Exploiting China’s economic dominance

Exploiting China’s economic dominance
Bede Hong
Sep 19, 06 3:24pm


In the second part of this three-part interview on the country’s economic woes, analyst Tony Pua shares his views on China’s growing dominance and Malaysia’s ambivalent policies towards the economic giant.


The 34-year-old Oxford University graduate, who runs an IT company in Cyberjaya, also speaks on the need for Malaysia to find it’s next competitive niche, in addition to ICT (Information and Communications Technology).


Malaysiakini: What do you think of Malaysia’s policies on China?

Pua: I think there has been quite a few references on China all around, in the budget and economic reports. It was mentioned all over. The government does recognise the impact of China on the region, whether as a threat or as an opportunity in manufacturing and investment and so on. But do we have enough of a specific policy to deal with China?

Tourism statistics since the lady’s case (the nude squad incident, first believed to involve a Chinese national but later confirmed as a Malaysian) has not been good. One of my investors, from China, said to me ‘What are you Malaysians trying to do to us Chinese?’ [laughs].

It showed that the news (of the nude squat and other similar incidents) were quite widely reported there (China). The statistics (on Chinese tourists) clearly showed that form just above half a million or 550,000 in 2004, it became 352,000 in 2005, which is a 36 percent drop. It has increased a bit this year compared to last year, but in the first five months it’s still 33 percent below the 2004 figures.

Even the numbers two years ago are low, a special report by CLSA (Asia-Pacific brokerage firm) and WTO (World Trade Organisation) indicated that China would be the second largest travel and tourism spenders by 2015.

Yeah, we are getting a lot of Middle East tourists and that’s a good thing. But relative to the top 10 country spenders, China is number two. And there’s no other Asian country on this list. And China is so close to us. It’s only a three-hour flight from the southern tip of China. Why shouldn’t we try to get more of these people?

They have something like 29 million tourists, they grew by 43 percent last year and they are larger than the Japanese market today, which is 17 million tourists.
The next slide (referring to a slide Pua had presented at a DAP forum on Sept 6) shows where the Chinese go today. Number one destination? Singapore. And I basically ask, what do they have in Singapore? [laughs] Why do they have more visitors than we do?

You know, they go there to see the fake Merlion, which is a useless entity. Now why don’t they come here and see our natural assets and islands and so on?


I was away for the last few days because my investor was from China. He came down and I took him to Tanjung Jara (Terengganu). And a lot of the (tourism industry) staff (there) were asking questions. ‘So where are these people from?’ I said from China. And they said ‘Oh Taiwan’. I said ‘No, China’[laughs]

It shows that no Chinese (national) goes to Tanjung Ara. And the most you get are some tourists from Taiwan. If you ask China people, when they come to Malaysia where do they go? They spend two days here during a hop over between Singapore and Thailand. They go to Kuala Lumpur for one day, Penang for one day. Next flight, Bangkok. That’s it. That’s not tourism in Malaysia.

We are only after Singapore, Thailand, Japan and Korea. So we can do a lot more in that area in terms of visits since we are placing so much importance on tourism and ‘Visit Malaysia 2007'.

How do you find our airports?

It is only in the past year that they started announcing the departures and arrivals in Mandarin Signboard-wise it is still in English, Malay (Bahasa Malaysia) and Japanese. Now given the quantity of Chinese people coming in, shouldn’t we have more signboards to attract the business.

So that sort of little things make a difference. I find that my Chinese investor really knows minimal English. I find that if I had not been around, he could not travel around Malaysia. If it’s not friendly for them to travel, they will not come here.

What is the role of IT in this country?

In 1997, 1998, we were promoting the Multimedia Super Corridor (MSC) as the next big thing. Then sometime in 2004, 2005 the ICT thing sort of died, or became a lot more low key [laughs] and bio-technology became the next big thing.

Talk to JJ (Science, Technology and Innovation Minister Dr Jamaluddin Jarjis). Basically, he is only interested in talking bio-tech. You can talk to him about ICT a little bit, and then he would divert the conversation back to bio-technology [laughs].

