Digitalising an economy : short-circuiting the rakyat

10th March 2023

1] INTRODUCTION

Since the inception of the Multimedia Super Corridor (MSC) in 1996, succeeding regimes in governance have been persistently promoting the digital agenda through multiple initiatives such as the National Strategic ICT Roadmap and Digital Malaysia (2008-2012), National eCommerce Strategic Roadmap (2017), Industry4WRD (2018) and the latest National  Fiberisation and Connectivity Plan (2019-2023). 

The nation has a total workforce of 15.1 million. More than a quarter of this — 26% or a huge 3.9 million people to be exact — are participating in the gig economy: such as ride-hailing, e-commerce delivery, and computer programming.

The country’s digital economy is even estimated to be worth over RM$ 270 billion, which equates to nearly 18% of Malaysia’s gross domestic product, (YCP Solidiance, 2020).

Wow! At their peaks, SIA constituted only 4% of the Singapore economy, and Walmart dominated 10% of Mexico economy.

2] WORLD BANK DIGITALISATION FRONTIERS

On the Malaysia Economic Monitor, February 2023, the World Bank is rather persistence in advocating the advancement towards a digital economy.  Though while advocating Big IT development as a means of continuing capital employment, and consequential deployment of monopoly-capital to own and control infrastructural platforms, this organised entity of US imperialism is only encouraging capital accumulation with extracted value from states – to ensure Global North Big Tech infrastructural platforms shall continue benefiting on expansive exploitation, through global labour arbitrage where underemployed labour is truly exploitated, (read  STORM, 2022, Big Tech Large Gig), and STORM 2023, Big Tech in Marine Cabotage where such transnational (TNCs) infrastructural platforms would even dare to hold our nation in a technical ransom on undersea communication cabling installation and maintenance.

Indeed, the large RM$1.5 billion IT allocation in the Revised Budget 2023 will benefit only wealthy and the well-connected companies – not our local SMEs entrepreneurs – with their huge expenditure for consultancy services, and perpetuating other cock-ups, (Hunter, March 2023).

A digital economy shall signal how infrastructural platforms are not only incrementally becoming invasive as techno-feudalism in the country, but once franchised by privatisation and outsourced to the Global North monopoly-capital that even local compradore capital shall collaborate to accumulate their capital by and functioning as intermediaries.

Take the National 5G case. Vested interests are calling the withdrawal from Swedish telecommunications giant Ericsson in the 5G network, (theedgemarkets, 10/3/23). The Financial Times on 6th March, 2023 reported that Huawei is lobbying for a role in country’s 5G roll-out. Then, Telekom Malaysia (TM), is also competing in this industry, too, and it is not considered a neutral entity in rolling out the network, but a national telecommunications monopoly.

Related Readings: Financialisation Capitalism; Digital Feudal Lords

3] THE DIGITAL ECONOMY

It is not just having multiple programs like eLadang, Pemangkin to Satellite Farms immersing in the metaverse world, any Digital Economy demands an assurance on buy-in from employees to lower resistance to change, and upskilling or reskilling existing talent within various companies through trainings, too.

And these constraints are not adequately nor appropriately attended, especially when the SMEs

are not well-funded nor properly supported by government agencies, as yet:

Compounding the productivity element, labour quality contributed only about 8% to real GDP growth over 2001-18, much lower than the OECD average.

Read also : Digitalisation, Capitalism and SMEs.

Combined comparatively with inadequate IT systems deployment and infrastructural projects implementation, there is still a long drive on our digital highway to cruise forth, and by.

Indeed, the World Bank Report, June 2022 stated the inadequacies of IT implementation in the Sabah state of Borneo (read also csloh:  Sabah – a state underdeveloped) is due to lagging in economic transformation:

Amplifying another factor is that our high-speed broadband accessibility is considerably more expensive compared to other countries, (read  STORM,  Digital Knights).

According to a study on internet access affordability in 2021, people in Malaysia had to pay 26.58 U.S. dollars per month on average for broadband internet access. Meanwhile, the cost of mobile data per 1GB was at 0.45 U.S. dollars per month, (data as released by Statista Research Department, 28/9/22).

Further, Malaysia ranked 74 out of 167 countries in terms of price per Mbps for fixed broadband services, and 64 out of 118 for fiber broadband services – way behind regional peers such as Singapore and even Vietnam.

