Joseph Stiglitz: Creating a Learning Society


February 9, 2016

Joseph Stiglitz: Creating a Learning Society

 

Calculus on a blackboard

(pic) Financial market liberalisation may undermine countries? ability to learn another set of skills that are essential for development: how to allocate resources and manage risk. Photograph: Image Source / Alamy/Alamy

by Joseph E.  Stiglitz

http://www.theguardian.com/business/2014/jun/09/why-learning-matters-innovation-joseph-stiglitz

Citizens in the world’s richest countries have come to think of their economies as being based on innovation. But innovation has been part of the developed world’s economy for more than two centuries. Indeed, for thousands of years, until the Industrial Revolution, incomes stagnated. Then per capita income soared, increasing year after year, interrupted only by the occasional effects of cyclical fluctuations.

The Nobel laureate economist Robert Solow noted some 60 years ago that rising incomes should largely be attributed not to capital accumulation, but to technological progress – to learning how to do things better. While some of the productivity increase reflects the impact of dramatic discoveries, much of it has been due to small, incremental changes. And, if that is the case, it makes sense to focus attention on how societies learn, and what can be done to promote learning – including learning how to learn.

A century ago, the economist and political scientist Joseph Schumpeter argued that the central virtue of a market economy was its capacity to innovate. He contended that economists’ traditional focus on competitive markets was misplaced; what mattered was competition for the market, not competition in the market. Competition for the market drove innovation. A succession of monopolists would lead, in this view, to higher standards of living in the long run.

Schumpeter’s conclusions have not gone unchallenged. Monopolists and dominant firms, like Microsoft, can actually suppress innovation. Unless checked by anti-trust authorities, they can engage in anti-competitive behavior that reinforces their monopoly power.

Moreover, markets may not be efficient in either the level or direction of investments in research and learning. Private incentives are not well aligned with social returns: firms can gain from innovations that increase their market power, enable them to circumvent regulations, or channel rents that would otherwise accrue to others.
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But one of Schumpeter’s fundamental insights has held up well: conventional policies focusing on short-run efficiency may not be desirable, once one takes a long-run innovation/learning perspective. This is especially true for developing countries and emerging markets.

Industrial policies – in which governments intervene in the allocation of resources among sectors or favour some technologies over others – can help “infant economies” learn. Learning may be more marked in some sectors (such as industrial manufacturing) than in others, and the benefits of that learning, including the institutional development required for success, may spill over to other economic activities.

Such policies, when adopted, have been frequent targets of criticism. Government, it is often said, should not be engaged in picking winners. The market is far better in making such judgments.

But the evidence on that is not as compelling as free-market advocates claim. America’s private sector was notoriously bad in allocating capital and managing risk in the years before the global financial crisis, while studies show that average returns to the economy from government research projects are actually higher than those from private-sector projects – especially because the government invests more heavily in important basic research. One only needs to think of the social benefits traceable to the research that led to the development of the internet or the discovery of DNA.

But, putting such successes aside, the point of industrial policy is not to pick winners at all. Rather, successful industrial policies identify sources of positive externalities – sectors where learning might generate benefits elsewhere in the economy.

Viewing economic policies through the lens of learning provides a different perspective on many issues. The great economist Kenneth Arrow emphasised the importance of learning by doing. The only way to learn what is required for industrial growth, for example, is to have industry. And that may require either ensuring that one’s exchange rate is competitive or that certain industries have privileged access to credit – as a number of East Asian countries did as part of their remarkably successful development strategies.

There is a compelling infant economy argument for industrial protection. Moreover, financial market liberalisation may undermine countries’ ability to learn another set of skills that are essential for development: how to allocate resources and manage risk.

Likewise, intellectual property, if not designed properly, can be a two-edged sword when viewed from a learning perspective. While it may enhance incentives to invest in research, it may also enhance incentives for secrecy – impeding the flow of knowledge that is essential to learning while encouraging firms to maximise what they draw from the pool of collective knowledge and to minimise what they contribute. In this scenario, the pace of innovation is actually reduced.

