What does your corporation do? Who does it belong to?
This is a state-owned corporation, but we have our own board of executives, which makes us independent from other public institutions. Our mission is to improve our country’s productivity and competitiveness.
Do you work only with the state-owned or also with the private sector?
We work with both sectors. We measure their productivity. Every year we make a report. The World Bank’s Doing Business Index reveals that it has become easier to open one’s own business in Malaysia: actually one needs merely a day to do it. For example in 2012, we were 14th in this ranking (Ukraine – 137th). Sometimes this breakthrough requires a year or two, although, of course, the rating by itself is not important.
You mentioned private companies. Do they need to pay for your services?
There are two ways. Firstly, there is direct cooperation (consultations, trainings, etc.); these services are rendered for a small fee, but in a year we make about $3 million. Secondly, there is a wide range of free services. For example, we make productivity diagnostics for free.
Pavel Sheremeta, a Ukrainian who have worked in Malaysia for years, says that your Prime Minister travels the world and picks up the stories of success in different countries. Is it your mission too?
Yes, it is. For example, we study indices of business efficiency and analyze for what reason a certain country has made its way to the top. Then we report to our Prime Minister. In this way we set examples and try to live up to them. It is important to be motivated by these stories of success, though it is not always possible to replicate them. For example, Germany’s practices may not work for you: the environment, the level of growth, etc. are different. There are specifics, too: unique features which make a certain country a success.
What global rankings are the most important? What are your benchmarks?
There are three basic reports which we monitor, and each one of them has its unique importance. First of all, there is the World Bank’s Doing Business: an important indicator of how easy this is for the business to work in your country. It helps the governments decide what regulations to improve and what processes to simplify. It shows how you look compared to other countries. It impacts the influx of foreign investments in the country, and investments account for the economic growth. Over many years, Malaysia’s economy has grown at least by 5% each year (for comparison, Ukraine has completed the year 2012 with 0.2% growth – LB.ua).
These are impressive figures for Europe. But not for Asia. China grows by 10%, and many other countries by 7-8%. Philippines have grown by 7%.
It’s true. In other words, 4-6% is not the limit. We want to improve our business conditions to attract bigger foreign investments. Investments accelerate the growth of the economy and create jobs. We have basically got rid of unemployment in Malaysia: our unemployment rate is less than 3% (in Ukraine, according to World Labor Organization, unemployment was 7.5% of active working force in 2012 – LB.ua).
This is a natural unemployment level.
True. Of course, we need workers, and accept migrants from Bangladesh, Indonesia, Pakistan, and Myanmar. Another need is to make our industries fully automatic. This will increase our global competitiveness, and this again depends on investments.
The second important index is the World Economic Forum’s Global Competitiveness Report (currently, Malaysia is on the 25th and Ukraine on the 73rd positions – LB.ua). This ranking helps us assess our competitiveness compared to other countries. This index is based mainly on other people’s appreciation of our country, and it also shows what businessmen in Malaysia think of Malaysia. Very often the results of this ranking depend on the economic situation. Sometimes businessmen give favorable comments, and sometimes, not so much. But this is an important indicator for the authorities to give them the reaction to the reforms: whether there is more need of propaganda, explanations, or simple information for the public. Sometimes the reports are negative because businessmen do not know what their government is doing, and it may be enough to do some PR work, print brochures, or outline the government’s position in other way to change this attitude. For example, we have just announced a competition among journalists in Malaysia: they write about the country’s competitiveness and we give prizes to the best of these stories. This contest has two goals. Firstly, the journalists begin to know the subject – Malaysia’s place in the world – better. Secondly, the public receives the information. The contest will be over in September; then we will collect all articles and publish them in a single volume.
The third important index is the World Competitiveness Yearbook by the International Institute for Management Development (in 2013, Ukraine had 49th position and Malaysia – 15th position in this index – LB.ua). This is a very important ranking for us, because its 70% are based on quality indicators. We receive a huge pile of data, which helps us compare Malaysia to other countries. This is important for us also because many people are skeptical of indices: they say indices are judgmental and subjective. But here we show them figures and facts, and it’s difficult to argue about them.
Many economists have criticized Doing Business. What’s your opinion?
This ranking shows the situation in 185 states. Some of these countries criticize the index, but these are usually unhappy about their positions in it. That’s why, in my opinion, some economists are critical about it. But as far as I know, the World Bank isn’t going to sweep this ranking away, because it is very influential, and the decision was made to go on with its publication. The new edition is expected in October, and there will be changes in it. For example, this year the World Bank will not evaluate job occupancy; it was replaced by network access. This is important for many countries, because infrastructure is important for business development.
What region of the world is growing fastest?
I think Asia, especially Southeastern Asia, has the biggest growth potential. Those regions which already have a high level of development cannot grow as fast as Asia. This is simple mathematics. Southeast Asia has high potential. While per capita income in Asian countries seldom exceeds $11 thousand a year, it’s five to seven times more in the USA. So we have a space to grow. Another reason is our population. There are a lot of people living in China or India, and even a small income growth stimulates domestic consumption and boosts the economy. Countries from all over the world want to enter these markets. The situation is different in Malaysia, Indonesia or Singapore. These countries are much smaller, so we have to be export-oriented rather than work for our domestic market. The world is our market that is why we have to be more competitive.
Is Malaysia interested in Ukraine’s market or investing in Ukraine’s economy?
So far, we know too little about Ukraine. When I told my friends I was invited for an event in Ukraine, they asked: Where is it? Of all former Soviet countries, we know only Kazakhstan and even began to trade with this country.
But one of my acquaintances recalled that his family studied in Ukraine during Soviet times. Many Malaysians studied here, and you could have continued your educational services, but you are losing this opportunity to Moscow. Many Malaysians go there instead of Kyiv. You also have rich, compelling history, and many Malaysians could have come here as tourists, but there is no direct flight, and there are other problems, too. For example, I had to fly here via Europe (there is also a flight via the Arab Emirates), and I had to apply for a visa. But first of all, you should advertise yourself more in Asia, so that people become interested in you. You should promote Ukraine.