bayern München, has players from many different countries around the world. We bring the best talent from all over the world, and that makes the team competitive. And that’s not at the expense of local German players. Now the same applies for the mobility of professionals more generally. In this Economic Monitor, we give examples of how we can think about the mutual recognition of professionals, not just for football, but also for doctors, lawyers, engineers, accountants, and so on. The same principles apply.

There is something called “mutual recognition agreements”, or MRAs. Malaysia can promote and pursue MRAs for professionals within ASEAN. Malaysia is going to be the chair of ASEAN in 2015. So Malaysia has a chance to seek commitments from other countries to advance the trade and competitiveness agenda; and one element can be such mutual recognition agreements with other countries. These MRAs will allow Malaysian professionals to export their services elsewhere, and they will also allow other countries to export their services to Malaysia. This way, Malaysian firms and others who want to use their services can do so, just like how Bayern München uses players from other countries.

To wrap up our thoughts on football – I mean trade – Malaysia’s economy is clearly World Cup material when it comes to trade. But to make it from the group rounds to the playoffs it needs to step up its skills so that firms are performing more high-value-added tasks.

The Economic Monitor has a lot more – the first chapter analyzes recent economic developments and includes our latest forecasts for the Malaysian economy. In very few words, we believe that the outlook for this and the coming years is favorable, and are upgrading our GDP growth forecast for 2014 based on the better performance in high-income economies.

The second chapter is a note on matching talent to jobs, and the third chapter is an in-depth look at Malaysia’s trade competitiveness. I’ll let Frederico give you more details, but I also encourage you to read the report.

In closing, I would like to thank Minister Wahid and the Economic Planing Unit (EPU) team. We greatly appreciate the support we receive from EPU in the production and the launch of the Economic Monitor. Thank you all!