How logistics players can help to meet NEM targets

They have to re-orientate the way they think of business, ops and processes

MALAYSIA is at a crossroad. It has done well to boost economic growth, thanks to sound economic strategies and management.

From being a developing nation dependent upon commodities and agriculture to power its economic growth, Malaysia is now one of the top 20 trading nations. However, it has fallen into ‘middle income trap’.

The economy, while more diversified today compared with three decades ago, is still reliant upon labour-intensive activities.

Malaysia’s vulnerability to external shocks, as seen during the recent global recession, underscores the urgent needs for the economic transformation to be more robust by climbing up the value chain.

Maritime players must boost efficiency in the production of goods and the provision of services.

The New Economic Model (NEM) provides the compass with which Malaysia can refer to in deciding which way to go from this crossroads.

Although skeptics might scoff at the grand ambition of the model, the NEM sets us in the right direction to make Malaysia’s economy more competitive and resilient.

Malaysians need to transform the way they work and think to adjust to a more competitive business climate and more liberalised and globalised environment.

And players in the maritime industry are no exception – they must take note of and take up.

Being in an industry which facilitates much of the nation’s trade and a key enabler of its offshore oil and gas sector, the maritime industry is at the forefront of the nation’s economic growth.

The NEM challenge for maritime industry begins with a question: What should the players do to ensure the targets of the NEM are met?

For starters, they have to re-orientate the way they think of their business, operations and processes.

They have to wake up to the fact that the operating environment has changed and will continue to be shaped and reshaped by various political, environmental, social, technological, economic and legal developments, among many others.

To ensure that the maritime industry develops in a way that fits into the NEM framework, players must take stock of where they are, what are the opportunities, and the strategies to be deployed to grab these opportunities.

The NEM is built on the principle of enhancing productivity as a catalyst for economic growth. In light of this, industry players must focus on increasing their productivity to propel the growth of their business and the industry, instead of just relying on the injection of capital to spur business growth.

Industry players must also boost efficiency in the production of goods and the provision of services. They should strive to deliver to their customers better quality products and services at competitive costs.

For this to happen, they need to upgrade their infrastructures, evaluate the processes and systems, harness and nurture talent, leverage on technologies and IT, and adopt a culture of “doing better everyday”.

Maritime industry players can fast-track the process of becoming productive and efficient by developing strategic alliances and joint ventures with foreign partners who have better resources and experience.

However, companies which are serious about growing in the long haul and tackling bigger markets, inevitably, need to invest in research and development (R&D) to come out cutting-edge products and services.

The shipbuilding and ship repairing industry in Malaysia is a case in point. The absence of shipyards of international significance in Malaysia can be partly blamed as the industry has inadequate capacity and low productivity and efficiency to deliver world-class products and services and compete on a global scale.

This can be largely attributed to the lack of R&D culture, which is so essential to attain a high level of excellence in this field, among local shipyard operators.

It is not a coincidence that South Korea, the world’s biggest shipbuilding nation, allocates a bigger percentage of their GDP to R&D compared with Malaysia.

This difference is telling when one compares South Korea’s achievements in today’s shipbuilding with Malaysia, although both nations started out about the same time in the industry.

The report by the National Economic Action council released on the same day as the NEM announcement outlined what should be done to help realise the aspirations of the new economic model.

It drew attention to the success of South Korea, a model Asian nation that managed to transform its economy into the global economic powerhouse it is today, despite lacking in natural resources.

At the core of the economic transformation programme spelled out in the NEM are the eight components of Strategic Reform Initiatives (SRIs) that includes re-energising the private sector, developing quality workforce, creating a competitive domestic economy among others.

The maritime industry players must plan for the future to align their businesses to be in sync with the SRIs.

As Malaysia’s economy, whose growth still depends on foreign direct investment (FDI), reels from declining investments and growing competition from regional nations to lure investors, it must alter its course towards attaining greater competitiveness.

Malaysia’s ranking in several categories in terms of ease of doing business, as stated in the World Bank’s Doing Business 2010 report, is a damning indictment of how alarming the nation has slipped from the ranking of competitive nations.

Malaysians, including practitioners in the maritime industry, must transform not only the way they do business but also their mindset and attitude.

They must stop limiting their services to the domestic market, focusing only on short-term gains and hoping to be indefinitely cocooned by protectionist policies and subsidies.

Source: StarBiz By Nazery Khalid senior fellow at the Maritime Institute of Malaysia