Economic management: Lessons Pakistan Could Learn from Malaysia
Pakistan’s premier completed his official visit to Malaysia this month. Both sides, as part of the joint press statement, acknowledged their close cooperation since Malaysia’s independence. Future exchange visits at several levels of government have been agreed upon to further expand bilateral ties. Expansion of trade was discussed in products such as palm oil, agriculture items, processed food, halal products, and automotive parts.
Beyond trade it was also highlighted that investment cooperation could be deepened in sectors such as energy, science and technology, and telecommunication. Tenaga Nasional Berhad – a Malaysian electric power company - has indicated its intent to conduct business in Pakistan including in renewable energy.
While the above mentioned sounds promising, the fact remains that despite a free trade agreement between the two countries and the Malaysia-Pakistan Closer Economic Partnership Agreement, trade volumes remain low. During the 2018 fiscal year Pakistan exports were $153 million while imports from Malaysia stood at $942 million. Malaysia, being a more competitive economy and its ability to offer a more diversified set of exports, has secured a balance of trade in its favour.
There is also a case to re-imagine the existing FTA between both countries. Perhaps deeper preferences may be allowed for the promotion of ‘trade in services’ and investment. For example, according to the Lahore Chamber of Commerce and Industries, joint ventures in areas such as livestock and dairy, food processing, energy, chemicals, halal products, and light engineering could create a win-win scenario for businessmen on both sides. There are some encouraging signs already, as compared to the low levels seen during previous years, net foreign direct investment flows from Malaysia stood at $155 million during the 2018 fiscal year.
While the joint statement emphasizes the need to deepen cultural ties, and in the same line proposes a partial visa abolition agreement, it remains a matter of concern why Pakistan cannot export high-end services to Malaysia. However, the prospects are encouraging as the Pakistani workforce in the Malaysian market has found it easier to navigate its way (vis-à-vis other countries) and contribute over $1.5 billion in remittances during 2018. The integration of Pakistani workers in the Malaysian services sector is expected to improve once higher education exchange programs for faculty and students expand.
Beyond trade, investment cooperation between Pakistan and Malaysia could be deepened in sectors such as energy, science and technology, and telecommunication.
Dr. Vaqar Ahmed
A related area of interest for both countries has been bilateral defence cooperation. Both sides agreed to work closely at the Langkawi International Maritime and Aerospace Exhibition (LIMA) and Defence Expo IDEAS2018. More avenues of cooperation are expected to be discussed at the 13th Joint Committee on Defence Cooperation, which will convene in Kuala Lumpur next year.
Perhaps going beyond the existing channels of economic cooperation - trade, investment, remittances and defence - one would also like to ask what Pakistan can learn from the success of Malaysia’s development model.
To start with, Imran Khan’s task force on institutional reforms could borrow lessons from Malaysia’s civil service reform effort. Also, key lessons could be drawn from the spatial planning system which looks at the overall planning and development of regions through federal, state and local administrative tiers. This system is rooted in national-level development plans. However, having a spatial focus in social policies allows for creating jobs, mitigating inequalities and ensuring basic public services in regions which are economically slow. Planning per se is not enough and therefore Pakistan also needs to learn how, through a system of robust monitoring and evaluation, Malaysia ensures that medium-term development plans get implemented in a timely and cost-efficient manner.
Second, Pakistan could certainly learn how Malaysia successfully put in place and practiced policies which could ensure technology transfer in high-end industrial manufacturing activities. A large segment of the country’s electronics industry rose from policies by Malaysia’s Ministry of International Trade and Investment.
Third, Khan has now approved the establishment of a state-owned supra enterprise 'Sarmaya Pakistan Company' to revive 193 loss-making public sector entities. Malaysia in this regard has its own model: Khazanah Nasional Berhad, a strategic state investment fund that is entrusted to manage the government’s commercial assets and to undertake investments on its behalf. As this entity has been around since 1994, Pakistan’s economic managers could benefit from the experience.
Finally, there is much discussion in government circles about the promotion of tourism in Pakistan. Here again Malaysia offers a key lesson. During the initial phases of tourism development it is the nationals or diaspora who can most easily be attracted to explore their roots. The long-term development of tourist resorts requires detailed planning – an aspect which Pakistan’s still nascent tourism industry may like to learn.
– Dr. Vaqar Ahmed is joint executive director of the Sustainable Development Policy Institute, Pakistan. His book ‘Pakistan’s Agenda for Economic Reforms’ was recently published by the Oxford University Press.