Patron YB Dato’ Seri Utama Dr. Rais Yatim Minister of Information, Communication and Culture Advisors Tuan Haji Ibrahim Abdul Rahman Director-General, Information Department of Malaysia
ISBN 978-983-54-0559-4 First Printed, 2011 All Rights Reserved Department of Information Malaysia All rights reserved. No part of this publication may be reproduced or transmitted in any means, electronic or mechanical, including photocopy, recording, or any information storage and retrieval system, without permission in writing from the publisher.
YBhg. Datuk Poziah Abdul Rahman Deputy Director-General (Strategic Information) Information Department of Malaysia
EDITORIAL BOARD Chief Editor
Published in Malaysia by Director-General Information Department of Malaysia Floor 7-15th, Wisma Sime Darby, Jalan Raja Laut,
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Hajjah Manisah Haji Salamon Zawahir Mohd. Daud Coordinator Pathma a/p Selvaraju Photo Resource and Photo Centre Visual Communication and Design Division Information Department
E-mail: webmaster@inform.gov.my 011.(B.I) July 2011 (002.) Perpustakaan Negara Malaysia Pathma Selvaraju, 1983
Najib Tun Razak : exploring changes for greater
achivements / [Pathma a/p Selvaraju].
ISBN 978-983-54-0559-4
1. Public administration--Malaysia. 2. Speeches,
addresses, etc. 3. Malaysia--Politics and government.
351.595
of Malaysia Designed and Printed by: Percetakan Zainon Kassim Sdn. Bhd.
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Cataloguing-in-Publication Data
R U K U N
N E G A R A
OUR NATION MALAYSIA is dedicated to: Achieving a greater unity for all her peoples; • Maintaining a democratic way of life; Creating a just society in which the wealth of the nation shall be equitably distributed; • Ensuring a liberal approach to her rich and diverse cultural traditions; and • Building a progressive society, oriented towards modern science and technology. •
•
We, her peoples, pledged our united efforts to attain these ends guided by the following principles: BELIEF IN GOD LOYALTY TO KING AND COUNTRY SUPREMACY OF THE CONSTITUTION THE RULE OF LAW GOOD BEHAVIOUR AND MORALITY
CONTENTS The Agenda and Policies of The Prime Minister in Leading The Country
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1MDB Spearheads New Growth for Malaysian Economy
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Transforming Malaysia Into a Green Nation
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1Malaysia Government Transformation Programme Roadmap
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Underlying the New Malaysian Economy
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A Roadmap for the Future
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ASEAN : Transformation for the Sake of Future Generation
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Celebrating Malaysia-Japan Multifaceted Relationship
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The Malaysia Green Forum 2010
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The World Islamic Community and Economic Challenges
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The Global Sukuk Issue Empowering The SMEs for Economic Development
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Energy Security : Beyond the New Reality
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Towards a High Income and Advanced Nation
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Propelling Halal Industry To Greater Heights
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Exploring the Full Potential of Halal Industries
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Malaysia-India: Strengthening Strategic Partnership for Mutual Progress
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Improving Healthcare Services for the People
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Revitalising National Identity
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Overcoming the Challenges of the New Century
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Transformation of the Malaysian Public Service
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Towards Better Healthcare Services for the People
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The Strive for Sustainable Development
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The 2011 Budget Driving The Nations’ Development Path
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Sustaining Growth in a Changing and Dynamic Economic Environment
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Accountants : Sustaining Value Creation
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ASEAN and India : Going Global
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Commonwealth and the Business Community
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ASEAN - Towards a Larger and Cohesive Investment Area
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The New Economic Model - The Concluding Part
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The Agenda and Policies of The Prime Minister in Leading The Country
Exploring Changes For Greater Achivements 2010
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his book entitled, “Najib Tun Razak - Exploring Changes for Greater
Achievements”, embodies the agenda and policies of the Prime Minister in
leading the country, which were highlighted in his speeches throughout the year.
After two years of being at the helm of the administration, Dato’ Sri Najib Tun Razak has enlightened all Malaysians of his style of leadership in stewarding
the country to achieve greater heights in all areas of development. Equipped with the slogan 1Malaysia - People First, Performance Now, Najib is leading the people to explore changes as a way of turning Malaysia into a developed and high-income nation by the year 2020.
Towards this end, efforts are being made to strengthen the growth of the country
in every sector in order to achieve a balanced development. The Government
Transformation Programme (GTP), New Economic Model (NEM) and the Tenth
Malaysia Plan are among the platforms highlighted by the Prime Minister as the instruments in developing the country.
Generally, this highly informative publication is of great help for its readers to
better understand Najib’s style of leadership and administration in transforming Malaysia into a highly successful nation in all fields. Therefore, it is hoped that
this book would serve as a source of reference and inspiration for Malaysians of all races, religion and culture in promoting unity amongst them under the concept of 1Malaysia as espoused by the Prime Minister.
Dato’ Seri Utama Dr. Rais Yatim Minister of Information, Communication and Culture
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1MDB Spearheads New Growth for Malaysian Economy
Exploring Changes For Greater Achivements 2010
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he setting up of an office for the Chairman of the Board of Advisors 1Malaysia Development Berhad (1MDB), who is also the Prime Minister, at Menara IMC, symbolises the important role 1MDB plays in driving strategic initiatives to spur new growths and further enhance Malaysia’s attractiveness as the place to do business. Although the stated objectives are a tall order for any corporation, the 1MDB is highly capable of delivering its responsibilities with the full assistance, cooperation and support of the government.
Indeed, there is now a clear understanding from all government agencies that a successful 1MDB will reflect positively on the government, which is the sole shareholder, and contribute towards the well-being of all Malaysians. This is reflected by the admirable zeal of government officers in relevant agencies, especially the Ministry of Finance, in their efforts to effect the transformation of 1MDB as a strategic development company wholly owned by the Government of Malaysia. As a result of the hard work by the pioneer team of professionals at the board level, 1MDB has had a strong foundation upon which this strategic development company will spearhead new growths for the national economy. These are professionals with heavy responsibilities as the CEOs of government corporations. 1MDB is extremely fortunate to have in its Board of Advisors renowned corporate leaders such as His Excellency Khaldoon Khalifa Al Mubarak, the Chief Executive Officer and Managing Director of Abu Dhabi’s Mubadala Development Company, and Mr. Bernard Arnault, Chairman & CEO of LVMH Louis Vuitton Moët Hennessy Group. Their guidance and expertise will go a long way to benefit our people.
Translating Creativity Into Actions For 1MDB to achieve its goals, the team needs to be innovative and to constantly think outside the box. But thinking outside the box is never enough as there has to be execution to translate creativity and innovation into action. It is, therefore, imperative for the team to be able to find new ways outside the box to ensure 9
that their executable actions will produce results to make good the promise of the government under the leadership of Dato’ Sri Najib Tun Razak - People First, Performance Now. Since “business is not as usual now” as stated by the Prime Minister, the 1MDB team must be bold and daring to be innovative, to break new ground and to do things differently. This, in the essence, is what the new economic model is all about - innovation, creativity and high value towards further enhancing national competitiveness. The crux of the new economic model is the ability of all Malaysians to change their mindset. We need to learn to do things differently to prepare ourselves for the new dynamics shaping global demands for ideas, talent and high value creation. If we don’t, Malaysia will be left behind in this rapidly changing world. It is towards this new mindset that 1MDB embodies the 1Malaysia principles of acceptance, equality and sharing in our efforts to include and unlock the potential of our young people who will be the next generation of leaders, business people, engineers, scientists, teachers and doctors. To achieve this, we must reshape our mindset to draw on talented people across our nation, regardless of their position or background, to re-energise our passion to make a difference for Malaysia. In this regard, it is heartening to see many young Malaysians returning from abroad to serve the country through 1MDB.
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Trust and Integrity In today’s highly competitive global economy, every nation is striving to stay ahead or at least stay in competition. The race to offer the best of incentives and everything else needed to attract investors is endless as nations rapidly try to outdo one another. In this regard, the sum of all physical incentives such as tax cuts, good location, logistics support, suitable manpower and political stability will not be enough to produce the added advantage.
In these days, trust and integrity is paramount. And trust is earned when individuals work together to develop a clear understanding of each other’s role, confident that everyone will deliver as promised without any hidden agenda. 1MDB has built enough trust among its global networking to give it the added advantage in forging strong partnerships that can bring home foreign investment. It is in this spirit that we are on a journey together to aggressively attract investors from the Middle East and Asia, especially China. Following the Prime Minister’s trip to the Middle East, a company from Saudi Arabia has entered into a USD2.5 billion partnership with 1MDB. When he visited China in June last year to renew our commitments to friendship and economic ties between China and Malaysia, there was an expression of interest by the Chinese in possible ventures in the Sarawak Corridor of Renewable Energy (SCORE). This interest was crystallised when the Chinese President, His Excellency Mr. Hu Jintao, visited Malaysia in November last year. Now, within a very short period, 1MDB and China’s state-owned State Grid Corporation of China (SGCC), will be collaborating to identify, plan and execute a number of multi billion ringgit joint projects in the Sarawak Corridor of Renewable Energy. These projects are believed to have a total potential value of USD11 billion.
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The Importance of Expediency In today’s highly competitive global economy, we cannot ignore the importance of expediency as a decisive factor. It is imperative that these proposed projects are attended to with the utmost sense of urgency by our relevant agencies. The entry of SGCC and its significant investment in SCORE will be an added boost to economic ties between China and Malaysia. It will pave the way for more substantial investments from China and globally into Malaysia. SGCC’s confidence in Sarawak will inspire even more confidence in Malaysia as the preferred investment destination among global investors. SGCC is ranked 15th in the 2009 Fortune’s Global 500, with sales revenue in excess of USD160 billion. It has 1.5 million employees and 145 million customers, serving over 1 billion people. That in itself speaks volumes for this future partnership.
SCORE represents the new economic model for Sarawak to transform its economy into an economy of a high-value and high-income, which is in line with the national development agenda. The Federal Government has given its commitment to work with the Sarawak State Government towards the success of SCORE and hopes that every state in Malaysia will develop and progress in tandem as we pursue the new economic model to push the nation towards developed status.
Social Responsibility However, in its quest for growth and profits, 1MDB does not neglect its responsibility towards society. In line with this, as chairman of the Board of Advisors, Prime Minister Dato’ Sri Najib Tun Razak announced the establishment of Yayasan 1MDB to manage a RM100 million CSR fund. The foundation will soon launch several key initiatives in bridging socio-economic gaps towards fulfilling the aspirational values of 1Malaysia.
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These key initiatives will, among others, promote equal opportunity to education and quality of life for all Malaysians and hopefully over time, they will contribute significantly to the strengthening of Malaysia’s rich tapestry of social cohesion. Indeed, the official opening of the new corporate head office of 1MDB signified the opening of minds to new ideas and approaches based on performance, creativity and innovation that ought to be embraced by all Malaysians in order to successfully confront the many challenges that lie before them as a nation. With this new outlook, and together with determination, fortitude and courage, Malaysians can take Malaysia to far greater heights than they ever thought possible.
- THE OFFICIAL OPENING OF 1MDB CORPORATE HEAD OFFICE Level 8, Menara IMC, Kuala Lumpur January 11, 2010
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Transforming Malaysia Into a Green Nation
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ahatma Gandhi said it all when he pointed out that the “Earth provides enough to satisfy every man’s need, but not every man’s greed”. However, in Copenhagen, the international community failed to seize the opportunity and to rise to the occasion. They have time and time again chosen to take the path of expediency, rather than boldly taking the bull by the horns and do what is needed and necessary to address the threat of climate change. The international community must and can do better to ensure a healthy planet earth. One of the biggest policy issues that require our collective effort and wisdom is the unsustainability of the current global energy consumption. The World Energy Outlook 2009 points out that continuing on today’s energy path, without any change in government policy, would mean rapidly increasing dependence on fossil fuels, with alarming consequences for climate change and energy security.
The growing world population and the quest for a better standard of living will put energy and fossil fuel demand on an upward trajectory - a trend which was temporarily dampened by the global financial crisis. It is projected that if current laws and policies remain unchanged, world energy consumption will increase by 44 per cent in the period from 2006 to 2030 with the strongest growth coming from non-OECD countries. Although addressing the voracious global appetite for energy seems daunting, it is a responsibility that every individual can neither shirk nor abdicate. It is the challenge of our times that requires a concerted effort in harnessing the global reservoir of scientific and intellectual capital.
Energy Efficiency The cheapest kilowatt-hour of electricity or litre of petrol is the one we do NOT use. Thus, Energy Efficiency (EE) is clearly the lowest hanging fruit. We must instil a new sense of urgency to make energy efficiency a culture and a way of life. More initiatives are needed to effect appropriate actions from public and 15
private sector entities. A simple initiative that, includes moving away from incandescent lights to energy - efficient lighting could be a starter. The European Commission projects that a ban on energy-inefficient bulbs will save about 40 terawatt hours of energy and prevent 25 million tonnes of CO2 emissions per year. Â
Renewable Energy In Malaysia, fossil fuels feature predominantly in our energy mix and the country aims to raise renewable energy to about 2,000 MW by 2020, compared to the current 50 MW. In order to promote renewable energy, a number of incentives were provided and among them is the Small Renewable Energy Program (SREP) which provides for a higher purchasing price for electricity generated under this initiative by the grid operator. Currently, we are in the process of instituting a renewable energy law and one of the mechanisms we are looking into is Feed-In Tariffs, to promote the usage of this type of energy.
Solar Energy Nature has given us more than enough. It is said that the amount of solar energy hitting earth is about double the Earth’s non-renewable resources.
The amount of solar energy hitting earth is about double the Earth’s nonrenewable resources.
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We have more than enough sunlight in Malaysia and increased use of solar power will be promoted aggressively. We have launched the Suria 1000 Program, which provides incentives for solar power use. Whilst energy prices and emissions are on the rise, there is a dire need for us, especially developing economies, to make our energy industries more efficient. A study has been commissioned to restructure and realign the Malaysian electricity sector. The findings will help lay the foundation for a more efficient industry through market mechanisms and liberalisation.
Green Technology Most countries have implemented moves to promote energy efficiency and renewable energy. Nevertheless, the breadth and depth of the initiatives taken should now be increased exponentially, reflecting the urgency of the challenge confronting us.
We have to adopt green technologies, to not only enhance efficiency and effectiveness of energy use, but also to effectively mitigate carbon emissions. For developing economies, this is an area where developed nations of the world can lend a much needed help. Malaysia established the Ministry of Energy, Green Technology and Water early last year with the task of spearheading Malaysia’s transformation into a green nation. We will be looking at four main sectors to implement green technologies, i.e., energy, transport, buildings and water. In the transportation sector, we will endeavour to reduce the carbon footprint by enhancing public transportation. We are upgrading our intercity electric rail links to increase the current capacity to move people in a more carbon-efficient manner. The government is also seriously looking into expanding the usage of biofuels with a pilot project well underway.
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We have been promoting energy-efficient buildings for some time now. The introduction of the Green Building Index will hopefully see more buildings going green in Malaysia soon. Water management is another area where green technology can be extensively applied. Although we have abundant rain in Malaysia, we are not taking this for granted including the harvesting of rainwater. In order to benefit from a green economy while reducing our carbon footprint, the government has launched both the National Biotechnology Policy and the National Biofuel Policy in 2005. These policies seek to leverage on the natural strengths of Malaysia, a nation where at least 50 per cent of land area remains forested. Currently, our natural forests and agriculture crop plantations combined cover 75 per cent of the country’s land area.
Our embracing of green technology is not only to conserve and preserve our resources, but it is also envisaged to act as a new economic impetus for Malaysia. Our planet can no longer withstand man’s unsustainable consumption and wastage. We do not own this Earth, we merely hold it in trust for our posterity. It is our moral responsibility to bequeath to our children a more pristine and healthy planet. The challenge is to act now before it is a case of “too little, too late”. - THE WORLD FUTURE ENERGY SUMMIT Abu Dhabi January 18, 2010
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1Malaysia Government Transformation Programme Roadmap
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Exploring Changes For Greater Achivements 2010
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he Government Transformation Programme (GTP) embodies the wishes of the people and what they expect of the government of the day. The government does not implement the programme randomly, but through objective evaluation after polling the ministers on what the people truly want.
Since the government of the day is the continuity of the previous ones, its journey is directed towards the same goal and the GTP is part of its agenda to turn Malaysia into a progressive and high-income nation. If Vision 2020 was associated with Tun Dr Mahathir Mohamad, his successor, Tun Abdullah Ahmad Badawi outlined the National Mission especially to eradicate hardcore poverty. This too is our direction, but to reach that destination, we need to adopt a new methodology. The new methodology involves the NKRAs and MKPI. The government also examined the experience of other nations and even invited an expert from the United Kingdom to give a briefing on what the previous British Prime Ministers have done. The expert said that Britain had done this, but what Malaysia is attempting to implement was more comprehensive and on a larger scale than was ever attempted in the United Kingdom. What this means is, Malaysia is ahead of the curve and God willing, our success will have a great effect on changing our nation. We are committed to success, the lead ministers, the six driving ministers and all other ministers are fully committed to the GTP. They held a series of discussions and workshops, including on Sundays.
Commitment of the Civil Servants Everyone, from Chief Secretary Tan Sri Sidek down to the lowest levels of the public services, is committed to the GTP. The proof of this was when the ministers and the Prime Minister Dato’ Sri Najib himself attended the NKRAs labs and spoke with government officers. 21
These were not senior officers, they were middle-level, but they showed extraordinary spirit. Some briefed the ministers and the Prime Minister at length, rapid-fire. Some said they had held meetings until 5am, which was unprecedented, such that the minister who is the chief driver, Datuk Seri Idris Jala, whom the government seconded from MAS, said they were better than MAS. This is the commitment of civil servants.
Our approach is two-pronged, that is, we must be big and we must be bold – the Two Bs. If we do this incrementally, it wouldn’t be big and bold. Being big and bold would mean the people will realize this is a big and meaningful change that will change our nation’s socioeconomic landscape. With this programme, we are encouraging our ministers and civil servants to set better and higher targets, to constantly consider new ideas and whatever proposals that can help us achieve the overall objective. We then compiled and expounded on all this in documents. If this were just verbal, if we made an announcement without documentation, there would be no guide. We have prepared a government transformation programme document. This document accords with the human spirit, in that, there are four categories. The first category is for those who are diligent in reading. The second for those who are not so diligent; the third for those who are lazy to read and the fourth for those who do not like to read at all. The diligent will have 261 pages to read, the less diligent 37 pages, the lazy will read 20 pages and for those who do not like to read at all, compact disc is prepared for them. This is complete and everyone should have it. This is a reading of human psychology.
The NKRAs Below is the explanation about the NKRAs. Although they might not be in order of importance, they are all equally important.
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Firstly, reducing crime. It is understood that the national crime rate declined 6.7 per cent between the second and fourth quarters of 2009. The government has deployed more policemen from desk duties to patrols. Now, thousands more are at 50 hot spots. In addition, Rela and JPA personnel have also been mobilized for patrols. The government has also considered other actions, such as the installation of more CCTVs as well as the setting up of special courts and the like. These are all part of the government’s efforts to reduce the crime rate. Secondly, combating corruption. The government is committed to improving Malaysia’s standing on Transparency International’s corruption perception index. It will evaluate this from time to time, along other actions that would be taken, such as ensuring that almost all government purchases are done on open or closed tenders and for the successful ones to be displayed on website so that everyone will know who receives government contracts. The government is also drawing up a “Whistleblowers Act” to encourage members of the public to provide information to the authorities. Thirdly, improving student achievement and access to quality education. This is done by raising pre-school enrolment from 67 per cent to 87 per cent in three years. The announcement of the 20 high-performance schools has been made by the Deputy Prime Minister and Education Minister Tan Sri Muhyiddin Yassin. These 20 schools will be the guideposts for all schools on what can best be done and be an inspiration to them. We also wish to establish a new nexus with principals and headmasters, promising them greater rewards for better performance.
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Fourthly, improving the living standards of low-income households. Under the programme known as “e-Kasih”, 44,000 people would be helped out of poverty in order to eradicate hardcore poverty. For the thousands more in the vulnerable group and who are susceptible to poverty, the government will give more attention in improving rural infrastructure to improve their standard of living.
The government is committed to emphasizing the four basic needs for roads, houses, water and electricity for the entire nation, especially in Sabah and Sarawak, which are still lagging behind. An allocation of nearly RM18 billion would be provided in three years for rural infrastructural development. On public transport, the government is committed to increase the usage of public transport in the Klang Valley from 10 per cent now to 13 per cent in 2010 and 25 per cent by 2012. It would also raise to 75 per cent the proportion of residents living within 400 metre of public transport route in the Klang Valley. The combined transportation terminal in Bandar Tasik Selatan will reduce congestion in the city centre. This will reduce the time spent waiting for buses, in more comfortable surroundings, with 200 new buses and 800 upgraded bus stops. The government will also be providing 26 new train sets and four new coaches from the LRT Kelana Jaya terminus. This is but a little of what the government wants to do. Indeed, the government is always aware of the principle of openness and the responsibility of accountability. The people can judge whether or not the government has fulfilled its promises to them. In a parliamentary democracy, if the people think the government does not keep its promises, it would face the risk. The government is ready to be judged by the people when the time comes and this is its sincere commitment to the people.
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The government will also produce an annual review report on how many people are no longer among the hardcore poor, how many children have registered for pre-school education, how many people are using public transport, the corruption rate and others. The people will be able to see all this and the government cannot run from its responsibility. It wants the people to see, feel and experience the implementation of the programmes. The government will not rest until this is done.  - THE 1MALAYSIA GOVERNMENT TRANSFORMATION PROGRAMME ROADMAP Kuala Lumpur Convention Centre January 28, 2010
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Underlying the New Malaysian Economy
Exploring Changes For Greater Achivements 2010
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he rapidly developing economic environment mandates that Malaysia continues the correct process of transformation. Malaysians must consider the consequences if we stand idle and fail to match with the changing global economic conditions. I would like to share my thoughts on several principles that will underlie the new Malaysian economy, how the government can help the business community and how the private sector can play its role in positioning Malaysia for decades to come. I have introduced major initiatives that the government is taking - 1Malaysia, the Government Transformation Programme (GTP) which details out the NKRAs, the 10th Malaysia Plan and New Economic Model. It is clear that we can no longer rest on the methods and approaches of the past.
We need policy changes apart from a change in our national overall mindset to achieve our goal of a high-value, highincome and high-skill economy that can compete on the world stage. With the rise of economic powerhouses such as China and India, Malaysia has real opportunities. However, we will only be able to take advantage of them if we raise our economic game, enhance our competitiveness and excel in the sectors the future will require. As we look out together towards Malaysia’s future, I believe there are a series of principles that must guide our nation and our national economy.
Innovation and Creativity First, we must be a nation that puts a premium on innovation and creativity. We are all aware that businesses that succeed are those that look ahead, innovators that look beyond the short-term challenges and seek to chart new paths to growth. We must also be innovators of the new economic sub-sectors, whether in information technology, green technology or finance, to spark new areas of economic growth for our country. With regards to creativity, I have stressed to the government to demonstrate value creation within the government’s processes, systems and policies. In 27
addition, the government will also do its part to unleash such creativity and will back those who want to move into new sectors of the economy through measures such as the green technology financing programme. However, the government can only do so much, and I recognize that the government is not always the best driver of creativity and innovation for the nation.
So, moving forward, there must be a strong partnership between the public and private sectors, collaborating in ways that are mutually beneficial and create opportunities, jobs and prosperity. Greater Awareness of Global Challenges and Opportunities Second, we must take advantage of new, non-traditional markets. Initiatives are in place, for example, to advance the economic integration of ASEAN member states. To what extent are Malaysian businesses, especially those in the manufacturing sector, are aware of ASEAN initiatives, the desired AEC, and the opportunities that this poses? While the government continues to carefully manage our international economic linkages, the NCCIM and trade organisations must help bring a greater awareness and understanding of global challenges and opportunities to the business community and to society at large. The 10th Malaysian Plan recognizes this, and is based on a growth trajectory driven by the private sector. In this regard, the business community need to understand the implications of a more integrated regional economy and to seriously look into the matter – the changes a Malaysian company must make to remain competitive in this current economic landscape. The ASEAN-China FTA would lead to the significant inflows of investment and goods into our markets. This can be a real opportunity for Malaysia and Malaysian business, but only if we are fully equipped to take advantage of it. We must consider opportunities such as increasing the base of our current trading relationships, capitalising on each other’s strengths in win-win sectors and thirdly is the investment and trading opportunity that has emerged in a market of almost two billion people. 28
Exploring Changes For Greater Achivements 2010
Delivery, Accountability and Performance The third principle which is equally important is delivery, accountability and performance which are already familiar to the business community. This is a concept that must be fully integrated into the government in order to get the best results. This is a new paradigm that I am introducing to the government getting results for the rakyat; People First, Performance Now. Allow me to share a story. In the case of the Immigration Department, I have already given the department due credit for the remarkable turnaround in the time taken for the renewal of passports. I have challenged the Immigration Department and other departments to emulate this success. This requires that government servants understand the wider context of their actions. In the case of the Immigration Department, their role is not just as a security division of the government, but also as agents of economic growth. This might sound strange, but it is a remarkable shift in behaviour and purpose. Immigration officials now see visa applicants through that prism. No longer do they think in national security terms, but in terms of how this person will contribute to Malaysia’s growth. Transformation is needed across all levels in the department, so that we welcome knowledge workers based on their credentials and not by race or country of origin.
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I introduced the blueprint for delivery in key areas of Malaysian life only a few weeks ago, setting out in the GTP. The blueprint lays out how - very specifically - we will reduce crime, improve access to education, enhance rural infrastructure, provide better urban transport systems, support low-income families and tackle corruption in our country. The blueprint was developed through a remarkable series of policy labs and public consultations. The labs themselves were an effort to reform government by engaging a broad spectrum of perspective in the formation of policies.
Tough Times Often Lead to Tough Choices The fourth principle for attaining success is the courage and ability to make the right decision in order to grow as a nation. As business leaders are aware of, tough times often lead to tough choices. As a government, we will not shirk these choices. Indeed, I believe it is because of the decisions we have made - stimulus packages, economic liberalisation, investments in the right areas and budget savings - that Malaysia will return to growth in 2010 with a lower budget deficit. This has come about by choice, not chance. We will face more such choices in the coming months and years. Let me assure you that the government will always support business growth, support families and Malaysians who need help most, and will introduce any difficult reforms sensitively and with an eye on maintaining stability. As an example, whether it is subsidies or broadening the tax base, the government will consider whether it would put off these choices to another time or for our future generation. We must act now - decisively and strongly - to prepare Malaysia for success.
Commitment to 1Malaysia I believe that the values, the vision and the commitment behind 1Malaysia will be vital to the long-term strength of Malaysia. Business cannot succeed and economies cannot be strong when our society is divided. We will not succeed in the new global era if we do not extend opportunity to all according to their needs and look to utilise the talents of all our people, not just some.
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Transformation is needed across all levels in the department, so that we welcome knowledge workers based on their credentials and not by race or country of origin. This entails not only bridging gaps across cultural and religious groups, but also ensuring fairness across all areas of Malaysian life to establish level playing fields. For instance, the Government Transformation Programme does not see different groups of Malaysians; it sees and serves 1Malaysia regardless of background. And NCCIM is in a great position as an umbrella body to serve that same purpose but in the Malaysian business context. We can achieve a remarkable future in Malaysia if we spark innovation, bring public and private sector expertise together in the common good, focus on delivery, have the courage to make the right choices for our country and maintain our commitment to 1Malaysia. We have ambitious plans, but they are developed in the full knowledge that we can meet our goals as a talented, innovative and skilled nation. In this regard, I want to ask for NCCIM support and commitment to our nation to make change happen and inspire others through its actions. I call on NCCIM to be bold, innovative and creative, to join the government as agents of change. In true spirit of 1Malaysia, the NCCIM will maximize its opportunities when it anticipates, innovates and collaborates to rise to the occasion.
