JAN 15 — Oil and Gas have served Malaysia well, but the country still has not tapped its strategic strength in this sector. This despite Malaysia enjoying unmatched natural and strategic advantages:
a) Malaysia is the leading Oil and Gas producer in the region. Our proven reserves have been augmented by major discoveries in recent years.
b) More than half the world’s annual merchant fleet tonnage passes through the Straits of Malacca, with most of it continuing into the South China Sea. Oil flows through the Straits of Malacca are three times greater than that through the Suez Canal and fifteen times greater than flow through the Panama Canal. We live alongside the most important oil shipping route in the world. Our fifteenth century ancestors may have done more to tap that advantage than we.
c) We have in Petronas one of the leading oil companies in the world.
d) We have strong trade links to Middle Eastern oil producers.
We could do much better. Consider that despite having no oil resources, Singapore is among the top three global players in trading, refining and manufacture of oil and gas equipment.
Three years ago, while Malaysia still held the OIC chairmanship, I proposed a National Strategic Plan with the vision of developing Malaysia into Asia’s Oil and Gas centre, with leading capabilities in refining, shipping, distribution, storage and downstream production.
We should develop offshore storage facilities for other producer nations with high country risk. Oil and gas exploration, extraction and production are increasingly technology driven, high value operations in themselves as oil becomes scarcer. There will be large payoffs for having our own R&D capability in exploration, extraction and production. We should specialise in energy technology, including alternative energy sources for a carbon-constrained future.
We should form partnerships along the value chain. These could include a network of agreements with Gulf producers and with major consumers to improve oil security. We could form G-to-G partnerships in Asean, provide tax incentives and craft innovative Production Sharing Contracts.
Here’s the exciting thing. For all these ventures to work we need greatly improved capabilities to finance and trade oil and gas. Given our very special geographic and strategic advantages, we should build the first spot and futures Exchange for Oil and Gas in an OIC nation.
3. Whatever the government chooses to do, it should understand that for us to get on a higher growth plane we must specialise, and we must have a government capable of providing the direction, drive and executive capability to foster that specialisation. Globalisation requires a relentless focus on competitive advantage. We need our own story.
Housing
Let’s start a programme to bring home ownership to the whole country. The construction sector creates multiplier effects in more than a hundred other industries. It provides work in everything from insurance to advertising to materials supply. Of all the national projects we could undertake, few could have such a large social as well as an economic multiplier effect.
Housing builds powerful social capital and gives substance to citizenship. A national housing project allows us to design entire communities and townships with their transportation, communications, educational and recreational infrastructure with a strong set of standards and social objectives. It lets us plan the housing stock to cater to the lifecycle of home ownership, with a good mix of options for different localities and life-cycle requirements. It is a way to grow racial harmony, build integrated schools, and help the poor without creating a crutch.
Let’s commit ourselves to having each and every Malaysian family own their own home. This vision is a radical challenge to the nation to do better.
It will require extraordinary improvements in our ability to design, construct and finance housing projects. It will require the setting up of a statutory board to oversee housing development, administration and management. As land governed by the State powers, the States will have to implement these projects. This will require, and hopefully force, improved coordination between the Federal and State governments, especially now that we might no longer expect that the same party is in power in both places.
Financing for this investment could come from modifications to EPF, with matched contributions from the government towards the value of the property. Because it comes out of savings, this spending would be non-inflationary. I can think of few better ways to get the economy humming again, give our citizens a focal point of hope and pride, and weave a safety net that also encourages savings and enterprise.
Public sector reform
We cannot wait till the crisis blows over to tackle the public delivery system head on. This is because we will need an upgraded public service just to implement such large public programmes successfully.
The need for improved governance is greater, not less, in challenging economic times. When Franklin Delano Roosevelt implemented the New Deal to push America out of the Great Depression, many feared that this would present a huge opportunity for graft. Confounding these expectations, the New Deal programmes were implemented with unprecedented transparency. FDR did this by building oversight into the implementation of his rescue programme.
Similarly, the two programmes I have suggested would come to nought if they were derailed by the corrupt practices that have become the norm in this country. Instead of rescuing our economy they would become millstones around our neck. As part of the project management of these programmes we should set up powerful, independent divisions devoted to investigating complaints of fraud.
Today the role of the public sector is a lot more complex than anyone could have imagined even a decade ago. A “public delivery system” that was designed for the challenges of the 1950’s cannot possibly cope with the complex demands of the globalised 21st.
The current crisis propagated worldwide in internet time as regulators scrambled to catch up. Government now needs to be smarter, tougher and more responsive than before to engage on equal footing with business.
We need leadership to change the operating model of the civil service from last century’s centralised planning approach, driven by budgetary plans, to a model of government as facilitator, aggregator and convener of business. Government that targets economic outcomes rather than accounting quotas.
We need to demand as much talent and organisational ability in our public service as the private sector does of its own people. Today the quality government is a core component of national competitiveness. However there is nothing strange about the expectation that the civil service should be a high performing organisation led by an intellectual elite. It is how the Malayan Civil Service used to operate.
Many of us remember it.
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