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Categories
| Slippery climb up the value chain |
| Written by Abd Ghani Hamat | |||
| Sunday, 21 June 2009 23:31 | |||
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Talk of such industrial progression is not new however. The realisation of the need to move up the chain easily preceded the plan for the national car project more than two decades ago. The country knew then that at some point in the future its screwdriver activities would have to make way for higher value activities, such as those in the design and prototyping shops. Malaysia could not sustain the cost advantage of its factories and yet aspire to a higher per capita income. Nonetheless, it wasn't until the Second Industrial Master Plan (IMP2: 1996-2005) that a comprehensive road map for moving up the chain was drawn up. And now, with the global economic crisis threatening to alter the world trade scene, calls for the country to move up the chain begin to be heard again. To be sure, the calls never did go away, but now there's a note of urgency in the tone. Rightly though, by now we should be talking more about fine-tuning our efforts. The time for expounding the virtues of moving up the chain is past; the urgency should be on identifying the causes of our slow progress and putting in place measures to overcome or circumvent the impediments. We should be looking at, for instance, how we have fared in the transfer of technology. Have those transfer agreements translated into real benefits for Malaysian companies? Or have we been deluding ourselves about the generosity of our foreign partners in the transfer of technology? Indeed, Malaysia might have done better had it given priority to developing its own industrial tools and machines industry. Clearly our slow progress in moving up the value chain points to there being plenty of issues to be resolved. But resolve them we must, or forever we would be talking about the need to move up the chain and never really coming round to doing it. We have to dissect the problems and come up with answers fast. The IMP2 identified eight industry groups involving 22 industrial clusters. What has happened to the clusters and the linkages that were meant to benefit the industries? Moving up the chain means being able to configure business processes to derive cost advantages and benefit from product differentiation. But have we been so fixated with moving up the manufacturing value chain that we have forgotten about the generic value chain? A mastery of the generic value chain — the sequence of activities from inbound logistics and operations to marketing, sales and service — is a prerequisite of viable business. Equally important to a company's performance are its infrastructure (control system and company culture), human resource management (recruitment, training compensation) and technology to support value-creating activities. Another area to look at is the linkages between value-chain activities. A firm's success doesn't rely solely on its value chain but is also linked to its supplier value chain, channel value chain and customer value chain. Have we created a conducive environment for greater vertical integration? Are there dislocations in the forward linkages? But then again the problems may lie outside the manufacturing chain altogether. The failure of the national car vendor programme, for instance, can be attributed largely to the suppression of open competition, which in turn stifled a quest for innovation and originality. While many people would argue that government hand had been necessary to crank the vendor firms to life, the secure demand by Proton had been injurious not only to the firms but to Proton itself in the long run. Perhaps, we also need to go back to school, literally, for a solution. To move up the value chain we need to change the mindset. The emphasis in education should not be on scoring 10As or 15As; it should be on learning how to think, come up with ideas and solutions, and converting them into practical use. It's about luring pupils into industrial design and artificial intelligence laboratories as much as to vocational schools. It's about an education system that instils dynamism and productive instincts to create and compete.
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