- THE NATIONAL CHAMBER OF COMMERCE AND INDUSTRY OF MALAYSIA (NCCIM) DINNER Kuala Lumpur Convention Centre February 12, 2010
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A Roadmap for the Future
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he theme of Invest Malaysia 2010, ‘Powering Global Excellence’, is a fitting one, given the forward-looking nature of Bursa Malaysia and the aspirations we share for our nation and our businesses. It is also precisely what I want to talk about with you today. In a new year, in a new context, in a world emerging from recession, we are focussed on:
• • • •
How to ensure a sustainable and robust recovery in the short and medium term; Enhancing Malaysia’s competitiveness; Sparking private investments and growth; Putting the country on a trajectory to achieve high income levels; • Building an innovative economy; and • Bold transformation and economic reforms to modernize our economic model for the future. Such an ambitious agenda may have seemed rather idealistic 12 months ago. Last year, the economic context was very different. The world was in the depths of the first truly global recession. Over twenty million jobs were lost. Trillions of dollars of wealth evaporated. Economies around the world faced GDP contraction. Industrial production and capital investment fell dramatically. Although Malaysia felt the impact of this recession, the country managed to weather the storm and made progress against the odds. We refused to be passive bystanders as the downturn swept across Asia, and instead acted decisively and swiftly. The government injected RM67 billion of stimulus funding and found the balance in our budget between investments our nation needs and belttightening required to reduce our deficit. We introduced a range of incentives and service-sector liberalisation initiatives that are opening Malaysia to high quality investment opportunities in key economic sectors. We are now beginning to see the results of these actions. Fourth quarter 2009 GDP figures indicated growth of a higher-than-expected 4.5 per cent. Stimulus packages are driving hundreds of job-creating infrastructure projects. Exports 33
have rebounded and quality foreign investments are flowing into Malaysia. The Industrial Production Index rebounded strongly to a 12.7 per cent growth in January 2010. Total exports rose 37 per cent to RM52 billion and imports increased by 31 per cent to RM40 billion. Positive private sector activity is also a deeply encouraging sign of recovery. Coca-Cola has announced a one billion Ringgit investment that could create up to 2,000 to 3,000 jobs in Malaysia. Maxis’ multi-billion dollar IPO is the largest ever in Southeast Asia and represents the sort of entrepreneurial vision that we see every day in our Malaysian companies. JCY Berhad is also a proud example of a positive private sector activity that started small and now produces 25 per cent of the world hard disc drives.
Moving forward, there will be more divestment of government holdings, capital can be raised, innovation can flourish and wealth can be created in ways that benefit the wider Malaysian economy. The global economy has not fully rebounded from the shockwaves of the past two years. No country - including ours - can be immune from the effects. But Malaysia’s economic recovery is on track. The decisions of the government and the vision of a dynamic private sector - have helped lay a foundation for the next stage of Malaysia’s economic development.
Challenges The world economy - both before and especially since the financial crisis - has changed significantly. Policies which in the past led to high levels of growth and helped reduce hardcore poverty will no longer be enough to raise income levels and create the high-value economy we want to see. We cannot depend solely on new capital to fuel growth. Rather, we must use it more effectively to increase productivity, stimulate innovation and enhance the skills of the Malaysian workforce. We risk losing our competitive edge altogether if we do not act quickly to address structural barriers to growth that stand in the way of an effective response to the changing economic environment. 34
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The country can no longer rely on just a few sectors of the economy to drive its growth. We must diversify and provide incentives in new strategic industries where our nation has expertise, strength and potential for even greater success. As we expand into these areas, we should also consider the value that we can gain from the competencies of the Malaysian workforce - those living here and abroad. They - with the support of foreign talent where appropriate - can provide the brainpower, the intellectual capital and skills to help us realize our goals more meaningfully. Thus, the government invite Malaysians who have left our shores to look home once again and to participate in this transformation process to realize Malaysia’s full potential. The education system in the country must continue to be re-evaluated and improved to create the workforce of the future, with a commitment to meritbased programmes. These will reward excellence and nurture talented graduates who excel in strategic and creative thinking and entrepreneurial and leadership skills that will drive success in the decades ahead. We need a government that enables and empowers the private sector. This means re-shaping and energizing the public sector to be more responsive and accountable to the needs of private citizens and businesses. We must also recognize that some policies, which served a purpose in a previous era, may now be impediments to success, distorting the market and putting us
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at a competitive disadvantage. For instance, the government is consulting on a series of fiscal reforms that will reassess the subsidy system that exists in Malaysia and broaden our revenue-raising base through the proposed introduction of a goods and services tax. They will bring Malaysia in line with international norms and reduce an unsustainable reliance on a small number of industries, businesses and taxpayers. These are essential, common sense reforms that will allow us to move forward together as a nation, while ensuring that we enhance and strengthen safety net programmes that support the welfare of Malaysia’s most vulnerable citizens. Cumulatively, these deficiencies go a long way in explaining why Malaysia’s private investment has not recovered to pre-Asian crisis levels and posed a threat to our long-term position as a home for international and domestic investment. Addressing these issues is not just about having a clear vision and the right policies. It is also about having a determined political will, effective execution and the full support of the Rakyat. Do we have the courage and boldness to rise out of the middle income trap? I believe we need to build a national consensus on this issue. Since growth is beginning to revive, some are questioning the need for urgency to break the habits of the past. There are now calls to protect the status quo. Do not be fooled. We need a new way of doing things. While the recovery has begun, we must
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act now to position Malaysia for the future. And this is the choice we now face: To rise out of the “middle-income” trap that will be a precarious position for any nation in the new global economy; or to stick to what we know, and what is comfortable, by hoping the world will adapt to us. Our choice, and the job of the government, is to pursue economic policies that succeed in the knowledge industries of the future, with high-wage jobs and prosperity that can be shared by all.
NEAC Report Now, an important next step in that journey is being taken. The backbone of our long-term policy agenda will be a new economic model - which will be integrated into the 10th Malaysia Plan and with a longer-term vision that will be delivered through the 11th Malaysia Plan. These can transform the Malaysian economy to become one with high incomes and quality growth over the next decade. The New Economic Model (NEM) is a vital part of the Malaysia we are building, the structure that will serve our people for the future. As a metaphor, think of a house under the Malaysian sun. We need a roof – an overarching philosophy that encompasses all parts of the building. In our case, 1Malaysia is the roof that we gather under. The Government Transformation Program (GTP) – a programme of delivery on six key areas – is one pillar of this home. The second pillar is the Economic Transformation Plan (ETP) that will deliver the NEM. In the months after I became Prime Minister, I set up an independent National Economic Advisory Council (NEAC) and tasked it with a thorough review of Malaysia’s economy. I asked it to make bold, yet practical, recommendations for a new economic model to transform the Malaysian economy. In its report, NEAC detailed in a frank manner, the state of the nation’s economy – its strengths and shortcomings - and assesses the current policies and potential areas of future focus for Malaysia. Today, I and the Cabinet - with the counsel of NEAC - will begin our detailed deliberations on how we move forward from here, particularly as we move from this report to a roadmap for the future. But this cannot be an old-style political debate. The NEM has wide-ranging implications for the people of Malaysia, 37
and we cannot afford to bypass their views on this matter. Like investors, this government accords high marks for transparency. Whether in the budget or the recent GTP, where thousands of public citizens were involved in the process, I have instructed that this report be published and made available to the general public to gather their input and provide them with an opportunity to be part of the decision-making process over the coming months. It is only through consultation with the people and all the other stakeholders that we can achieve a strong, convincing and effective plan to implement our NEM.
I have made clear on many previous occasions that the era of “government knows best” is over. The people - and groups such as business leaders and investors - want and deserve input into the policy-making process. We must develop a more consultative approach to engaging our most important stakeholders. Only through such a process can we broaden our viewpoints, challenge conventional wisdom, help build transparent and open consensus for the right way forward. This is the path we will follow. People will come first.
NEM Principles As this consultation moves forward, I want to set out three principles that I believe should guide our nation’s thinking and the development of a new economic model. I want all of us to visualise the impact of the NEM by standing in the future and envisioning what the NEM should mean to each of us as an individual and as a business. Three principles emerged clearly from the NEAC report – firstly, high income, secondly, sustainability and thirdly, inclusiveness. These three principles will drive our economic progress for us to become a fully developed nation; a competitive economy strategically positioned in the regional and global economic landscape, environmentally sustainable and a quality of life that is all inclusive and encompassing.
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High income, sustainability and inclusiveness will drive our economic progress for us to become a fully developed nation. We should ask ourselves this fundamental question: Will the NEM create high income jobs where the people benefit from a competitive economy and a better way of life? This is the raison d’être of the NEM. We want to see a Malaysia that makes a quantum leap from the current USD7,000 per capita annual income to USD15,000 in ten years as stated in the NEAC Report. The NEM must be built from here. It will be no easy task, but the rewards will be great if we make this transformation. The challenge is how we will do it. This means building upon existing sectors and maximizing the potential of new ones through innovation. Creating a high income nation will mean higher wages throughout the economy as growth is derived not only from capital, but also from greater productivity through the use of skills and innovation, improved coordination, stronger branding and compliance with international standards and Intellectual Property Rights. In a knowledge economy, investment in new technology, multi skills, innovation and creativity and increased competency are the drivers of public and private sector performance. We expect investment and competition for the best talent through paying higher wages. Even wages for blue collar workers will be based on them acquiring higher competencies, with their performance more readily benchmarked against international competitors. With more skills, come greater responsibility and better, higher paying jobs. Among other findings, the NEAC Report highlights that today 80 per cent of the workforce have education only up to SPM qualifications, Malaysia’s equivalent to the O-level. This is not in line with a high income economy that we aspire to 39
be. We need continuous education, on-the-job training and re-skilling to benefit from new technologies. And by building a highly skilled workforce where productivity and competitiveness drive growth, the costs of doing business will still be competitive as capital is used more efficiently and with emphasis on quality of workers. This means a reduced dependency on unskilled foreign labour and greater attention to multi-skilling of employees who can increase productivity. This change will also require that government raise the quality and productivity of its own workforce. I believe we have begun along this path with the GTP, amongst others, which will enhance the nation’s infrastructure and improve access to quality education. Second, the NEM must include a commitment to sustainability, not only in our economic activities, but also in considering the impact of economic development on our environment and precious natural resources. There is little value in pursuing a future based entirely on wealth creation. Pursuing growth that deplete resources and displace communities will have dire consequences for future generations. This is a false and futile choice.
We can have a powerful and dynamic economic approach, but one that protects the nation we love for future generations. High and sustained growth and environmental stewardship can and must go hand-in-hand. As I stated when setting up the NEAC, simply being richer falls far short of my expectations. Not only do I want the people to earn better, but they must also live better. Raising the quality of life must be an integral part of the NEM. Finally, is the NEM inclusive? We must recognise the imperative that we harness the potential of all Malaysians, and that all share in the proceeds of increased national prosperity. Inclusiveness is a key prerequisite for fostering a sense of belonging and engagement in the NEM. I would like to touch on the issue of an inclusive NEM that will ensure that no one is left out in contributing to and sharing in the creation of wealth as we progress. While perfect equality is in reality impossible to achieve in an open, global economy, an inclusive society will ensure that 40
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we can narrow inequalities in our nation, help those who need help most and engage all of Malaysia’s talents in our effort to build a competitive economic workforce. Reforming our approach to fully meet these new challenges will require a change in our national mindset. In the short-term, there will be entrenched opposition. Some economic sectors may experience adverse effects. The process of change is never easy and there will be painful moments. But for the long-term strength of our nation, we cannot afford to duck these issues any longer. If we are to truly tackle inequality and become a beacon of progress in our region, we must bring a sense of urgency to reform.
Affirmative Action as Part of Inclusiveness The New Economic Policy (NEP) launched about 40 years ago with its affirmative action policy has served the nation well, balancing the economic growth strategies of our nation with the need to address structural inequalities and promote social harmony. Poverty has been drastically cut, standing today at around 3.7 per cent. As a nation, we should be proud of this achievement. It is one that many other multi-racial nations would like to emulate. However, we still have an unacceptably large segment of low-income households in Malaysia. We, the government, are now dealing with 21st century problems that require fresh 21st century approaches. The NEAC report sets out an approach to tackle poverty and renew our affirmative action policies for a new and more competitive economic context. This will be part of the public consultation. The government feels there is merit in much of this proposal and I want to set out the broad parameters here. Our first priority must be to eradicate poverty, irrespective of race. We cannot have the high income, sustainable and inclusive economy we seek when disparities in income are not addressed. So, there will be a renewed affirmative action policy in the NEM, with a focus on raising income levels of all disadvantaged groups. It will focus on the needs of all our people – those living in the long houses in Sabah and Sarawak and poor rural households in Peninsular Malaysia, who often feel disconnected from the mainstream economic activity. Fishermen, petty traders and small farmers 41
The ultimate goal - in time - is that no Malaysian lives in poverty, that all get the chance to succeed and share in prosperity.
also fall under this category. Not forgetting the Orang Asli and low income urban dwellers, seeking out a livelihood in tough economic circumstances. The proposal in the NEAC Report suggests a focus on the bottom 40 per cent of Malaysia’s income strata – both individually and regionally. These are the disadvantaged groups where special attention is still required. The ultimate goal - in time - is that no Malaysian lives in poverty, that all get the chance to succeed and share in prosperity. While there are those who struggle on low-incomes and in harsh conditions, we will always provide special support to help lift them out of the poverty trap. The NEP has been a milestone of our society for decades, a policy I have fully supported and admired. Its original objectives are still relevant, but it is time to review its implementation. We will pursue the same goals, but transform the way we do things. Our renewed affirmative action policy, therefore, will be built on four principles: It must be market-friendly, • It must be merit-based, • It must be transparent and • It must be needs-based. •
For instance, one important consideration will be developing a competitive and transparent tender process, with set and clear rules for the whole Bumiputera community, made of both Malay and other indigenous groups. This is set out as a common-sense enhancement of our policies for a new economic reality 42
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and where inclusiveness is a key component in our new economic model. In practice, this approach will mean greater support for the Bumiputera, a greater support based on needs, not race.
The Bumiputera segment still forms the majority in the vulnerable groups by any measure and while our new approach will help those on low-incomes from any group, it will still largely benefit the Bumiputera community and at the same time provide for the disadvantaged of other communities. In assessing the results, fair distribution must encompass the whole spectrum of measuring wealth such as equity ownership, other financial and non-financial assets and access to wealth creating opportunities such as long-term concessions and contracts. Even in measuring ownership, it should go beyond equity to include other properties, business assets such as retail, landed properties, commercial buildings, intellectual properties and other services as well as managerial positions. A valuable example would be the redevelopment of Kampung Baru, a holistic opportunity of wealth creation and value enhancement that goes deeper and well beyond equity ownership. I have instructed the NEAC to develop a detailed framework to operationalise this new model of affirmative action based on a transparent and market-based mechanism to achieve fair distribution of the benefits of a high-income economy. The NEAC report sets out its view that the previous mechanism that concentrated on target setting should now focus on structured and dedicated capacity building investment that allows the Bumiputera to take advantage of new opportunities in the economy. In addition, fair access and opportunities to retraining, upgrading of skills and ability to gain employment will also be emphasised for all Malaysians. This approach built on our experience in implementing the affirmative action policy over many years. When they are implemented in a transparent, fair and empowering way, they will yield better results. But for too long, the implementation of our affirmative action policies has not reached those who needed them the most. There is a perception that the non Bumiputera have 43
not benefitted from the progress made to date although facts and figures show otherwise. Therefore, with the new principles of affirmative action stated earlier, we need to change this perception. We can no longer tolerate practices that support the behaviour of rent-seeking and patronage, which have long tarnished the altruistic aims of the NEP. Inclusiveness, where all Malaysians contribute and benefit from economic growth - must be a fundamental element of any new economic approach. These are the principles I want to see guide this next phase of consultation. Can we build a new model that creates a high wage, sustainable and inclusive economy where together we prosper? I believe we are within striking distance. I believe there is widespread support for it across Malaysia. And I believe knowing the ingenuity and creativity of the Malaysian people and Malaysian businesses - we can and will make such aspirations our national economic reality.
From Principles to a Plan The question then becomes: How do we get there? The work of the government and the NEAC is far from over with this initial report. This is a two-stage approach. We must now ensure a robust and thorough consultation and then the development of a detailed blueprint or roadmap on how the NEM and accompanying economic reforms are to be implemented. For instance, working groups akin to the labs that drive development of the NKRAs under the GTP will be held, made up of participants from both the public and private sectors to drive the strategies behind the NEM, culminating in a second report that is a detailed transformation roadmap. We will, in effect, develop an ETP to deliver on this new economic model. To achieve this transformation, the NEAC has set out a series of strategic reform initiatives. The eight Strategic Reform Initiatives focus on:1. Re-energising the private sector to lead growth; 2. Developing a quality workforce and reducing dependency on foreign labour; 44
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3. 4. 5. 6. 7. 8.
Creating a competitive domestic economy; Strengthening the public sector; Putting in place transparent and market-friendly affirmative action; Building knowledge-based infrastructure; Enhancing the sources of growth; and Ensuring sustainability of growth.
All the eight initiatives are complementary and cross-cutting in their impact over all sectors of the economy. All three goals of the NEM require that we achieve significantly higher growth rates in GDP in the next decade. As such, several of the policies we must pursue relate to the foundational issues, to enable accelerating the growth momentum through a holistic approach to remove all barriers. They emphasise the need for capacity building rather than just nationbuilding as the sustainable way forward.
Adding to the NEAC Report, what I would like to suggest is to focus our efforts effectively by targeting specific key sectors, or what I would call the National Key Economic Activities (NKEAs). These are the areas where our economy has the potential to thrive as we move into the high income bracket. In the past, the government has played a paternalistic role in recommending and promoting the sources of growth that should be undertaken by the private sector. Yes, we need to provide some guidance, but we are aware that the government should not be making investment decisions for the private sector. Based on the NEAC new approach that the private sector should drive growth, the government needs to enhance its role as the facilitator for industries to flourish. The majority of the initiatives that have been set out deal with all that is imperative to set the economy right – to remove distortions, barriers and impediments that hinder our economy from progressing up the value chain and to promote healthy competition. Implementing these policies is a pre-condition to successfully tapping new sources of growth. As long as these barriers remain, the growth opportunities in all sectors will not be realised.
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The NEAC – with the input from across the private sector – has identified key sectors that can be leaders in generating high growth rates, sectors in which our nation is competitive, has a wealth of expertise, the opportunity to leverage specialisation and has gained first mover advantages, as well the traditional comparative advantages. There is much work to be done, but the potential upside requires us to place a focus on these key sectors. Mirroring the process we followed for the GTP and its NKRAs, I am committed to undertake a thorough consultation process with all the stakeholders and ensure the National Key Economic Activities will be selected with the sole criteria of Malaysia’s best interest. The NEAC will work with PEMANDU to develop the NKEAs. They will consult the people and all other stakeholders and, when the 10th Malaysia Plan is unveiled together with the NKEAs, a special Economic Delivery Unit will be established to spearhead the reform process and finalise and implement the NKEAs. There is still a lot of work to be done to identify a successful strategy for execution and the NKEAs to focus on, but, as a mere indication of what may come in the future, let me give you a few examples of the possibilities we are looking at: In the electrical and electronic sector, Malaysia can leverage its early mover advantage. Building on a strong foundation, Malaysia’s future in this sector must be focussed not only in manufacturing but also in research and development and design, where Malaysian companies are driving innovation rather than simply importing it. Among the measures, we must consider incentives for high-value research and support for SMEs supplying larger firms on a larger scale basis.
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Resource-based industries in the palm oil and oil and gas sectors continue to be emphasised. In the palm oil sector, strengthening research initiatives should lead to indigenous technology that better meets market demand, such as healthy fats and oils, biofuel from biomass, cosmetics and bio-degradable plastics. In oil and gas, we have one of our nation’s most visible and valued champions in Petronas. It has built a strong brand internationally and I believe now we must also help drive growth here in Malaysia with even greater support for local suppliers as it grows. Beyond the core oil and gas sector, however, Malaysia’s international energy expertise can help companies in this industry and beyond expand internationally by sharing its know-how, partnering on international bids and offering support on a truly global scale. The strength of having a well-developed pool of local talent and companies which are able to compete globally gives us a lead advantage. In services, the tourism sector has not been exploited to its potential. More can be done to attract new markets from Europe and the Americas to complement the markets from the United Kingdom and Asia. We have some of the oldest forests in the world, rich with flora and fauna and diving experiences acclaimed to be unforgettable. Malaysia can lead in providing environmentally sustainable eco - tourism adventures that are much sought after by the advanced markets. We should aim to provide services which will attract high - end tourists who seek exclusiveness and high-value services. We must also be creative as we consider new areas of tourism. From medical tourism - a high-potential growth sector to eco - tourism, luxury market tourism and visitors related to our growth as a regional education hub. Malaysia’s tourism future is bright if we have the vision and creativity to support its diverse growth potential. As an agriculture producing nation that is also heavily reliant on imports of food, there is a strategic need to focus on expansion of the high value agriculture sector. There is potential to create value in rural space through largescale agriculture, higher yield methods, new technologies, better linkages to the market place that will result in greater production and income. We must also promote agro businesses through integrated and modern agriculture practices. Given that the Bumiputera community is large in rural areas in both Peninsular Malaysia and Sabah and Sarawak, an intensified expansion of modernised agriculture activities can contribute both to higher incomes and to the reduction in income inequality. 47
And to compete globally, we must commit Malaysia’s agricultural sector to cultivation and processes that meet and exceed international standards and best practices, as well as marketing on an international scale. Malaysia also has the potential to embrace a leadership role in green technology and develop a niche in high-value green industries and services. We have on the ground expertise in complex manufacturing and are early movers in the region’s solar and alternative energy sectors. And with recent success in commercialisation of natural bio-diversity into high value products which are gaining traction among environmentally conscious consumers, Malaysia can become a green hub all the way along the business development continum - from research to design to manufacturing to commercialisation - we have the skills and the public sectors support. There are many areas that Malaysia can explore to expand the sources of growth. I would like to mention another example, the financial services industry, which is both a growth sector as well as an enabler to growth of other sectors. Its growth potential is seen in Islamic financial services as well as in the derivatives for risk management by local and regional players.
Malaysia is now a world leader in Islamic finance, capital market and the takaful industries. We see the potential to become a hub for integrated Islamic financial services. For instance, Bank Negara Malaysia is currently finalising the establishment of a physical Islamic financial centre and the imminent approval of two mega Islamic banks licences. Competition is no longer only between nations but also between cities. For Malaysia to move into a higher income economy, we must exploit higher returns by adopting strategies to build density, develop clusters and specialise in high value sectors. Recognising this role, cities such as Kuala Lumpur and Johor Bahru which includes Iskandar Malaysia must be developed to be more liveable and be able to attract talent and be part and parcel of a more comprehensive and integrated urban-rural planning. 48
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In the palm oil sector, strengthening research initiatives should lead to indigenous technology that better meets market demand.
We must develop stronger clusters that serve as incubators for start up companies, ensure shared services and develop more businesses and university linkages. Evidence shows that development of cities helped raise incomes of surrounding rural areas especially when they are integrated into the supply chain network. There are many more sectors of strategic growth where Malaysia has the potential to flourish. We have strengths in the IT industry. The creative industries – our music, film, arts and cultural expertise – can be an important sector in Malaysia’s future. And with a strong base of medical, scientific and manufacturing expertise, we can be a regional home for the fast-growing biotechnology and life sciences sectors. So, I call on Malaysian companies, investors and entrepreneurs - to seize the opportunities before us and become regional and even global champions. We must have concerted policy intervention to turn this into reality. Companies that show innovation and foresight to reshape and revitalize their activities would have unprecedented prospects to be world leaders in the future.
Public-Private Sectors Cooperation If Malaysia is to achieve its goals, we must build a strong, solid and strategically demand-driven market that connects sectors of growth to the ambitious goals I have set out for our NEM. I have already touched on many of the strategies 49
I believe we will require, including modernisation of our education system to build a world-class workforce; prudent fiscal reforms that bring greater balance to our revenue and expenditure framework; and market-friendly affirmative action designed to ensure that all Malaysians benefit from this new approach. But underlying all of these strategies must be a new and clear understanding of the respective roles of business and the government. The government is an enabler of wealth-creation. Our role is to ensure stability, openness and fairness in a secure environment that facilitates, rather than distorts or hinders, growth. Competition should be promoted to allow dynamic and efficient markets, and where appropriate, public sector support is needed, we should be there to help. We have also seen in the past 18 months - more clearly than ever - the need for governments to be vigilant in safeguarding economic stability when markets fail. I look around this room today and I see some of the finest private sector talent in the world. You are the torchbearers of wealth creation and growth. We will be active in protecting the interests of the Malaysian economy and the Malaysian people, but we want private sector expertise and investment to flourish. Again, to succeed in a different economic context, we need to look at doing things differently. One of these changes must be a new approach that expands the role of capital markets under our new economic model. Malaysia will not be successful - even in our key sectors - if we simply maintain the status quo. Sparking growth means cultivating innovation, risk-taking and creativity in the development of new products or services.
IT industry, the creative industries – our music, film, arts and cultural expertise – can be an important sector in Malaysia’s future 50
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Hence, in order to facilitate Malaysia’s new economic model, support private sector innovation and to stimulate financing in the higher-risk services and knowledge-driven sectors that are critical to Malaysia’s future, I would like to see an expanded role for our capital markets, evolving from a primarily fundraising model to a liquidity-driven and risk-diversification model that encourages entrepreneurs and investors to be part of Malaysia’s exciting economic future. The development of our capital markets will be further strengthened in the Second Capital Market Master Plan currently being formulated by the Securities Commission and I see the acceleration of capital market industries such as the fund management, venture capital and private equity sectors as a crucial part of our drive to create the high wage, high skill economy of Malaysia’s future. Related to this issue, the Employees Provident Fund presently dominates local equity and bond markets with up to 50 per cent of daily Bursa volume represented by EPF related trades - a situation that is not healthy for the market or for the EPF. I would like to make known that the EPF will be allowed to invest more assets overseas, both diversifying its portfolio and creating more room domestically for new participants. EPF presently has about six per cent of assets invested offshore and this will increase significantly.
EPF will also increase its direct investments in the real economy of Malaysia, as an alternative to market investments – taking positions in healthcare, commodities, property and other long-term investments that match EPF’s requirements to protect the real rate of return on its assets. On the institutional front, the Malaysian Industrial Development Authority (MIDA) is the principal government agency responsible for the promotion and facilitation of investments in the manufacturing and services sectors in Malaysia. MIDA has been instrumental in the nation’s transformation under different phases of industrial development over the last four decades and has emerged as a well recognised institution among both foreign and domestic investors. However, the time has come for key changes in MIDA in order to make it a more effective investment promotion agency. 51
I am pleased to announce that MIDA will be corporatised to give it the necessary organisational flexibility to attract and retain the manpower and talents it needs in order to be an internationally competitive national investment promotion agency. The Government has also agreed to empower MIDA with the necessary authority to negotiate directly with investors for targeted projects. In addition, MIDA will also be designated as the central investment promotion agency for the manufacturing and services sectors, excluding utilities and financial services, to enhance the coordination and cohesion among the various investment promotion bodies in the country. These changes will enable MIDA to approve incentives in real time and act swiftly to engage investors more effectively. Finally, MIDA will be renamed as the Malaysian Investment Development Authority while maintaining its acronym, MIDA, which is a well known brand name. In addition to this important institutional reform, I believe that we need to look anew at ensuring an appropriate balance between government, GLCs and the private sector in our economy as part of this new economic model. In the years prior to the Asian financial crisis, the private sector contribution to GDP far outstripped that of the public sector, but in the first decade of the new century, the statistics have been reversed. What started as a cyclical necessity of fiscal pump priming has hardened into a dependency and an unsustainable structural condition. I have touched on many of the key principles that will underpin this recalibration of the public-private sector relationship: Government reforms to reduce bureaucracy and focus on creating a growth-enabling environment; encouragement and incentives to spur private sector innovation and productivity; a focus on strategic knowledge sectors of long-term growth; and a recognition of the crucial importance that pursuing opportunities in regional and global markets will play in Malaysia’s growth. 52
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At this venue last year, I outlined a strategy that would see GLCs proceed to dispose of non-core assets; to catalyse and develop the eco-systems of their core sectors; and, to compete on a level playing field with the private sector. Building upon the third principle, I mentioned that Government Linked Investment Companies (GLICs) should be allowed to divest non-core and non-competitive assets. Today, I want to announce further steps that will enhance private sector opportunities and appropriately recalibrate the relationship between the public and private sectors.
