Chapter 3 Toward Continuous Competitiveness: Targeting Malaysian Information Technology (IT) Output ‐ Macro Perspective

Abstract

In the Theory of Continuous Competitiveness (CC) developed in Chapter 1, we specified two sufficient conditions, one of which, PSPG Ratio, is found to integrate IMP2 [Industrial Master Plan 2] strategic thrusts 1 and 2. Customized hitech products (PS: Performance‐Specific products) are first demanded in small quantities in Country XYZ. In a few months, as demand increases, the PS products will be offered as PG (Performance‐ General) products of mass manufacture in Countries LMN, PQR, etc. The PSPG Ratio calibrates CC. To achieve CC, Malaysia has to decide whether, emulating the experience of developed countries, the share of manufacturing in GDP should be 30%, instead of the 38.4% projected for the year 2005. Similarly, Malaysia has to decide whether the Services Sector should be 48.4% of GDP as it is projected to be in the year 2005. Even Don Tapscott who swears by the inexorable convergence of what we have called 3C (computer, communication, content) industries, says that Services are not the source of income: “The planet, and even the Western World, still relies on agricultural and industrial production for the creation of wealth and the meeting of basic human needs. You can't eat or live on information.” If nearly half of Malaysian GDP is going to be not the means of production, but the means of consumption, it behooves us to find a viable means of production. We examine Information Technology (IT) as a candidate means of production. IT Industry is half Products and half Services. What should be the nature and magnitude of Malaysian IT products? If we keep the manufacturing share of GDP at the norm of 30% experienced by developed countries, that would release 8.4 percentage points of GDP from the current projection for the year 2005. Similarly, if we reduce the GDP share of Malaysian Services Sector to 40%, that would release another 8.4 percentage points. If we assign the former to IT Products, and the latter to IT Services, each should have a value of RM 36.2076 million in current prices in the year 2005. The RM 36.207 million in IT Products should generate RM 128.4 billion in IT exports in the year 2005, or each RM worth of IT products should generate RM 3.55 in exports. If domestic consumption is to be a third as much as the exports, each RM of IT products should generate RM 1.18 for domestic consumption. Each RM of IT should thus produce (3.55 + 1.18=) RM 4.73 for exports and domestic consumption. IT is also expected to be the engine of development. Based on the growth of GDP between 1995 and 2005 in the IMP2, the IT Sector should generate 50 sens in the rest of the economy for each RM of IT. Thus, each RM in IT Products should generate (4.73 + 0.50=( RM 5.23 (rounded to RM 5.00) in the year 2005. We are talking of new machine‐producing (cloning) IT machines worth 60% of 1995 Malaysian exports of semi‐conductors, computers/peripherals, and consumer electronics as the necessary stock of IT capital in the year 2005, each unit of which is to produce five times its value in output in the year, for a start.