More broadly, many of the policies (especially those associated with the neoliberal “Washington Consensus”) foisted on developing countries with the noble objective of promoting the efficiency of resource allocation today actually impede learning, and thus lead to lower standards of living in the long run.

Virtually every government policy, intentionally or not, for better or for worse, has direct and indirect effects on learning. Developing countries where policymakers are cognisant of these effects are more likely to close the knowledge gap that separates them from the more developed countries. Developed countries, meanwhile, have an opportunity to narrow the gap between average and best practices, and to avoid the danger of secular stagnation.

• Joseph E. Stiglitz, a Nobel laureate in economics, is University Professor at Columbia University. His most recent book, co-authored with Bruce Greenwald, is Creating a Learning Society: A New Approach to Growth, Development, and Social Progress.

Copyright: Project Syndicate, 2014.

Malaysia :Moderates and extremists and anyone in between


January 15, 2016

 Malaysia :Moderates and extremists and anyone in between

by Dr. Kua Kia Soong
http://www.freemalaysiatoday.com

Our society is fast becoming an Orwellian dystopia in which “moderates”, “extremists”, “national security”, “national harmony” and other fluffy terms have become relative (Doublespeak) and imprecise, depending on how they are defined by the state and the judiciary.–Kua Kia Soong

The rise of the far right and the religious bigots in Malaysia has in turn given rise to a movement of “moderates”. As human beings, we have an instinctive grasp of the ancient wisdom of moderation as the way (the Tao) to a healthy body and way of life. In the body politic, however, espousing “moderation” becomes imprecise since it is an example of fluffy language that is also used by the powers-that-be to deal with those who uphold truth, justice and human rights.

Kua-Kia-Soong

Let me illustrate what I mean. When I was detained without trial by then Prime Minister Mahathir Mohamad under Operation Lalang from 1987 to 1989, the Special Branch in their relentless interrogations insisted on categorizing me as an “extremist”.

Among ‘allegations of fact’ under the Internal Security Act, I was alleged to have written a book ‘Polarisation in Malaysia: The Root Causes’. This is an excellent example of the relativism of “moderation” and “extremism” in Malaysia.

In the first place, this book was sponsored and signed by all the 24 major Chinese associations in Malaysia in 1987. It was not banned by the government. But I was considered an “extremist” for having written it and (in their eyes) deserved to be detained without trial because I was alleged to have threatened the internal security of the country.

On the other hand, Mahathir himself had in fact written a book, The Malay Dilemma, in 1969 and the government at the time under the Tunku had considered it “extremist” and banned the book. Nonetheless, while his book was considered “extremist” and not fit for public consumption, Mahathir was not considered extremist enough to be detained without trial and he has, in fact, never been detained under the ISA.

If we are to ensure the principles of democracy are upheld, we have to question the validity of the issues involved in such loosely used terms as “moderation” or “extremism”, and take a stand so as not to fall for these fluffy concepts. Recently, we had religious bigots and racists calling for Bibles containing the word “Allah” to be burned. The authorities considered them to be “moderates” because they were “merely trying to defend Islam”. Such an interpretation of “moderation” seems to go on ad nauseam in contemporary Malaysian society.

Extremism-Featured

Our society is fast becoming an Orwellian dystopia in which labels such as “moderates”, “extremists”, “national security”, “national harmony” and other fluffy terms have become relative (Doublespeak) and imprecise, depending on how they are defined by the state and the judiciary. This requires civic vigilance to demand precision about who “the perpetrators of a crime” are; we need to know “who specifically said what” and “what specifically they said or did”. “

Calling an Equality Act an Equality Act

It is very clear that we are trying to deal with a problem widely recognised by the world community, at least since the Second World War – namely, racism, racial discrimination, related prejudice and intolerance. Let us examine how other countries deal with this problem.

Britain has the Equality Act 2010, the purpose of which is to align the Race Relations Act with European human rights legislation and to extend protection to other groups not previously covered namely, age, disability, gender, religion, belief and sexual orientation.

Thus, in my critique of the “Harmony Act” that has been proposed to replace the Sedition Act, I have stressed that we should call an Equality Act an Equality Act and not by any other fluffy name. If equality is still taboo in Malaysia in the 21st century, we are indeed living in Never-never Land (or Takboleh Land)!