Going forward, I would like to see GLCs and government holding agencies pursuing strategic collaborations with private sources of capital in Malaysia in order to provide prospective investors with exposure to the government order book and build national competencies. These coalitions will not only drive the regionalisation strategy of Malaysian companies which is vital given the size of the domestic market, but also ensure ready pools of capital are in place and available for quick deployment. In addition, the opportunity to form partnerships with a wider range of coinvestors including retail investors, local and foreign mutual funds remains open. If successfully implemented on a large scale, these catalytic coalitions could become a unique form of Public-Private Partnership. We already have initiatives moving in this direction, for example the upcoming privatisation of Astro and the partnership between Malakoff and Tenaga Nasional on a utility project in Saudi Arabia. We have made progress in the area of divesting non-core assets and Khazanah alone has over the course of the last nine months divested significant stakes in Tenaga Nasional, Malaysia Airports and PLUS for the purpose of increasing the liquidity of these counters. But more such progress in this area must be made. We will be pursuing further such divestments of non-core and non-competitive assets that operate in areas where new strategic shareholders have the potential to enhance the creation of value, as compared to them being left within the government stable. Of course, we must ensure that any such divestments stand up to rigorous checks to ensure that they are in the public interest. 53
A transparent process will be implemented to ensure that potential private sector bidders meet a minimum set of criteria, including financial standing, track record in business expansion and management excellence, and that their proposals help grow the Bumiputera and 1Malaysia causes. The bidders will have to demonstrate delivery against set benchmarks of innovation and value creation, and support the goals of the NEM – high wages, inclusiveness and sustainability. To develop these processes, I propose evaluation panels consisting of financial professionals, international industry experts and senior government officials be appointed to assess private sector bids for GLC-related assets. And because it is so important that public and private sector performance are each enhanced, we will be vigilant in ensuring that the transfer of GLC assets into the private sector does not compromise our goals for public sector reform and delivery, or lead to asset stripping that runs counter to the public interest. For a predetermined period of time, this may include the retention of key management and the prevention of involuntary staff layoffs. Equally, I recognise the importance of reviewing existing tariffs and incentives available to GLCs if we are to attract private sector investment, and I propose that any such reviews are taken up at the Cabinet. With clear guidelines and strategic principles in place, I can say that the journey on GLC transformation continues to maintain its momentum, and I can go further today with the announcement that Khazanah has resolved to divest its controlling 32 per cent stake in POS Malaysia through a two-stage strategic divestment process. In the first stage, that begins immediately, proper corporate governance and regulatory processes will be adhered to. A full consultation with the various stakeholders will be undertaken. POS Malaysia will be prepared for the strategic divestment by addressing various aspects of its business environment including its regulatory structure, usage of government controlled land and the position and welfare of its employees. The long outstanding matter of low income of some of the staff including postmen will be reviewed. To ensure both public and commercial interests are balanced, the Government will undertake a comprehensive review and update the regulatory framework of the postal system. In stage two, Khazanah will draw up a bidding and evaluation process to select a new and entrepreneurial shareholder to further modernise POS Malaysia. 54
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Khazanah will draw up a bidding and evaluation process to select a new and entrepreneurial shareholder to further modernise POS Malaysia.
To promote higher levels of economic investment, expansion and growth, several parcels of land in Jalan Stonor, Jalan Ampang, Jalan Lidcol in Kuala Lumpur have been identified to be tendered out and developed by the private sector. This asset, if not developed, will be wasteful and the government will incur cost of maintaining it. This initiative will be a good kick-off for more outright sale and joint ventures between the public and private sectors in land development. In this regard, I would like to inform you that the Government of Malaysia and the EPF will form a joint-venture to promote the development of 3,000 acres of land in Sungai Buloh into a new hub for the Klang Valley. This will lead to over RM5 billion of new investments being made that will have an immediate effect on domestic growth, with an enormous potential for the private sector to participate in prominently. I can also share with you today that we will gradually reduce public sector involvement in activities that compete directly with the private sector. We have begun a review of a number of companies under Minister of Finance Incorporated and other agencies, and I can inform you that we are considering privatisation measures related to Percetakan Nasional Malaysia Berhad, CTRM Aero Composites Sdn. Bhd., Nine Bio Sdn. Bhd. and Innobio Sdn. Bhd. with more under consideration. In addition, Petronas has already identified two sizeable subsidiaries with good track records to be listed this year. These initiatives have the goal to reduce the 55
government’s presence directly or indirectly in business activities that are best carried out by the private sector and are a clear signal of our commitment to promoting competition in the economy, risk-taking and long-term economic growth that benefits all Malaysians. As I have stressed before, we cannot afford to slip back to the status quo. The challenge that stands before us requires an urgent need to review the way things are being done. Institutions, approaches and systems that have worked well in the past may need to be altered to suit the changing global landscape. The announcements I have made today – on new divestments, public and private partnership and a renewal of government processes to spark growth – are a sign of our commitment to reform and position our country, our workforce, 56
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our companies and our future generations for the challenges of a competitive global economy.
The Defining Moment In my first days as Prime Minister, I said that Malaysia must be open to change. We have no alternative but to move forward and become a high income country with sustainable and inclusive growth. Change can be painful and shortcuts will be tempting. But we cannot seek only the quick wins. This will be a journey that may cause some short-term pain, but will pay off in a stronger Malaysian future. We need to have a sustained and consistent ‘big push’ if the reforms set out today are to gain momentum and help achieve our goals. In this regard, this is a defining moment for Malaysia. As we emerge from a global recession, will we have the courage and the vision to pursue an ambitious agenda for change that may seem daunting, but is essential for our nation’s future? Our answer is to create high-wage jobs, give our children the best educational opportunities and attract the high quality investment that is the driving theme of this important gathering. At this critical juncture, where we balance our nation’s history with its future, I believe we do have the courage to meet Malaysia’s hopes and ambitions. But this is about far more than the economic goals of our nation. This is about the life chances open to future generations. This is about raising the sights of low-income families to help them out of poverty. This is about the very fabric of our society where we each have opportunities and responsibilities. It’s about placing Malaysia at the forefront of a high-income economy so that we can stand shoulder to shoulder with other fully developed nations. I am confident - with your support - we will choose the right path, move forward, not back, and build a fairer, stronger and dynamic Malaysia for many decades to come. I call upon you to join me in this momentous journey to build a truly prosperous and a new future for 1Malaysia. - THE INVEST MALAYSIA 2010 Shangri-La Hotel, Kuala Lumpur March 30, 2010
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ASEAN: Transformation for the Sake of Future Generation
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Transformational Leaders
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ransformational leadership is a challenge facing ASEAN and its respective member countries. Our citizens want leaders who can transform society and improve their lives so that they can have a higher standard of living and a more prosperous and peaceful future. All leaders would surely strive to be transformational, but transformational leadership is not easy. At the same time, transformational leadership offers a variety of challenges. For one, there will always be pockets of people in any nation, society or organisation who resist change. Some are fearful of the uncertainty that change brings. Others could feel threatened by the requirements of doing things differently. So, a transformational leader must be able to address these concerns and impediments, and break down resistance to change. They must have a strategic vision and clear goals in mind. Leaders must plan strategies carefully and be able to effectively communicate the vision, goals and strategies in order to build support. These are necessary for the transformation to succeed. Transformational leaders must also have a sense of mission and a sense of urgency to get things done quickly.
Transformational leadership is especially important today as the world grapples with uncertainties created by the global financial crisis and other threats to world peace, security and prosperity. Transformational leadership makes a real difference in peoples’ lives. Transformational leaders deliver results that matter, change mindsets and can mobilise support. They are able to implement difficult changes and are not afraid to make tough decisions.
Government Transformation Programme Malaysia embarks on transformational journey with the Government Transformation Programme (GTP). It has clearly defined National Key Result 59
Areas (NKRAs) and Key Performances Indicators (KPI). These are the scorecards by which the government will be measured. The focus on Performance Management is a fundamental pre-requisite for transformation to be successful. The GTP has charted a roadmap and strategic direction to transform government. The Malaysian public expects nothing but success in this. Failure to deliver will have dire consequences for us all. Performance Management and the GTP are not mere slogans, but they represent a determined plan of action that will be closely monitored and carefully implemented to improve the lives of the people. Another transformational agenda of Malaysia, the NEM, which will complement the GTP and our broader efforts to implement real and important change for the benefit of all Malaysians, was launched recently. The new model will serve as the backbone of our long-term policy agenda and is integrated into the 10th and 11th Malaysia Plans that will transform the Malaysian economy along three guiding principles – high income, inclusiveness and sustainability – driving our economic progress as we become a fully developed nation.
In line with the first principle, high income, we will re-invest in the people of Malaysia, break down barriers to growth and enable and empower the private sector by re-shaping and energising the public sector in order to achieve a highincome economy where the people will benefit from better, higher paying jobs and a better quality of life. In fact, the true strength of Malaysia is in harnessing the potential of all Malaysians and allowing all to share in the proceeds of increased national prosperity. So, our second principle of inclusiveness is built into the DNA of our new economic model, where the implementation of affirmative action policies is redefined to go beyond racial considerations and be market- friendly, fully transparent and based solely on merit and needs. And as there is no value in pursuing a future where an influx of wealth is traded for a world that will not foster better lives for our children and grandchildren, we will not forget the 60
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Malaysia embarks on transformational journey with the Government Transformation Programme (GTP).
importance of maintaining a commitment to sustainability of both economic performance and environmental impact. There is a great deal of work to be done to push this transformational initiative forward – taking it from a defined set of principles and goals and turning it into concrete policies – but we are steadfast in our commitment to seeing this implemented as part of the 10th Malaysia Plan. We will soon be announcing the Economic Transformation Programme with a dedicated public private delivery vehicle, similar to PEMANDU (ETP), which will bring us through this process. The first stage will include broad engagement with the people and groups such as business leaders and investors, to ensure that all Malaysians have an opportunity to provide input into the policy-making process. As stressed in the past, the era of ‘government knows best’ is over, so we will be seeking input and engagement from all of our most important stakeholders. This period of consultation will drive the second phase – the development of a detailed blueprint or roadmap on how the NEM and accompanying economic reforms are to be implemented. Malaysia offers GTP as a model for other countries to emulate. It can serve as a case study for other ASEAN countries to consider in their efforts to transform their own administrations and societies. To do this, Malaysia would like to exchange ideas and share best practices, so that we can learn from each other. Sharing transformational experiences and case-studies will help us all. While each member country is unique and not everything tried in one 61
country can be successfully applied in another, greater openness and willingness to share experiences can allow us to learn from one another. Malaysia has accomplished much and proven her critics wrong. Many had written off Southeast Asia after the 1997-98 Asian Financial Crisis. Others doubted our ability to recover from last year’s Global Financial Crisis. Yet we have bounced back. ASEAN is clearly on the road to recovery now. Coming into full effect with AFTA and the ASEAN-China Free Trade Area this year demonstrate ASEAN’s resilience and continued relevance in the international marketplace. ASEAN will need to transform itself in order to ensure its relevance for future generations. Our young people must feel a sense of community, a sense of belonging and commonality. That is the reason why ASEAN leaders at the last summit in Thailand focussed on the importance of ASEAN Connectivity. We believe that a more connected region will enhance regional
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integration. Connectivity covers not only physical linkages but also financial and socio-cultural ties, including tourism, cultural exchanges and movement of people. This calls for a convergence of ideas. A high level task force is developing a master plan for ASEAN Connectivity. We look forward to receiving a bold, comprehensive master plan from them in October. In addition, ASEAN must continue to have a strong external orientation. Increasingly, other regions and countries want to expand their engagements with us, such as the EU, Japan, China, Korea, India, the U.S., Australia and New Zealand. Meaningful, constructive engagements with external partners will help us maximise the benefits. That’s another reason for ASEAN connectivity to be inclusive, involving not just member states in the region, but also dialogue partners.
Accordingly, ASEAN Connectivity can boost trade, investment, tourism and development. It will narrow development gaps and facilitate people-to-people contacts, contributing to ASEAN community building. A good example is the Singapore-Kunming Rail Link, which passes through Malaysia, Thailand, Cambodia and Vietnam on the way to China. The project is expected to be completed in 2015. ASEAN is also working towards a single aviation market by 2015. It is hoped that this community building and the sense of ASEAN consciousness will allow governments, the private sector and the people to work closely together. It’s like a three-legged stool; we need all 3 legs for the stool to be strong. It is my hope that, in facing our future challenges, we can all work together and benefit from our smart power for mutual benefit and development. - THE AXIATA 7TH ASEAN LEADERSHIP FORUM Sunway Resort Hotel & Spa April 5, 2010
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Celebrating Malaysia-Japan Multifaceted Relationship
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alaysia has long been inspired by Japan’s past struggle for success. The rise of Japan from the ashes of the Second World War to become one of the most powerful global economies through its resilience and determination has impressed Malaysia very much. Japan’s success which is based upon single-minded dedication, an impeccable work ethic, discipline, high morale and management capability, has inspired Malaysia to formulate its Look East Policy in the early eighties.
Without doubt, the Look East Policy which is now entering its 28th year has managed to become a magnet, attracting Japanese companies to invest and set up their businesses and bases in Malaysia. These investments have allowed Malaysia to move up the ladder to become an upper middle income nation within the space of a decade. Malaysia and Japan are two old friends. Friendship between the two countries is an enduring one, predicated upon a common and mutual worldview. Ours is not a relationship of fair weather friends. It is one that has withstood the test of time over the years as both nations work on the possibilities rather than being fixated by the past.
Friendship between Malaysia and Japan is manifested vibrantly in trade and investment, education and human resource development, capacity building, science and technology, cultural exchanges as well as tourism. Malaysia is indeed appreciative of Japan’s participation in Malaysia’s progress and development over the years. Much has been achieved to date but much more can be realised through enhanced partnership between the two countries. As a nation and as a people, we seek to build on our current success and move Malaysia into the ranks of a developed high income economy by 2020. In realising this goal, successful economic policies that have served Malaysia well thus far are insufficient for us to progress to the next level. Malaysia realises the need to change not only in the way we think, but also the way that we do business and the way we formulate and execute our policies. 65
High-Income Economy I had recently unveiled both the Government Transformation Programme (GTP) and the Economic Transformation Plan (ETP) as the twin thrust enabling Malaysia to propel itself into becoming a developed high-income economy by the end of this decade.  The GTP is designed to accelerate our performance in order to achieve developed nation status. It is formulated based upon the overarching principles of 1Malaysia - People First, Performance Now. Through the GTP, several measurable initiatives are mapped out to ensure the government remains focussed on delivering services to the people. The GTP will boost efficiency and effectiveness in the government and is aligned with other national priorities such as the New Economic Model (NEM) and the Tenth Malaysia Plan. Our immediate GTP goals are to improve the government efficiency and therefore the public service delivery system in areas identified as National Key Result Areas (NKRAs) and Ministerial Key Result Areas (MKRAs). The six NKRAs comprises reduction in crime, fighting corruption, rural basic infrastructure, improving urban public transportation, elevating low-income households and provide access to quality education.
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The second thrust is the ETP at the core of which is the NEM which will be encapsulated in the 10th and 11th Malaysia Plans. Economic reforms are by nature daunting, but the Malaysian Government under my stewardship has pledged to see it through. We will not shirk from doing what is hard, we will never abdicate from doing what is necessary and we will not step away from taking the difficult decisions just because the challenges that it will present. If we do not seize the opportunity to fundamentally change and institute the necessary reforms needed for a future of sustainable prosperity, then we risk being emasculated in the middleincome trap.
Understanding and Collaboration Through Smart Partnership Japan can play a pivotal role in helping Malaysia’s transformation from an industrial economy to an innovation economy, much like her help in our first transformation from an agricultural to an industrial economy. We share the belief that it is now perhaps timely to revisit the Look East Policy by introducing new and innovative fields or areas where Japan can share her expertise. Japan’s cutting edge technology in the fields of environment and green technology comes to mind fitting well into this new framework of cooperation. In the field of education through the Look East Policy, more than 15,000 Malaysians have benefited, a big number of them engineers and professionals who graduated from universities in Japan with many of them currently occupying mid to high level positions in the public and private sectors in Malaysia. Malaysia can indeed benefit from a much broader education, human resources and capacity building cooperation, especially between institutions of higher learning. Collaboration between Malaysia and Japan must take our relationship to new heights. The synergy can create new avenues of cooperation not only in areas of technology and science, but also in the cultural milieu. For as much as Malaysia can learn from Japan’s strength in terms of science and technological advancement, Japan can also gain from Malaysia’s diverse expertise; from oceanography to forestry, from palm oil to tropical medicine, and from Islamic finance to multi-cultural engagement. 67
I strongly believe that Malaysia and Japan can engage in various initiatives at different levels to achieve mutual benefit and our shared goals. First, both nations can foster closer understanding and collaboration through smart partnership, academic engagements and corporate joint ventures. Secondly, Malaysia and Japan can share resources to create value in an open innovation ecosystem that will benefit both countries at various levels. For example, there can be increased student and staff mobility between universities engaging in innovative projects in various areas of concern that will benefit all parties. In addition, both countries can extend the existing framework such as the Japan Society for the Promotion of Science (JSPS) with the Malaysian Vice Chancellors Council on areas of importance such as sustainability and innovative technology.
Another initiative could be to revisit the idea of the Malaysia Japan University as a symbol of our renewed commitment in bilateral relations and in the quest for a more vibrant and dynamic ecosystem for intellectual collaboration. Nevertheless, the success of this endeavour hinges upon our mutual commitment to find an equitable modality towards it’s’ realisation. The Japanese Government has long supported Malaysian academics resulting in high-impact academic collaboration and joint research, while encouraging the mobility of experts between the two countries for many years. In addition, Japanese companies such as Hitachi and Panasonic have also provided scholarships and fellowships for higher degrees and joint research projects. In relation to this, I am happy to be informed that Universiti Teknologi Malaysia (UTM) , one of the top tier universities in Malaysia, will be setting up a UTM Tokyo Satellite Office based in Meiji University which will further enhance the academic ties and research collaborations already existing between our two nations in areas of concern.
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Through Research University collaborations, nations can be linked through effective engagements in pertinent research areas that would contribute to knowledge and expertise in such fields as sustainability and innovation as well as other economic and socio-environmental issues currently impacting the world. At the same time, Malaysia is committed to provide facilities and incentives to welcome Japanese research companies to set up operation in Malaysia. We are ready to create a more vibrant and fertile research environment that would support a more creative and innovative investment ecosystem, contributing to the synergistic well-being of both nations. We live in a truly interdependent world where advances in the fields of science and technology have given rise to the situation where national prosperity and security can no longer be secured by any one nation acting in isolation. It is thus in this spirit that I just came back from the nuclear security summit in Washington DC where Malaysia and Japan are also participating states. The aim of this summit is to bring likeminded nations who see global nuclear proliferation as a clear and present danger to the world we live in. Weapons of mass destruction, nuclear weapons included, do not contribute in any way to the peace and security of the world we live in. It is indeed a dangerous
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fallacy to equate national strength and greatness with the possession of such weapons. Their existence is perversely like having a modern day equivalent to the sword of Damocles hanging precariously over our collective heads.
We need and must work towards removing this danger for the sake of our future generation. A world free from nuclear weapons is not an option, but an imperative that all nations must work towards. It is poignant that I am delivering this speech in Japan - the only nation that has been traumatised by the usage of this weapon. Humanity can never afford for this experience to be repeated. It must never happen again. Today, we stand together at the confluence of time, where age-old traditions melds seamlessly with modernity, where East co-exists with the West and where national identities intertwined with global citizenship. Remaining relevant challenges demand us to re-examine our long held assumptions and prejudices. It requires us to adopt new paradigms while holding on to core values that underline our uniqueness as a nation. This is neither a time for timidity nor of cruising along in exploring the inherent possibilities in terms of our bilateral relationship. This is the opportune moment to push the envelope of cooperation, collaboration and solidarity further for our mutual benefit. In conclusion, I would like to extend my sincere gratitude and appreciation for the special honour given to me by Meiji University. I hope that this will further enhance the ties and understanding between our two nations as we work towards creating high value in all our endeavours in an increasingly challenging and competitive global environment. May I wish Meiji University more success in the future as a premier learning institution of Japan and the world.
- THE HONORARY DOCTORATE CONFERMENT CEREMONY Meiji University, Japan April 20, 2010
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The Malaysia Green Forum 2010
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he aim of Malaysia Green Forum 2010 (MGF2010) of establishing an actionoriented network that deals with environmental issues in a holistic manner is indeed refreshing and most welcomed. I was made to understand that MGF2010 has drawn the participation of senior government officials, industry captains, society leaders and academic experts from within and outside the country. I hope a meeting of these brilliant minds would be able to come up with creative, innovative and pragmatic solutions to the green issues we face today, taking full consideration of the country’s inherent strengths and weaknesses, opportunities and threats.
After all, Malaysia is one of the countries with the richest biodiversity in the world, prized with 16 million hectares of tropical forest area, which covers 60 per cent of the country’s land area. Preservation of this asset is the key to sustainability and I am proud of the fact that over 73 per cent of the total forest area in this country is currently protected as national parks. As we have already seen in the past three decades, green issues have become a world concern, and the issues have in turn travelled the world over and back. From Rio Summit to Kyoto Protocol to Bali Road Map and recently the Copenhagen Accord, progress however, has been slow and rather unconvincing.
Environmental Awareness In truth, moving forward towards environmental sustainability is not without its unique obstacles and Malaysia certainly faces a fair share of the challenges that lie ahead. For one, the lack of awareness about the impact of irresponsible activities to our environment is disheartening. This has led to environmental degradation and destruction by the very beneficiaries of the environment i.e. ourselves. There is still a lot of work to be done in convincing people to own up for their actions and attune their behaviour for the benefit of the environment.
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Renewable Energy Another equally daunting impediment is finding a cost-effective alternative to fossil fuels that are gradually depleting. As we know, this is a resource that will become increasingly scarce, escalate in price and will eventually run out. Whether we realise it, we are in a race with the world to wean ourselves from dependence on this resource. And the only way forward seems to be the currently costly migration to renewable energy.
Green Technology The third hurdle is the technology gap. There is still a high level of dependency on developed countries for access to cutting edge green technology. In addition, most of these technology applications are too expensive and impede wider usage. For instance, despite the abundance of sunlight in Malaysia, the use of solar power is still limited due to the colossal cost involved. Typically, a rooftop photovoltaic system that powers a four-room house costs more than RM150,000. Although improvements in technology and economies of scale are driving the price down, as it stands, it is still largely beyond the reach of the average household. Â
To sum up, the three biggest challenges we face with regards to environmental sustainability are environmental awareness, renewable energy and cost-effective green technology. Environmental Management  Malaysia is one of the earliest nations in the world to have adopted a serious concern towards the environment by enacting the Environment Quality Act way back in 1974. Likewise, the very concept of sustainability was an integral part of the Third Malaysia Plan, even before the idea of sustainable development was popularised in the late eighties by the Brundtland Report. In this regard, I would like to recognise the critical contribution by Yang Amat Berbahagia Tun Abdullah Ahmad Badawi for bringing together 14 agencies from four different ministries 74
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Malaysia has never underestimated the role of trees in oxygen creation, temperature moderation and carbon sequestration.
when he established the Ministry of Natural Resources and Environment in 2004 that paved the way for a more comprehensive and cohesive approach in tackling environmental issues.  Indeed, the government has consistently affirmed its commitment to environmental sustainability over the years and I pledge to continue this throughout my administration. Only six days after taking office, I announced the formation of the Ministry of Energy, Green Technology and Water. The government continues to take cognizance of the growing need and urgency of green technology towards sustainable development. Hence, the National Green Technology Policy was launched last year, just 106 days after the setting up of the said ministry. A technical arm called The National Green Technology Centre also came into being through a restructuring exercise of the then Malaysia Energy Centre.  This was then followed by both monetary allocations and non-monetary provisions towards developing green technology that I made as Minister of Finance, when presenting Budget 2010. The New Economic Model (NEM) that I revealed last month put sustainability as one of the three goals of the Economic Transformation Programme (ETP) and aspires to place Malaysia as a green hub all the way along the business development continuum – from research to design to manufacturing to commercialisation. This further underscores the
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government’s seriousness in taking a holistic approach towards environmental management. Malaysia has never underestimated the role of trees in oxygen creation, temperature moderation and carbon sequestration. Unlike many “hi-tech” mitigation solutions, trees, once planted, practically function automatically to clean as well as to cool the air. Environmental sustainability can only fully materialise if there is a complete and holistic ecosystem that allows for it. The government is aware of this fact and has taken this approach in gearing the nation towards this aim. I have identified six major components of this ecosystem and together they form the acronym AFFIRM. They are: • Awareness; • Faculty; • Finance; • Infrastructure; • Research, Development and Commercialisation; and • Marketing
Awareness The shallow public attitude that takes our environment for granted and regard it as a resource to be exploited for profit generation and personal gain is certainly regrettable. For example, when it comes to waste management, Malaysians need get past the “out of sight, out of mind” mentality. This not only applies to tangibles such as solid, liquid household and industrial wastes, but also intangibles such as heat. The country is in a dire need for a total public awareness on environmental sustainability at all levels of the society and the government can never achieve this on its own. Only through synergistic efforts of the public sector, private sector and civil society, including non-government organisations, can this be attained.
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Faculty Next is faculty i.e. the ability and skill of human capital, developed through education and training. In this regard, the government is working hard with other stakeholders in developing and introducing green topics in the school syllabus and curriculum of higher learning institutions. A system for formulation of grading and certification mechanisms for competent personnel in green technology is also under way. This is an important aspect as it supplies the “green collar” jobs that will in turn help in developing local green technology and spur the transformation into a “green economy.”
Finance Thirdly, providing effective financial incentives will be crucial in driving businesses to explore green technology and adopt green practices. For this, a green technology soft loan scheme has been launched with a fund amounting to RM1.5 billion. This fund will provide soft loans to companies that supply and utilise green technology. For suppliers, the maximum financing is RM50 million and for consumer companies RM10 million. The government will bear two per cent of the total interest rate. In addition, the government will provide a guarantee of 60 per cent on the financing amount, with the remaining 40 per cent by banking institutions. On the other hand, the government is also considering tax incentives such as tax deduction for contribution towards environmental funds and tax breaks for buildings and designs that work harmoniously with nature. 77
The need to promote greater labelling of environmentallyfriendly goods and services for easier identification by consumers. Infrastructure In infrastructure, the government is moving towards initiating a green township in Putrajaya and Cyberjaya as well as developing our very own guideline and rating scale based on carbon footprint base line to be adopted and applied in Green Townships in the country. This is important as many still do not realise the extent of environmental costs generated through home and industrial waste. Thus, the significance of green community cannot be neglected as it affects the consumers’ behaviour and preferences which are the powerful pull factors in driving the private sector to go green. Â
Research, Development & Commercialisation Though green technologies help provide environmental sustainability, their initial costs however hinder wider applications. To make it more accessible to the man on the street, research, development and commercialisation must focus on reducing the cost of purchasing smart devices and technologies so that all levels of the society can contribute towards environmental sustainability. And since environmental issues are global in nature, I would like to encourage local research centres and industries alike to look for global solutions by partnering with strong foreign green institutions, be it from the universities or multinational companies.
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Marketing People use to say that a good product is only as good as its marketing. Through SIRIM, the government is embarking towards developing eco - labelling for local products which will be internationally recognised. This can then support the government green procurement initiative as well as assist local manufacturers to export their products.
There is also a need to promote greater labelling of environmentally-friendly goods and services for easier identification by consumers such as “Energy Efficiency Star Rating”, “Organic food” and “Green Building Index.” This will be critical in securing buy-in from the public in supporting the “green economy.” In conclusion, AFFIRM is the holistic approach taken by the government in completing an ecosystem for environmental sustainability. Affirm means to express commitment to something and with this notion in mind, I seek the commitment of all stakeholders in committing towards environmental sustainability in Malaysia. I hope and call upon every Malaysian to work towards completing this ecosystem and becoming one with the ecosystem so that we may achieve satisfactory levels of environmental sustainability in Malaysia. And in the spirit of 1Malaysia, I dream that we would all work together, instead of against another, so that we may extend this call to the world at large and collectively, change the landscape of the earth for the betterment of future generations.
- THE MALAYSIA GREEN FORUM 2010 Sri Siantan Conference Hall, Putrajaya April 26, 2010
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The World Islamic Community and Economic Challenges
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he World Islamic Economic Forum provides an unparalleled platform for productive discourse and collaboration towards enhancing the economic well-being of the Muslim business community. As part of the global community, Muslims are now facing a period of great uncertainty arising from: • issues such as climate change, environmental degradation and human tragedies that affect almost every corner of the globe, with natural disasters becoming more prevalent;
a growing gap between the rich and the poor that leads to poverty and often social unrest; • new challenges to national and international security; and • a global economic environment where the recovery is uneven and the risks of a double-dip recession for some regions of the world are very real. •
On the economic front, while some countries, including Malaysia, are experiencing a return to strong levels of economic growth, others are still grappling with excessive debt burdens and significant financial pressures.
