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GLOBALISATION AND ECONOMIC LIBERALISATION - IMPLICATIONS ON THE PUBLIC SERVICE.


Introduction
Globalisation is not a single phenomenon. It has become a catch-all concept to describe a range of trends and forces leading to openness, integration and interdependence of economies
Meaning Of Globalisation
The term globalisation in the economic sense can be broadly defined as a process relating to:
The integration of economies worldwide where world economy is viewed as a single market and production area with regional or sub-sectors rather than a set of national economies linked by trade and investment flows.
Cross border operations of economic activities – production, investment, financing, technology utilisation and marketing.
Optimal utilisation of global resources including competitive sourcing of inputs for achieving cost competitiveness in production, economies of scale in operations and efficient technology utilisation.
Easy movement of product and factor flows across borders involving merchandise trade, services, investment, financial capital, technology and labour.
The internationalisation of consumption – consumers are buying more foreign products.
Competition, production and markets become global in nature and goods and services become less distinguishable or identifiable with their country of origin.
At the firm level, globalisation would refer to a process in which firms configurate and coordinate their activities across national boundaries in order to maximise profit and remain competitive.
This would reflect a situation in which firms decentralise their production in different parts of the world. (e.g. production facilities may take place in country X, research and development facitlies in country Y and regional headquarters in country Z).
Liberalisation
The term trade liberalisation refers to market opening measures and they can take various forms namely:
Reduction of tariffs and non-tariff barriers;
Deregulation of domestic regulatory measures including liberalisation e.g. relaxation of investment and capital flows between countries;
Enhanced transparency of trade policies/regulations; and
Trade facilitation measures (e.g. simplification of customs procedures/practices)
Factors Behind Globalisation / Liberalisation
The economic circumstances and factors that spur globalisation and liberalisation are:
Enhanced efficiency in production made possible by increased specialisation
Improvements in transport, communication and information technology networks have led to lower cost of transactions and of doing business globally This has created new ways to organise firms at global level.
Increased production levels due to better exploitation of economies of scale made possible by the increased size of the market.
Greater worldwide acceptance and commitment to the free trade principle and market economy and dismantling of planned economies.
Easy movement of factors of production across national borders. This had facilitated firms to locate different parts of their production process in different countries.
Rapid liberalisation (dismantling and lowering of tariff/non-tariff barriers) and deregulation of trade, investment and capital flows both at national and international levels.
Implications Of Globalisation / Liberalisation
Globalisation and liberalisation processes can bring both positive and negative effects to the development of economies.
Globalisation
Positive aspects
Allows for greater realisation of potential; economies of scale of operations, technological and productivity improvements through cross-border specialisation and utilisation of global factors of production and technology.
Allows for more productive applications of capital worldwide, maximise rates of return on savings and investment which national opportunities are unable to provide.
Negative effects
Perceived loss of employment as low technology, labour intensive productions shift to low wage countries. This raises the risk of a political backlash against free trade and capital flows.
Loss of sovereignty over national objectives and priorities to multilateral, global rules; national priorities may be sidelined.
Inadequacy and unreadiness of domestic national capacity to participate actively may lead to marginalisation and inability of nationals to realise benefits of globalisation.
Liberalisation
Positive aspects
Provide a conducive economic and business climate necessary for continuous growth.
Promote a cost effective business environment, encourage competition and enhanced efficiency.
Liberalisation of trade and investment regimes as well as deregulation and privatisation of government business activities generate opportunities for expansion of trade investment and technology flows.
Obtain reciprocal market openings, by trading partners particularly in the context of multilateral, regional and bilateral negotiations.
Wider choice of goods and services and reduced prices resulting from increased international competition and specialisation.
Negative aspects
The rapid opening of markets will result in unrestricted entry of competing products. This would affect domestic industries which are not mature enough to face the onslaught of competition.
Malaysia’s Response To Globalisation / Liberalisation
The trend towards liberalisation is not only irreversible, but the pace can only intensify and accelerate. Malaysia recognises that there are benefits to be derived from liberalisation. Foreign competition can be beneficial in encouraging Malaysian companies to enchance competitiveness and improve efficiency and productivity. At the same time, it will also enable Malaysian companies to expand their operations abroad.
Malaysia’s outward looking trade and investment policies and practices including liberalisation initiatives have enabled her to effectively respond to the challenges and opportunities of an increasingly globalised economy.
