Tuesday, February 10, 2009

New Route To Economic Sustainability - Tun Dr. Mahathir

The main thing is to increase income so that the economy will rise through higher consumption of local products, says Tun Dr Mahathir Mohamad in an interview with Business Times. MALAYSIA needs to conduct a careful study on ways to turn the country into a high-cost, high-wage one to ensure the sustainability of its economy in the years to come, former prime minister Tun Dr Mahathir Mohamad says.

This is a way to move forward, but should not be at the expense of losing its competitiveness, especially against major countries such as India and China.

"The main thing is to increase the income of our people so that the economy will rise through higher consumption of local products," he said, adding that with high income, the people too must be prepared to pay higher prices for products and services.

In an interview with Business Times last week, Dr Mahathir noted that such a transformation cannot happen overnight, and careful planning and study have to be done. He said Malaysia first needs to find out what kind of business or industry it can excel in and work on increasing efficiency through more automation and innovation, "so we can have less labour cost but higher wages".

He cited Singapore as a country that not only found its niche in financial services, but had managed to increase both its gross domestic product and per capita, disposal income of its people, to reach a developed nation status. "Since their separation from Malaysia, every year they (Singapore) increased their wages but remained prosperous, although not so now," he said, referring to Singapore's recession.

He has suggested to the private sector to take the lead in achieving this transformation, but with significant role-playing by the government. He said from his discussions with the local business fraternity, they are all for making Malaysia a high-cost, high-wage country. "That is the only way to compete," Dr Mahathir said.

Touching on the private sector's practise of cutting workers' wages when times are bad, the former premier said such a move is not desirable. He said there are many ways to reduce cost, but wage cut should not be it as it stops people from buying goods, which in turn will hamper business activities and this can further deteriorate an economy.

Articles from Business Times.com

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