Religious bigotry and Islamic populism

The increasing cases of religious bigotry and injustice toward non-Muslims in the country are actually instances of the misapplication of the federal constitution which provided for freedom of religion as at independence. Subsequent amendments to the Federal Constitution and state enactments have led to the Judiciary deferring its powers to the inferior syariah courts in disputes between a Muslim and a non-Muslim regarding conversion from Islam and other areas.

To reinstate the status quo ante as it was in 1957 (our “social contract”?), there needs to be in place a Law Commission that would be empowered to ensure freedom of religion in this country and restate the jurisdiction of the civil courts and the syariah courts. In upholding the principle of freedom of religion in the federal constitution, the post-1957 state enactments that clearly violate this freedom – as in the case of the Bible-seizing episodes – have to be rescinded. Such a reform is essential in order to recognize the 1957 “social contract” as supreme and thus prevent any further Bible-seizing adventures. This and not the magnanimity of the Menteri Besar or the monarch is crucial in establishing our right to freedom of religion under the federal constitution.

Routinization of racial discrimination

These are examples of the routinization of racial discrimination in Malaysia that has become part of the “normality” accepted by many so-called “moderates”. Again, this only exposes the relativity and vagueness of the concept of “moderation” that currently abounds in the media and begs the question: moderate in relation to what?

Concerned Malaysians should call for the institution of structural reforms for healthy ethnic relations and the equality to which we as citizens are entitled. These include calling upon the government to immediately initiate moves to ratify the Convention on the Elimination of Racial Discrimination (CERD) and the International Covenant on Civil and Political Rights (ICCPR).

We need to address the main issues of racism, racial discrimination and related intolerance in our society and to propose appropriate bills and institutions to resolve these problems. Failure to do so results in fluffily clad initiatives and bills which can be used by despots as double-edged swords to deal only with human rights defenders rather than the perpetrators of hate and division.

Dr. Kua Kia Soong is the adviser of SUARAM (Suara Rakyat Malaysia).

 

Professor Kishore Mahbubani–Asia Rising Again


January 12, 2016

Professor Kishore Mahbubani– The Return of Asia

This is intended for the benefit of my doctoral students at the Techo Sen School of Government and International Relations, The University of Cambodia.  I think it is useful to share the thoughts of this controversial and strategic thinker and Dean and Professor Kishore Mahbubani of the Lee Kuan Yew School of Public Policy, National University of Singapore with all of you.

I  also hope my fellow Malaysians can see why our nation is today’s laggard in Southeast Asia. The reason is very simple and that is we have mediocre  and corrupt leadership and  a culture that promotes mediocrity and dependency on a nanny state.–Din Merican

Bill Gates: The Billionaire Book Critic


January 8, 2016

Bill Gates: The Billionaire Book Critic

Evan Thomas, the best-selling biographer of Robert F. Kennedy and Dwight D. Eisenhower and the author of a half-dozen other books, has seen those books reviewed over the years by The New Yorker, The Washington Post and The Atlantic. But with the recent publication of his latest work, “Being Nixon: A Man Divided,” he experienced for the first time a new phenomenon: the Bill Gates bump.

Bill Gates in May 2014. In his Gates Notes blog, he has reviewed books, including: “Thing Explainer,” by Randall Munroe and “The Rosie Project,” by Graeme Simsion. Just before Christmas, Mr. Thomas learned that his book had been favorably reviewed by Mr. Gates on his blog, Gates Notes.

“I’m surprised by the number of biographies I read that paint their subjects in black-and-white terms,” Mr. Gates wrote. “A classic example is former U.S. president Richard Nixon, who is too often portrayed as little more than a crook and a warmonger. So it was refreshing to see a more balanced account in ‘Being Nixon,’ by author and journalist Evan Thomas.” The review was illustrated by a photograph of the book on a desk adorned with objects from the Nixon era, like a rotary phone.

Bill Gates on Books and Blogging

Bill Gates, the co-founder of Microsoft, has emerged as a force in the publishing industry, thanks to the book reviews he posts on his blog, Gates Notes. Mr. Gates, who says he reads about 50 books a year, discussed his love of reading, how he makes his selections and what book Warren Buffett recommended. Below are excerpts from a recent email interview.

