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Dynamos of The Future
The Competitive Advantage
Key Technology
Last Update:
10 May, 2000
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| The Edge : March 13, 2000 |
K - E C O N O M Y
The competitive advantage
We continue our series on the knowledge economy, presented with the cooperation of the
National Information Technology Council (NITC) and MIMOS Bhd By
Dr Wan Latifah Wan Mohamed |
Increasing functional
disaggregation is one key characteristic of the new economy. In rethinking the new
taxonomy idea put forward in my last article, sectoral analysis in the manufacturing,
services or agricultural sectors is becoming almost irrelevant as the merging and blurring
of sectors are the sources of value, and value generated transcends all sectors.
Globally-distributed production and democratised means of research, design and
distribution are chipping away at the traditional advantage of being in the P-economy. The
experience in the US suggests that P-work (production work) produces less income than
K-work (knowledge work), both at the group and individual levels. The following
observations about P-work are made for developing countries — recipients of the
outsourced production work of the advanced economies, in particular the US:
• There exists a division of income, both intra- and inter-industry, which favours
K-workers. During times of high performance, total P-jobs often grow, but that of the
K-group (an extreme case is the computer industry) is increasingly skewed;
• Foreign manufacturers continue to increasingly manufacture “intelligent”
(embodied K) P-equipment, thereby reducing skill and labour requirement overtime, while at
the same time, increasing profits.
• In situations where the workforce has a strong bargaining position, real P-wages
may be sticky and total real P-earnings may stay high but that is often detrimental to the
performance of the industries concerned;
• The reverse may also be true — high-performance (defined by value-added) is
often accompanied by limited growth of P-hours, and of the P-share of the earnings pie;
and
• In a competitive international environment, the most competitive P-country with
capacity, sets the ceiling (P-cost plus shipping disadvantages) for other countries’
P-groups.
Now, some brain-teasers. Will exports of palm oil be more competitive or fetch more income
in the near future? Will production workers enjoy as much income in the future compared
with those in the Philippines? Who will be their competitors? Should the production of
palm oil be outsourced? Or should it be designed in such a way it becomes more of K-work,
to reap more income? If so, how do we
do it?
We will concentrate on the last question. One way is to conduct more research on palm oil
usage. However, a more innovative way would be to combine biotechnology research on
transgenic seeds, which can grow in any weather condition, with the medical usage of palm
oil. Networking with an international biotechnology research centre is necessary for
technology transfer and purchase, as well as for exchange of human resource for skill
building. A commercialisation centre should also be incorporated in this concept. Another
strategy is to provide information on content and usage on every bottle of palm oil.
Will our star performer — the electronics industry — stay competitive and earn
more foreign exchange in the near future? Unless we do something, the answer is most
likely “no”. Where do we stand in the electronics industry now? Statistics show
that Malaysia had the lowest production and market capacity for 1998; South Korea’s
figures were double those of ours; the country also produces high-end components, as does
Japan.
The 2001 figures for Malaysia shows little growth from that for 1998, indicating that
there is no increase in new industries that consume components and electronics. Only Japan
shows some growth.
The above are examples of our traditional advantage bundles that are becoming less
attractive, due to functional disaggregation and globally-distributed production —
dividing P-and K-work, wages and earnings. Hence, the competition stems from two sources:
• Low-cost locales (low-wage and low-resource cost) where production of physical
goods will be located; and
• High-technology production/exports such as Japan.
The third source of competition are the now low-cost locales such as China, the
Philippines or Thailand. With the increasing use of sophisticated, “skill-substituting”
technology, they could erase Malaysia’s traditional competitive advantage should our
strategy remain production-based. (China has now about seven ICT projects, which it calls
Golden projects).
Malaysia is also vulnerable in having relatively higher wages and technology and still
remaining in the P-class (or group of income).
The principal differentiators of manufacturing competitiveness are wages and
technology-intensive manufacturing. Our situation seems to show that we are torn between
the two. Is it so difficult to have both, combined, becoming the competitive advantage?
Dr Wan Latifah Wan Mohamed
is with NITC/Mimos Bhd |
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