Progress is being made at different speeds in different regions of the world, but we should be clear that the recovery is fragile at the moment. The economies that succeed will be those that act prudently, make wise decisions for the long-term and to initiate bold reforms that will make them competitive in a new global economic order. Indeed, now is not a time for the faint hearted to recede or return to the old status quo. What the Muslim world needs now and indeed the whole world needs now is more effective government. That is why I recently set out the principles of a new economic model for Malaysia that aims to: • Use capital more effectively to increase productivity, stimulate innovation and enhance the skills of the Malaysian workforce; • We seek to end an over-reliance on a few dominant sectors, when what we 81
need is strength across many sectors and industries, particularly areas of high value growth such as technology, financial services and energy; • To build a more merit-based, more globalised education system to reward excellence and help us develop the skills of our children and retain the skills in the country that our economy needs; • We want to rebalance the relationship between the private and public sectors, where we recognise the role of the government to empower and enable wealth creation in the private sector, across all groups and income levels; and • Implement fiscal reforms that broaden the tax base, and gradually phase out broad-based subsidies that distort the market and lessen our competitiveness. We will act to address these issues because our goal for Malaysia’s economy is no less than one that seeks to achieve high-income economy, inclusive and sustainable where all Malaysians share in growing prosperity.
Global Financial Crisis Among many Muslim countries, the need to address economic inequity is also real. Muslims around the world are dealing with extreme poverty, illiteracy, malnutrition and a widening gap between the rich and the poor, especially in developing Organisation of Islamic Conference (OIC) countries. The top 20 OIC member countries contribute 90 per cent of the organisation’s Gross Domestic
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Product (GDP), totalling USD4.5 trillion, while the remaining 37 countries contribute only 10 per cent. OIC member countries have not escaped the global financial crisis. Many have been seriously affected by the deterioration of current account balances and the sudden drying-up of capital inflows. The financial crisis has increased food prices, which has reduced resources available for basic social services like education, healthcare and housing. The key issue of food security was discussed during the 5th WIEF in Jakarta. It is indeed a shame to see parts of the Muslim world today unable to feed itself or to assist fellow Muslim countries in ensuring an adequate supply of basic foods. Some have become totally dependent on non-Muslim countries after natural disasters. It is time that the utmost priority be given to food security through the support and involvement of both governments and the private sector. This is an overarching prerequisite before we can commit ourselves to economic resurgence. One area of opportunity is the burgeoning halal market. Its assets are estimated to be worth more than USD1 trillion, which bodes well for the development of various halal hubs worldwide. This is indeed a positive development, as no single halal hub can cater to the global needs of the Muslim Ummah. To achieve this, linkages must be established between regional hubs to ensure coordination and standardisation of halal products. Such linkages would enable efficient sourcing and deployment of halal products by donor countries and nongovernment organisations when Muslim communities face natural disasters.
Renewable Energy The subject of energy security is also pertinent today. We need to make the green agenda central to policy making. The current reality must be recognised: We all stand accused of doing too little too late. Otherwise, we need to do more to develop alternative energy sources that address growing requirements and prevent further degradation of the environment. More intergovernmental collaboration is required to formulate policies and initiate programmes that promote renewable energy options such as bio-fuels. Here in Malaysia, we have taken a number of actions. We established a Ministry of Energy, Green Technology and Water that is dedicated to addressing 83
OIC member countries have not escaped the global financial crisis. Many have been seriously affected by the deterioration of current account balances. environmental issues. At the policy level, we have formulated the National Biotechnology Policy and the National Biofuel Policy to leverage the natural strengths of Malaysia, such as our nation’s vast biodiversity, abundance of rainwater and sunshine for energy generation. At the practical level, we have introduced the Small Renewable Energy Programme. An example is the Suria 1000 Programme which offers incentives for corporations to invest in green energy. As clean energy is being pursued by governments and security of energy supply is becoming a priority for countries with few, if any, hydrocarbon resources, there is tremendous potential for the development of alternative energy sources. In this regard, I would like to propose that a “Clean Energy Development Bank” be established to accelerate the development of clean energy-related industries for the benefit of developing OIC countries. Malaysia is prepared to spearhead this initiative which I hope can be discussed during the Forum’s Special Leadership Dialogue Session on Climate Change.
Islamic Finance and Banking Much has also been said about Islamic finance and banking as key to our futures. Muslim countries must continue to play a leading role in transforming this sector from being considered niche banking into something that’s widely accepted as central to long-term economic stability around the world. The right conditions need to be put into place. These include an appropriate regulatory framework and an infrastructure and architecture that promote Islamic capital markets. Islamic finance and banking must be systematically put in place, with 84
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the involvement of all stakeholders. It will require getting a higher level of acceptance of “ethical banking” as a norm in modern day banking. The time is right for this. We see positive trends prevailing for the development of Islamic finance. In some countries, growth is as much as 10-15 per cent annually. This is indeed most encouraging and deserves full government support within the OIC countries. Malaysia has spent 30 years developing Islamic finance and has successfully developed it in parallel with the conventional banking system. It’s clear that Islamic finance can co-exist and thrive alongside conventional banking system, and it should be promoted further.
Economic empowerment of the Ummah is critical to achieving our goal of stability through prosperity. Access to funding is needed for economic growth. Fortunately, Islamic financing can serve all - from small entrepreneurs through micro-financing to large corporations through sophisticated instruments from Islamic capital markets. Malaysia is prepared to share her experiences and expertise to spur development of Islamic finance on a worldwide basis. Clearly, Muslim countries are well endowed with resources needed for economic growth – in areas of agriculture, energy, mining arable land and other natural resources. We need to capitalise on these strengths in order to spur growth of new emerging economies. However, nothing can be achieved without adequate capital. Effective capital deployment is required to spur growth and productivity and to support the development of the Muslim Ummah. In this regard, the private sector should take the initiative to mobilise capital through Islamic Equity Initiatives from regional and global sources and to deploy this capital productively to ensure an appropriate return for investors.
Education Growth and Development Muslim countries also need to strengthen their efforts in human resource development, especially in education and training which are far from satisfactory. Non Muslim country can aspire to be a leader and to transform the 85
country without investing heavily in education. This requires talking less and doing more to provide educational opportunities for all our children. This can no longer be seen as a privilege for a few segments of the population. One important dimension of education that should be prioritised is the application of technology. This would enable the construction of a global curriculum that can transform national classrooms into an international education system, based on universal values. These values can be manifested in all learning situations by adopting what I call a “values across the curriculum” approach. It would be based on one set of values, shared by all countries, which will support mutual growth and development. Since education funding is crucial, Specialised Development Funds could be established to develop an educational infrastructure and support teacher training and academic research. Properly structured, managed and utilised, such funds can help reduce the educational gap that exists between the Muslim and non-Muslim world. There is no doubt that the issues we face are daunting, and some will see our goals as unattainable. But we cannot afford to be bystanders. We must begin even with small steps. If we get it right, these small steps will snowball into an economic revolution that can ultimately achieve a remarkable change in our countries and throughout the Muslim world.
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Muslim countries should look to the future with confidence and there is a strong basis for that. As nations, we have weathered economic storms and emerged determined to build for the long term. As a Muslim world, we have remarkable competitive advantages and opportunities. And we have shown a commitment to proactively address the challenges confronting us and working together to create a stronger future. Indeed, our collective efforts must be devoted to finding more innovative approaches and more ideas to foster the positive change we want to see in the Muslim world.
In line with the concept “Gearing for Economic Resurgence” which is the theme of this forum, I propose that we plan an entire ecosystem. We need to think and think anew and move beyond our conventional frameworks and conventional wisdom. This may require a new economic model for the region, if necessary, that is designed to meet the specific needs of the Muslim world. Such a model, underpinned by a theoretical framework, should not only be inclusive and progressive, but also practical in respect of policy formulation and implementation. Most importantly, it will need broad support, taking into account the requirements of the OIC member countries. We are well aware that the OIC currently has its own Islamic Summit. This conference, under its present form and structure, should continue. But, the time has come for us to consider holding an OIC Economic Summit, in collaboration with the Islamic Summit Conference. In this way, we can focus on pressing economic issues and ways to expedite decisions and actions on behalf of the Muslim world. A dedicated, issue-oriented summit of this type would breathe new life and meaning into the OIC and overcome any cynicism towards it.
- THE 6TH WORLD ISLAMIC ECONOMIC FORUM The Plenary Hall, Level 3, Kuala Lumpur Convention Centre May 19, 2010
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The Global Sukuk Issue
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Global Financial Crisis We live in extremely challenging times. In 2008, the world economy experienced the worst financial crisis in the post-war period arising from the collapse of the subprime mortgage market in the United States. The global crisis not only led to the failures of several major financial institutions, but also monetary losses suffered by investors and house owners. While financial market conditions have normalised following aggressive policy measures by national authorities worldwide, the global financial stability is tested again by the emergence of sovereign debt problems in Europe. This highlights the persistent vulnerabilities in the international financial system. The series of financial crises will continue to challenge the ability of policy makers to shore up confidence in the market and ensure sustainable growth. While Malaysia has not been fully insulated from the global crisis, the country recovered rapidly to register positive growth in the fourth quarter of 2009 and moderate contraction of 1.7 per cent for the whole of 2009. This would not have been achieved, if not for the swift response of proactive monetary policies and the introduction of two economic stimulus packages totalling RM67 billion, which succeeded in reviving business confidence and encouraging consumer spending. As we approach the half mark of 2010, global recovery and the strengthening of the domestic economy is clearly evident. The Malaysian economy expanded 10.1 per cent in the first quarter of 2010, the highest quarterly growth since the first quarter of 2000. The robust recovery we are witnessing is well entrenched and broad-based, driven by the improving external sector and strong domestic demand. Based on the encouraging Q1 growth performance, coupled with government and economic initiatives, I am confident the growth target of 6.0 per cent for 2010 is achievable. The government is indeed committed to providing a more conducive business and investment environment. In this regard, the Malaysian Industrial Development Authority (MIDA) will be transformed into a more effective investment promotion agency. We will also aggressively pursue measures to enhance the contribution of the services sector to GDP. Among measures taken 89
include the liberalisation of 27 services sub-sectors and the financial sector. In the equity market, foreign companies can seek listing on Bursa Malaysia without the requirement of local equity participation.
Long-Term Reforms to Transform Malaysia Moving forward, the government is committed to undertake comprehensive long-term reforms to transform Malaysia into a developed and competitive economy by 2020. This transformation as encapsulated under the New Economic Model would be achieved through holistic frameworks under the Government Transformation Programme (GTP) and the Economic Transformation Programme (ETP). Integral to sustainable economic growth is the strength of the domestic banking sector. Malaysia’s banking institutions not only remained healthy throughout the global crisis, but also have actually improved during the course of 2009, with the overall industry risk-weighted capital ratio at 14.7 per cent and Tier-1 capital ratio at 13.1 per cent as at end 2009. The non-performing loan ratios have been on an improving trend since 2002 and remained at comfortable levels despite the economic downturn in 2009. By the end of March 2010, the net NPL ratio has declined to a healthy 1.8 per cent. Despite the slowdown in world trade, Malaysia’s balance of payments current account remained in surplus of RM13.8 billion for 2009. Coupled with our strong net international reserves of RM331.3 billion, we are well able to accommodate international fund flows without serious disruptions to the domestic economy. Malaysia has learned from the challenges faced during the Asian financial crisis. These included measures to develop the bond market to reduce overreliance on the banking system and ensuring the economy’s external debt remains at manageable levels. Malaysia’s external debt has improved to 34.4 per cent of GDP. Notably, as a result of prudent debt management strategies, the government’s external debt is presently at only 2 per cent of GDP. As the government is on track to narrow its fiscal deficit from 7 per cent of GDP in 2009 to 5.6 per cent of GDP in 2010, and in view of Malaysia’s strong exportoriented economy, the government is well-positioned to prudently extend its international debt exposure. In the medium term, the government is committed to ensuring fiscal sustainability. 90
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Sukuk Market Malaysia is the bond market leader in ASEAN and one of the largest in Asia with outstanding bonds of RM643.8 billion as at end-December 2009. While Malaysia’s bond market has developed significantly in terms of its range of instruments and market efficiency, it is worth mentioning that one of her most impressive achievements is the development the Sukuk market, which has spurred the depth and sophistication of the financial sector. In 2009, Sukuk issuance in Malaysia totalled RM31.7 billion. Malaysia remains one of the largest issuers of Sukuk, accounting for 47 per cent (including both domestic and international bonds) of the world’s sukuk issuance originating from Malaysia. Several measures have been put in place to further develop the Sukuk market in Malaysia. An important step was the launch of the MIFC initiative in 2006, with the aim of propelling Malaysia as the International Islamic financial hub and the centre for Sukuk origination globally. Another significant initiative was the liberalisation of regulations to allow foreign issuers to raise Islamic bonds in the Malaysian capital market. This has led to several issuances of Islamic bonds by supranational, such as the International Finance Corporation, International Bank for Reconstruction and Development and the Islamic Development Bank. Petronas had also recently issued a USD1.5 billion Sukuk, which was well oversubscribed. In this respect, the Government of Malaysia is poised to contribute to the development of the Sukuk market by issuing its very own USD-denominated Sukuk under the MIFC initiative. At the international level, Malaysia is the first country to successfully issue sovereign global Islamic bonds amounting to USD600 million back in 2002. Eight years have since passed and the Government of Malaysia believes that it is well positioned to issue its second dollar-denominated Islamic bonds. Today, I am pleased to kick-off the road show for the Government’s Global Sukuk and look forward to a successful rollout of this dollar-denominated issuance. This Global Sukuk will set a new pricing benchmark and facilitate our price discovery for dollar bond issues. - THE GLOBAL SUKUK ISSUE Mandarin Oriental Hotel, Kuala Lumpur May 19, 2010 91
Empowering The SMEs for Economic Development
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MIDEX 2010 provides an important forum for small and medium enterprises (SMEs) to identify new market opportunities and forge linkages through business-matching sessions with potential buyers. This event will not only boost the visibility of innovative Malaysian companies, but also provide a platform to share experiences, best practices and strategies to compete in a globally competitive market. Â Â The era of globalisation and trade liberalisation has changed the rules of the game. Governments are increasingly engaging in free trade agreements to open market access and put into place mechanisms that facilitate international trade and investments. As consumer purchasing power increases, these agreements stimulate demand for high quality products. Opportunities abound as free trade agreements offer both economic and technological benefits.
Companies that deliver the best product at the most competitive price will benefit the most from trade liberalisation. The challenge will be our ability to grasp the significance of open markets, to capitalise on innovation and ensure that our companies can compete and sustain their businesses despite increasing competition borne out of these agreements. Innovation In the new business environment, there are many uncertainties. Companies need the agility to adapt and the insight and skills to take advantage of market access opportunities before competitors. Â Indeed, globalisation and new technologies will accelerate changes required in business models, industrial structures, and employee competencies. Knowledge has become a key driver of economic growth and development internationally. But innovation will provide the tipping point. Â Countries that make innovation a priority have obtained a competitive edge. We have learnt this from the experience of Asian countries like Korea and Taiwan which have taken their economies to new levels by investing in innovation. 93
We have seen that knowledge and innovation-based societies score high in international business rankings. It’s interesting to note that Scandinavian countries with small populations still have among the highest per capita incomes in the world. Innovation, specialisation and internationalisation of their large scale research facilities have helped them overcome the small size of their domestic economies. Going forward, innovation will be the key in ensuring the high productivity growth that the Malaysian economy would require to attain a high income and developed status by 2020. Typically in many developed countries, SMEs have been the catalyst in initiating innovative ideas. In this regard, Malaysian SMEs have shown a remarkable progress, with real GDP of SMEs consistently expanding at a faster pace than the overall economy since 2004, with an average annual growth rate of 7.7 per cent compared with 5.7 per cent growth in the overall economy.
New Economic Model In Malaysia, the foundation for its transformation is the New Economic Model (NEM). It supports innovation across all sectors and in everything from industry, education and healthcare, to management and even in our way of thinking. It must be embraced and must encompass all that we do.
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The NEM offers initiatives to support the transformation of companies, including SMEs. Our approach is embedded in Strategic Reform Initiatives designed to re-energise the private sector, to build a knowledge-based infrastructure and to pursue additional sources of growth. You will be pleased to know that, under the NEM, SMEs role as an internal source of economic growth will be further strengthened. Incentives will be offered to speed the transformation of SMEs that have high potential for innovation.
A key success factor is having a knowledge infrastructure that links government, the private sector and academic institutions, so that they can work together toward common goals. This approach promotes human capital development and inter-organisational and inter-sectoral knowledge-sharing. It also forges R&D linkages between institutions of higher learning and the private sector.
Innovation-led Economy As Malaysia progresses on the journey toward becoming a high-income nation and an innovation-led economy, we will need the full engagement and participation of all Malaysians. It will be important to ignite the creativity of our people because creativity provides the foundation for innovation. We also need an ecosystem that identifies great ideas and seizes their potential. This is a high priority for the government. Ideas alone are not enough. In addition to a supportive ecosystem to nurture creativity, the entire value chain must be designed to stimulate innovation and bring ideas to market. It is for this purpose that the government has formed the National Innovation Council. It will rationalise and strengthen our national innovation system across all technological areas. The National Innovation Agenda launched in 2007, is already helping to transform Malaysia into an innovation-led economy. It has three main thrusts. The first is a research agenda that targets our areas of competitive advantage and emphasises commercialisation of output. The second involves the development 95
of intellectual capital in science and technology fields, while the final thrust supports the National Innovation System. To move innovation and commercialisation forward, the government has established the National Innovation Centre which is supported by a network of Innovation Excellence Centres. The centre coordinates innovation activities and provides an impetus for new product development and commercialisation. It drives innovation across all fields - everything from biotechnology and ICT industry, to animation and agriculture industries.
We are aware that an innovation-led economy demands a new breed of SMEs-firms that can foster market and technology-driven innovation and create high-skilled jobs in all economic sectors. To fulfil this vision, the government is encouraging the development of innovation-led SMEs or in short, Inno CERT SMEs. These are SMEs that are market and customer-focussed, have a high percentage of knowledge professionals and utilise technology and innovation for process and product development. Innovative SMEs can manage new risks associated with technology, funding and the fast-evolving marketplace. In promoting their development, we have put into place initiatives to ensure a conducive environment for these companies to thrive. We are providing fiscal incentives, among others, a higher ceiling and higher margin of financing for 1-Inno CERT SMEs. These will be provided by MIDF.
SMEs Development Programme In addition, the government has identified programmes to harness the innovation potential of SMEs, To better guide and assist these companies, SME Corp. Malaysia, through its One Referral Centre, will provide SMEs with the information they need – about everything from business start-ups to exportation.
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To complement the National Innovation Agenda, SME development programmes under the 10th Malaysia Plan will focus on developing SMEs that are innovative, competitive and resilient. They can then, in turn, contribute significantly more to the economy. Implementation will be through three strategic thrusts: strengthening the enabling infrastructure; building capacity and capability; and enhancing access to financing. While the focus will be on sectors with high growth potential, programmes for capacity building will be tailored to the varying needs of SMEs along the growth cycle. The previous grant-based assistance programme for SMEs will be converted into soft loans as we want to reduce their dependency on government funds. A sound infrastructure is a key enabler for innovation. With this in mind, the government has deployed an advanced infrastructure to help businesses reduce costs, be competitive and fund research and development. Malaysian businesses also need to harness the full power of internet. This means faster and more widely available broadband. The government has already taken steps in this area so that, by the end of 2010, 50 per cent of Malaysians will have access to broadband. This will position businesses, particularly SMEs, to compete effectively in an increasingly technology-rich, knowledge-based economy. The said investments are a testament to the government’s commitment to Malaysia’s small and medium-sized businesses. In tandem with dedicating resources to support and foster entrepreneurial initiatives, the government’s efforts to streamline administrative process, drive anti-corruption initiatives and promote education are demonstrating real results on the global business
An innovation-led economy demands a new breed of SMEs – firms that can foster market and technology-driven innovation and create high-skilled jobs in all economic sectors. 97
stage. Just last week, for example, Malaysia was ranked for the first time as one of the 10 most competitive countries in the world, as published in the Swiss-based Institute for Management Development’s highly respected World Competitiveness Yearbook. This ranking recognises the significant progress that Malaysia is making to improve the level of government effectiveness and promote entrepreneurship. Specifically, we advanced 10 spots, from 19th in the world to 9th, in the IMD’s assessment of Malaysia’s Government Efficiency. More tellingly, we were ranked ahead of countries such as Switzerland, Canada and Denmark for our efforts to improve Business Efficiency, advancing nine spots from 13th in the world to 4th. This recognition, and other economic, social and business indicators, tells us that our government transformation policies are beginning to deliver the planned results and Malaysian businesses are on the right path to compete in the global economy of tomorrow. Now is the time to take our efforts to the next level and I encourage each of you to play an active part. We see the immense transformational power of technology and innovation, and how they can improve the lives of all Malaysians. The government has an important role to play by setting the ground rules and providing an environment conducive to innovation. Ours will be the government that embraces and utilises innovation to achieve our Vision 2020 goal to become a developed nation.
- THE SMEs INNOVATION SHOWCASE Kuala Lumpur Convention Centre June 01, 2010
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Energy Security: Beyond the New Reality
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ast year, the world was hit by severe economic downturn. In the advanced economies, the destruction of business and personal wealth ran into trillions of dollars and millions lost jobs. International trade contracted with terrifying speed, while prices of commodities and manufactured goods slumped, affecting many strong manufacturing economies, including Malaysia. While problems still exist in key parts of the world, many regions and countries have begun to recover from the attack. As for Malaysia, her economy continues to outperform our expectations. During the first quarter of this year, growth surged to 10.1 per cent on a year-on-year basis - the highest in a decade. However, let us be clear, downside risks continue to loom large over the recovery. The pick-up in economic activity has been uneven. Governments and central banks must make wise and forward thinking decisions on fiscal and monetary supports. Debt levels remain high around the world and as the recent Greek debt crisis reminds us, in a world more interdependent than at any time in history, it may still be too early to breathe a collective sigh of relief.
I believe it will be some years yet before the world fully overcomes the effects of this “Great Recession”. But a number of important lessons must be learnt. For one, the globallysynchronous nature of the downturn showed us just how economically interdependent and how intertwined our fates have become. It also reminded us of the value of working in concer - that the “Great Recession” did not turn into another Great Depression was, in my view, the result of globally coordinated policy response. And a lesson for all nations - and one that we are acting on here in Malaysia - is that we must be proactive in charting a path for economic growth in the years to come. There is a new economic order and the nations that will succeed will be those that plan ahead, seek new sectors, with will to innovate and invest in human capital.
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A New Chapter in Economic Development Malaysia has reached a defining moment in its development. Recognising that new economic realities will require reinventing our approach to development, the government launched the New Economic Model (NEM) earlier this year. Its aim is, to transform the country into an advanced, high-income nation which is inclusive and sustainable by 2020. In this regard, the business and investment community will benefit from this NEM - namely, through enhanced market transparency, a fully liberalised and competitive market environment, an efficient and effective public delivery system as well as greater regional market integration. The government will increase its efforts to provide policy measures and a political environment that encourage private enterprises, both local and foreign, to pursue new investments in their respective commercial interests. This will not only be confined to a few sectors, but across the whole economy, particularly in areas of long-term strategic importance such as the energy sector.
A Norm in the New Reality? Why are we committed to strategic investments that support innovation and growth in the energy sector - including oil, gas and renewable energies? Not with standing Malaysia’s efforts to bolster economic resilience, as a major trading 102
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nation, our prosperity is endemically tied to the health and stability of the global economy. Since last June, the oil prices edged steadily upwards to around USD80 per barrel - a level not seen in eighteen months. This strengthening has come about despite the fact that demand growth has been fairly modest, particularly in the OECD countries, while global supplies remain ample, as reflected in an OPEC spare capacity above recent historic averages.
Undoubtedly, this apparent mismatch between prices and supply or demand fundamentals raises questions over whether oil markets have become “overheated”. Some will view current and prospective demand increases – modest though as they are – as being sufficient to justify a new, higher threshold price. Yet others will say that with oil ceasing merely to be a source of energy, higher prices reflect the fact that, as a commodity, oil is today a much sought-after financial asset. Is financial exuberance getting ahead of Reality? Or are we facing a “New Reality” in which USD80 per barrel has become the “new” sixty-dollar oil? Indeed, it is noteworthy that despite the recession, industry costs continue to remain stubbornly high by historical standards. But given the rapidly changing industry dynamics, what guarantee is there that we will not have another “new” price anchor in a few years’ time? We should not let this fixation on what is an “appropriate” price level detract us from the more important task of ensuring that oil prices do not diverge from their underlying market and economic realities. In this respect, proposals for greater oversight of financial markets aimed at preventing price manipulation should be welcomed if they lead to a more efficient and robust price formation. In today’s environment, unjustifiably high oil prices would risk jeopardising the fragile recovery and undermine the stability of the global economy.
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The Key to Energy Security Whatever our views may be on what constitutes an “appropriate” price level, we can be assured that prices, even at these levels, will come under renewed pressure as the recovery gains momentum. Over the longer-term, population growth trends, urbanisation and industrialisation in the emerging world, will continue to underpin historically-robust growth in energy demand. Under these circumstances, an adequate supply-side response is critical if market stability is to be restored. Today, we may be grappling with an ample supply situation and yet, this should not lull us into a “false sense of security” that supplies will not be an issue for the future. Even, moderate growth rates in demand, sustained for a period of several years, will erode any excess capacity down to levels that should give us cause for concern. As always, the main complication lies in the question of timing those investments in a way that would enhance market stability, instead of inducing further volatility. And yet, it is on this all-crucial point that we seem to be unsure of things. Suppliers point to uncertainties in the pace of future demand growth as one of the main reasons for being rather cautious against over-committing investments. Consumers, on the other hand, see exactly this as a potential source of future market instability - in other words, a justification to accelerate the shift into alternative sources of energy. Indeed, these uncertainties feed off one another. Other developments too are exacerbating the uncertainties further. While we all recognise the need to shift towards a low-carbon economy as a major step in mitigating global climate change, progress to date has been measured. In Malaysia we are considering new investments in four main sectors to implement green technologies - namely energy, transport, buildings and water. We will make hopefully wise investments to stimulate innovation and job creation, and our hope is that these will form a significant part of Malaysia’s contribution in support of global energy security. But global energy security will require a holistic approach to innovation in the energy sector. New, game-changing technologies have emerged to unlock the vast potential of alternative supplies-meaning we now have more options 104
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at our disposal to meet existing requirements and to strategise for new ways to meet future ones. In mentioning this, I have in mind the rise of shale gas production in the US that could potentially challenge the existing conventional gas business model. Imagine if this same success were replicated in other major gas-consuming regions - we would certainly then be looking at a re-definition of global gas trade flows on a scale that will have a huge impact on existing producers in the Asia-Pacific and of course, the Middle East. How should existing gas exporters then strategise to avoid losing their global competitive positions? If investments in conventional value-chains in gas were to be curtailed as a result of depressed prices while the promise of unconventional gas does not then materialise to its fullest extent, can we turn the situation around sufficiently rapidly to avoid a supply crunch? How can we leverage on our collective wisdom to avoid the perils of such a situation? Indeed, what other disruptive game-changing technologies lurk beyond our predictive horizons? Will plans to commercialise methane hydrates by the end of this decade bear fruit? Will the next ten years bring about a breakthrough in advanced generation biofuels? Is Iraq oil’s a “game changer”? etc, etc.
The Need for Renewed Global Policy Framework Irrespective of the what changes the “New Reality” amounts to or how the industry will be transformed as a result, the challenge of ensuring the security
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of energy supplies will still remain our paramount concern. As I have noted earlier, the crucial element in this respect is adequate and timely investments encouraged through a stable market environment - or at least one that is changing predictably. While change is inevitable, the decisions we take, whether as policymakers or industry players, will determine if those changes take us toward a new stable equilibrium or if they will work to undermine market stability. Inappropriate, inadequate or even incompatible choices will amplify the uncertainties further, erode the confidence to invest and thereby undermine market stability.
In this respect, one important step governments should take to create a more conducive investment environment is to reaffirm their commitment to uphold transparent, well-functioning markets as the ideal long-term guarantor of energy security.