What role does reading play in your life?

It is one of the chief ways that I learn, and has been since I was a kid. These days, I also get to visit interesting places, meet with scientists and watch a lot of lectures online. But reading is still the main way that I both learn new things and test my understanding.

For example, this year I enjoyed Richard Dawkins’s “The Magic of Reality,” which explains various scientific ideas and is aimed at teenagers. Although I already understood all the concepts, Dawkins helped me think about the topics in new ways. If you can’t explain something simply, you don’t really understand it.

What made you decide to start the books blog and write reviews?

I have always loved reading and learning, so it is great if people see a book review and feel encouraged to read and share what they think online or with their friends.

It also helps to have a platform for talking about the work I’m doing, both through the foundation and separate from it, because I find people are curious about it.

How do you choose the books you read? Recommendations from family/friends/media?

It’s a mix of things. Melinda and I will sometimes exchange books we like. I also get recommendations from friends. After I finish something great, I will often try to find other books by that author or similar ones on the same subject.

Earlier this year Melinda and I saw the musical “Hamilton,” which inspired me to read Ron Chernow’s biography.

What was the process of selecting the books for the best-of-the-year list? Any tough choices?

I didn’t set out to do this intentionally, but when I looked back at the books I read this year, I realized that a lot of them touch on the theme “how things work.”Some, like Randall Munroe’s “Thing Explainer,” are written exactly for that reason. He uses diagrams paired with the most common 1,000 words in the English language to explain complicated ideas.

Other books on my list offer insights into human beings, our values, our strengths and flaws.

Is there one book that was an unexpected choice for you that you unexpectedly loved?

One of the main reasons I started my blog was to share thoughts about what I’m reading. So it is nice to see people sharing their own reactions and recommendations in the comments section of the site.

One book that was especially fun to highlight was “Business Adventures,” by John Brooks. This is the first book Warren Buffett recommended to me after we met in 1991, and it is still the best business book I have ever read. Brooks deserves to be much better known than he is.

Although he wrote in the 1960s, the issues he talks about are still relevant today. “Business Adventures” went out of print decades ago and Brooks died in 1993, but his family was nice enough to let me post one chapter called “Xerox Xerox Xerox Xerox” on my blog.

I don’t read a lot of fiction but was surprised by how much I loved the novel “The Rosie Project,” by Graeme Simsion. Melinda read it first and kept stopping to recite parts of it out loud to me. Eventually, I decided to take a look.

I started it one night at 11 p.m. and stayed up with it until 3 a.m. It is very funny, while also showing a lot of empathy for people who struggle in social situations.After I sent it and the sequel (“The Rosie Effect”) to dozens of friends and wrote about it on my blog, I heard from a lot of people who were touched by it. There is talk of turning it into a movie, which I hope happens. Rosie and Don Tillman would make a great on-screen couple.

I like highlighting the work of Vaclav Smil. He has written more than 30 books, and I have read them all. He takes on huge topics like energy or transportation and gives them a thorough examination.

Smil’s books are not for casual readers and I don’t agree with him on everything, but I like to feature his work because the world would be a better place if more people thought as rigorously and systematically as he does.

Singapore: Getting Around with Technology


November 9, 2015

Singapore: Getting Around with Technology

by Surekha A. Yadav

getting_around_-_singapore.htm_txt_js_singapore_title_photo

Not everyone has noticed but Singaporeans are living through a revolution right now. An old and arbitrary tyranny is falling around us for a new, better order driven by technology.

Taxi apps are revolutinising our transport space and that’s a pretty big deal.Taxis and the weakness of the Singapore cab system have long been a personal bugbear.And I am not alone.

Often you had to wait more than an hour to get a cab at many points in the city and getting a taxi in the suburbs was well near impossible every weekday morning — crippling facts of daily life for many Singaporeans.

Yet now just months after I last penned my lament on the state of taxi affairs, the situation has turned on its head. Waiting for a cab to get to work in the morning, I’m honestly spoiled for choice. I could use Grab taxi, Hailo or of course, Uber.

