Formula One and the developing country

Just finish watching interview with author of Pit Stops: The life of formula one racing, on Bloomberg. The author cannot fathom the logic of the existence of grand prix event surrounded literally, by dire poverty in Brazil. Personally I wonder what is the costs to Malaysia, especially in foreign exchange losses, for staging similar events. The academics at Universiti Malaya, it was reported a few years ago, was commissioned by the local promoter to conduct the cost benefit analysis of staging grand prix in Malaysia. I have yet to see the final product of the research.

In the meantime I thought we could pick up a bit of lesson from Britain as the hub of formula one industry. There is a cluster of developmental activities from design to manufacturing of components, located to the north of London. It is also dubbed as the silicon valley of motor racing. Many of these activities, since 1950's, was the result of individual creativity from people like Colin Chapman, who eventually established Lotus. Others like Chapman also began to build their own car. They form clubs to organise racing. They also design their own engine. With all these activities they attracted highly motivated young engineers. One such product was in the form of Cosworth engineering. With constant competition they would require contant innovation and development which in turn would require new engineering specialties like aerodynamics etc. One study estimated that the income generated by these activities was not less than 2 billion pound and export worth more than 200 million pound.

Living beyond the means

Recently Malaysians have been writing to the local newspapers expressing their concern of the adverse impact of foreign labour to the local society. Even Ministers acknowledged that the number of foregners in this country has become a burden to the nation, and if nothing is done now their number will reach 5 million by 2010. The Minister of Health also reported that on the average foreigners have been owing govt hospitals about RM 8 million a year and the maternity wards of hospitals in major town are inundated with foreigners.

The proposed measures by the government like structural adjusment to the manufacturing industry, using more capital instead of labour will take some time to materialise. Besides with the current pegging of MYR to USD will make capital expenditure expensive in Ringgit terms. Malaysian in the meantime cannot afford to subsidise foreigners for their healthcare, education etc. I think the immediate measure would require the imposition of compulsory health insurance to all foreign workers before granting them the work permit. Schooling fees for foreigners in govt school must be raised as a disincentive for them to bring their entire family to Malaysia.