Enmeshed within these Real Geoeconomics are the socio-economic factors of poverty and inequality that exist in a stark manner in the states of Perlis, Kelantan, Trengganu and Sabah

where there are high unemployment rates among the youth and the emergence and expansion of youth that can be termed as “the precariat” [Guy Standing’s definition (2011)] as the mass class characterized by unstable labour, low and unpredictable incomes, and loss of citizenship rights.

First used by French sociologists in the 1980s, the precariat describes persons “working precariously, usually in series of short-term jobs, without recourse to stable
occupational identities or careers, stable social protection or protective regulations relevant to
them”.

Then, there is the emergence of a “cybertariat” type of worker has created an awareness about the multilateral ways by which mutually reinforcing economic, political and technological factors are transforming not only the global economies, nature and application of work, but also each individual lives, (Ursula Huws, Labor in the Global Economy, 2014 and The Making of a Cybertariat: Virtual Work in a Real World, 2003).

Thus, this informal employment sector occupies a sizeable segment of the country’s workforce that inevitably is without adequate social security safety provisions in place, (read csloh, 2022: Workers; Emir Research: Brain Drain; bernama: gig-economy and Khazanah Research Institute 2020, Shrinking “Salariat” and Growing “Precariat”?):

4] DE-INDUSTRIALISATION AND DIGITALISATION

The present renewal objective in advocating the digital economy is no more than a bad decision in the premature de-industrialisation process during the 1990s.

In Malaysia case, though, the years since 1970, the lack of significant technological upgrading, and the required structural change as a follow-up, has caused the premature plateauing of manufacturing, stemming from failures to coordinate policies, enforce standards, sustain high productivity growth and stimulate transition to higher value-added activities.

The resultant outcomes are that in the Global Value Chains, the country’s attractiveness as an outsourcing base has weakened. Further, rhe contribution of foreign value-added in the manufacturing sector’s export growth has also declined. There is micro-level evidence pointing to weaknesses in terms of human capital and technology, too.

Compounding these situations, there was the often ‘stalling’ – temporarily or complete closure – of the many Malaysian industrial projects that weakened workers employment,
(Jeffrey Henderson et al., Capitalism and Industrialization in Malaysia in Economy and Society, Volume 36, 2007 – Issue 1). Manufacturing as a whole has began to register a slower wage growth since the late 1990s, with labour markets characterized by heavy presence of low-skilled foreign workers, increased contract labour and/or outsourcing and the subsequent declining worker organization. The focus on sweat-based low-skilled foreign labour rather than on expanding professional and skilled labour locally has driven Malaysia down the low industrialization road as a result, (see Rajah Rasiah, Vicki Crinis & Hwok-Aun Lee in Industrialization and Labour in Malaysia).

In fact, a number of Malaysian firms have even relocated their research facilities and/or manufacturing plants to Cambodia and Vietnam to access more developed and expanding markets according to Rasiah, whereas the poverty of Malaysian industrial workers has persisted, and the precarious labour has continued, exacerbated by the dependency on migrant labour that had inadveribly reduced national labour surplus value tremendously.

Then, the concurrent continual enforcement of colonial industrial legislations (see, STORM 2021, Union Busting) had suppressed any broad or even marginal salary gain through the decades.

in the case of Loh Guet Ching v Myteksi Sdn Bhd (berniaga atas nama Grab) e-drivers are considered “independent contractors” and do not have the right to be heard before the Industrial Court for the alleged unfair dismissal by Grab. In short, with digitisation of an economy, the gig-labour is considered a sui generis  class with different legal rights and obligations from 9-to-5 employees as a new dimension to the labour force without adequate social security nor workers rights as an employee of a corporate entity.

Whilst, corporate Malaysia has much to gain with merchandise sales through an e-commerce economy:

5] CONCLUSION

Labour, hence, becomes digital-dehumanised workers where they are mere inputs in an interfacing intermediaries loop as conduits to big data storage and retrieval. A gig-worker daily experience and personal assets are exposed to financialisation or value extraction.

The consequential manipulation of such raw data into timely, accurate, relevant and complete information – by infrastructural capitalism platforms that are so overwhelmingly powerful in exploiting not only surplus value of labour but in the regal accumulation of capital relentlessly, too, (Social Europe,  Gig Workers Guinea Pigs of the New World of Work, February, 2021, and to see Foundation for European Progressive Studies, Governing Online Gatekeepers: Taking Power Seriously, 2021).

