The Importance of Economic Competitiveness of Malaysia and Hong Kong - Essay Example

?Malaysia and Hong Kong Table of Contents 0.A Case Study Analysis: Hong Kong 3 1.Government’s Role in Enhancing Economic Competitiveness 3 2.Role of Human Capital in Developing Economic Competitiveness 4 1.3.SWOT Analysis of Hong Kong’s Human Capital 7 1.4.Key Characteristics of a Knowledge-Based Economy According to APEC 9 1.5.Recommendations 10 2.0.A Case Study Analysis: Malaysia 11 2.1.Causes of the Financial Crisis in Malaysian Economy: 1998 and 2008 11 2.2 Governmental Measures Undertaken 12 2.3 Pros & Cons of the Measures Adapted 13 2.4 The Present Scenario: Economic and Social Context 14 References 15 Bibliography 17 1.0. A Case Study Analysis: Hong Kong 1.1. Government’s Role in Enhancing Economic Competitiveness Various economists have discussed the importance of economic competitiveness and also suggested several measures to attain the objectives to develop knowledge-based society. In this concern, majority of the economists have developed their ideas focusing on the educational criterion of the economy to promote knowledge-based society. Notably, the governmental bodies can play a significant role in accumulating the public sector with the private sector in this regard and promote the educational background of the economy. This shall not only stimulate the economic growth with lower rate of unemployment, but shall also rejuvenate the economic competitiveness (Wilson, J. P., “Human Resource Development: Learning & Training for Individuals & Organizations”). The fact can be well identified in the recent economic development of Hong Kong. Since the initiation of the 21st century several analysts have been observing the trend of Hong Kong in terms of its Human Resources. Mr. Tung Chee-Hwa played a major role in stimulating the need of knowledge-based society in order to enhance the affectivity of the Human Resources of Hong Kong. Mr. Tung was designated as the Chief Executive of the Hong Kong Special Administrative Region (HKSAR). His ‘Policy Addresses’, for consecutive few years, were based on the requirements and the importance of a knowledge-based society. For instance, his 2000 Policy Address outlined the series of measures to be customized by the government in order to improve the infrastructure of the economy. This in turn shall facilitate its objective of gaining the advantages of a knowledge-based society. It is worth mentioning that Mr. Tung’s initiation to develop the economy into an innovative and knowledge-based society made it a prior concern for the governmental bodies until 2003. Stating precisely, as suggested by Mr. Tung, the objective could be attained effectively providing extra strength to the four chiefly categorized economic pillars, i.e. logistics, finance, producer services and tourism sector. Furthermore, to ensure these strategies the governmental framework initiated to push value added industries. Hence, the governmental supervision played a crucial role in enhancing Hong Kong’s Human Resources and in turn stipulating the economic competitiveness (Wong, G., “Taking stock of Hong Kong's Human Resources”). 1.2. Role of Human Capital in Developing Economic Competitiveness According to the Organization for Economic Co-operation and Development (OECD), human capital is defined as “The knowledge, skills, competencies and attributes embodied in individuals that facilitate the creation of personal, social, and economic well-being” (OECD, “The Well-being of Nations: The Role of Human and Social Capital”). Apparently identifiable from the provided definition, human capital is quite important to reward stability and competency to the economy irrespective of its present status. As further communicated by the OECD report, efficiency in terms of human capital can be attained through an enhanced education and training system to improve the knowledge base of the society (OECD, “The Well-being of Nations: The Role of Human and Social Capital”). It is in this context that the concept of knowledge-based economy is gaining a growing importance in the modern era. According to the economists, the development of the human capital is interrelated with the aspect of political, institutional and legal arrangements of an economy which in turn influences its social capital. These attributes of an economy further influences its natural capital with the assistance of physical capital and intangible knowledge. All these features in turn stimulate the GDP growth of the economy and thus play a crucial role in signifying the economic growth (OECD, “The Well-being of Nations: The Role of Human and Social Capital”). Notably, the significance of human capital in Hong Kong’s perspective can be well recognized with reference to its weaknesses and opportunities in the global market. For instance, in the late 20th century and the early 21st century, the economy was recorded to witness certain major challenges in terms of poor technological base and disparity in human resources. This acted as a fuel to rejuvenate the necessity of effective human capital (Wong, G., “Taking stock of Hong Kong's Human Resources”). Even in the current scenario the economy is witnessing certain crucial limitations such as issues related to housing sector and wealth gap (Consulate General of Switzerland in Hong Kong, “Annual Economic report: Hong Kong 2010 Update”). These challenges faced by the economy are termed to be quite significant in determining its growth. However, these obstacles can be eradicated by improving the potential of human capital present within the economy. Through a well-defined educational system the country shall be able to increase the employment ratio of the economic population which in turn shall minimize the risk of wealth gap rewarding growth to the economy. 