At one glance (and a few swipes) I can see what my options are, know which cabs are in the vicinity, get an idea of how much my journey will cost and manage the whole process while scrolling my Facebook feed. I don’t need to make so much as a phone call, let alone walk out onto the street and stand at the corner soliciting stony-faced taxi uncles.

This brave new world is an amazing demonstration of how technology really can change lives and alter the fabric of daily life. Thousands of vehicle owners and drivers are clearly using the technology to such an extent that the triumvirate of traditional taxi companies Trans-Cab, Comfort and SMRT appear to be struggling to find drivers and maintain fleet levels.

Taxi Service in Singapore

These days, you don’t have to fret about not being able to get a taxi in Singapore… taxi apps to the rescue! So far (traditional cab companies aside) it seems to be a clear win-win with drivers getting better terms such as higher revenues or lower overheads and app users getting a faster and more reliable service.

What’s even more striking is that regulators have stepped in broadly to support the city’s taxi transformation. Government legislation is often the bane of innovation. And as taxi apps moved from being a novelty to becoming a regular means of transportation, legislation became inevitable.

There were cries by taxi companies and drivers affiliated with them to outlaw or severely restrict the scope of app-driven hire services. Their argument being that the low overheads and limited legal restrictions in the online space give these apps an unfair competitive advantage.

Basically, the old operators wanted to freeze the taxi eco system and preserve their market share. However, the Bill passed this week does not lock us into the ancient regime. Rather it broadly empowers what it terms Third-Party Taxi Booking Service Providers while ensuring they stick to basic legal parameters.

Uber cars cannot pick customers off the street like regular cabs, and the apps can’t compel you to provide your final destination in advance — lest drivers begin adopting the behaviour of regular taxi drivers and reject customers for going somewhere out of the way.

With a few safeguards in place, it’s really a positive piece of legislation and it’s clear in this case that the government is moving with technology and not impeding it. What this means is the taxi revolution has succeeded and become the new status quo with legislation, users and providers all lined up behind a new world.

Viva la revolution!

http://www.themalaymailonline.com/opinion/surekha-a-yadav/article/a-taxi-revolution-in-singapore#sthash.RYS8n4iF.dpuf

Beyond Economics– First Fix the Political Elephant in the Room


October 5, 2015

Beyond Economics:  First Fix The Politics

by Dato’Seri Nazir Razak

themalaysianinsider.com

Nazir Razak at Khazanah Megatrends

The theme of Khazanah Megatrends this year is around “innovation” and “creative disruption.”

In the next 30 minutes I would like to share with you some personal stories and anecdotes, and perspectives about why Malaysia remains frustrated in its quest for greater creativity and innovation, risk and adventure taking, ethics and integrity in our economy, and how thinking about this problem leads me to the same conclusion as when I think of many other pressing national issues – we must address the “elephant in the room”.

Capital

As a 25-year banking veteran, I would be the first to admit that banks have been poor at supporting not just innovation, but many creative ideas.

Some who survived to tell the tale include two young Malaysians who some years ago came to see me about buying an airline for RM1 to build a regional low-cost carrier. I showed them the door very quickly and quite rudely, and was only nice to them when AirAsia was successful and going for its IPO.

Similarly, our experiments at banking start-ups and technology companies did not go well. Banks are by definition conservative, highly regulated and staffed with bankers.

In the mid-1990s, in response to the perceived lack of access to capital for technology start-ups, I was asked to chair the “Industry Action Committee” to set up Mesdaq, the Malaysian Nasdaq.

Even before we had venture capital and proven technology companies, we decided to set up a stock exchange. And lots of money was spent on the new exchange when really it should have just been another board at Bursa; it would have been a far cheaper failed experiment. Till today, I regret not saying no to this project, but it was a good early lesson for me and probably why I do find it hard to keep my mouth shut.

As banks and the capital markets fell short, the government availed lots of money for technology and start-ups in general. Funds like MTDC and several venture companies were seeded by the government. Money itself has never been the problem. The problem was that we never had the institutional capabilities to allocate the money effectively, bias as we were to local intermediaries who lacked experience and networks, and prone as we were to proliferating agencies rather than building large institutions with economies of scale and partnerships with international experience and networks.