Further, to reaffirm their commitment to upholding market-driven solutions, the governments should establish clear and coherent national energy policies that help reduce variability in expectations of future demand growth. Such policies must be grounded in economic realities and be forward-looking, so that they remain fairly stable through time. A reasonable degree of international coordination will also prove necessary not only to ensure mutual-consistency across countries, but also to minimise any costs of adapting to the changing industry circumstances. In this regard, I believe that an early multilateral commitment to a global strategy for transitioning to a low-carbon economy is desirable to anchor expectations on both the speed of future energy demand growth, as well as changes on the supply-side. This will facilitate industry to make upfront assessments on the repercussions such a commitment will have on their business environment and thus to strategise for their future growth.
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Malaysia has a proud legacy of being an active supporter of international energy co-operation.
International Energy Coorperation Although a comparatively small member of the global energy community, Malaysia has a proud legacy of being an active supporter of international energy co-operation. Through various energy platforms as well as initiatives at the ASEAN, ASEAN+3 and APEC levels, the country takes a collective approach in managing energy security challenges. Despite these efforts, something bolder will be required for us to act in concert. To overcome the uncertainties and ensure an orderly adjustment to our energy challenges, we need a platform to directly involve all systemically-relevant countries and ensure it adequately addresses their concerns.Yet, beyond our existing arrangements on international energy governance, it is by no means clear how will emerging economies, from which much of the future demand increases are expected to come, find their voice? Or indeed, major oil and gas resources owners, on whose supplies we will increasingly come to rely? Without an international energy governance framework that better represents their interests, it will be far more difficult for us to stave off any future energy crisis with the speed and decisiveness we had in confronting the recent economic and financial meltdown. - THE 15TH ANNUAL ASIA OIL & GAS CONFERENCE Plenary Hall, Level 1, Kuala Lumpur Convention Centre (KLCC) June 7, 2010 107
Towards a High Income and Advanced Nation
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The Developmental Journey
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ince independence more than five decades ago, as a nation characterised by diversity, Malaysia has achieved remarkable success after success. Many expected Malaysia to fail but we managed to prove that their doubts and cynicism were unfounded.
Malaysia can be proud because we have demonstrated that with the right leadership and environment, we have prevailed in the face of many challenges, overcome many barriers and achieved success. As a result, from a low income agrarian nation dependent on rubber and tin, Malaysia has emerged as a modern, industrial, high middle income nation with strong economic fundamentals. All these achievements did not happen by chance nor without proper planning and diligent efforts, instead it is the result of visionary government leadership, coupled with the people’s unwavering support since independence. In this respect, we are greatly indebted to the past leadership and previous generations because their great efforts and sacrifices provided us with a strong foundation, from which we can build on. This developmental journey has spanned Two Malaya Plans, Nine Malaysia Plans, Three Outline Perspective Plans as well as a National Mission before coming to this juncture today. At this point, on behalf of the government and the people of Malaysia, I would like to record our sincerest appreciation and highest gratitude to our five former Prime Ministers, starting from Tunku Abdul Rahman Putra, Tun Abdul Razak Dato’ Hussein, Tun Hussein Dato’ Onn, Tun Dr. Mahathir Mohamad and Tun Abdullah Ahmad Badawi. They are all national heroes, whose contributions deserve to the highest accolades. For those who have left us, we pray that their souls be blessed and accorded the appropriate rewards by Allah SWT. Undoubtedly, the nation’s historical journey has endured crises and enjoyed triumphs. Our history offers valuable lessons, but we cannot allow experience to constrict our ambitions going forward. To succeed, we must be brave enough to think outside of the box. In this regard, even though the government should 109
use history as a guide, we should not be confined by history from what we intend and plan to do. For the 9MP period, the Malaysian economy is expected to have grown at a rate of 4.2 per cent per annum and gross national income per capita to reach RM26,420 or USD8,260 in 2010. In addition, this is being achieved in a low inflation environment while the unemployment rate is expected to remain at 3.6 per cent in 2010. The federal government fiscal deficit is expected to narrow to 5.3 per cent this year compared with 7 per cent of GDP in 2009. The implementation of poverty eradication programmes have successfully reduced the incidence of poverty to 3.8 per cent in 2009, compared with 5.7 per cent in 2005. The incidence of hardcore poverty also declined from 1.2 per cent in 2005 to 0.7 per cent in 2009. To overcome the challenges of the global economic slowdown in 2008 and 2009, the government implemented two economic stimulus packages amounting to RM67 billion. With the grace of Allah the Almighty, the economy has rebounded and recorded an impressive growth rate of 10.1 per cent for the first quarter of 2010. This is the fastest quarterly growth rate in a decade. God willing, in 2010, the Malaysian economy is expected to recover and record a 6 per cent growth rate. Our journey towards Vision 2020 is full of challenges and uncertainties at the global level. The global economic landscape today has changed significantly and
The Tenth Malaysia Plan (10MP) has been formulated with various new approaches towards becoming a high income and high productivity economy, in line with the New Economic Model (NEM). 110
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Malaysia can no longer depend on a low-cost structure to remain competitive internationally. Globalisation, liberalisation and the emergence of countries such as China, India, Brazil, Russia, the Middle East and countries in the region have intensified the competition for trade and investment. Apart from external factors, Malaysia faces various internal challenges to drive economic growth to a higher level, while having to implement a prudent fiscal policy. The nation is confronted with the challenge of providing a conducive investment environment as well as developing high quality human capital, which are critical to enable the shift to a higher level of value added and productivity.
The Tenth Malaysia Plan – The Way Forward The Tenth Malaysia Plan (10MP) has been formulated with various new approaches towards becoming a high income and high productivity economy, in line with the New Economic Model (NEM). During the 10MP, the gross national income per capita is targeted to increase to RM38,850 or USD12,140 in 2015. This requires achieving real GDP growth of 6 per cent per annum. Growth will be led by the services and manufacturing sectors, in addition to revitalising the agriculture sector towards higher value-added as well as the adoption of ICT, biotechnology and other relevant technologies. A key challenge of the 10MP is to stimulate private sector investments to grow at 12.8 per cent per annum or RM115 billion per annum. At the same time, the government is committed to reducing the fiscal deficit from 5.3 per cent of the GDP in 2010 to less than 3 per cent in 2015. In addition, the government will ensure that the living standard as well as the quality of life of the people continues to improve, particularly for the bottom 40 per cent household income group.
10MP – 10 Main Premises Transforming the nation towards achieving Vision 2020 requires a holistic and focussed approach. We can only succeed if we put our hearts and minds to it. This Plan is based on 10 ideas which have been translated into 10 Main Premises as follows: 111
First
: Internally driven, externally aware.
Second
: Leveraging on our diversity internationally.
Third
:
Fourth
: Unleashing productivity-led growth and innovation.
Fifth
: Nurturing, attracting and retaining top talent.
Transforming to a high-income nation through specialisation.
Sixth : Ensuring equality of opportunities and safeguarding the vulnerable. Seventh : Concentrated growth, inclusive development. Eighth
: Supporting effective and smart partnerships.
Ninth
: Valuing our environmental endowments.
Tenth
: Government as a competitive corporation.
10MP – Five Strategic Thrusts To achieve the aspirations of the 10MP, five key strategic thrusts have been identified. These thrusts are holistic and comprehensive strategies to achieve the objectives and targets set in the 10MP. The five thrusts are as follows: First : Designing government philosophy and approach to transform Malaysia using NKRAs methodology; Second : Creating a conducive environment for unleashing economic growth; Third
: Moving towards inclusive socio-economic development;
Fourth
: Developing and retaining a first-world talent base; and
Fifth
: Building an environment that enhances quality of life.
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First Strategic Thrust: Designing Government Philosophy and Approach to Transform Malaysia Using NKRAs Methodology The transformation of the nation requires the transformation of the government machinery to support changes in the economic landscape. To emerge as a competitive nation at the global level, the government needs to increasingly act as a competitive corporation. In pursuing our aspiration to become an advanced and high income country, we can no longer resort to mere incremental measures but instead, the government must implement transformational measures, while at the same time, pursuing its social justice agenda. For these reasons, the government will uphold four main pillars that is the four by four formulae. Two of these components can be divided to four Main Pillars, comprising Firstly
:
The 1Malaysia - People First, Performance Now philosophy;
Secondly : The Government Transformation Programme or GTP; Thirdly : The Economic Transformation Programme or ETP which rests on the New Economic Model; and Fourthly :
The five-year development plans which are the Tenth Malaysia Plan and Eleventh Malaysia Plan.
These four main pillars are supported by 4 complementary values. Firstly
: Acculturation of creativity and innovation;
Secondly : Emphasis on speed of decision-making and execution; Thirdly
: Value for money; and
Fourthly : Integrity values.
Using the analogy of a house, the roof would be the prime philosophy depicting 1Malaysia - People First, Performance Now, the walls would be the Government 113
Transformation Programme (GTP) and Economic Transformation Programme (ETP), and the foundation that is being constructed can be likened to the Tenth Malaysia Plan and Eleventh Malaysia Plan. The staircase to the 1Malaysia home would be the social justice policies and a culture of high achievement. Furthermore, the government’s transformation measures that are currently being undertaken began with the implementation of the six national key result areas or better known as NKRAs. Through the NKRAs, the government is determined to reduce crime, fight corruption, improve student outcomes, raise the living standard of low income households and improve rural basic infrastructure and urban public transport. The consultative approach with the public and private sectors as well as the non-government organisations (NGO) has been adopted to ensure that the wants and needs of people are taken into account. To date, many of the initiatives under the NKRAs have borne fruit. As an example, the overall crime index dropped by 15 per cent in the first quarter of 2010 compared to the target of 5 per cent in 2010. In the effort to fight corruption, the Whistleblower Act was approved by this august house in April 2010. Under the NKRAs on urban public transport, measures to realign the routes linking main towns have increased ridership by 13 per cent. For the NKRAs on education, about 18,000 children have benefited from 929 pre-school classes.
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Continuous initiatives have been identified by PEMUDAH to enhance government efficiency and procedures. These have resulted in marked improvements in many areas. For example, beginning 1 April 2010, the time taken to start a business was significantly reduced to three days from 11 days. Today, registration of land transfers can be completed in one day compared to 30 days previously. Effective 11 May 2010, there are 26 locations nationwide where Malaysian international passports can be issued within 1 hour.
ST1.1 Shift of Focus to Non-Physical Infrastructure Moving forward, the government will focus on efforts to develop non-physical infrastructure, including human capital development such as skills development and strong innovation capabilities. Meanwhile, the 10MP allocation for nonphysical infrastructure will be increased to 40 per cent, compared with 21.8 per cent in the 9MP.
Focus will be given to skills development programmes, R&D activities and venture capital funding geared towards promoting a higher level of innovation in the country. This approach is also in line with efforts to encourage the private sector to invest in physical infrastructure and provide services such as skills training. To support this objective, the government will shift its focus to the private sector for procurement of services. This means that the private sector will compete to offer skills training services at competitive costs.
ST1.2 Improving Efforts for Human Capital Development in the Public Sector We take cognisance that the delivery of efficient and effective government services is closely linked to the quality of human resource. To ensure the best talents remain in the civil service, the framework for human resource management and career development will be improved. Opportunities for civil
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servants to increase their knowledge and field of expertise will be expanded. In this respect, a world-class civil service college will be established to raise the competency of civil servants.
Second Strategic Thrust : Creating a Conducive Environment for Unleashing Economic Growth ST2.1 National Key Economic Areas (NKEAs) The main approach in transforming to a high income economy will be to adopt strategies based on specialisation, given that strong and sustainable competitiveness is difficult to achieve without specialisation. This Plan will focus on 12 national key economic areas or NKEAs, which have potential to generate high income. Apart from 11 sectors, Greater Kuala Lumpur has also been selected as an NKEA as it has the potential to become a world-class city that can be a driver of economic growth. Details of the NKEA will be finalised in the ETP, which will be announced in October. The following are the NKEAs: •
Oil and gas;
•
Palm oil and related products;
•
Financial services;
•
Wholesale and retail;
•
Tourism;
•
Information and communications technology (ICT);
To ensure the best talents remain in the civil service, the framework for human resource management and career development will be improved.
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•
Education services;
•
Electrical and electronic;
•
Business services;
•
Private healthcare;
•
Agriculture; and
•
Greater Kuala Lumpur.
An Economic Transformation Unit will be established to plan and coordinate the implementation and development of the NKEAs. In addition, the application of high technology will be emphasised in the development of NKEAs. Technology platforms such as biotechnology, nanotechnology and high-end engineering will further increase the impact of the NKEAs on economic growth. For economic sectors which are not listed as NKEAs, such as green technology, automotive, aerospace and logistics, the development of these sectors will continue to be driven by relevant ministries, agencies and councils.
ST2.2 Creating Private Sector-led Economy The achievement of the 6 per cent per annum growth target for the 10MP period requires a significant leap in investment activities led by a more dynamic private sector. To achieve this goal, the Malaysian Investment Development Authority (MIDA) has been corporatised and rebranded. In addition, business regulations which are outdated will be abolished. Towards this end, the Malaysian Productivity Corporation (MPC) will be restructured to spearhead a comprehensive review of business regulations and improve processes and procedures to increase productivity and competitiveness of major economic sectors. Healthy competition is needed to make the economy more efficient and dynamic. For this, the Competition Law will be introduced to provide a regulatory framework against market manipulation and cartel practices that may affect market efficiency.
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A Competition Commission and Appeal Tribunal will be established to ensure more orderly and effective implementation of the law. China, India and the Middle East are among the rapidly growing economies. Malaysia, which has historical and commercial links with these countries and is strategically located, must strengthen its relationship with these countries including East Asia. Therefore, Malaysia must focus on building the regional markets through trade promotions and trade agreements. In addition, we will continue to strengthen existing economic relations with Europe and the US.
I am confident that the measures that we will implement can make Malaysia one of the best countries to do business in, particularly in the Asian region. According to the World Bank Report, Malaysia is now ranked 23rd out of 183 countries for ease of doing business. The government believes that the country will be ranked among the top ten by 2015. This is not impossible given that Malaysia has leaped to become the 10th most competitive country within a year based on the recent report of the Institute for Management Development. Malaysia is the only OIC and NAM member country in the top ten ranking. However, the government will not rest on its laurels and will continue to strive to be among the top five in the world in the future.
ST2.3 Public-Private Partnership Smart and effective partnerships between the public and private sectors will be established to drive the economic transformation agenda. This new wave of public-private partnership (PPP) will ensure equitable sharing of risks and returns. To date, 52 high-impact projects worth RM63 billion have been identified for implementation. These include: First : 118
Seven highway projects at an estimated cost of 19 billion ringgit. Among the projects are the West Coast Expressway, GuthrieDamansara Expressway, Sungai Juru Expressway and ParoiSenawang-KLIA Expressway;
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Second : Two coal electricity generation plants at an estimated cost of RM7 billion; and Third : Development of the Malaysian Rubber Board’s land in Sungai Buloh, Selangor covering an area of 3,300 acres at an estimated cost of RM10 billion. The private sector will also have the opportunity to participate in the development of several projects led by government-linked companies (GLCs). These include projects such as the Kuala Lumpur Strategic Development by 1Malaysia Development Berhad (1MDB) covering the Sungai Besi Airport area, the KL International Financial District in Kuala Lumpur, construction of the liquefied natural gas regasification plant by PETRONAS in Melaka at an estimated cost of RM3 billion as well as two aluminium smelters in SCORE Sarawak with an estimated cost of RM18 billion. To help the private sector finance these projects, a Facilitation Fund of RM20 billion will be provided under the 10MP. This fund aims to help bridge the private sector viability gap with respect to projects that have a strategic impact and those with huge economic spill over. The fund is expected to attract private sector investments worth at least RM200 billion during the Plan period.
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Projects that are being considered for financing under this fund include Land Reclamation in Westport in Port Klang, Malaysia Truly Asia Centre in Kuala Lumpur and Senai High Technology Park in Iskandar Malaysia, Johor.
ST2.4 Innovation-led Growth As we all know, economic growth thus far has been driven by factors of production, mainly investment, energy and labour. The shift to high income will need growth that is based on productivity and led by innovation. For that purpose, the government will establish a special unit under the Prime Minister’s Department to set the direction and drive the National Innovation System and innovation policies and strategies. An important measure in the 10MP is improving the method of financing for public venture capital companies. Currently, government financing for public venture capital companies, such as the Malaysian Technology Development Corporation and Malaysian Venture Capital, is provided through long-term loans. In this Plan, financing will be in the form of equity to match the risk profile of venture capital investment.
For this purpose, the Mudharabah Innovation Fund (MIF), with an allocation of RM500 million will be introduced to provide risk capital to government venture capital companies. To bridge the financing gap between the early stage of commercialisation and venture capital financing for high tech products, the government will set up a Business Growth Fund with an initial allocation of RM150 million. The aim of this fund is to support these companies until they can generate sufficient commercial value to attract venture capital financing and other forms of financing. We realise many entrepreneurs have failed due to unexpected business risks. It will be a tragedy if a high calibre and credible entrepreneur who fails once, 120
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is not given a second chance to recover and become a successful entrepreneur. We are aware of many individuals, businesses and innovation initiatives that failed the first time, but became successful later. Hence, bankruptcy laws will be simplified to support a risk-taking culture, eliminate the stigma of failure and allow high calibre and credible entrepreneurs who fail to become active again.
ST2.5 Building World-Class Infrastructure The 10MP will continue to focus on the provision of infrastructure to support national growth, while ensuring that it benefits all segments of the people. The implementation of the high-speed broadband project will cover major towns, priority economic growth areas and industrial areas. This will be complemented with the roll out of the Broadband for General Population which will provide coverage for sub-urban and rural areas. For the rural population, last mile broadband services will be provided through wireless infrastructure, offering a variety of affordable packages. The development of a wider and efficient multimodal transport network is also needed to support national growth. Among the major projects that are currently being implemented is Phase 2 of the East Coast Expressway from Kuantan to Kuala Terengganu which will be completed in the Plan period at a total cost of RM3.7 billion. This expressway will also be linked to the Kuantan Port which will be upgraded and will spur growth in the east coast. Road networks to the hinterlands will also be improved. Among them are the roads linking Kuala Lipis to Cameron Highlands and from Jerantut to Sungai Lembing. In addition, the electrified double track rail project from Gemas to Johor Bahru, which is estimated to cost RM8 billion will be implemented to complete the electrified double track rail project from Padang Besar in the north to Johor Bahru in the south. Apart from these, will be the construction of a sewerage treatment plant using green technology in Lembah Pantai, Kuala Lumpur and at a later stage, similar plants throughout the country.
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ST2.6 New Energy Policy In this Plan, energy supply will continue to be strengthened by creating a more competitive market and reducing energy subsidy in stages. The New Energy Policy has identified five approaches: First : Rationalising energy pricing gradually to match market price, taking into account current economic condition and affordability to the people; Second :
Undertaking a more strategic development of energy supply by diversifying energy resources, including renewable energy resources. Nuclear energy will also be considered as an alternative source of energy;
Third : Accelerating the implementation of energy efficiency initiatives in the industrial, commercial, residential and transport sectors; Fourth : Improving governance to support the transition to market pricing, while providing assistance to mitigate impact on the low income group; and Fifth : Ensuring that the New Energy Policy is implemented based on an integrated approach and according to schedule to achieve energy supply security.
ST2.7 Cluster Development Regional economic development will focus on a number of dense urban clusters with high value industries to attract investments and skilled workforce. This is intended to transform several cities in Malaysia as destinations to attract high tech investments, talent and knowledge workers. The cluster-based development approach that will be adopted in the corridors will exploit the potential and available resources and serve as a catalyst to growth. Cluster development will focus on selected sectors as well as identify key investors, including government linked companies and the private sector, 122
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to lead the development of clusters in the corridors. In addition, connectivity and linkages between the clusters and its suburban and rural hinterland will be improved to ensure direct benefit to these areas.
ST2.8 Developing SMEs as the Engine of Growth and Innovation Small and medium enterprises (SMEs) play an important role in spearheading the economic growth of the country. The government will continue to support SME development, including small companies that are still in the early stage, and companies that have the potential to become global. We will also encourage foreign SMEs to collaborate with local SMEs, particularly in modern technology, so that they can mutually benefit from the transfer of technology and access to wider markets. To ensure that the SMEs have better access to financing facilities, the government established the Working Capital Guarantee Scheme totalling RM7 billion and the Industry Restructuring Loan Guarantee Scheme totalling RM3 billion which I announced under the Second Economic Stimulus Package. The entire RM7 billion under the Working Capital Guarantee Scheme has been approved. In view of the encouraging response to the Working Capital Guarantee Scheme, the government will provide an additional RM3 billion under the 10MP, making it a total of RM10 billion.
Among the major projects are the East Coast Expressway from Kuantan to Kuala Terengganu which will be completed in the Plan period at a total cost of RM3.7 billion. 123
The government is aware that there are local SMEs, which have penetrated international markets, but face problems to gain a foothold locally. There are also SMEs that have obtained domestic recognition or international awards in terms of quality and innovation. Such SMEs will be given green lane access or priority in the procurement processes of the government and GLCs. The government views seriously the provision of credit facilities for SMEs to facilitate their participation in key economic activities. In this regard, the government will consider increasing the financial resources of the SME and the Agro Bank to enable them to provide effective services to SME entrepreneurs. In addition, SME Corp will be provided adequate financial allocation to ensure that SMEs with potential to succeed receive appropriate assistance.
Third Strategic Thrust: Moving Towards Inclusive Socio-Economic Development Inclusiveness is the main prerequisite to ensure that every Malaysian can benefit from the prosperity resulting from the country’s development. This approach will ensure social justice for groups that are truly in need of assistance and no one will feel marginalised. The government will continue to undertake relevant initiatives in ensuring a better future for the people. Development policies will be driven by the principles of progressiveness and pragmatism in the interest of the people. However, we will always abide and uphold the Federal Constitution with the highest regard and sanctity.
ST 3.1 Participation of the Bumiputera Community in the Economy The Bumiputera development agenda will continue to be addressed in line with the concept of growth with distribution. In view of the increasingly challenging global and domestic economic environment, there is a need to transform the Bumiputera development agenda to enhance participation among competitive
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and resilient Bumiputera companies. This new approach will be based on four key principles: market-friendly, needs-based, merit-based and transparency. Priority will be given to enhancing Bumiputera capabilities. In this regard, emphasis will be given to enhance Bumiputera capabilities by leveraging on past achievements. Support will be given to potential Bumiputera enterprises who have demonstrated their capability and credibility to enable them to move towards higher value added activities in line with the government’s aspiration, so that they can realise and optimise their potential.
The objective of Bumiputera ownership restructuring in the early 1970s was focussed on equity ownership. Going forward, the measurement of Bumiputera participation in the economy will be enhanced to include financial and nonfinancial assets, such as real estate and business premises as well as professional employment. This holistic and comprehensive approach focuses not only on the aspect of wealth ownership, but also the aspects of income enhancement, in line with the government’s aspiration to become a high-income nation. At the same time, the target of achieving at least 30 per cent Bumiputera corporate equity ownership at macro level remains. Accordingly, five strategic initiatives to strengthen the Bumiputera development agenda have been identified for implementation as follows: First :
Increasing Bumiputera equity ownership through institutionalisation. In this regard, private equity programmes in government-linked investment companies, such as Permodalan Nasional Berhad (PNB), Lembaga Tabung Angkatan Tentera and Tabung Haji will be renewed, strengthened and expanded to consolidate and pool various funds to broaden ownership and control of Bumiputera equity.
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EKUINAS will adopt a new approach which is more market friendly and merit-based
In this context, EKUINAS was established as a Bumiputera private equity investment institution. EKUINAS has a similar function as PNB, with special emphasis to invest in high potential medium-sized companies, to be supported to become champions and leaders in their respective sectors. EKUINAS will adopt a new approach which is more market friendly and merit-based. In this regard, the government will support credible Bumiputera entrepreneurs and capable Bumiputera professionals to expand their businesses to a higher level at the domestic, regional and international arena. Second :
Increasing Bumiputera property ownership. In this context, Pelaburan Hartanah Berhad will establish a Real Estate Investment Trusts (REITs) to facilitate Bumiputera investment in commercial and industrial properties and 28 benefit from property appreciation. In addition, Kampong Bharu, a valuable Bumiputera asset in the heart of Kuala Lumpur, will be redeveloped to enable landowners to realise and unlock the value of their properties without affecting the Malay ownership.
Third :
Improving skill and entrepreneurial development programmes and funding through various Bumiputera development agencies. An integrated development package will be provided to the Bumiputera Commercial and Industrial Community (BCIC) to strengthen their competitiveness and resilience. The package will include entrepreneurial training, technical
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assistance, financing, consulting services, promotion and marketing. To improve access to financing facilities, 1.5 billion ringgit or half of the additional Working Capital Guarantee Scheme of three billion ringgit, which I announced earlier, will be allocated to Bumiputera entrepreneurs. In addition, entrepreneurial development organisations such as MARA and Perbadanan Usahawan Nasional Berhad (PUNB), will be strengthened. For this, an allocation of RM3 billion will be provided;
Fourth :
Developing professional Bumiputera employment in a more holistic manner. In terms of employment creation, we have successfully produced large numbers of 29 Bumiputera professionals, including accountants, engineers, medical specialists, lawyers and others in the corporate sector. Currently, Bumiputera participate in all professions and even lead in the fields of engineering, medicine, law, surveying and architecture. During the period 2000-2008, Bumiputera overall employment increased from 56 per cent to 63 per cent, while in the managerial and professional category, it increased from 46 per cent to 51 per cent; and
Fifth :
Establishing a high-level Council to plan, coordinate and monitor the implementation of the Bumiputera development agenda. I will lead this Council, made up of relevant cabinet ministers, senior government officials and the private sector. The Economic Planning Unit in the Prime Minister’s Department will be the secretariat to the Council. The Project Management Unit in the Ministry of Finance will monitor the implementation of programmes to ensure their efficient and effective implementation.
ST3.2 Continuation of Social Justice Policy The government is cognisant of its responsibilities and commitments arising from the mandate given by the people towards ensuring social justice. The government is committed to continue policies based on social justice. I believe 127
many of the difficulties faced by the people, whether in interior villages, estates or the Chinese new villages, can be resolved by giving specific attention to the issues. The intention of my walkabouts is to receive feedback on difficulties faced by the people. The 10MP will focus on raising the income and quality of life of the bottom 40 per cent household income group. Bumiputera form the largest number that is 73 per cent of the 2.4 million households in this group. In order to enhance competitiveness and market efficiency as well as ensure more optimal utilisation of resources, price controls and subsidies need to be reduced in stages to eliminate market distortions and abuses. However, any subsidy reduction will only be undertaken after taking into consideration the feedback from the people. I wish to give the assurance that the lower income group and those who are most vulnerable will continue to be given assistance to mitigate the impact of any subsidy reduction on their cost of living.
Specific focus will be given to disadvantaged groups, especially those living in the interior, those who live in long houses in Sabah and Sarawak, as well as the Orang Asli (the aborigines) and estate workers in Peninsular Malaysia. There are still pockets of people living without electricity and water supply and with limited access to health facilities. There are school children who have to make arduous daily trips to schools. The government will address issues of the less fortunate and free them from the poverty trap. I want to ensure that the prosperity, resulting from the country’s development, will be enjoyed by all Malaysians, to those in a Malay kampung in Grik, Perak; to Orang Asli communities in Pos Titom, Cameron Highlands; Indian estate workers in Mary Plantation Estate, Kuala Selangor; residents of Chinese new village in Pasir Hitam, Perak; Iban communities in Mujong Balleh, Sarawak; and Rungus communities in Kudat, Sabah. For this, the government will intensify the implementation of economic programmes and the provision of basic amenities. The government is also considering issuing land titles to the Orang Asli and Bumiputera of Sabah and Sarawak. This will enable them to benefit from integrated agricultural 128
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development programmes through the agropolitan and contract farming approaches. They will also be given better access to infrastructure and public facilities, such as roads, education and skill training. Focus will also be given to improving the quality of life of workers in estates and displaced estate workers. Water supply will be provided to 182 estates up to 1,000 acres in size and located less than five kilometres from the water mains, costing RM109 million. Skills training will be provided especially to school drop-outs from various ethnic groups to enhance their employability. Those interested to venture into small businesses will be given appropriate access to AIM and TEKUN micro-credit facilities and this will help to address urban poverty. This loan scheme will be packaged together with entrepreneurship training to develop their capabilities in areas such as financial management, preparation of business plan, marketing and promotion. The training will be conducted in Institut Keusahawanan Negara (INSKEN), Pusat Giat Mara and Institut Kemajuan Desa (INFRA). Residents in Chinese new villages will also be given assistance. Currently, there are about 280,000 households living in these new villages. The residents will be provided soft loans to assist them to pay their land premiums and renewals of leasehold. The loan will be channelled through Bank Simpanan Nasional and an initial fund of RM100 million will be provided. In addition, the Cabinet Committees for Indians as well as Sabah and Sarawak Bumiputera affairs will continue to address the issues of the respective communities. 129
Strategic Thrust 4: Developing and Retaining a First-World Talent Base Competition for talent has intensified and many countries, particularly developed nations, have adopted comprehensive and open policies in attracting the best talent including Malaysians. A skilled and knowledgeable workforce is the cutting edge of a nation’s competitiveness. In this regard, the government will implement holistic measures to strengthen education and training systems, starting from early childhood to tertiary education. Aside from providing the best teaching and learning infrastructure, the government will also ensure that the quality of teachers and educators are of a high level.
