Four economic triangles Part 1: Examining “human” and “science & technology”

四个经济三角（上）检视人力与科学实力

Healthy tree needs strong roots. Similarly, healthy economy also needs strong roots or foundations. Four important economic foundations are (i) human, (ii) science and technology (ST), (iii) capital, and (iv) system. Individually, human, ST and capital are economic inputs while system acts as catalyst to utilize and integrate these three inputs. This framework is conceptualized as four inter-related triangles as in Figure 1.

Figure 1: The Four Economic Triangles

(1) Human

Generally, “human” equal to labor (quantity aspect) and is merely one types of production input. However, it is best to also view “human” as source of productivity (quality aspect). Thus, its strength is measured by labor participation rate (quantity), total factor productivity (quality) and Gross Domestic Product (GDP) per person employed (quality).

Based on Table 1, Malaysia Gross Domestic Product per person employed (GDP ppe) for 2012 is US$24,857. This amount is more than Thailand, Indonesia and Philippines. Together with Malaysia, these four countries are formally known as “Asian Tigers” for their fast developing economies. Malaysia’s GDP ppe is also higher than the celebrated BRICS economies of Brazil, Russia, India, China and South Africa. However, given consideration of the size of population of BRICS countries and Indonesia, their economies are naturally bias towards labor-intensive which are less productive compare to capital-intensive production.

To progress, we should look forward and benchmark ourselves with the better ones. Thus, where is Malaysia as compared to the developed countries? Malaysia’s GDP ppe level in 2012 has been achieved by Singapore since 1987, which is 25 years ago! Japan, Germany, France, Australia, United Kingdom, United States, Spain and Netherlands have achieved this level since the very first year of data available. South Korea managed to get to Malaysia’s level since 1994. All these indicated that two things. First, Malaysia still has a long way to go to reach those productivity levels of developed nations. Second, Malaysia was on par with Singapore and South Korea previously but is now far behind. Malaysia does improve its productivity but still relatively too slow due to absent of fair competition and meritocracy.

Table 1: Human Factor Comparison

Country	GDP ppe (2012)	TFP (2000)	LPR (%) (2012)	Remarks for GDP ppe
Selected Asian countries
Malaysia	24,857	0.527	62.2	---
Thailand	16,764	0.284	78.2	Malaysia achieved this level since 1994
Indonesia	11,461	0.266	70.0	Malaysia achieved this level since 1984
Philippines	8,667	0.284	67.0	Malaysia achieved this level since #1984
Vietnam	6272	N.A	81.9	Malaysia achieved this level since #1980
Singapore	49719	0.742	73.7	Singapore achieved this level since 1987
Japan	44851	0.600	74.1	Japan achieved this level since # 1980
South Korea	45478	0.565	65.7	South Korea achieved this level since 1994
BRICS countries
Brazil	13557	0.46	74.9	Malaysia achieved this level since 1991
Russia	19656	N.A	73.1	Malaysia achieved this level since 2002
India	9200	0.246	57.9	Malaysia achieved this level since #1980
China	15250	0.232	77.0	Malaysia achieved this level since 1993
South Africa	14659	0.538	55.7	Malaysia achieved this level since 1992
Selected developed countries
Germany	43243	N.A	77.4	Germany achieved this level since # 1991
France	52535	0.768	70.7	France achieved this level since # 1980
Australia	50652	0.825	76.4	Australia achieved this level since # 1980
United Kingdom	49428	0.787	76.0	UK achieve achieved this level since # 1980
United States	68374	1.000	72.0	US achieved this level since # 1980
Spain	43297	0.728	74.4	Spain achieved this level since # 1980
Netherlands	46691	0.831	79.1	Netherlands achieved this level since # 1980

Note: All amounts for Gross Domestic Product per person employed (GDP ppe) are measured in constant 1990 Purchasing Power Parity (PPP) US$. # indicates earliest possible year where data is available. “N.A” indicates data “not available”. Total Factor Productivity (TFP) is measured in relative to United States (US), thus US’s TFP is benchmark at “1.000”. Labor forces participation rates (LPR) are measured in term of percentage from total population aged 15 to 64.

Source: World Bank for GDP ppe and LPR; United Nation Industrial Development Organization (UNIDO) for TFP

Comparative trend for Total Factor Productivity (TFP) is similar with GDP ppe trend. For year 2000 (data latest available year), Malaysia has higher TFP than Thailand, Indonesia, Philippines, Vietnam and BRICS countries except South Africa but lower than all selected developed countries. Figure 2 shows that Malaysia’s TFP was either higher or comparable to Singapore, Japan and Korea in the early 1960s but sadly lag behind thereafter.