Today however, I do think that from a capital standpoint, there is much less frustration on the part of budding entrepreneurs and creative disrupters. Equinas, for instance, has scale and leverages professional fund managers well.

GLICs have evolved to apply best international standards in investing and now hire – and pay – a much better cadre of professionals for themselves and at investee companies. There has also been a proliferation of private equity and venture capitalists to supplant banks and offer more effective risk and reward structures.

There is room for improvement, of course. I would like to see more funds made available to smaller companies and more focus on how to encourage large GLICs to better support small companies or small deals.

I would also urge that we look at how to make it less punitive for banks to become investors in PE funds given the difference in the needs of our emerging economy versus the more developed markets where these new rules are being written.

Mentoring and international perspectives

Innovation is about three things – insight, idea and implementation. Beyond capital, entrepreneurs need guidance to help them build their ventures. Malaysia has had Technology Park Malaysia and others, and lately MaGIC, with varying degrees of success.

I feel that one thing lacking has been the international element to mentoring. It is unrealistic to think of building sustainable businesses based purely on domestic dynamics in this era of Asean economic integration and an increasingly borderless world.

This is why a few other individuals and I set up the not-for-profit organisation Endeavour Malaysia in 2013. In partnership with Endeavour Worldwide we search for entrepreneurs via a rigorous selection and interview process by first the local management, then the local board and finally the international Endeavour board.

Successful entrepreneurs are badged “Endeavour”, allocated local and international mentors, and are given access an international network of businesses – about 1,100 Endeavour companies worldwide.

Endeavour Worldwide is all about successful business people eager to give back by supporting new entrepreneurs. It does take an entrepreneur to know one and it takes knowledge from all over the world to assess the prospects of the best ideas.

Local mentors for Malaysian Endeavour companies include my co-founders Afzal Rahim, Mark Chang, Brahmal Vasudevan and Tony Fernandes.

Endeavour’s “mentor capitalist” model has worked extremely well in Latin America, where its biggest success story is MercadoLibre, the eBay equivalent. Marcos Galperin started the company in 1999 and was selected by Endeavour that year itself.

He expanded the business across the continent and the company is now listed on the Nasdaq with a market cap of about US$4 billion. Marcos is the perfect example of how a high-impact entrepreneur can have an outsized impact on the ecosystem around him or her. He subsequently became a founder and board member of Endeavour as well role model, mentor or direct investor in a whole string of emerging companies.

I hope that we can rapidly add to the six Endeavour companies that we have so far, but overall Malaysian entrepreneurs now have reasonable choice of ecosystems to help them.

Beyond economics

If we define access to capital and ecosystems as economics, then I would say we have over the years largely addressed the economic issues, but there is still no real breakthrough.

Recent data shows national productivity growth slowing down from 2.7% between 2006 and 2010 to 2.1% between 2011 and 2014. And other worrying data points include the story of two recent big Malaysian innovation success stories – GrabTaxi and HappyFresh – they started in KL but have effectively moved to Singapore and Indonesia for various reasons.

When I asked several entrepreneurs whether if given the choice they would choose to be based in Malaysia, most said no, and those who said yes tended to strongly espouse their nationalistic sentiment. Even though it is just my crude dipstick survey, it is worrying because we are at risk of losing the best companies that we nurture.

So I asked those who said they would move away what their concerns are, without fail, they go beyond economics to the big picture, and relate not just their own concerns but perception of their potential international financiers and partners.

Role of the government

The heavy presence of government in the economy is one issue they highlight. We have spoken and agreed ad nauseam in various other platforms about reducing government involvement in business, yet the data from the past few years show quite the opposite.

Even more important is the role of government in overseeing business competition – the rules of the game in each sector. Much of this has been covered in the New Economic Model, and we are making progress with the Government Transformation Programme (GTP) and Aviation Commission, for instance. But much, much more needs to be done.

The more sensitive area of concern is the perception that people or businesses are not equal before the government and even when one can accept preferential treatment based on our affirmative action policy, the rules are often not clear. Added to that is a culture of top down decision-making, even in the sphere of innovation.