In short, where the underemployed youthful and useful gig-labour is exploited to the finite digit.

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STAGNATED ECONOMY STUPOR RESPONSIBILITY TOWARDS REFORM STRUCTURALLY

In 2020, the economy contracted by 5.6%.

1] INTRODUCTION

Not only has the national economy shrinks, its debt has surmountly increased concurrently :

Malaysia’s economy grew on average only 4% annually over the past decade, a marked deceleration from the 9% yearly growth from 1967 to 1997, according to a World Bank Report.

The stagnation has been analysed adequately by Sudhdave’s and in a fury firesstorms paper, too.

The country needs high-quality foreign investment to boost growth, but that requires broad reforms (already well expressed 20 years ago by Olin Liu et al in an International Monetary Fund Report, Malaysia: From Crisis to Recovery, IMF Occasional Paper No. 207) covering everything from the education system and labour participation to its investment promotional framework that were not completely executed by succeeding ruling regimes that cemented and colluded on clientele relationship upon a rentier capitalism platform economy.

Since 1997, the country had gone through three economic crises: the Asian Financial Crisis-1997, the dotcom-2002 crash and the Global Finance Crisis-2008, and presently, battling the fourth crisis: Covid19-2020 Ecological-Epidemiological-Economical calamity, but each crisis had been concentrating on saving kleptocrates’ enterprise in support of capital than caring for a rakyat2 economic wellbeing, and as such, succeeding ruling regimes had not wholesomely restructure the political economy with a strategic competitive outlook, but maintained the feudal-clientiel capitalism superstructure.

“While other countries sprinted into high-income and developed nation status, Malaysia is jogging slowly,” said Raad, the World Bank country manager for Malaysia.

2] STAGNATION and STUPOR RESPONSES

i) Stagnation in the country’s economic growth since the Asian Financial Crisis (AFC 1997) and the Global Financial Crisis (GFC 2008) when the country decoupled from industrialisation towards a financial capitalism regime (see: Southampton’s Lena Rethel Financialisation and the Malaysian Political Economy; STORM, Financialization Capitalism in a Covid19 Political Economy, and firesstorms‘ Financialization of PNB Capital) where Khazanah and PNB playing primal roles, creating – instead of producing physical manufactured outputs – a high volume of monetary throughput with currency in circulation :

where the circuitry of capital induces household debts through financialization capitalism mode

It is also the wide corruption embracement during the Najib governance where the 1MDB AFFAIR encouraged economic mismanagement and political uncertainty.

ii) The 2021 Budget has already highlighted growing budgetary deficits and rising debts (see indepth STATE OF ECONOMY 2021, HERE) – which are linked to monopoly-capital Global North’s commodity chain connection, read subsection #2 The Scenarios HERE) – but the present ruling regime is adamant on its ethnocratic economic thrust, clinging to political clientship under rentier capitalism whilst trying to “develop“ a national economy with an immense debt that is bloating yearly :

A paper published by the International Monetary Fund titled ‘Debt and Growth: Is There a Magic Threshold?’’ stated that countries with a debt-to-GDP ratio of 90 per cent and above could experience a dramatic decline in economic growth.

We are there at 89.2%!

The primary losers under an ethnocratic-based economy means allocation of resources in any national budget is not according to means nor resting upon a national well-being agenda but racially, and non-secularly, biased, with resultant marked rise in absolute inequality through the years:

Source: Martin Ravallion 15 April 2019

By 2020, Malaysia‘s average gross national income (GNI) per capita is estimated to reach US$11,200, still US$1,335 short of the current threshold level that defines a high-income economy. It is not surprising that Vision 2020 is not realized because, as Jomo expresses, the major political tendencies in Malaysia are invoking ethno-populist agendas that inevitably torn the already divided nation apart, even while vehemently claiming otherwise.