Figure 2: TFP for Malaysia, Japan, South Korea and Singapore; 1960 – 2000

Malaysia’s labor participation rate was surprisingly lower than all selected countries for this study except South Africa. As Malaysia has high literacy rate, free schooling until secondary and ample higher learning institutions, this indicates under-utilization of human resources. One of the most probable reasons is low female labor participation. Yet, low labor participation rate gives hope that Malaysia still has lots of room for improvement if we can greatly increase female participation in labor forces.

(2) Science and Technology (ST)

“Science and technology” has very broad coverage with various definitions. Insights from World Bank’s definition for their variety of science and technology (ST) indicators provide a good conceptualization. Thus, ST can be referred as “engagement in the conception or creation of new knowledge, products, processes, methods, or systems”. In economics perspective, capital intensive production implies higher level of science and technology application as compare to labor intensive. Therefore, a higher capital per labor (KpL) indicates higher level of ST. Other selected indicator to analyze level of ST are “Scientific Journal (SJ)”, “Research and Development” in term of number of researchers (RD) and expenditure spent (RDE), patent filled in by resident (PR) and non-resident (PnR). All those indicators are compiled in Table 2.

Table 2: Science and Technology Factor Comparison

Country	KpL (2000)	SJ (2011)	RD (*)	RDE (*)	PR (2012)	PnR (2012)
Selected Asian countries
Malaysia	50,719	2,092	1,191	0.98	1,114	5,826
Thailand	33,863	2,304	332	0.25	1,020	5,726
Indonesia	12,711	270	90	0.08	541	5,297
Philippines	13,649	241	nil	N.A.	162	2,832
Vietnam	N.A	432	nil	N.A.	382	3,423
Singapore	174,196	4,543	6,226	2.24	1,081	8,604
Japan	145,955	47,105	5,153	3.37	287,013	55,783
South Korea	91,321	25,593	5,345	3.67	148,136	40,779
BRICS countries
Brazil	39,130	13,148	669	1.16	4,804	25,312
Russia	N.A	14,151	3,103	1.13	28,701	15,510
India	6,142	22,481	160	0.82	9,553	34,402
China	9,902	89,894	982	1.75	535,313	117,464
South Africa	21,534	3,125	379	0.85	608	6,836
Selected developed countries
Germany	N.A	46,259	3,923	2.83	46,620	14,720
France	141,771	31,686	3,784	2.23	14,540	2,092
Australia	132,446	20,603	4,280	2.40	2,627	23,731
United Kingdom	98,436	46,035	4,089	1.77	15,370	7,865
United States	145,688	208,601	3,936	2.78	268,782	274,033
Spain	120,319	22,910	2,851	1.36	3,266	209
Netherlands	134,430	15,508	3,231	1.92	2,375	338

Note: “N.A” indicates data “not available”.  “*” indicates average 2008 to 2010. “SJ” is number of scientific and engineering journal articles published in the following fields: physics, biology, chemistry, mathematics, clinical medicine, biomedical research, engineering and technology, and earth and space sciences”. Latest available year for United States is 2009. “RD” is “professional researchers engage to do research and development but includes postgraduate PhD students”, reported in term of “per million people”. “RDE” is “expenditure on research and development” measured in term of percentage to GDP. “PR” and PnR” are patents applications by residents and non residents respectively; Data for Indonesia is year 2011.

Source: United Nation Industrial Development Organization (UNIDO) for Capital per Labor (KpL). World Bank for SJ, RD, RDE, PR and PnR.

Based on Table 2, Malaysia is more capital intensive compares to Thailand, Indonesia, Philippines and the BRICS countries. Yet, Malaysia is far behind developed countries. For example, Malaysia KpL is more than three times less than Singapore. Indeed, similar trends noticed for other indicators (SJ, RD, RDE, PR and PnR). Malaysia is generally better than Thailand, Indonesia and Philippines. Malaysia is far behind selected developed countries. Despite greatly lower population than Malaysia, Singapore SJ more than double the amount of Malaysia. Worst, Malaysia is also far behind BRICS countries in term of scientific journal publications and patents registered.   

Summary

Malaysia is clearly better than Thailand, Indonesia and Philippines in almost all aspects in both “human factor” and “science and technology factor” categories. In addition, Malaysia is also better than those celebrated BRICS countries (except Russia) in many aspects. Should we feel proud? We are aiming toward becoming a developed nation. Thus, we should be benchmarking with developed nations. Sadly, all data and analysis show that we are far behind them. Malaysia, South Korea and Singapore were once about the same level. Now, those two countries are far in front. What should we do? Mmm… just ignores Singapore and proudly compares ourselves to Bangladesh and Myanmar!

[Chinese version published at Nanyang Press, 24th November 2014. Available online at http://www.nanyang.com/node/664434. This English version may be slightly different from the Chinese online/printed newspaper version]