ST4.1 Raising Student Quality To improve the quality of students, the proportion of graduate teachers in primary schools will be increased from 28 to 60 per cent. The performance of students in critical subjects, particularly the National Language, English, Science and Mathematics, will also be improved by increasing the number of quality teachers.
To achieve this goal, the programme enabling non-graduate teachers to attain degrees will be intensified. To improve the quality of preschool teachers, the qualification requirement for their appointment will be raised to a diploma and bachelor’s degree. The government will also implement measures to establish teaching as a profession of choice. In order to meet the demand for quality Mandarin language teachers in Chinese National Schools and National Schools, those with Unified Examination Certification and Sijil Pelajaran Malaysia or SPM will be considered for enrolment into the Chinese Language Programme in Institutes of Teacher Education. The same consideration will also be given to those who have Sijil Menengah Agama or Sijil Tinggi Agama and SPM to become teachers in J-Qaf and Islamic Education Programme. 130
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Technical and vocational training provides a viable alternative for individuals to realise their full potential.
The government has also established high-performing schools to enable students to achieve excellence in all aspects of education. Twenty schools have been awarded the status of high-performing schools based on their achievement and performance. The number of high-performing schools will be increased to 100 by the end of 2012, which will include primary, secondary, day and residential schools. A Trust School framework will be introduced to enable public-private partnership in the management of selected government schools. The government will provide Trust Schools with greater autonomy in decision making and in return greater accountability in improving student outcomes. The autonomy will include flexibility to modify the learning curriculum, use of allocation, providing incentives to teachers in line with their performance and selection of teachers and support staff. The government will continue to help government-aided schools to ease the burden borne by the school management. For purposes of renovating and upgrading government-aided schools, a sum of RM280 million will be allocated for 2011 and 2012. Each category of government-aided school, namely Chinese schools, Tamil schools, religious schools and mission schools will receive an allocation of RM70 million for the first two years of the Plan. In addition, assistance will be provided to pay electricity and water bills up to RM2,000 per month per government-aided school, benefiting about 1,900 government-aided schools.
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Children are our most valuable assets. They are our future. The government is committed to provide children with opportunities for their future success in coping with challenges and competition. The investment on these children is vital for the country’s future. Accordingly, the PERMATA early childhood education programme has become an important national agenda. According to experts, there is a gifted child for every 10,000 children. In 2007, there were about 8.9 million children under the age of 14 in Malaysia. This means there are at least 900 gifted children in Malaysia. The enrolment of children between the ages of 4+ and 5+ years in pre-schools will be increased from 67 per cent in 2010 to 87 per cent in 2012. This target will be achieved through the addition of pre-school classes in government primary schools and by encouraging the private sector to establish pre-schools. An incentive of 10 thousand ringgit will be provided to private pre-school providers for each new pre-school established. In addition, to strengthen pre-school programmes, the government is considering lowering the entry age of formal schooling from 6 to 5 years during the Plan period based on the capacity of the government. The lower entry age will extend the access to structured education for children during their formative years.
ST4.2 Mainstreaming Technical Education and Vocational Training In developed countries, technical education and vocational training are the preferred choices for students expecting good career prospects. In Malaysia however, it appears to be the last choice due to perceived limited career opportunities. This misperception has to be changed. Technical and vocational training provides a viable alternative for individuals to realise their full potential. Every year, 100,000 SPM holders or 22 per cent enter the job market without any skills training. To enable them to obtain technical education and vocational training, such facilities will be enhanced. The focus will be to improve the value proposition and attractiveness of technical education and vocational training to prospective student, providers 132
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and industries. In this regard, the Department of Skills Development will be the sole agency in developing and certifying the quality of the technical education and vocational training curriculum. The Malaysian Skills Certificate will be recognised for entry into the civil service and institutions of higher learning. I believe these measures will increase confidence and encourage more school leavers to pursue their studies in technical education and vocational training. Currently, only 23 per cent of our workforce is highly skilled. This percentage is much lower compared with other developed countries. We need to improve the composition of highly skilled workers to at least 37 per cent by 2015, to become a developed nation. To encourage private sector involvement in the training for 37 highly skilled workers, the Government will undertake the following measures: First :
Expand the coverage of matching grants of the Human Resource Development Fund and SME Corp Malaysia to assist employers of small and medium industries in the training of their employees;
Second :
Provide financial assistance in the form of loans for employees to undergo training to enhance their qualification. A sum of RM500 million will be provided under the Skills Development Fund Corporation and this is estimated to benefit at least 38,000 employees;
Third : Establish a joint fund financing between the government and employer to enable employees to study at the PhD level in fields related to the industry where they are currently employed; Fourth :
Expand the National Dual Training System (NDTS) programme, which stipulates 70 per cent of training content is hands-on in the workplace and 30 per cent is theoretical class at training institutions. The NDTS covers workers and SPM school leavers and will be expanded to include those unable to complete 11 years of education;
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Fifth :
Expanding the recognition of prior learning by awarding the Malaysian Skills Certificate to 60,000 employees annually on the basis of their knowledge, experience and skills acquired in the workplace; and
Sixth : Encourage the private sector to provide vocational and skills training using the Public Private Partnership method.
ST4.3 Raising Graduate Competence To improve the competence of graduates, their employability will be one of the KPIs of universities. Financial allocation to universities will depend on the achievement of their KPI targets. In addition, the government will grant gradual autonomy to the universities to improve their performance. The quality of academic staff will be improved by increasing the number with PhDs, with a target of 75 per cent in research universities and 60 per cent in other public universities. To achieve this target, the implementation of the MyBrain15 programme will be intensified to finance doctoral studies for the purpose of increasing the number of PhD holders to 18,000 by 2015. In addition, salary packages will be reviewed to attract foreign lecturers and retired academic staff. The higher education institutions in the country have played a pivotal role in moving and providing the impetus for research, development and
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commercialisation activities. Academicians in various fields of expertise have been pioneering new ideas, concepts or theories to be the leading edge for new discoveries, expansion of knowledge as well as new creations and inventions that are technologically advanced and innovative. As a matter of fact, there is significant relationship between economic growth and R&D activities in higher education institutions. Hence, in order to promote and encourage R&D activities among the higher education institutions, the government has declared UM, UKM, UPM and USM as research universities. In tandem with our aspirations to further enhance R&D activities and programmes under the 10th Malaysia Plan, I hereby, have the pleasure of announcing another public university to be elevated to the status of a research university. The said research university is Universiti Teknologi Malaysia (UTM).
ST4.4 Increasing Labour Market Efficiency The efficiency of the nation’s labour market needs to be improved. In this regard, related labour laws will be reviewed to ensure a balance between labour market flexibility and job security. Currently, the country has approximately 1.9 million foreign workers. While we undoubtedly need the services of foreign workers, especially in jobs that are not favoured by locals, the continued reliance on unskilled foreign workers will hinder our aspiration to shift to higher value-added economic activities. Therefore, the foreign worker employment policy will be streamlined by introducing different levy rates according to the ratio of foreign workers to total workers in the company, and vary according to the skill level of the foreign workers. Higher rates will apply for lower skilled workers. The rates will be increased yearly. To attract more skilled workers into the country, the government will establish a Talent Corporation, which will identify skill shortages in key sectors, and attract and retain necessary skilled human capital. While we are faced with the shortage of skilled manpower, there are more than 700,000 Malaysians currently working abroad.
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The Talent Corporation is expected to spearhead Malaysia’s initiative to attract the Malaysian diaspora back to the country to contribute to the country’s skilled manpower needs. For this, the Talent Corporation will provide an integrated Skilled Human Capital Blueprint with the cooperation of the public and private sectors. In addition, the Talent Corporation will become a one-stop centre to coordinate with relevant government agencies, including immigration matters, for the entry of skilled workers into the country. The government has launched the National Council of Professors to mobilise intellectual potential in public universities. The intellectual capacity and expertise of more than 1,400 professors in public higher education institutions will be fully capitalised through this initiative. Producing quality human capital is another national agenda to realise Malaysia’s objective to become a developed nation with high income. Therefore, public universities must have the best and highly motivated academic staff and researchers. For this purpose, the government has announced an improved service scheme for professors and lecturers at public universities and teaching institutions. Under the new scheme, the Senior Professors category will have Staff Grade pay scale. Promotion to this level will be based on individual qualification and performance, and will not be limited to a certain number. Furthermore, the government has decided to reward The Royal Professor with a better remuneration package in line with the responsibility and prestige of the title. Since The University and College University Act, 1971 has restricted the number of The Royal Professor holders, the government does not intend to increase their numbers.
Strategic Thrust 5 : Building an Environment that Enhances Quality of Life Strong and sustainable economic growth is unsatisfactory if the quality of life for all levels of society does not improve in tandem. In line with the concept of social justice imbued in the Tenth Plan, the government will ensure that the economic prosperity of the nation is equitably distributed, thus, improving the quality of life of all Malaysians. 136
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ST5.1 Ensuring a Higher Quality of Life in Urban Areas Global competition is no longer just between countries but increasingly between cities. Economic activities will naturally concentrate in cities, where the density of firms and talent drives productivity and innovation. Cities are therefore at the frontline in the drive towards high income. The challenge is to enhance the liveability of cities to ensure that the benefits of agglomeration are not lost to escalating crime, grime and time (congestion). In reality, the trend of urbanisation is increasing in Malaysia. Presently, 67 per cent of the population are living in urban areas. To cater for the increasing density, the government will ensure that urban areas are vibrant and liveable, complete with the necessary infrastructure and facilities. In this regard, the National Physical Plan 2, which will be finalised this year, will pave the way for more strategic and better planning in the creation of compact yet efficient urban areas. The government aims to provide an attractive and comfortable living environment for city dwellers to live, work and play. Open spaces and green areas will be created and improved. Among the initiatives to be implemented are the transformation of the Lake Gardens in Kuala Lumpur into a botanical garden and the setting up of a Malaysia Truly Asia Tourism Centre in Kuala Lumpur. Waterfront areas of cities will be beautified and turned into attractive spaces, similar to the restoration of the Melaka River waterfront.
ST5.2 Expanding Essential Facilities in Rural Areas Focus will be given to increasing the coverage of basic infrastructure such as roads, electricity and water supply, and communication networks to rural areas. The government will build 6,300 km of paved roads in Peninsular Malaysia, 2,500 km in Sabah and 2,800 km in Sarawak, which is expected to benefit 3.3 million people. The government will also improve rural water supply with a target of 99 per cent in Peninsular Malaysia, 98 percent in Sabah and 95 per cent in Sarawak. This will involve the extension of water supply to 117,000 homes in Peninsular Malaysia, 112,700 in Sabah and 87,400 in Sarawak.
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This is an iconic project in our capital city that will be highly beneficial to commuters and have large spillovers to the economy.
The provision of electricity supply in rural areas will be extended to 6,000 homes in Peninsular Malaysia, 59,000 homes in Sabah and 76,000 homes in Sarawak. Apart from providing infrastructure and basic utilities, the government will also provide social amenities and information and communications technology (ICT) facilities to rural communities.
ST5.3 Enhancing Public Transport Efficiency Improving the public transport system is a major priority of the government. The government has established the Public Land Transport Commission (SPAD) as the lead agency responsible for planning, regulating and enforcing public land transport related matters and operations. It will also be responsible for providing safe and reliable services at reasonable fares to encourage more people to use public transport. In line with the “Greater Kuala Lumpur� NKEA, the government will further enhance the public transportation network in Kuala Lumpur with the implementation of the high capacity Mass Rapid Transit system. This is an iconic project in our capital city that will be highly beneficial to commuters and have large spillovers to the economy. When completed, the system is expected to cover a radius of 20 km from the city centre with a total length of about 150 km, and when fully operational, will serve up to two million passenger trips per day from 480,000 trips on current urban rail systems.
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The construction of bus and rail terminals such as the Gombak Integrated Transport Terminal will ensure that public transport runs smoothly. These measures are expected to increase the public transport modal share in Greater KL from 12 per cent in 2009 to 30 per cent in 2015. Efforts to enhance the public land transport system will also be expanded to other cities. For this purpose, a Bus Rapid Transit System will be introduced in Iskandar, Johor, while the number of public buses in Pulau Pinang will be increased by 200 buses to enable the expansion of 26 routes with an added capacity of 75,000 passengers per day.
ST5.4 A Healthy People, A Productive Society A healthy society contributes to a dynamic and productive nation. Thus, measures to improve the health of the people will be given special focus. Healthcare access, coverage and quality will continue to be improved. Amongst the government’s major initiatives are the construction of eight hospitals, including specialist hospitals, 197 clinics and 50 additional 1Malaysia Clinics which are expected to be ready in the first half of the Tenth Plan.
It has been said that a healthy mind comes from a healthy body. A community that is active in sports will be a healthy and productive society. Furthermore, sports can bring not only recognition and glory to the nation, but also serves as a platform for national unity and integration. The government, in collaboration with the private sector, will emphasise familyorientated sports and recreational activities and its acculturation into the daily life of the community. Accordingly, sports and recreational facilities will be built and upgraded in strategic and easily accessible locations.
ST5.5 Affordable Housing for the People’s Wellbeing The government intends to provide an adequate supply of affordable houses especially for the low income. For this, 78,000 affordable houses will be built 139
during the Plan period. Related laws will also be tightened and enforcement enhanced to ensure the quality of affordable houses built. A fund of RM500 million will be established for the repair and maintenance works of public and private low-cost housing. This fund will be allocated on a matching grant basis where half of the contribution will be borne by the government and the other half by the management committee or resident associations.
ST5.6 Enhancing People’s Confidence in Public Safety Public safety and order is a critical concern for all Malaysians. The government’s efforts and strategies to improve public safety have shown positive results based on the decrease in overall index crime in the first quarter of 2010. Police patrols will be increased, especially in 50 hot spots to curb criminal activities. These efforts will be complemented and supplemented by RELA, the Civil Defence Department and other public volunteers. In addition, 496 CCTVs are currently being installed nationwide to increase monitoring capacity. The Safe Cities Programme is also ongoing with the mobilisation of various government agencies such as the Royal Malaysian Police, local authorities, National AntiDrug Agency and Department of Social Welfare.
ST5.7 Development of a Progressive Society As the saying goes, the hand that rocks the cradle rules the world. The status of women in society is a good indicator of a dynamic and progressive country. 140
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Women are the cornerstone of happy families and the essence of a successful nation. Steps will be taken to increase the participation of women at all levels in both public and private sectors, including entrepreneurial ventures. Existing laws and related regulations will be reviewed to create a more conducive environment that encourages greater female participation in the workforce. I call upon the private sector to increase the participation of women, especially in senior positions, such as chief executive officers and members of Board of Directors. The young generation is also important because they will shape the future of the nation. Being the largest segment of citizens, the government will be accommodative to their aspirations. We will become better listeners to as well as constructive partners to youth. Their idealism, ideas and energy are needed by the nation to realise a better future. Therefore, the government will streamline the delivery system of existing youth development programmes to ensure that the younger generation is more productive in the nation’s socioeconomic development, particularly through the activities of associations and volunteerism. Following the success of the Youth Day celebration held recently in Putrajaya, I am also pleased to announce that Putrajaya will be a focal point for youth and it will provide avenues and opportunities for their activities and programmes. More importantly, these programmes can serve as a successful platform to cultivate unity among youth as well as pave the way for entrepreneurial and innovative avenues and opportunities for them. Older persons are also not forgotten. By 2020, it is estimated that they will number 3.4 million. The government realises that harnessing this pool of resource is valuable. This group should be given the opportunity to remain healthy, active and productive in their golden years. In line with this, programmes will focus on enhancing elderly-friendly infrastructure, improving access to affordable healthcare, ensuring adequate provision of homes and improving financial security as well as employment opportunities. To facilitate this, the collaboration amongst the government, non-governmental organisations and the private sector is vital towards increasing the senior citizens’ involvement in social and economic activities. 141
The government is committed to enhancing the well-being of persons with disabilities. Greater efforts will be made towards providing them with more opportunities for skills training, employment and entrepreneurship. Measures will be taken to provide easy physical access for transportation and buildings, towards creating a more disabled-friendly environment. Enhanced focus will be given to mainstream persons with disabilities into society thus enabling them to be independent, productive and valued contributors in the nation’s development.
ST5.8 Sustainability of the Environment is Our Responsibility In this plan, various measures will be implemented to ensure the sustainability of the environment. Emphasis will be placed on the use of renewable energy and increasing energy efficiency. The government will introduce the Feed-in Tariff and Renewable Energy Fund to encourage the implementation of renewable energy projects. Relevant guidelines, standards and laws will also be introduced to ensure efficient use of energy, and to reduce greenhouse gas emission. Environmental conservation cannot rely purely on a sense of responsibility. The government will, therefore, promote economic opportunities that create value from conservation. For example, eco-tourism can generate income particularly for local communities to encourage the conservation of the country’s flora and fauna. We must also seize opportunities that arise from emerging trends, where green products, services and technology are increasingly in demand. In this respect, I call upon industries to take this opportunity and use the incentives provided by the Government through the Green Technology Financing Scheme worth RM1.5 billion to enhance the application of green technology in the production of goods and provision of services. The government will also promote environmentally friendly housing by introducing guidelines and a green rating system. Putrajaya and Cyberjaya will serve as flagship green townships. The government will take the lead in adopting green building standards. New government buildings will be designed to meet green standards. Energy efficiency of existing buildings will be enhanced and as a showcase example, the Prime Minister’s Office complex will be upgraded to meet the Gold Standard Green rating.
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Development Allocation Beginning with the 10MP, the implementation of programmes and projects on a rolling plan basis will be introduced. With this approach, allocation for programmes and projects will be provided on a two year basis beginning 20112012. This allows commitment to be made based on the financial position of the government and provides flexibility to respond to new priorities and changes in the global and domestic economic environment. The detailed list of the programmes and projects for the first rolling plan will be ready by the end of August 2010. To carry out the 10MP development programmes, the government will make available an allocation of RM230 billion for development expenditure. This will comprise 55 per cent for the economic sector, 30 per cent social sector, 10 per cent security sector and 5 per cent for general administration. We have the potential to achieve greater heights if we are able to collectively work in an effective manner, leveraging on our respective strengths. I therefore call upon all Malaysians, irrespective of race, religion or political opinion, to work with the government, towards building a greater nation, where all have a sense of ownership, a Malaysia where all talent is valued and optimised and a Malaysia where an individual is only limited by the limits of his own ambition and hard work. The country is at a critical juncture of its developmental journey and the choice is in our hands, whether to choose the path towards glorious success or the path of decline. We are akin to being in the last leg of a relay race. The baton is now in our hands, for us to forge ahead to victory. From this moment, let us move forward on our journey, which will not take a day, week, month or year, but a journey to be undertaken generation after generation. InsyaAllah, we will succeed.
- THE TENTH MALAYSIA PLAN 2011-2015 Dewan Rakyat June 10, 2010
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Propelling Halal Industry To Greater Heights
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T
he Halal Malaysia week, a joint three-party effort between Kasehdia Sdn Bhd (for WHF), Malaysia External Trade Development Corporation or MATRADE (for MIHAS) and the Halal Industry Development Corporation or HDC (for WHR Summit) is an excellent example of public-private partnership initiatives to advance the Halal industry to the forefront of The Global Economy. Historically, Halal Malaysia Week has been a focal point for global industry players, with deals and transactions in 2008 amounting to RM2.2 billion and increasing to RM 3.23 billion in 2009. This year this figure is expected to exceed RM3.8 billion. Halal Malaysia Week firmly positions Malaysia as a beacon of the Global Halal Industry, highlighting Malaysia’s thought leadership credentials and its strong statement of intent to be the World’s Halal Hub.
Halal as a Symbol of Quality and Excellence Halal brings together Muslims across all cultures and ethnicities. It also has the potential to be a conduit for greater harmony and acceptance across national and cultural boundaries. Such harmonization was clearly demonstrated by the University of Massachusetts which in 2008 strove to serve Halal food in their dining halls, as well as in bistros and hotels in Beijing which saw the value of being Halal, and finally, with the Five Star “Hotel Kunlan” serving Halal cuisine exclusively in one of its restaurants.
Halal is a growing industry that seeks to be culturally inclusive. It is based on wholesome Islamic values that have a universal appeal. Halal as a brand is a reassurance of safety, quality and humane treatment of animals. It embodies values that are not just for Muslims, but for everyone.
Therefore, Halal must continue its journey towards becoming the premium brand recognised throughout the world as a symbol of quality and excellence. In the Halal sector, the critical component of integrity is traditionally carried out by Islamic bodies. As such, it is imperative that best practices are incorporated by these bodies in order to be better position them to protect the integrity of the Halal Market. 145
Halal must continue its journey towards becoming the premium brand recognised throughout the world as a symbol of quality and excellence.
There are over 300 bodies globally offering Halal certification and typically, these are Islamic associations and at times, even a “one-man” show. However, only one third of these are legally registered entities and only 15 per cent of them are recognised by JAKIM, Malaysia’s National Body for Islamic Development as well as certification. The question that needs to be asked is how many are accredited in line with international benchmarks and hence capable of certifying based on international standards? At the same time, related industries must bear in mind that the Halal industry cannot exist without solid Syariah foundations and therefore must continue to inculcate and reflect Islamic values. This is a crucial point in maintaining the integrity of the Halal products and services. In order to overcome the major hurdles and challenges that lie ahead for the Halal industry, we must work to establish and maintain strong strategic alliances with mainstream players. And we must leverage the best expertise available if we Muslims are to advance in this field. I foresee powerful synergies as a result of smart partnerships between mainstream industry and Muslim organisations. Muslims must seize opportunities to propel themselves into higher valueadded activities and knowledge-based skills, such as quality assurance and compliance, training, management and branding.
Halal Certification and Standards Development Malaysia is offering her expertise and years of experience in Halal certification and standards development. The Department of Standards Malaysia
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has adopted the most stringent methodology of benchmarking against international best practices in developing Malaysian Halal Standards. This methodology has been provided to other countries as part of our duty to spearhead the establishment and promotion international best practices. The year 2000 saw the introduction of Malaysia’s first Halal Standard, MS1500. Since its creation, this standard has undergone two revisions, the latest MS1500:2009. This proves Malaysia’s immense and meticulous capacity for developing standards at national level. Discussing such standards at the international level presents an entirely new set of challenges. Malaysia has sought to highlight and therefore extend the gift of Halal awareness to the world. Through events like The World Halal Forum and MIHAS as well as the tireless efforts of JAKIM and the Ministry of International Trade and Industry (MITI), Halal has been accepted as an industry in its own right. This acceptance has grown to such an extent that mainstream industry is gravitating to Halal. Because of this fact, now is the time to capitalise on this acceptance, beginning with laying the foundation for uniformity.
Malaysia seeks to amplify our role by working towards the development of global standards within the larger Halal industry. In this respect, the International Halal Integrity Alliance (IHI), an initiative born out of the World Halal Forum, has moved one step closer to achieving the goal of a harmonised Halal industry with the publication of four modules of the Global Halal Standard. This was achieved with vital input from JAKIM and Standards Malaysia as well as from international stakeholders. Having obtained the mandate together with the Islamic Chamber Of Commerce and Industry (ICCI) at the OIC Islamic Summit in Dakar, Senegal in March 2008, the IHI Alliance is now strongly poised to establish itself as the global Halal authority and may begin the process of unifying a fragmented community. We need to think beyond industries and move into the larger realm of a Halal Economy - a value-based economy rooted in trust, integrity and fairness – as 147
a new source of high income for our respective countries. Islam is the fastest growing religion both through birth and conversion. As the new generation of Muslims are better educated and able to obtain a higher income level, many sectors are creating products and services to cater to this growing consumer demand. This, coupled with the larger acceptance of Halal by those of other faiths, has resulted in the Halal mindset, transforming from being just food products to the ‘farm to fork approach.’ This has, in turn, triggered demands in other areas, such as non-food consumer products, Islamic finance, logistics and other sectors such as tourism.
The Global Halal Products Market The global Halal products market is estimated at USD2.3 trillion, not including banking. Research by the World Halal Forum secretariat found 67 per cent or USD1.4 trillion of this market is comprised of food & beverage. Pharmaceuticals make up 22 per cent or USD506 billion, with cosmetics & personal care totalling USD230 billion. If we include the services sector for Halal, and we should give this serious consideration, the potential size of the total market is astronomical. This is the mark of an economy in its infancy and with concerted effort, we can nurture it into a thriving, robust economy. However, realising the potential of the Halal industry requires a thorough understanding of all the issues and challenges that face it. We’ve aimed high and achieved a lot, but it is time to take stock and realistically assess our progress in order to effectively re-evaluate
Research by the World Halal Forum secretariat found 67 per cent or USD1.4 trillion of this market is comprised of food & beverages.
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our strategies, ensuring that we’re on the right track to fully capitalise on the enormous untapped potential that remains. Najib commended private organisations, such as Kasehdia, who on their own initiative, have brought government and private sectors together over the years, enabling various stakeholders in the Halal industry to sit at the same table and discuss issues affecting our Ummah, not only in Malaysia but globally. We have progressed into an era of private business enterprise and should take the lead in developing initiatives and innovative frameworks for universal good and betterment of society. - THE WORLD HALAL FORUM 2010 Kuala Lumpur Convention Centre June 21, 2010
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Exploring the Full Potential of Halal Industries
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H
alal is an important agenda in our New Economic Model (NEM) that the government recently launched. For Malaysia, the value proposition of Halal is in the fact that it is as much driven by the bigger corporations as it is by the Small Medium Enterprise (SMEs). Our SMEs are involved in the whole spectrum of Halal products and services ranging from food and beverages, pharmaceuticals, cosmetics and personal care to herbal products, packaging and household products. MIHAS provides an important avenue for our SMEs to show to the world what they are capable of. The Halal sector also contributes to our export revenue. Taking Malaysia’s export of processed food to the Organisation of Islamic Conference (OIC) countries as an indicator of the potential, the trend is certainly promising. Malaysia’s exports of processed food to OIC countries increased from RM1.62 billion in 2004 to RM3.94 billion in 2008. Although, there was a decline in 2009 due to the impact of global recession, the growth trend would certainly resume. A similar positive trend is also seen in the export of other Halal products such as pharmaceutical, cosmetics, toiletries and essential oils to OIC countries, increasing from RM409.7 million in 2005 to RM839.4 million in 2009. Even during the global recession last year, exports of these products rose by 8.1 per cent.
Beyond that, the eco-system supporting trade in Halal also offers other business opportunities that have yet to be fully explored. This would include a broad spectrum of activities including research and development, product design, logistics, training, certification, standards and e-commerce. These are businesses in their own right and offer opportunities for revenue generation. Halal Standards While we recognise that there are significant opportunities in the Halal market, there are still many hurdles to overcome to realise the full potential of this sector. One of the obstacles relates to the lack of common Halal standards that are acceptable to all Muslim community and it is very much still a ‘work in progress’. Therefore, is pertinent for the Muslim community to strive towards 151
common standards for the benefit of the Ummah globally. Malaysia would like to offer her expertise in this area and welcome all countries to utilise the existing standards that Malaysia has developed. Malaysia has been in the forefront in developing standards for the Halal industry that meet international best practices. This initiative will ensure that the Islamic community, no matter where they are, would feel safe and convinced that the food and products they consume are Halal. Malaysia started with the launch of MS1900:2005 on Quality Management Systems in 2005. Since then, the country has developed the MS1500:2009 on Halal Food – Production, Handling and Storage and the MS2300: 2009 on ValueBased Management System. And we have not stopped there. Malaysia recorded another milestone in the development of Halal standards with the launching of two new standards namely, Standards on Halal Cosmetics, MS 2200: 2008 and Standards on Halal Logistics, MS 2400: 2010.