The direct beneficiaries are the Bumiputera who are the top income groups (the top 1 per cent and the 10 per cent) benefited the most from economic growth where in the top 10 per cent, the average growth rate per adult national income for Bumiputera is 5.4 per cent, compared to 1.2 per cent for Chinese and 4.6 per cent for Indians. While the gap in the growth rate among the different ethnic groups was large in the top 10 per cent; however, it is even larger for the top 1 per cent. In the top 1 per cent, the average growth rate for Bumiputera was 8.3 per cent, which is sharp contrast to -0.5 per cent for Chinese and 3.4 per cent for Indians:

Disparity in Income Growth among Different Racial Groups

iii) Loss of competitiveness in the electrical and electronics sector, and in manufacturing and exports more generally, has also given rise to concerns that Malaysia is deindustrialising prematurely, which has the potential to undermine the country’s long-term growth prospects. The weaker business sentiment from the Purchasing Managers’ Index (PMI) is not that promising either as regime’s policymakers had not undertaken adequate strategic longer-term future planning nor during preceding years, had any tactical short-term initiatives to solidify a firmer base towards strong growth trajectory progressively.

Instead, in 1983, two-thirds of the government total expenditure were spent to operate twenty seven of the country’s largest public entities, ( Shahriza Ilyana Ramli et al in Malaysia’s New Economic Policy: Issues and Debate, American Journal of Economics, 2013).

Department of Statistics Malaysia chief Uzir Mahidin said on February 11, 2021 that Malaysia’s fourth quarter GDP fell again by 3.4 per cent – bigger than the 2.7 per cent decline in the third quarter. Overall GDP shrank by 5.6 per cent, the biggest contraction since the 1998 Asian Financial Crisis. This sliding trend was foreseen a year ago when the theedgemarket Feb 5th 2020 issue publishes a Malaysian Rating Corp Bhd (MARC) report stating that the country expects to record minus 5.6% GDP growth for 2021.

On 4th. Dec 2020, Fitch Ratings has downgraded Malaysia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘BBB+’ from ‘A-‘, basing on the following parameters’ rationales:

a) the depth and duration of the COVID-19 crisis have weakened several of Malaysia’s key credit metrics. The impact on Malaysia’s economy has been substantial, and has added to Malaysia’s fiscal burden. Lingering political uncertainty following the change in government in March 2020 weighs on the policy outlook as well as prospects for further improvement in governance standards.

b) weak investment and low tourism receipts have reduced economic activity, and Fitch expects GDP to contract by 6.1% in 2020, before rebounding by 6.7% in 2021.

c) Fitch expects the fiscal deficit to remain higher than pre-pandemic levels, given a continuation of support measures and political pressure for higher spending. The 2021 budget targets a deficit of 5.4% of GDP, from an estimated 6.0% in 2020, and an average deficit of 4.5% of GDP from 2021 through 2023. 

iv) The unemployment rate stood at 4.8 per cent at the end of 2020 after surpassing 5 per cent in the middle of the year, the highest rate unemployment in three decades. The governor of Bank Negara Malaysia (BNM), the central bank, Nor Shamsiah Mohd Yunus, had indicated that the labour market was expected to remain weak in the first half of 2021 before improving.

Official figures show that the informal sector made up 8.3 per cent of total national employment in 2019, or roughly 1.2 million people in the labour market estimated at over 15 million. This is an understated set of figures because the underemployment statistics are not provided as to exact number of GIG-LABOUR and those seeking for fulltime employment.

More worrisome is the high graduate unemployment rate which spiralled to 5.3% during 2020, from 3.3% previous year; MOHE had indicated that 41,161 out of 330,557 graduates in 2019 are still unemployed and with an addition of 2020’s 75,000, the total unemployment among this cohort is high 116,161 graduates still being unemployed. The Gig-economy may not be able to absolve underemployment, and those working under zero-hour contracts nor able to generate higher private consumption which took a hit in 2020, decreasing by 4.2%. The November 2020 national unemployment is a high 764,400 persons without taking into accounts the underdevelopment figures that might be nested among the employed labour force. Between 1Q2017 and 4Q2019, an average of 32.7% of the total employed persons or 1.4 million people experienced skill-related underemployment. This is an extremely high amount of workers who are underemployed.

Time-related underemployment are employed persons who work less than 30 hours a week due to the nature of their work or due to insufficient work, and are able and willing to accept additional hours of work.