These policies had resulted in expansion of exports, foreign direct investment (FDI) inflows, accelerated the industrialisation process, aided the technology transfer process and evolved Malaysia into a production base of high quality products.
Liberalisation and opening up of markets have been prescribed as the panacea to the challenges and problems resulting from globalisation. This is not always true.
Unfettered liberalisation could also adversely affect the domestic industry if they do not have the capacity to absorb it. The timing of the opening up is crucial so as to ensure that the domestic sector is sufficiently competitive to secure a fair share of the domestic market on a sustained basis. Thus, in line with the principle of gradual and progressive liberalisation, Malaysia’s liberalisation commitments will continue to take into account the interest of domestic industries to avoid any disruption or dislocation. Commitments made would be properly sequenced and phased gradually as industries in the sector in question acquired the necessary competitive strength in the international markets. Malaysia will also ensure that its liberalisation commitments take into account the level of development, the level of existing foreign participation and the governing regulatory environment in the respective sub-sectors.
Issues
In order to be in the mainstream of economic globalisation, Malaysia as well as many other developing countries find themselves faced with a number of issues and challenges. There is a need to abide by the norms and rules of the international economic system and in doing so, may have to subjugate some of these national constituency considerations.
There is the pressure to liberalise and keep open the domestic economy and thus to reform existing trade and investment required with the objectives of shedding protectionist elements. This will have implications for domestic industries which will no longer benefit from a protected domestic market. Some industries will have to undergo structural adjustments or close down thus resulting in some element of social cost. Of late, issues outside the ambits of trade per se, have surfaced to influence international trade. These are questions of environmental protection and human rights and labour standards. Often they are not being viewed objectively and linkages to trade have been made out of politically motivated reasons.
The linking of such issues to trade clearly work against developing countries that are trying to integrate into the world economy. They will continually find market access into several developed countries more restrictive as non tariff barriers are put up. Thus there is every reason for Malaysia and other developing countries to be suspicious of the motives for linking extraneous issues to trade.
Role Of Public Sector
The public sector will have to contend with many challenges arising from globalisation as these will have a bearing on how long Malaysia can sustain her economic success story. The internationalisation of the world economy will bring about increase in international competition. There will be pressure for global rules relating to market behaviour and practices for governing trade in goods and services. Domestic trade and market rules will have to conform to global rules. Some of these rules could have a negative impact on the development objectives of the country. Therefore the public sector must think and respond in a global manner. The relevant public sector agencies must effectively coordinate among themselves and contirubute proactively towards the formulation of those global rules. The public sector’s negotiating role is important to ensure there is a balance between the developmental goals of developing countries and the pressure by the economic powers to have equal treatment for their business entities operating abroad.
The public sector must also assume a proactive role to provide an instituitional framework which will help the private sector harness and upgrade its resources and capabilities for national competitive advantage and encourage economic development. Some specific measures which can be considered include:
Pro business policies and attitudes which can create the necessary cost competitive operating environment
Improve and strengthen the economic foundations to foster Malaysia’s competitiveness as a global player in industry and trade with emphasis upon human resource development, technology development and strengthening of both the physical and non-physical infrastructures.
Finally, to successfully meet the challenges of globalisation, Malaysia’s Public-Private Sector Symbiotic Relationship must continue to be strengthened and reinforced in the context of the Malaysian Incorporated Policy. Joint public and private sector consultative group is necessary to provide the necessary input into the government’s negotiating machinery.
Conclusion
Globalisation presents both challenges and opportunities. The challenge is the extent to which national economic policies and corporate strategies enable the economy to enhance productivity and competitiveness and take advantage of the opportunities and overcome problems. The key will be national competitiveness with the foundations lying in the competitiveness of individual industries. Industries will need to engineer and sustain competitive advantage in international terms. The public sector will need to create and sustain a climate for building and maintaining competitiveness.


Paper presented by
Mr M. Suppermaniam, Deputy Secretary General (Trade) Ministry of International Trade and Industry
At the Workshop On Human Resource Management
Being Organized by the Public Service Department, Malaysia
in cooperation with The Commonwealth Secretariat,
Langkawi, 12 – 14 November, 1999
( source from: http://www.jpa.gov.my/buletinjpa/bil2/globalisation_and_economic_liber.htm)