The Halal Cosmetics Standard prescribes practical guidelines for the Halal cosmetics and personal care industry. The standard on Halal logistics is a comprehensive standard and is the first in the world which addresses three main components: transportation, warehousing and retailing. Beyond the Halal standard, there are many other ways that Malaysia can support the growth of the global Halal industry. The country has set up a global reference centre in Halal knowledge and Halal-related services, including fatwa know-how, information on Halal certification, capacity building, business opportunities and incentives. The Halal Industry Development Corporation (HDC) has taken the initiative to develop a Global Halal Support Centre (GHSC) for both investors and consumers. HDC has also introduced its innovative Halal application on iPhone platform to help consumers locate Halal food premises or restaurants using the Global Positioning System (GPS) technology and Google Maps. Users will also be able to obtain immediate mobile access to the Halal directory, e-codes and Halal related fatwas, Halal industry news and knowledge by the end of 2010. 152
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Malaysia offers itself as a base for international Halal operators. The country has all the necessary elements that make for an attractive investment destination including world-class infrastructure, advance telecommunications and logistics network and business-friendly policies. Specifically for the Halal sector, Malaysia has the necessary eco-system including several dedicated Halal parks. In addition, investors in Malaysia can also leverage on the Free Trade Agreements (FTAs) that Malaysia has concluded, to access the Muslim markets in the FTA partner countries. These include the ASEAN Free Trade Agreement (AFTA), which provides access to a Muslim population of 273 million and other bilateral and regional FTAs concluded with countries with high percentage of Muslim population such as Pakistan, China and India. Â The recent collaboration between HDC and Glon Groupe, a French integrated agriculture producer to set up poultry farming in the East Cost Economic Region (ECER) is a good example of an investment capitalising on what Malaysia can offer for the Halal sector. Another example is the business partnership undertaken by Felda Global Ventures Livestock Sdn. Bhd. with Middle East Oil and Grains Ltd and Felda Iffco Sdn. Bhd. to develop an integrated livestock project in Malaysia.
Islamic Finance The Halal business fraternity is also supported by a sophisticated Islamic financing and banking system. There are a total of 38 Islamic financial 153
The country has supportive government policies to augment Malaysia’s attractiveness as a strategic hub for access to Syariah-compliant financial services. institutions operating in Malaysia, covering both domestic and overseas operations. Of these, 18 are the Islamic banks, five investment banks, seven Islamic fund and wealth management companies and eight Takaful operators. Malaysia distinguishes itself as one of the most comprehensive platforms for conducting Islamic finance activities across the globe through strengthening connectivity with other financial centres. The country has supportive government policies to augment Malaysia’s attractiveness as a strategic hub for access to Syariah-compliant financial services. These include tax incentives which have been extended until 2015 and stamp duty exemption of 20 per cent for Islamic financial products, as well as the legal certainty provided by legislation such as the new Central Bank of Malaysia Act 2009. MIHAS and the World Halal Research Summit in Kuala Lumpur represent Malaysia’s efforts at showcasing a sector whose full potential has yet to be realized. It is hoped that the summit will contribute towards enhancing networking and creating business opportunities among the producers of Halal products and services throughout the globe.
- THE 7TH INTERNATIONAL HALAL SHOWCASE (MIHAS 2010) AND 3RD WORLD HALAL RESEARCH SUMMIT 2010 Matrade Exhibition And Convention Centre, MECC June 23, 2010
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Malaysia-India: Strengthening Strategic Partnership for Mutual Progress
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alaysia and India have so much shared history and so much in common in terms of civilisation. And above all, there is this promise of a huge and somewhat unrealised potential between the two countries to mutually engender greater economic cooperation and progress. India is Malaysia’s 12th largest trading partner and 11th largest export destination, while the latter is India’s 13th largest export destination. In 2009, total trade between the two countries amounted to USD7.1 billion, 29 per cent down from the 2008 total of USD10.5 billion. First quarter of 2010 saw trade between them recovering and the latest statistic showed that in the first five months of this year (2010), total bilateral trade is up more than 11 per cent on a year-to-year basis. As close friends, there are many areas where Malaysia and India can work together in facing the challenging global economy for the sake of their respective people. This include through Malaysia-India Comprehensive Economic Cooperation (CECA). It is heartening to note that Malaysian and Indian officials are working in earnest to ensure that the agreement can be concluded before the prime ministers of both countries meet at the end of this year.
Strategic Partnership
The CECA is just one example of what both governments are doing to take our bilateral relations to a higher level. They are also working on a Framework for a Strategic Partnership. This is an overarching agreement to oversee bilateral relations on various fronts, including economic, security and people-to-people engagements and there are many positives that we can look to lately, for example, in terms of connectivity between our two countries. There is today a record of 111 flights between India and Malaysia-30 times weekly by MAS, 63 times weekly by AirAsia and 21 flights weekly by three Indian carriers.
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The Roles of the Private Sector A robust relationship between countries is one that is built on a proliferation of relationships at all levels, especially between the business communities. Over the years, we have seen growing involvement of Malaysian and Indian business communities in each other’s economies. Malaysian construction companies have a strong presence in India, especially in infrastructure development. Now, we have now beyond that traditional area by forging business partnerships in many new areas including, of course, the construction of the wonderful new terminal at Delhi Airport, a shining example of the growing relationship of our two countries. Likewise, Indian manufacturing and IT companies have had a long history of engagement with us. Trade and industry associations, such as the Confederation of Indian Industries in Malaysia, CIIM, the Malaysia-India Business Council, MIBC and the Confederation of Indian Industries (CII), must collaborate to bring Malaysia and India closer together. Companies should tap on these associations, engage them and get their views in order to understand the markets better. MIBC and CII might be able to provide insights and connections that might be useful for Malaysian companies aspiring to enter the India market, whilst the CIIM and the various Malaysian chambers can play a similar role with regards to the Malaysian market.
From the Malaysian point of view, the chambers in India can play a key role in sharing the views of their member entrepreneurs and captains of industry on what needs to be done by the Government of Malaysia in order to attract investments. Indeed, Malaysia is very much open for business. The country will therefore do what is necessary for Indian business to increasingly view Malaysia as a strategic commercial destination - a destination that can play a key role in their business’ onward growth and expansion. Early this year, Malaysia and India signed 18 Memoranda of Understanding (MoU) and agreements and some of these have already materialised. Now, at 158
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least two companies are working together to explore third markets. The GMRMalaysia Airports Berhad venture in the Maldives to build and expand the airport at Male exemplifies the kind of synergistic business relationship that we want to encourage. Furthermore, many Malaysian Government-Linked Companies as well as other listed businesses have invested in the transport, infrastructure and telecommunications sectors in India. Both countries should explore more opportunities in order to deepen the economic bond between them to the extent that it engenders greater commercial confidence in each other. Â Prime Ministers of both countries have also decided that Malaysia and India need to strengthen not only business-to-business relationships, but also business-to-government one. They have agreed to the establishment of the Malaysia-India CEO Forum. This CEO Forum, which comprises captains of industry from both sides, must serve as an advisory body to accelerate and deepen bilateral economic relations. The forum would serve as important link between the two countries.
Collective Roles on the Regional and Multilateral Fronts Regional economic integration is unfolding in a very tangible way. First of all, there is the goal of establishing the ASEAN Economic Community by 2015. There is ASEAN Plus One arrangements in place whilst the ASEAN Plus Three and ASEAN Plus Six arrangements are shaping up. Further afield, there are Trans Pacific Partnership (TPP) and the Free Trade Agreement for Asia and the Pacific (FTAAP). 159
However, such regional and multilateral economic integration makes sense only if it also benefits the people and the domestic economy for example, will it improve the quality of life for the people of a nation? Will it eradicate poverty, will it create more employment? Countries must be allowed the flexibility and space to determine their economic course. This is especially important for developing countries which today account for about one-fifth of world output and world trade. Â
Herein lies the role that Malaysia and India can indeed play. The two countries must not limit their cooperation to working together just in regional economic integration through ASEAN. More importantly, they must collaborate to ensure the effective conclusion of the negotiations towards a rules-based multilateral trading system under the auspices of the World Trade Organisation or WTO. The WTO, imperfect as it may seem, must continue to provide the framework for nations to discuss and negotiate at the multilateral level. Going forward, Malaysia and India should join forces and facilitate the establishment of the middle-ground and thereby, contribute towards the conclusion of the Doha Round. Malaysia-India cooperation in bilateral, regional and multilateral fronts is undoubtedly heading in the right direction. Both countries are on the cusp of better things to come. They have begun to put processes and mechanisms in place for greater business-to-business and business-to-government relationships. With the deep political commitment of both governments and with the warm, not only formal but personal relationship enjoyed between leaders of both countries, Malaysia-India relationship can only grow from strength to strength and be a very important relationship between the two countries. - THE MALAYSIA - INDIA SEMINAR : TOWARDS STRATEGIC PARTNERSHIP - TAPPING GROWTH OPPORTUNITIES Kuala Lumpur Convention Centre July 8, 2010 160
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Improving Healthcare Services for The People
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he medical profession has made remarkable progress in the five decades since the MMA was first established. Fifty years ago, there was not a single medical school in the country. Today there are 27 medical colleges, both public and private providing almost 4,000 places annually. The healthcare services have also come a long way. Data compiled by the World Health Organisation show that the overall performance of the Malaysian health care system is remarkably good. One indicator, the Health Adjusted Life Expectancy at birth, is comparable to that of industrialised countries. Malaysia’s health care system achieves these high standards at rather relatively low cost.
Improved Healthcare Services Despite these achievements and in keeping with our guiding philosophy of 1Malaysia - People First, Performance Now, the government is pushing ahead to further improve the quality of services to the people. We are aware of the ever increasing demands for better and improved healthcare services. The government will do its level best to provide the services. In fact, quality healthcare is an integral part of the New Economic Model (NEM) which outlines the government’s aim of providing better quality of life, including quality healthcare which is accessible to all the people.
Currently, some 70 per cent of Malaysia’s population lives in urban areas resulting in increased demand for healthcare services in these areas. Those living in cities, especially the urban poor, should not be denied access to quality healthcare services. The 1Malaysia Clinics have been launched to cater to some of their needs. These are designed to provide quick and easy access to affordable healthcare, where treatment for minor ailments is available for One Ringgit. As of 4th July, a total of 644,315 patients have received treatment from the 50 1Malaysia Clinics throughout the country. The Ministry of Health ought to 163
be congratulated for implementing the fifty 1Malaysia Clinics in record time. More 1Malaysia Clinics will be opened under the Tenth Malaysia Plan. Further improvement to healthcare services in the rural areas will also be undertaken. The 1Malaysia Clinics complement the existing rural and suburban network of health clinics. These Klinik Kesihatan provide access to basic primary healthcare services in the rural areas and more than 90 per cent of the population has access to these facilities within a 5 kilometre radius.
The needs and demands of those in the lower income levels cannot be overlooked. In keeping with the People First, Performance Now approach, the government is exploring various options to provide access to quality and affordable primary health care to all Malaysians. The latest initiative by the government is to launch the 1Malaysia Mobile Clinic in the form of a bus. This is to allow for medical treatment and even minor operation to be done onboard. The whole idea is that some remote areas which are not adequately served by the existence of a rural clinic can be served by these mobile clinics. With the launch of the 1Malaysia Mobile Clinics, more and more people living in the rural areas, traditional kampungs, estates and new villages will have access to better quality healthcare. At the same time, those who can afford to pay have access to private sector facilities. And to cater to the increased demand from the more affluent segments of society, the private sector has stepped up to the plate by providing a range of medical facilities. Currently there are 273 private hospitals and 130 government hospitals in the country.
Upgrading Knowledge and Skills In line with the government’s aspirations to move into the high income bracket, it is necessary for Malaysians, including those in the medical profession, to upgrade their technical and managerial skills. Medicine is an ever evolving field 164
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and it is important for practitioners to continuously upgrade their knowledge and skills. Here, the MMA can play a role in ensuring that it’s members attend adequate and appropriate continuous medical education (CME) activities. This will help equip members with the most up-to-date knowledge and skills and increase demand for their services, including that from overseas. Now, an increasing number of foreigners are seeking treatment in Malaysia. Between 2006 and 2008 more than one million foreign patients sought medical attention in Malaysia with medical receipts of about RM800 million. This growth is testimony to the capabilities, the quality services and care provided to patients by medical professionals in Malaysia, including MMA members. With increased affluence, an ageing and increasingly mobile population, medical and healthcare services are a growth industry. The Tenth Malaysia Plan identifies healthcare as one of the 12 National Key Economic Areas (NKEAs). Targets have been set and concrete actions to drive economic growth in these areas have been drawn up. The aim is to create a seamless and integrated healthcare system, incorporating a professional, competitive healthcare travel industry and state of the art medical technology.
Healthcare Travel Industry The plan is to boost health tourism and make Malaysia the preferred healthcare destination in the region. It also aims to grow revenue from healthcare travel
Encourage more private hospitals to seek accreditation with international healthcare accreditation bodies.
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by about 10 per cent per annum. Among the strategies to achieve the target include: • Fostering strategic alliances among local and foreign healthcare service providers, travel organisations and medical insurance groups to provide a more integrated and comprehensive package of services to healthcare travelers. • Encourage more private hospitals to seek accreditation with international healthcare accreditation bodies. Currently, 35 private hospitals in the country participate in health tourism programmes, and • Promote investment in and utilisation of high-end medical technology to increase efficiency, effectiveness and competitiveness, and intensify and coordinate professional activities to strengthen the Malaysian healthcare brand globally. In this regards, I hope more promotional activities can be undertaken so that more and more people around the world will be increasingly aware of the medical facilities that we can provide to them.
Improvement of Scheme of Service The focus on medical tourism does not mean that the government will neglect the healthcare and medical needs of Malaysians.
We have set the target of achieving a ratio of one doctor to 600 people by the year 2015 from the current ratio of one doctor to 900 patients. I believe the ministry has been bolder by setting new KPI to achieve a ratio of one doctor to 400 people by the year 2020. This will commensurate with the situation in some developed nations. In fact, there are more and more medical students now in the country and overseas than ever before, and the numbers are increasing. It is hoped that an increasing number of people from the medical profession will find working in government hospitals a good and attractive proposition following several announcement made by the government on the improvement of the scheme of service.
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The Talent Corporation that the government will launch shortly will seek out specialists and encourage them to return to serve at home. Efforts are being made to have a system in place that allows every Malaysian to realize his or her maximum potential and provide the quality service needed. Specialized organisations and associations, such as the MMA, can also assist in encouraging talent to return and offer their skills, services and expertise to the nation.
- THE MMA 50TH ANNIVERSARY CELEBRATION DINNER
Hotel Royale Chulan, Kuala Lumpur July 13, 2010
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Revitalising National Identity
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he theme of the Chinese Economic Congress which was held on 14 August 2010: “The Role of the Chinese Community in Achieving the New Economic Model and the Tenth Malaysia Plan Targets” is indeed apt and welcomed. That underscores the point the Chinese community should want to help achieve the government’s targets and plans is a highly commendable and responsible notion. The model, plan and targets have all been devised to benefit them, as it has for all Malaysians. It is good therefore that the Chinese community is taking personal ownership of these efforts because it is not personal plan, but a national plan.
The Chinese community contributes directly to our economic progress, as it has for generations. When this country became an independent nation, Malaysians of all backgrounds shared one core belief – that we should work together to strengthen our nation and our collective future. It is for this reason that the government initiated three national policies designed to steer us back to the path of prosperity. They are the New Economic Model (NEM), the Tenth Malaysia Plan (10MP) and the Government Transformation Programme (GTP). I am grateful for Datuk Seri Chua’s confidence, support and commitment to these plans. And I am equally grateful for his astute observations of areas to improve.
Rejuvenating Malaysia’s Spirit And Identity Malaysia would not be what it is today without the industry, expertise and dedication of the Malaysian Chinese community. Likewise, there will be a bleak future for Malaysia without the Chinese community’s support for our policies. We would clearly fall short of reaching the goals of Vision 2020 – to become the developed nation that our fathers and grandfathers strove so hard to achieve – without this vital support. Indeed, there are structural issues in our economy that must be addressed. Some of these have become entrenched for so long that our ability to compete internationally is now at risk. There are also some shortcomings in our internal 169
delivery systems. Much needed assistance is not reaching the lower-income groups and the marginalised in our society who need help. At the same time, the constant complaint about the people not interpreting government’s policies and decisions in the right way is often heard. These and other issues have created great political and social divisions. We are now facing one of the greatest challenges in our history. Our success as a nation - our relevance as a global economic and political player - requires a new momentum, a new vision, and renewal of the spirit that united our predecessors in their dreams for Malaysia. We can only achieve this if we are truly together.
Therefore, we need to rejuvenate Malaysia’s spirit and identity. I believe 1Malaysia is more than a concept and certainly more than a slogan. It reflects not only a return to the values of our great leaders: Tunku Abdul Rahman, Tun Tan Cheng Lock, Tun V.T. Sambanthan and others but goes beyond that as it emphasizes the people, performance and it is very strategic in its conception. The courage of our forefathers and their commitment to unity remain as shining examples to us today. But this revitalization of our national identity cannot succeed without the support of all communities in the country - both here and abroad. Underpinning this notion of national unity and identity is the proverbial economic ‘pie’ which needs to continue growing and is shared in a way that is fair and just. While there must be a sense of equity or more accurately, fairness in how Malaysia divides its wealth, this must not be done in a way that inhibits the success of others or benefits one community over another. Whatever we do, we must not be trapped in this notion of a zero sum game i.e. helping one community must not be seen at the expense of the other community. It requires a major mindset change in many of us both in the public and in the private sector.
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Unity for Future Prosperity The NEM and the 10th Malaysia Plan are blueprints by the government for the people. The government is elected to serve. This is a government of the people and by the people. The government certainly cannot achieve the NEM or the 10MP without the involvement of all stakeholders. The Chinese business community, which is known to be practical, thrifty, self-starters, risk-taking and definitely hard working, is a key catalyst for getting these blueprints off the ground. If there is a consistent theme to my views, it is that we cannot continue to grow and thrive as a nation unless all of us – Bumiputera, Chinese, Indian and other ethnic groups – are willing to come together and see past and beyond our differences to build up our country together. All processes of transformation create uncertainty, even fear. The GTP, NEM 10MP provide for a level of economic liberalisation previously unknown in our society. The relaxation of the 30 per cent Bumiputera equity requirement in Initial Public Offers (IPO) and liberalisation of 27 service-industry subsectors, reflect just the first step in the reform process. The ultimate goal of the transformation process is to create a high-income economy for all Malaysians. These advancements are critical to the nation’s competitiveness and future prosperity.
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Even as some resist new ways of thinking and fear the unknown, it’s not transformation that we must be worried about, but it is stagnation. As Confucius said, what we must truly fear is “being unable to change what is not good.” It takes courage to grapple with systematic transformation because it forces us to recognise that our previous practices have fallen short. .
Transformation Before we can advocate greater liberalisation and measures to improve access, we must achieve goals set forth in our policies for transformation. Put another way: We cannot expect our trees to bear fruit if we have neglected to first fertilise and water the soil. It is the soil that we must attend to now. These transformations must take effect at the very core of our economy and society. Let me now turn to the solutions we have put in place and ways the government is working to promote them.
The NEM, 10MP and GTP address these concerns comprehensively and inclusively, while 1Malaysia provides the framework for their realisation. When taken together, they will provide the conditions by which the trees we plant will bear fruit for ourselves and for generations to come. The liberalisation of the services sector announced early last year signalled my commitment to reform. This was done to create a conducive business environment to attract investments, technologies and higher value employment opportunities. The government’s removal of the Bumiputera ownership requirement involved dealing with an entrenched policy that had widespread Malay support. Nonetheless, this government lived up to its commitment to do away with the FIC. The government’s commitment to tackle entrenched issues in order to benefit all Malaysians has led to renewed interest in Malaysia from international parties. For the first time, Malaysia has been ranked among the top 10 most competitive countries in the world. And, after a tough year of the global recession, there are signs of renewed investor interest from overseas. 172
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The community continues to be the backbone of the Malaysian economy through its Small and Medium Enterprises (SMEs). Moving forward, we all have roles to play. We also need the private sector to transform its thinking and reassess its own entrenched beliefs. To achieve our national goals, the public and private sectors must work together and utilise the talents of all our diverse communities. We must encourage genuine partnership between bumiputera and non-bumiputera communities. Through these genuine partnerships, we can attain our goal towards equitable distribution of the nation’s wealth.
Active Support and Participation It may be fitting that I ask this question: what’s the role of the Prime Minister in all of this? Like my predecessors, I recognise that I am a leader for all Malaysians. Your concerns are my concerns - not the other way around. I have been entrusted with the responsibility to chart the best possible future for all of us. But I can only be successful at this with your active support and participation. My role is to hear your concerns and to act on them whenever it is appropriate decisively. I have begun to do this with the policies initiated in my first year in office and I will continue to do this with the invaluable encouragements well as with some constructive criticisms from my own party and friends in the MCA and the other Barisan Nasional component parties. It is clear through the Chinese community’s many contributions to nationbuilding that its loyalty to this country should be clearly appreciated. The community continues to be the backbone of the Malaysian economy through its 173
Small and Medium Enterprises (SMEs). I am pleased to say SMEs will continue to receive the government’s wholehearted support through development assistance and greater opportunities. The government will re-examine access to credit and financial facilities so that the growth of the SMEs in this country will not be hindered. Our faith in Malaysia requires a long-term investment in the future. Here, the Malaysian Chinese community must once again take up the reins and take up a more leadership role through economic innovation in genuine partnership with other communities. We must do this within the spirit of 1Malaysia. The emergence of companies that reflect the spirit of 1Malaysia, perhaps companies like SP Setia and AirAsia must be applauded as shining examples of the private sector embracing sense of togetherness in reaching out to all. And reaching out to all communities and all customers is a great commercial advantage to be derived from business enterprises being seen as a Malaysian company. I would like to emphasize the true partnership but not the often quoted gibe about being “Ali Baba” like appointing a Bumiputera, usually a Tan Sri or a Datuk Seri, former politician or senior civil servant to be the chairman of your company is not the answer. It is an old way of doing business and should be replaced by true and genuine partnership between all communities in terms of equity and management. We must do this if we are to achieve our potential and sustain the progress and prosperity we have enjoyed thus far. The government is working to broaden opportunities for all Malaysians. We must do this because we recognize that diversity is the core strength and the source of creativity and innovation needed to grow our economy. This does not mean there won’t be assistance for those in need. Where affirmative action remains, it will focus on areas where systemic inequities persist. This will not be based solely on race. They will target assistance to those most in need. For example, affirmative action will be aimed at: 1. Reducing the urban-rural divide in standards of living; 2. Reducing the education gap among disadvantaged students and offer support to those who show outstanding talent. This is reflected in the rather 174
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unique way in which we have decided in the disbursement of JPA Scholarships in which we have merit the concept of meritocracy and taking into account the socially disadvantaged. What is very significant is that this could be a good example of how we could approach in other areas as well that for the first time in our history every single Malaysian student who achieved 9A+ receives a JPA scholarship. We will continue to support those who are poor and those whose income level are below RM1500 as listed down in the NEM. This is hardly a question of favouritism but is being equitable. The non Chinese role in the economy remains relatively low and in the true spirit of 1Malaysia where all Malaysians will be given fair opportunities, assistance will be provided to the targeted communities until they are ready to be lifted eventually.
The Private Sector Transformation Let us be candid. The government alone cannot make all the necessary changes. The private sector plays a vital role in driving the innovation, creativity and investment that are needed to boost Malaysia’s global competitiveness and support our goal to become a high-income nation. In fact, the Chinese business community can be transformed to be another pillar of the national growth and development. The private sector transformation is urgently needed because the economy cannot expand without their committed and positive participation. Businesses should not only look for short-term profit but also must be prepared for a longer haul. For this, the private sector must dare to take risk and invest in new industries, new products and services. R&D expenditure and technology acquisition should be regarded as investment for long-term growth and profits. The private sector should also value human capital by paying the right level of wages and allocate resources to nurture talent. Under the NEM, the private sector is essential to investments and projects that support Vision 2020. The achievement of the 6 per cent per annum growth target highlighted in the 10MP will require a significant boost in investment, much of which needs to come from a more dynamic private sector. The Plan expects private investment to grow 12.8% per annum or RM115 billion of investment 175
annually. The role of the government will be an enabler to encourage, to enable, to incentivize the private sector to make this kind of investment to the level that I have just mentioned. To make this leap forward, I appeal to all Malaysian Chinese businesses, industries and enterprises to invest as much in their employees to support their growth and career development. The current structure of our economy depends too heavily on cheap foreign labour. These are generally lower skilled jobs that produce goods with little value added. The government take note of MCA’s desire for a comprehensive minimum wage policy as a measure to build human capital to the levels necessary in a highincome economy. This is also necessary to reduce our national dependence on foreign labour especially in the construction sector and the services industry.
A sectoral minimum wage probably offers the best way to build a skilled and competitive workforce capable of harnessing the potential of all Malaysians. The government is looking at the best formula to address this issue. While we would like producers and companies to move up the value chain, the government also understands that leaps like that do not happen overnight, especially for companies in labour-intensive industries. To this end, I urge all employers here to seriously consider the minimum wage as a business strategy and an opportunity to revitalize your businesses.
Producing Highly Skilled and Educated Employees To support the growth of your businesses and progression to the higher value areas, the government is strengthening the education system in order to produce the highly skilled and educated employees you need. One measure is to improve the competence of graduates by linking their employability to the KPIs for universities and using results to allocate funding to universities. The government is also prepared to offer skills training for school dropouts to boost their value in the job market. Government spending will also reinvigorate our education system. 176
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Outstanding students will have access to scholarships for higher education and no Malaysian child who is a high achiever should be barred from an opportunity to progress via whatever assistance that can be provided. Talented youths are national assets who provide the foundation for our shared future. Continuous engagement with MCA and other BN component parties to discuss about how we can constructively help the Chinese schools progress even further in providing more opportunities for all Malaysians. Education alone is not enough. We need talent. I appeal to you to help stop the “brain-drain.” The NEM and 10MP provide many excellent opportunities for talented Malaysians to assume positions of leadership. Towards this end, I call on all Malaysians working abroad to return and take advantage of these opportunities.
Making Malaysia a More Exciting Place of Employment A large number of the approximately 700,000 Malaysians working abroad are Malaysian Chinese. Our goal is to make Malaysia an attractive and more exciting place of employment for all so that overseas Malaysians want to come home or stay home to work. If we are to achieve the goals of Vision 2020, we need to become a united, strong and resourceful nation. We must trust in our own abilities and drive transformation at the core to ensure a better future for ourselves and that of our children. We have provided the means to do this through the GTP, NEM and the 10MP. It is important that we remain positive and work together to explore new methods and ideas to achieve our development goals – together as a nation, united under 1Malaysia. - THE CHINESE ECONOMIC CONGRESS Grand Ballroom Prince Hotel & Residence Kuala Lumpur August 14, 2010
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Overcoming the Challenges of the New Century
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The New Era
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t a particularly high point in the Internet era, we began the millennium with high hopes for the prospects offered to society by rapid advancements in technology. The 21st century held out the promise of a New Economy powered by productivity gains, unleashed by scientific discoveries and electronic networks that connected developed and emerging markets to expand consumer opportunities.
We quickly saw the power of the Internet and of the rapid rise in technology as a force for good that would break down trade and cultural barriers, encourage awareness and civil activism and promote transparency. For the most part, all of this has happened : globalization is here to stay and the world will only continue to be even more inter-connected. The past two years have brought us down to Earth, however, and we now know that our growth potential is not limitless. Our hopes and enthusiasm have been dampened by the global financial crisis and we have all adjusted to a “new normal” that reflects greater caution and risk aversion than before. Over the past two years, governments have demonstrated their commitment to provide stability even as private sector markets and enterprises went into a tailspin. Governments are still pre-occupied with addressing immediate vulnerabilities and fragilities. But we cannot continue to operate in this mode, reacting with only short-term remedial measures and actions. We risk allowing the world economy to drift listlessly and without direction.