Let me share with you one personal anecdote. In 2004, I was appointed to the board of the infamous InventQjaya, set up by a self-described genius innovator, generously funded by the government with cash and a super smart building in Cyberjaya.

I joined two other independent directors, Tan Sri Shahril Shamsuddin and Datuk Sidek Ahmad. From early on, we sensed things were not right and when we conducted our own technical due diligence there were a lot of question marks around the intellectual property the company had expensively acquired from the genius innovator’s own company back in the US.

The turning point for me was when he showed us his “killer invention” – a glass window which would turn opaque at the touch of a button. Well, massage parlours in Korea had had them for years – so I was told!

Shahril and Sidek, who were both more literate in science than me, also found other dubious inventions. So finally, together with MoF official Datuk Rahim Mokti, we decided that enough was enough, we had to do the right thing.

Truth be told, if we knew how painful blowing the whistle was going to be, I’m not sure if we would have done it!

Etched in my memory is the day Shahril and I went to report the case at the A-G’s chamber. After spending a couple of hours showing all the evidence, the officer calmly asked “Did you bring your toothbrush?”

He said, based on his experience, people who make accusations are often the real crooks so perhaps he should detain us! So then we spent another couple of hours explaining that it wasn’t us –thankfully, we were convincing enough.

After triggering the institutional processes, we were advised that we had to see and explain ourselves to Tun (Dr) Mahathir who had firmly backed the project. After the A-G Chamber experience, we were too afraid so we ran to the master salesman Tan Sri Nor Yakcop and begged him to carry the news for us. I was told Tan Sri Nor did a splendid job, Tun agreed that we were doing the right thing and we were safe.

The authorities never managed to build the legal case against the inventor. A lot of money was wasted, but a great deal more would have been lost had we, the directors appointed by the government, not done our fiduciary duty and been willing to tell truth to power.

I have never fully traced the history of how and why InventQjaya started, but I was told it was by navigating the corridors of power and convincing the PM. Tun’s idea of a government-backed R&D centre was good, the problem was how it was implemented.

There could have been a tender open to scientists across the globe, for instance, as opposed to one man’s full trust in another who went on to liberally use the threat of his access to power to get his way.

I am sure there are other similar stories. So we need to recalibrate how the corridors of power work, re-establish processes and reaffirm institutional checks and balances. Over the years, power has become too concentrated and system checks and balances are not functioning as they should.

Human capital and education

Another issue that the entrepreneurs highlighted was human capital.I will not delve into education reform as many of our finest, Tan Sri Azman, Tan Sri Zarinah Anwar, Tan Sri Jeffrey Cheah and Tony were part of the National Education System Evaluation Panel set up in 2011, and from what I gather, the issues are well-understood.

There is of course plenty of research that show correlation between national propensity to innovate and the right educational policies. It’s the political realities of education reform that seem to have held us back. On the wider issue of talent retention or drain itself, again much has been discussed via TalentCorp, etc, but then when I speak to the brightest overseas Malaysians, the most often cited reasons for not coming home are socio-political.

Politics–The Elephant in the Room

The elephant in the room is politics and the socio-economic structures that have evolved in tandem over the years. As we have seen over the last two general elections, the dominant political party system that we have had since independence is at risk.

While we can point to many other countries where the transition to a multi-party system happens peacefully, Malaysia has a unique and complex with a potentially toxic mix of race and religion deeply embedded in the political system, so we can’t take that for granted.

Meanwhile, crucial reform proposals by many of our cleverest people like the NEAC which presented the NEM that proposed major structural reforms, have been frozen by politics.

I won’t try to predict the consequences of continuing with the current trajectory of Malaysian politics. But I will predict that if we don’t undertake major structural reform of our socio-economy soon, we may well lose the international economics game.

Way forward

I propose that we go back in history. Not to the early, joyous, optimistic days of the initial post-Merdeka years.

Instead, let’s travel back to the devastating blow we suffered on May 13, 1969 – a day of infamy in our short history as a nation. A day that punctured our innocent idealism and introduced us to the Hobbesian nature of reality.