In a note, UOB Global Economics and Marco Research said the near-term outlook of the labour market is expected to be dim as the third wave of the Covid-19 pandemic enters in January 2021. Its jobless rate forecast stands at 4% in 2021. Meanwhile, MIDF Research has revised its forecast on Malaysia’s unemployment rate to 4.5% from 4.3% in 2020. Overall, challenges remain for the labour market as businesses may hold back hiring on concerns over weaker domestic demand and sales outlook.

v) The country’s key engines of growth – domestic consumption, private investment, government expenditure and exports – are all faltering.
Malaysia’s RHB Investment Bank noted in a report this month that serious weaknesses to the economy due to concerns that sluggish expansion in the construction and retail sectors, coupled with slower take-off in big-ticket government projects due to the current administration’s financial limitations are likely to put a dampener on growth.

RHB has revised its 2021 GDP forecast to 5.4 per cent, down from 6.3 per cent. GDP would have contracted by 5.5 per cent in 2020; the actual published GDP figure is 5.6%.

The Ministry of Finance is targeting for the economy to grow between 6.5% and 7.5% in 2021.

“Malaysia’s per capita income has increased nearly four-fold since joining the upper middle-income country group in 1992,” so said the Minister of Finance.

It is high time that a minister product of the 1970’s NEP be honest in presenting comparison aged facts that are 30 years lapse in time, and to be consciously brilliant in executing economic policies truly, otherwise it is most unfortunate the jarring question in many rakyat2 minds is: how long can we go on like this? under an unelected government? in the midst of a political pandemic – ecologically, epidemiologically and economically? that this ruling regime is completely lost in the Malaysian wilderness.

3] THE POLITICAL-ECONOMY AHEAD

To escape velocity from middle-income status which is slower than other countries that had reached high-income status, the nation needs to perform many structural reforms ahead.

On one aspect, Firas Raad, the World Bank country manager for Malaysia, said reforms would revitalise Malaysia’s investment credentials and boost growth.

There is uncertainty about Malaysia’s vision and what it can offer investors compared to regional peers. Further, foreign inflows  should remain subdued as Malaysia lags in reforms of policies that drove its 1970s to 1990s boom, said Richard Record, the bank’s lead economist for Malaysia.

Under a high case scenario, this could be achieved earlier in 2024, whereas under a low case scenario the achievement could be very well later only in 2028 or even in a worsening scenario as presented by a former deputy-governor of BNM (“risk not being a high-income economy even over the next 20 years“) because without a fail, we have consistently budget deficits since late 1990s :

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Since polarisation, according to race and religion issues, has ascended, and national unity has declined with widespread general despair in the country, particularly over the ugly politicking taking place and political frogging becoming the national pastime, it is indeed timely that a Second National Consultative Council be established to provide valuable inputs into a new economic policy as was articulated by Tan Sri Ramon Navaratnam in a Chew Daily November 25, 2020 opinion piece.

Widely encouraged is the clarion call, “to embark on another system” by Datuk Seri Nasir Razak, in his talk to the Chevening Alumni recently when he has called for three major reforms: to referee political competition, to have a clear separation of business, government and politics, and to introduce electoral reforms, preferably also towards the replacement of the old and outdated New Economic Policy (NEP) where even its successor – the New Economic Model – was deemed a failure.

Although poverty had reduced considerably, there are still serious pockets of dire poverty in many parts of rural Malaysia, especially in the interior highlands of Sabah and Sarawak, Kelantan and Terengganu. Even many urban areas in our country have Malaysians surviving from hand to mouth; many are supported by nightly food banks where 26% of our national food consumption is imported :

FOOD, FOOD CONSUMPTION and IMPORTATION OF FOOD

Though the NEP seemed to be necessary and fair to all at that time and that poverty was to be eradicated regardless of race and the restructuring of the economy had to be coordinated well planned to be equitable to all, but regrettably, the NEP was distorted and manipulated in its implementation, (Jomo, 2004) with an unequal wealth distribution accompanies poverty of the poors in housing and an inadequate healthcare. Definitely, these deficiencies strongly demands a new involvement to chart a dynamic direction in the eradiction of poverty and the consequential outcome of an equity in the distribution of wealth among rakyat2.

In short, the NEP policies have attracted considerable financial abuses in the process of “restructuring” leading to cronyism, corruption, clientelism politics with the undue and callous wastage of public funds as publicised by various Auditor-General Reports and in the press.

There is an urgent need towards a progressive economic development with an appropriate growth path and equity model in wealth-sharing through timely well-structured structural reforms that shall substantially spur Malaysia’s economic development post-2020.

The way forward would entail continunous structural reforms to promote  equity in wealth-sharing.

Towards executing effectively Now!