1.3. SWOT Analysis of Hong Kong’s Human Capital Hong Kong’s human resources encompass certain strengths, weaknesses, opportunities and threats. The trends in the current economic perspective are depicted in the following table. Strengths Weaknesses Unemployment rate was recorded to fall by 2.2% for the knowledge workers in the first quarter of 2010 The percentage of payroll is increasing as recorded in the first quarter of 2010 Inflation rate is less than Mainland China (Hong Kong SAR Government, “Third Quarter Economic Report 2010”) Population is constantly rising with a density of almost 6,339 people/sq.km (Bureau of East Asian and Pacific Affairs, “Profile”) The wealth gap is huge (BDO, “2010/11 Hong Kong Budget Highlights”) Opportunities Threats Employment rate is likely to increase in the current fiscal year due to more than 50% of employers agreed to raise their staff numbers (Hong Kong SAR Government, “Third Quarter Economic Report 2010”). The 2010/2011 budget is focused on promoting the knowledge-based industries (Tax & Business Advisory Division, “Synopsis Of Hong Kong 2010/11 Budget”) Internet subsidies and other educational subsidies to poor families (BDO, “2010/11 Hong Kong Budget Highlights”) As recorded in September 2010, the Inflation rate is increasing The budget is likely to incur deficit which would in turn promote cost reduction strategies to be adhered by the government (Tax & Business Advisory Division, “Synopsis Of Hong Kong 2010/11 Budget”) 1.4. Key Characteristics of a Knowledge-Based Economy According to APEC After the concept of Knowledge-Based Economy (KBE) by Organization for Economic Co-operation and Development (OECD), the concept was further elaborated by Asia-Pacific Economic Cooperation (APEC). In this regard, APEC contributed certain key characteristics of a KBE such as: The main drivers of employment, growth, and wealth creation in a KBE are its production, allocation and efficient utilization of knowledge A KBE comprises of the virtues of innovation, education and R&D which perpetually highlights the significance of knowledge in every sector of the economy KBE represents a Modern Economy which to an extent is not stagnant In a KBE all sectors are knowledge-intensive (Leung, “Statistics to measure the knowledge-based economy: The case of Hong Kong, China”). 1.5. Recommendations With reference to the above discussion, it is quite apparent that Government’s role in stimulating the aspect of economic competitiveness is inevitable in the current context. In this regard the government of Hong Kong has adapted numerous strategies in order to maintain a constant growth as a KBE. However, the bodies should also provide significant considerations to the limitations faced by the economy such as wealth gap, growing population and increasing inflationary rates. As most of these issues shall directly hamper the economic interest to develop as a KBE, the governmental rules should ensure that these limitations are eradicated with a minimal effect on the aspect of human capital. Thereby, the government can focus on long-term policies to promote higher education within the economy. Accordingly, it should rejuvenate its knowledge-based sectors in order to reward employment to the increasing population. 2.0. A Case Study Analysis: Malaysia Besides other economies, the Malaysian economy was also affected twice by the financial crisis, once occurring in 1997-98 and the next during 2008. Both these occurrences had a strong impact on the developing economy influencing its political, economical and social factors. 2.1. Causes of the Financial Crisis in Malaysian Economy: 1998 and 2008 The Malaysian economy is recorded to be highly depended on the foreign portfolio creating an inter-depended relationship between the economic factors, i.e. the stock market and the forex market. Therefore, any kind of fluctuation arising in the external environment of the economy affected its forex market which in turn influenced the stock market. This characteristic of the economy is noted as the prime factor for causing the financial crisis in 1997-98 (Hasan, “The 1997-98 Financial Crisis in Malaysia: Causes, Response, and Results”). Realizing the fact, the Malaysian government since then has been making efforts to develop an independent economy by relying on its major industrial sectors such as agriculture, tourism and others. However, the economy was still recorded to be depended on the international market in terms of export. During the financial crisis in 2008, this fact became one of the major causes to lead the financial crisis in Malaysia. This not only affected its financial well-being but influenced the social and political aspects as well (Khoon & Mah-Hui, “The Impact of the Global Financial Crisis: A Case of Malaysia”). 