In the wake of that tragic and horrific blood-letting, the government declared emergency rule and set up a National Operations Council led by Tun Razak to run the country after Parliament was suspended indefinitely.

Eight months later in January 1970, Tun Razak chaired the first National Consultative Council, or NCC, meeting to examine the ethnic, political, economic and cultural sparks that provoked the May 13 episode and undermined national unity.

The NCC’s members consisted of just three ministers – Tun Dr Ismail, Tun Tan Siew Sin and Tun Sambanthan – as well as representatives from state governments, members of religious establishments, professional bodies, unions, teachers associations and political parties – a balanced representation of the population.

The NCC’s deliberations over a few months produced two extremely significant documents that guided our nation in the post-May 13 years: the New Economic Policy or NEP, and the Rukunegara.

Parliament was subsequently reinstated while the NEP spurred the growth of the government’s involvement in business with the establishment of many agencies to facilitate the rebalancing of wealth among ethnic groups and poverty eradication initiatives, with considerable success. The NEP epitomised what this conference is all about – innovation, creative disruption and inclusivity.

So, here we are today.  The NEP that was set to be a 20-year programme remains 44 years on, albeit in a much mutated form. In the meantime, the world and our place in it have changed, not least with the advent of the knowledge economy and the shift in economic power from large corporates and institutions to individual talent and entrepreneurship. The near future looks even scarier as articulated this morning by Charles Leadbeater.

Supply chains have shifted dramatically and creative disruptors flourish in economies where vested interests are not protected by governments and politics. Is our economic system substantially designed in the 1970s able to cope with the demands of today?

We all seem to know major reforms are needed – there is already much good literature on reforms from the government itself – but implementation has been trapped by realpolitik. Recent events are surely symptoms of systemic strain.

I believe that just as in the post-May 13 era, we are now facing a national challenge. Back then, the fundamental issue was national unity. Today, in the 21st century, the parameters have widened. National unity and the forging of a Malaysian identity are still very much works in progress. But added to them are a plethora of problems ranging from the ethical to the practical, and even our quest to spur innovation and creative destruction leads us to this fundamental national challenge.

We urgently need a new social and economic re-engineering programme to suit today’s challenges and for today’s Malaysians. My humble suggestion is this: the time is ripe for the setting up of a council similar to the NCC. Let’s call it the National Consultative Council 2 or NCC2.

To borrow a leaf from history, let us once again bring together the best and brightest among us Malaysians to huddle and deliberate our options. Let the NCC2 be no different from the first NCC in terms of participation from all members of our Malaysian society.

Its membership should be inclusive, its deliberations wide-ranging, and its reports succinct and practical to implement. And it should be led by someone or some people with the moral authority to bring the good and the great to the table for the sake of the nation’s new future.

My own ideas on how the NCC2 would function are still evolving. Offhand, I would suggest the setting up of six panels to deliberate on the following critical issues, namely:

1) Constitutional reforms;

2) Electoral reforms;

3) Economic reforms-affirmative action, role of government;

4) National unity and the social contract;

5) Preserving and strengthening the integrity of the federation; and

6) Institutional integrity – checks and balances between various branches of government and within government itself.

I make no apologies for adopting NCC from my late father. As I have written earlier, he was a Malaysian to the core, a public servant to the extreme definition of that. I believe his legacy of an inclusive, deliberative, and Malaysian vision and identity, is even more relevant today than it was in the dark days after May 13.

Conclusion

As I said at the start of my speech, there are adults who consider my views on current affairs as unsuitable. And they will look for 1,001 motives behind my suggestion of NCC2 instead of what I have just articulated. That is their prerogative.

Just as it is my prerogative to say we can and must opt for national – politics, economics and social – recalibration. We have to address the elephant in the room. Malaysia needs innovative and creative disruption of a national scale to spur innovation and creative disruption in our economy. Malaysia also needs innovative and creative disruption of a national scale to secure our future and realise the true potential of our great nation. We have done it before, we must do it again.

* Datuk Seri Nazir Razak is chairman of CIMB Group. This is his speech at the Khazanah Megatrends Forum in Kuala Lumpur today.