I did a simple comparison with Singapore. It (bio-technology) is a thing that would give the country a competitive advantage, compared to the threat, say from China and India. They are taking away all our manufacturing investments. Intel is even shedding resources in Penang today.

It’s very simple. China is the place to be. So we need to find our next niche, whether ICT or bio-tech. So we are struggling to find this next new thing so we don’t get caught up in a manufacturing war down the road. Right thing to do, but are we executing the right policies?

So now, they say they are giving RM210 million in grants and so on. Sounds a bit big for those who haven’t seen the numbers.

But, Singapore to date, has already spent SD4 billion, which about RM10 billion just on infrastructure for bio-technology. You know Singapore, when they commit, they do spend a bit and they have committed a further SD8 billion more in the next four years.

Can we compete with those numbers?


Even if we want to, we cannot afford to compete with those numbers. Because they have the money to pay for it. So from that perspective, will bio-technology be our competitive advantage, or potential competitive advantage?

I’m not sure. I don’t think so. If we are going to do bio-technology, we need to be focussed. Focussed in areas we know Singapore won’t do. You can, for example, manufacture all the generic drugs. I know, it’s not as exciting, it’s not sexy.

But we can do the generic type drugs which India has been doing for a while. And as the many reports have stated, our SSO (shared outsourcing services) business is not too bad.

It’s a distant third from number one and two, but it’s still third. Maybe we should spend more money promoting that so sort of investments in Malaysia. It takes away the threat of China and India, but it doesn’t fall into the space of trying to compete with Singapore for bio-technology.

And we’re just right next to Singapore. We don’t even have a geographical advantage! So from a strategic perspective, have we really thought up the right polices?

India is number one in terms of outsourcing, followed closely by China, followed by Malaysia in a distant third. But we have been consistently third for the last couple of years. One can be (skeptical) with reports, but it means we are
somewhere there. But it means we are somewhere there. We may think of focussing on areas that we can win. I’m sure by outsourcing you can (employ) a lot more than the current figures of 20,000 people.

What about the MSC? How about outsourcing, you mentioned about that.

I think the IT industry needs to be developed. No matter what, the IT industry needs to be developed. It will be a supporting industry to the economy. It won’t just be an innovation industry. We will not have a Microsoft here.

To be fair, not just in Malaysia. In places like Singapore, they could barely come out with their own IT software. It’s very difficult. There was so much grant, promotion and Singapore couldn’t do it.

Geographical, market size, everything (posed a problem).

Maybe it’s education...

Even Singapore’s education is good.

Maybe if you compare to South Korea or Japan...

Korea does not have that many products. Worldwide the only place where they are producing real money making software products is the United States. It is given partly to the market size and market reach. You got Malaysia, who’s going to buy your software from you?

It’s good that they are promoting ICT, but it should be not from an innovative perspective. People who innovate, will innovate. You don’t have to tell them to innovate. But the rest of it you need to turn it into a supporting industry to promote the rest of the economy.

You have the construction sector, you have the manufacturing sector, the services sector. Because all sectors of the economy rely on ICT today. You don’t want to be forever dependent on foreign software.

And MSC, the cost, (that has already been spent) there. If I were the government, I will leave it be.

Is it a failure?

I don’t think it’s a failure. But some of the spending that they have done there is a pure waste of time. To create a Cyberjaya ... maybe they needn’t have done that.

But they have done that ... a lot of people did relocate there. It is growing at a slow pace, but not at an exponential rate ... it’s not a Silicon Valley. It will not be Silicon Valley.

The most important thing for MSC companies to grow is the domestic market. And one of the biggest spenders in the market, is the government. The rest of the ministries do not care for MSC companies. They care for their own vested interest suppliers.

See all the suppliers that are out there? None of them are MSC because they can’t be bothered. I can continue to get the jobs from the Ministry without having to be a MSC-based company. So being an MSC-based company doesn’t help me get jobs from the ministries.

It should. If you want to promote MSC, it should. The government should be saying, that one of the conditions should be that you are an MSC company. In fact that could be the sole condition - that you are an MSC company.