2.2 Governmental Measures Undertaken In order to eradicate the consequences of the financial crisis and overcome the challenges, the Malaysian government undertook various precautionary measures during the crisis of 1997 and that of 2008. For instance, the government’s intervention as a response to the financial crisis during 1997 prescribed certain strict measures to improve the monetary system of the economy, such as restricting the foreign exchange by banks. Furthermore, the government also replaced its monetary policies with the Keynesian recommendations in spite of targeting the assistance of International Monetary Fund (IMF) following the path adapted by other similar economies. These measures, including the interest rate fluctuations within the economy caused numerous issues affecting the financial health of the economy which in turn also affected its socio-economic culture at large (Hasan, “The 1997-98 Financial Crisis in Malaysia: Causes, Response, and Results”). Before the occurrence of the second financial crisis in 2008, the major structural deficiencies of the economy were mostly eradicated. However, the economy witnessed major consequences during the crisis which forced the government to adopt certain measures. The measures were, however, concentric on the financial health of the economy to an extent. For instance, the government decided to allocate subsidies to the most reliable projects with an immediate return on investment (ROI). The measures further intended to control the domestic demand through public sector expenditures. On the whole, the Malaysian government focused on a ‘stimulus package’ stating several measures aimed at eradicating the ill-effects of the financial crisis during that period (Khoon & Mah-Hui, “The Impact of the Global Financial Crisis: A Case of Malaysia”). 2.3 Pros & Cons of the Measures Adapted In both the cases, the concentration was provided to the financial aspect of the economy in order to overcome the challenges raised by the financial crises. It is worth mentioning that the stretching of monetary policies during 1997 influenced the socio-economic factors of the economy which in turn affected the political environment largely. Accordingly, the strategies employed during the financial crisis in 2008 focused on stimulating the private interventions in the economy, reforming the government expenditure norms. As the prime focus of the government during the period was to enhance the domestic consumption, it also influenced the socio-economic environment and the financial health of the economy at large. 2.4 The Present Scenario: Economic and Social Context With reference to the above discussion, it is quite apparent that the governmental reforms considered during both the financial crises, were mostly concentrated on the financial aspect of the economy. In other words, the economic regimes neglected the structural flaws active in the internal environment of the economy. However, the current status of the Malaysian economy is largely based on its domestic market rather than the international market. This rewards the economy an independent outlook to stimulate its growth. Presently, the economy’s population growth is recorded to be almost 2% with a literacy rate of 88.7%. Accordingly, the economic growth recorded in the fiscal year 2010 was 7.1% which was a steep rise from the previous years. On the whole, the current economic facts of Malaysia depict a positive outlook both in terms of social and economic aspects (CIA, “Malaysia”). In a nutshell, it can be stated that the future prospects of the economy is quite stable with a rapid growth and positive social stance. But the country still requires focusing on its structural weaknesses such as increasing inflationary rates and growing population. Furthermore, it is highly depended on the imports and exports which should also be considered by the Malaysian government to ensure a positive performance in the future. References Bureau of East Asian and Pacific Affairs. “Profile”. February 18, 2011. Background Note: Hong Kong, 2010. BDO. “2010/11 Hong Kong Budget Highlights”. February 18, 2011. Caring Society, 2010. CIA. “Malaysia”. February 18, 2011. The World Fact Book, 2010. Consulate General of Switzerland in Hong Kong. “Annual Economic Report: Hong Kong 2010 Update”. February 18, 2011. Hong Kong, 2010. Hasan, Zubair. “The 1997-98 Financial Crisis in Malaysia: Causes, Response, and Results”. February 18, 2011. International Islamic University of Malaysia, 2002. Hong Kong SAR Government, “Third Quarter Economic Report 2010”. February 18, 2011. Economic performance in 2010 Q3, 2010 Khoon, Goh Soo. & Mah-Hui, Michael Lim. “The Impact of the Global Financial Crisis: A Case of Malaysia”. February 18, 2011. Third World Network, 2010. Leung, Stephen. K. C. “Statistics To Measure The Knowledge-Based Economy: The Case Of Hong Kong, China”. February 18, 2011. 2004 Asia Pacific Technical Meeting on Information and Communication Technology (ICT) Statistics, 2004. OECD. The Well-being of Nations: The Role of Human and Social Capital OECD Publishing, 2001. Tax & Business Advisory Division. “Synopsis of Hong Kong 2010/11 Budget”. February, 18, 2011. Proposed Changes in Government Revenue and Measures, 2010. Wong, Gilbert. Taking Stock of Hong Kong's Human Resources The University of Hong Kong, 2003. Wilson, John. P. Human Resource Development: Learning & Training for Individuals & Organizations Kogan Page Publishers, 2005. Bibliography Abdelal, Rawi. & Alfaro, Laura. Malaysia: Capital and Control Harvard Business School, 2003. Read More