Broadening Reform Agenda to Promote Long-Term Confidence First, the obvious question must be asked. What lessons have we learnt from the crisis to ensure that past mistakes do not recur in the future? There is little doubt that modern financial tools have advanced the cause of civilization by broadening the ownership of assets and, in the process, recycled global savings
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to accelerate capital formation. But market efficiency has been sacrificed as selfserving financial and corporate players exploited loopholes and lax regulations to make profits at the expense of society. They have diverted markets from their objective of efficient intermediation for productive investment and unleashed systemic risks in a relentless pursuit of profits. As a result, the relationship of financial markets with society is now in disarray. The consequences of this financial crisis are far greater than the ones in the past because there is now extensive public participation in and dependence on markets. Many individuals entrust their life savings to organized financial intermediation to accumulate savings for their old age. Yet, too many in the financial industry remain callous to their responsibilities and continue to rely on the principle of caveat emptor, or “buyer beware�, as a pretext to undertake complex transactions and sell opaque products that pose financial risks to the public. Worldwide, there are sweeping reforms to address financial system weaknesses at the root of over-leveraging funds, opaqueness of risks and fiduciary duties of financial intermediaries. But it will not be enough to address existing weaknesses to safeguard mechanisms to overcome the current predicament that ails the global economy. I propose for your consideration a broadening of the scope of reform, which is critical to catalysing a sustained global economic recovery, and would like to spend my time with you discussing some of components necessary to achieving such sustainability
The first priority of a global agenda for governance must be to shift the emphasis from nations competing to promoting global cooperation and collaboration.
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First, there is a need to focus on increasing private sector commitments to investing over long-term horizons. Investors are now increasingly risk-averse, preferring safety and short-term liquidity. But the willingness to commit funds over long periods of time is necessary to fuel an entrepreneurial environment. Governments can only fill the vacuum in investments for a limited time. If eventually a sustained global economic recovery is to take root, it is necessary to galvanise the “animal spirits� in the private sector to make new and substantial investments for the long term. Restoring confidence in long-term investing requires reforms that address public trust through an agenda based on governance and coordinated among nations. Second, there is a need to achieve a better balance in the social compact between finance and business on one side and the interests of society on the other. Profits cannot be the sole motivation of enterprise; for while they satisfy the individual shareholder, they may not meet the requirements of society. It is only when there is equitable sharing of the fruits of enterprise through ensuring social inclusion that prosperity can be sustained.
Shaping a Global Agenda for the 21st Century In the 21st century, there is a great urgency for us to lift ourselves out of the current economic morass so that businesses can resume their quest to utilize technology and financial innovations that create sustainable economic improvements for the majority of our global society, not just the privileged few. If we are to truly begin laying the foundations for sustained and shared prosperity for the New Millennium, we should aspire to a new ethos of governance. This requires us to work together to shape a global agenda for governance, based on a set of shared values that provides a moral underpinning for fair and sensible conduct within and among nations. In this regard, economic and social goals are inevitably intertwined; they cannot be pursued in isolation of each other. The current pre-eminence of profits or returns in the allocation of capital merely reflects a predisposition for selfenrichment. From the recent crisis, we have all seen that such wealth can be transient. When business objectives are achieved at the expense of other citizens 181
and other nations, it results in an eventual breakdown in trust and confidence. Business cannot flourish without the confidence, support and participation of the public at large. The first priority of a global agenda for governance must be to shift the emphasis from nations competing to promoting global cooperation and collaboration. Many countries naturally strive to strengthen their competitiveness. But for trading and investments across borders to be sustained, there must be mutual benefits for both countries – a win-win situation. Competition must be managed so that it does not turn into a free-for-all, otherwise this will inevitably lead us down the road of “beggar-thy-neighbour”. The building of bridges of trust and confidence across borders is a task that in my view requires greater attention than previously provided for. Indeed, it is incumbent upon us, whether we are trading within our borders or beyond, that we are all bound by an agenda of greater good. Second, international governance arrangements must be reviewed as they play a key role in shaping the compact between organized business and finance and how they use resources and impact on livelihoods and the environment.
Institutional arrangements need strengthening to promote fairer distribution of economic wealth and widespread social well-being. Similarly, we must show greater restraint in how we use our natural resources. We are depleting these resources without consideration for environmental sustainability. It is a practice we cannot continue. Good governance must also translate into adequate checks and balances to avoid domination by influential interests in the global decision-making process. It must provide equal access and consideration to the views of a diverse range of stakeholders and countries. Ultimately, the quality of governance arrangements must be judged by the extent of grassroots participation and how it translates into sensitivity to and benefits for citizens all over the world.
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Last but not least, there must be greater emphasis on social justice. In Islam, social justice is about fairness, mutual respect and integrity that are based on rights, relationships and responsibilities. Within the universe of social justice, it is considered that intent fuels actions and must take into consideration the effects on people, society and the environment. Therefore, there must be ideals to guide day-to-day behaviour and promote the principles of fairness, moderation, compromise and sustainability. Distributive, compassionate and sustainable requirements should be embedded into economic systems to temper the Darwinian characteristics inherent in “survival-of-the-fittest” or “winnertake-all” market philosophies.
Leadership in a Transparent and Diverse Society In recent years, technology has altered the speed of communications, resulting in our actions and words being quickly transmitted and quickly disseminated throughout the world. While actions can be seen and words can be heard instantaneously and repetitively, intent can also more easily be misunderstood. The implications are that misunderstandings are now easily telegraphed from one part of the globe to another at astonishing speed. In addition, citizens today are also more greatly empowered by knowledge. With knowledge, diverse groups become more assertive of their rights and
We must always remain motivated to build a better world for our children.
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public expectations are higher. The speed and weight of public opinion requires responsible moderation to achieve compromise and to make progress so that all can benefit. The leadership skills required to shape consensus within society need to match the changes in time and in circumstance. In a transparent and diverse society, the accountability of a leader is far higher, the need to explain and convince, far greater. In this regard, the continued advancement of society requires citizens to trust the judgment of stewards who possess a sense of purpose and whose adherence to a code of ethical conduct allows them to lead their communities beyond the narrow pursuit of self-interest. Leaders must strive to serve the needs of society so that they are trusted to achieve the compromise and collaboration in which harmony is achieved and prosperity can blossom. Even though opinions may diverge, leaders must increasingly act as arbiters, seeking consensus on the walk able paths to bring everyone along to a common destination.
We must face our current economic adversity with renewed faith and optimism. We must learn from our mistakes, resolve conflicts through cooperation, foster greater understanding of each other, deepen our compassion for humanity and undertake the duties we have been entrusted with. We must always remain motivated to build a better world for our children - one where they live in peace and harmony and share in the prosperity that comes from working together. After all, history teaches us that humanity has sustained progress through learning, that it weathers crises through resoluteness and always emerges triumphant and stronger than before. We have the opportunity to continue this positive trend if we take the right steps today.
-THE WORLD CAPITAL MARKETS SYMPOSIUM 2010 Shangri-La Hotel, Kuala Lumpur September 27, 2010
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Transformation of the Malaysian Public Service
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A Quantum Leap Towards a Brighter Future
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his year, Malaysia celebrated her 53rd year of independence. As a nation and as a people, we have much to be thankful for, from a fledgling under developed economy besieged by the threat of terrorism we managed to be transformed into a prosperous upper middle income economy. This is not a result of chance or mere fate. Rather, it was the fruit of vision, strategic planning and steely fortitude of our forefathers in blazing a trail before us. Their wisdom, foresightedness and pioneering spirit geared us towards a path of national prosperity. Their work may have been done but ours is just beginning and the torch has been proverbially passed. Now, it is incumbent upon our generation to pick up the gauntlet and continue to work hard and deliver the promise of a high-income developed economy for all Malaysians. Our nation has always been at the forefront in the process of change and reform. We have been constantly ahead of the curve in successfully meeting our domestic and global challenges. This trait and our clear headed pragmatism have held us in good stead. Nevertheless, we have come to a juncture where gradual and incremental change is no longer adequate for our national interest. We need to be bolder in our planning, more decisive in our execution and more driven in our endeavour. In a nutshell we now need to quantum leap towards a better future.
In less than a decade, our hope is for Malaysia to join the fraternity of high income developed nations. The government, on its part, has put in place the necessary mechanism to ensure the nation is on the right track to achieve our national vision. Both the Government Transformation Programme (GTP) and the Economic Transformation Programme (ETP) under the overarching guiding philosophy of 1Malaysia - People First Performance Now is the essential roadmap in transforming the country into a developed and high-income nation.
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The Malaysian Public Service is a vital partner in nation building. It has over the years built a reputation as an effective institution. Malaysia would not have achieved what it has achieved today without the commitment and dedication of its public servants. Nevertheless, the Malaysia of today is different from the Malaysia of even a decade ago, it is a completely new era that compels a rethinking on the formula of success. Succeeding in a new and more challenging environment requires the Malaysian public service to take a critical stock of its’ new environment and realities. A paradigm shift is needed in meeting the expectations of a more open, complex, demanding and nuanced society. Nostalgia and doing business as usual should be a thing of the past. Innovation, facilitation, meritocracy and creativity should be the new buzzword. Now, change is no longer an option, but an imperative.
Challenges Among our most daunting challenge is caused by the rapid rate of globalisation. Individuals thousands of miles apart can now network and interact with each other with the click of a button. This compels us to change how we plan and conduct our core business. We need to be more mindful of public sensitivities and aspirations. Ultimately, it requires the public service to be more accountable to their constituents, to better manage expectations.
The second challenge is developing and managing high quality human capital to ensure high-quality service. Countries no longer exist as “islands” on their own – trends towards regionalism means that the competition is getting tougher, not easier. Everyone is competing for finite resources and markets. This is as a healthy environment because competition is not just about coming out on top ahead of the rest, but as a mechanism to ensure that we are pushed and driven to do our best, hence resulting in improved service for the public.
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It is therefore important that Malaysia equips her public service system with a mechanism in measuring quality human capital and quality of service. There has to be a new standard that will shift the old paradigm of our public service to a new one that is reflective of the expectation and demands of our society. This measurement must be at par with the levels of development of a nation and its aspired place in the world. Four areas serve as benchmarks:
First: Transparency and Accountability Today, people no longer limit their demands and expectations to only meet their basic needs and amenities as these must be given without being asked. But the society wants to be part of the decision-making process because the people are the ultimate stakeholders of the government. Public participation is not the exception, it is the norm of all excellent public service delivery systems the world over. We need to move towards a more collaborative dialogic approach which includes voices and ideas from multiple angles. Their feedback and participation is needed for the seamless fleshing out of the best policies and services. This can only happen when at the most basic level, we, as a society, are ready for a “cultural transformation� in the way we work and the way we deal with new challenges and problems. This is what some have referred to as the new public leadership in context.
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Second: Competitiveness The best business knows that to remain competitive means to listen to the stakeholders. In the case of the public service sector, the stakeholders, as I have mentioned before, are none other than the people themselves. We promise to take complaints and consider questions and solutions from the public, and to respond in the best way that we can. But to even get to a point where this becomes second nature to us, we must find ourselves in an environment that is receptive to change. If the environment is lacking, then we must be creative and innovative to create the condition that will allow us to be more competitive. We can only achieve competitiveness if we allow competition to flourish in the public service. We need to be challenged and compete with others in order to prove and improve on our credibility and efficiency. Without a competitor, it is unlikely that we will be challenged, thus, will forever remain static. Competition is not just about winning and losing, but a venue to capitalise on one’s strength, improve weaknesses and embark upon what is called a positive continuous Restructuring and positioning to achieve our goals of transformation. I am optimistic that if we allow healthy competition to be a culture in the Public Service, keeping in mind our values and norms of respect and trust, behold, a new revamped Public Service will emerge in the nation, providing only the best for its people.
As a society, we are ready for a “cultural transformation� in the way we work and deal with new challenges and problems.
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Third: Merit-based Advancement Everyone has an equal chance to perform and to contribute, depending on each individual’s capacity and potential and this should be our operational yardstick to assess a public servant. The merit should be outcome-based in the sense that satisfaction of performance and delivery is the benchmark of awarding the merit. The tradition of promotion based on seniority and clique without taking into cognizance of performance, talent and true potential should cease. The nation cannot afford deadwoods or mere seat warmers.
Fourth: Knowledge and High Awareness Knowledge is borderless and always powerful, regardless of time and location. It distinguishes each human, organisation, society, nation and what more, a civilisation. In this regard, public service is not excluded. We need to implant knowledge into our thinking and reaction, ensuring that we are a highly distinctive segment of people in the society. With the advancement of information and communication technology (ICT), we must ensure that our public service is not lagging behind even for a moment. Hence, life-long learning should be the way of life to our public servants, so that our existence will stay relevant, even with the changing of time.
Knowledge leads to awareness. The current world order is experiencing substantial change. New dimensions are surfacing while the old features are redefined. Traditional hard power, for example, is now fused with emerging soft power. Our awareness can no longer stay stagnant and static, but must reflect present and future demands and changes constructively. We are aware that a new wave of generation is emerging in our country. The empowerment of youth and civil societies has resulted in the demand for alternative solutions. We should groom the young public servants at an early stage so that they would be well-equipped in serving the people. 191
In the end, what we want to achieve is a society-centric government - a situation where the public voice will be heard by the public service and be the best assessor to the quality of public service. Globalisation has accelerated the development of a modern and progressive society in a way that renders government and society inseparable. A question then arises, how could we strengthen trust in the Public Service? We need to repair the fractured trust between the Public Service and the public. The day where ‘government knows best’ is over.
The government must be able to feel the pulse of the citizens. We are no longer the absolute arbiter of wisdom, but a respondent to the people’s needs and demands. The 21st century concept of governance requires a new reengagement between the government and the people.
Reforms and Transformation It is vital that our institutional and structural transformation is guided by a clear, comprehensive and commonly accepted vision of the fundamental principles that should shape the new public service. The idea of the New Public Leadership is what we have to keep in mind. Change is no longer feasible only through management, but must be accompanied by leadership. By working in partnership across government agencies, the Public Service creates a networked governance environment whose aim is the delivery of public value. The creation of a people-centred and people-driven Public Service is a must if we want to see the structural change happens. Therefore, institutional and structural change is a must! It is very difficult to change the mindset of our Public Service without internal structural and institutional reform happening. Such reforms are necessary to support our transformational plan to take the next leap forward for the Public Service and the country. 192
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Strategies and Approaches for Moving Forward One of our strategies of moving forward is retaining talent. To be a developed nation, a country must utilise the talent of its human capital. Malaysia is never short on talent, but where do these talents go? Thousands of bright students have been sent abroad as a means of investment for our future, but do we get the proportionate return on what we have invested? In shaping the country to be a great nation, Malaysia needs to utilise the top talents, providing them sufficient platforms to share the inner qualities they possess in the public service context. How can the Public Service attract the best brains and retain them to serve our country? First and foremost, we need to appreciate the talent that they have. The Public Service needs to create incentives for them to want to join. It may not offer a life of luxury but it certainly offers satisfaction of serving a higher purpose, of making a difference. The government will continuously seek to improve the conditions and terms of service for civil servants. Â Our immediate challenge is to design a quality workforce and environment for our talents, legally, structurally, and institutionally. We need to generate an intellectual ecosystem in the public service that cultivates ideas and celebrates criticism. Â
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Creating Inclusiveness Most of the time, our attitude is such that we tend to think that we earn the right to everything and this ‘club mentality’, where a certain group remains exclusive, must be abolished. We need to work collectively as a team so that we can deliver what we set out to do. The Public Service has to keep pace with the rising expectations, sophistication and demands of the people.
Public Leadership This entails the need to have an integration of public organisations and agencies in sharing the same vision based on agreed aims and values, and to together execute the vision through partnership with other bodies. The integration and collaboration are intended to promote, influence and deliver public services sensitive to the socioeconomic and socio-political aspects within the society.
Communication We are faced with the rapid rise of technology in today’s globalised world. While we all have equally benefited from this phenomenon, its mismanagement can render meritless even the finest tuned plan. That is why we need to create a solid partnership with the media. At the end of the day, the Public Service will need to talk and engage with the people. Leaders must be prepared to face this new reality. It is only through transformation in the realm of ideas that institutional change can happen.
Feedback Mechanism We plan to increase consultation among stakeholders, as I believe working hand-in-hand will not only make our goals of achieving Vision 2020 easier, but will also develop us into a society that is governed through dialogues and persuasion rather than fiat and decrees. Various methods should be used to seek input, ideas and feedback from the people so that our system of government will become more efficient.
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A world class public leadership is not merely there to lead, but to inspire others to follow. It requires the capability of making the right decision, with fully informed reasoning, seamless execution, and outcome-driven mentality. To do this, we need to cultivate a knowledge-based public service. Thus, our immediate challenge is how to ensure that talented and knowledgeable Malaysians out there will contribute towards the nation becoming a better country to live in. The establishment of institutions like RSOG is to pre-empt, react and respond to these questions. The School is founded on two main thrusts: 1. Leadership and 2. Knowledge. Transformational leadership coupled with knowledge, capacity and capability is the golden formula for creating an environment that is conducive to effective problem-solving and innovation. With the sealing of our commitment to transform, the government and society will be able to establish a platform for debate on matters that are pressing. This is perhaps one of RSOG’s most important roles – to become the platform for dialogue and discussion. By consulting with our various stakeholders, we give them the opportunity to let them review and provide us with feedback as to what is best for them. Reaching out to our people on the ground is the only way to create a sense of trust and with this trust, we can provide a public service that will make us proud. It is time that we truly recognize that this is not a matter of choice. Not only are we presented with the ripe opportunity to transform the nation, but we must also transform. We must transform or risk becoming a failed state. Transformation can only happen when three things are in place: the active participation and input of all stakeholders, an environment in which key players are ready and able to take on the challenge, and the readiness to embrace the culture of always reaching far above and beyond. It is no longer affordable or intelligent for us to be satisfied with the way things are. An institutional and structural change can only happen when our public leaders not only understand what must be done, but also have the integrity, humility, and determination to bring this great nation into the next horizon. - THE LAUNCHING OF RAZAK SCHOOL OF GOVERNMENT “TRANSFORMING THE MALAYSIAN PUBLIC SERVICE” Putrajaya International Convention Centre (PICC) October 08, 2010 195
Towards Better Healthcare Services for the People
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he World Health Organisation (WHO) Regional Committee Meeting for the Western Pacific Region is an important forum for health ministers and experts throughout this region and this year’s session is particularly significant because, amongst other things, it provides an opportunity for the various experts to examine the response and effects of global Pandemic Influenza A (H1N1) that we all experienced about a year ago. We are now in the post-pandemic phase of the H1N1 pandemic. Like most countries, Malaysia has followed the recommendations of WHO with regards to our national influenza preparedness strategies. Truly, the H1N1 pandemic has been a baptism of fire for us. We had to balance important public health considerations with the multitude of opinions, especially during the implementation of many of the containment phase strategies. The H1N1 pandemic tested our risk communication strategies in facilitating public vigilance and the avoidance of panic.
One good case study is the immunization coverage that Malaysia recommended. As advised by WHO, Malaysia made the decision to provide enough vaccines for our frontliners i.e health care workers, those providing essential services and high risk groups. But the pressure was on us to cover our entire population, just like what was being done then in developed nations which began ordering the vaccines early, as soon as they were available. Fortunately, the pandemic turned out to be a mild one and Malaysia was spared the dilemma of disposing vaccines that were not used. One wonders what would have happened if the pandemic evolved into a serious and severe pandemic? Any responsible government would do whatever it takes to protect its people, even if the costs are daunting. This is where Malaysia stands guided by international and reputable organisations like WHO which must demonstrate strong and firm leadership backed by impeccable technical competency. Member states look towards WHO in providing appropriate guidance and advice as such threats are often unprecedented.
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Cardiovascular diseases, cancers, chronic respiratory diseases and diabetes represent a leading threat to human health and development. Non-Communicable Disease (NCD) Another health challenge in our region is Non-Communicable Diseases or NCD. According to WHO, cardiovascular diseases, cancers, chronic respiratory diseases and diabetes represent a leading threat to human health and development. These four diseases are the world’s biggest killers, causing an estimated 35 million deaths each year - 60 per cent of all deaths globally - with 80 per cent in low and middle-income countries. The prevalence of NCD and NCD risk factors in Malaysia, as well in the Western Pacific Region, are increasing at an alarming rate. The staggering increase of NCDs over the past two decades threatens the quality of life of those affected. In addition, it poses an unprecedented challenge to health care systems in the region, many of which are unprepared and in transition. The Western Pacific Region can be viewed as a critical area for global public health as the majority of the global population lives in this region which is now one of the most populous and dynamic regions of the world. How the member countries grapple with these NCDs challenges will shape the future of this region and beyond. In developed countries, it is estimated that about half of the decline in NCDs mortality is influenced by lifestyle changes and the other half by better treatment and care. Although we are making headway in the treatment of chronic diseases, we must emphasise the importance of primary prevention, early NCD risk factor identification and NCD risk factor intervention. Continuing health promotion, especially targeted towards younger persons, together with creating an environment that supports healthy living, are important in curbing and decreasing the prevalence of NCDs. 198
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To stay healthy, individuals need to embrace a healthy lifestyle. They must be constantly reminded that health is an important and vital resource for living. Now is the time for them to give serious attention to the importance of a healthy lifestyle. They must be made to be responsible for their own health as they have the capacity to influence it. Amongst the things they must now focus on would include healthier eating choices, staying physically active and refraining from resorting to a sedentary lifestyle. Non-smokers must maintain their status whilst smokers must quit smoking. To overcome NCDs threats, it is necessary to strengthen health systems. The health care delivery system must be “re-engineered” to provide quality care that is coordinated and cost-effective, rather than focusing on high-burden services and acute episodes. In order to do this, countries, especially the middle and lower-income countries of the region, would need a formidable health workforce. In Malaysia, the National Strategic Plan for NCD represents our approach to operationalise existing knowledge and current scientific evidence in reducing the burden of NCD. The Ministry of Health will continue to enhance smart partnerships with other government agencies and other stakeholders to further reinforce NCD prevention and control programmes in Malaysia.
Malaysia’s 1Care for 1Malaysia In our quest to become a developed high-income nation, the Malaysian health
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care system will be transformed into a more efficient and effective system in ensuring universal access to health care. The blueprint is currently being worked out to develop 1Care for 1Malaysia - a restructured health system that is responsive in meeting the health care needs of the population, provide choices of quality health care and ensuring universal coverage based on solidarity and equity. Malaysia has been cited by international bodies as being a good model in health care, especially in terms of primary health care for the rural population. So, some may ask why we need to change a model that has served us well for more than five decades? The reason is simple enough. We want to do better. Like other countries in the world, Malaysia has to grapple with challenges brought about by the epidemiologic and demographic transitions, overall health care cost escalation, increasing out-of-pocket spending, overstretched public facilities and increasing client expectations.
The goals for restructuring are to enhance universal coverage in line with 1Malaysia concept. We propose an integrated public and private health care delivery system; ensure that health care remains affordable & sustainable; improve equity in terms of access and financing, ensure efficiency, quality of care and optimal health outcomes; improve effective safety nets for catastrophic payments; enhance responsiveness of the health care system; increase client satisfaction; increase provision of personalised and community care and reduce the brain-drain especially to overseas markets. But as Malaysia continues its accelerated action towards universal access to primary health care and moves towards high-income status, safety nets to address the hard core poor, the vulnerable groups and catastrophic expenditure will still be given our foremost attention. The restructuring proposal includes establishing a sustainable healthcare financing system, with the government continuing to uphold its responsibility in maintaining a strong social safety net. 200
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Primary health care will remain the thrust of this transformed health service delivery system in order to manage rising health care costs and ensure better equity in health, through better utilization of resources. This will be implemented without compromising on the universal coverage and ensuring services that are efficient, responsive and of good quality.
Climate Change With global warming projected to increase two to ten times greater than the last decade, we are indeed heading towards potentially disruptive and irreversible changes to the ecosystem, which will not only impact on human health and well being, but may even ultimately compromise human survival on this planet earth. Throughout the world, the prevalence of some diseases and other threats to human health depend largely on local climate. Extreme temperatures can lead directly to loss of life, while climate-related disturbances in ecological systems, such as changes in the range of infective parasites and life cycle of vectors such as mosquito, can indirectly impact the incidence of serious infectious diseases. The Asia Pacific region in particular, has been subjected to challenging climatesensitive mosquito-borne diseases, particularly dengue. It is the fastest emerging 201
viral infection and the maximum burden is borne by the countries in this region. It is estimated that out of the 2.5 billion people at risk of the infection globally, 1.8 billion or 70 per cent reside in the Asia Pacific Region, mostly in the developing countries. Regional and international cooperation and collaboration is vital to mitigate the effects and reduce the impact of climate change. There is a need for stronger partnerships and international action in Asia and the Pacific Region, emphasising that it is essential for the donor and international community, to maintain their commitments for aid and assistance during the crisis period.
Towards this end, the Government of Malaysia has signed an agreement with the World Food Programme to establish the first United Nations Humanitarian Response Depot (UNHRD) in Asia, based in Subang, Selangor. The UNHRD in Subang, the fifth such hub in WFP’s global emergency response arsenal, is designed to deliver humanitarian relief items within 48 hours of a crisis occurring. We are aware that a Regional Working Group on Protecting Health from Climate Change was established in 2008 to address climate change and health issues relevant to WHO programmes in the region. This initiative should continue as the main platform to enhance regional cooperation and harmonization in addressing the challenges of climate change of our future generations. Since we are all living in a global village, regional and international cooperation in public health administration remain the most essential weapon against the spread of infectious diseases across countries.
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- THE 61ST SESSION OF WORLD HEALTH ORGANIZATION REGIONAL COMMITTEE FOR THE WESTERN PACIFIC Putrajaya International Convention Centre (PICC) October 11, 2010
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The Strive for Sustainable Development
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Environmental Sustainability
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he mission of global environmental sustainability is as much a moral obligation, as it is a noble calling. It is the moral obligation of every one of us to bequeath to posterity, an environment that is as pristine as we inherited from our forefathers. Environmental sustainability is a high calling as the world is in crisis, particularly pertaining to climate change. We are at a crossroads in human civilization. Where previously mankind’s predominant concern was mere survival, today, material pursuits cause us to consume resources at a rate far greater than they can ever be replenished. Now, our profligate use of these resources has brought the world very close to the brink of a global environmental catastrophe. Signs are beginning to appear that earth cannot take much more of modern man’s wanton disregard of his environment. If we do nothing, it is only a matter of time before we shall all suffer the most disastrous of consequences. To me, the choice is obvious. It cannot be more of the same or ‘business as usual’ as far as the environment is concerned. We must make substantial changes especially in the way we consume energy in order to reverse the environment’s downward spiral.
While fossil fuel will remain the dominant source of energy in the coming decades, we must begin to critically and realistically examine how energy from renewable sources such as wind, water, solar, biofuels and geothermal heat can progressively and satisfactorily meet global energy demand. The fact of the matter is that although renewable energy demand will double by 2030, its share will only be a paltry 6 per cent of total energy demand in that same year. A global revolution is needed in the way we source and use energy. The world needs a new economic driver – one that is built on green technology.
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Some people feel that the difficult financial circumstances that the world now faces mean that the climate-change agenda would be relegated to the backburner, against other “more pressing” issues confronting the world. But, I believe otherwise. I believe that climate change, brought on by the uncontrolled emission of carbon, must continue to be a priority agenda of any government as it is in the case of Malaysia. This is because when it comes to the global environment, no nation is an island. Damage to one part of the environment affects the entire world. The melting of the polar ice-caps, for example, causes sea levels to rise everywhere, constituting a threat to all littoral and coastal states. So, when it comes to environmental sustainability, there are simply no two ways about it -we are all in it together.
Reducing Carbon Emission As such, Malaysia joins the world in our concern about the environmental threat arising from carbon emission. Accordingly, the adoption of low carbon emission and environment-friendly technologies is the new economic driver in Malaysia’s sustainable development strategy. Indeed, green technology is one of the key tenets of Malaysia’s recently-unveiled New Economic Model (NEM) which underpins the nation’s sustainable development efforts. To underscore further our commitment to environmental conservation, at the United Nations Framework on Climate Change Conference at Copenhagen in December last year, Malaysia made a voluntary commitment to the world to
Green technology is one of the key tenets of Malaysia’s recentlyunveiled New Economic Model (NEM).
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reduce our carbon emission intensity per GDP by as much as 40 per cent from the levels prevailing in 2005. To realize Malaysia’s commitment of low carbon growth, the country looks forward to the help of developed nations in bridging the technology gap. Such help can be through the transfer of cutting-edge green technologies which will expedite the rate of adoption and proliferation. In this regard, many countries namely Germany, France, United Kingdom, Italy, South Korea, Japan and China have committed to help Malaysia develop and apply green technology.
Green Technology Today, the global marketplace offers immense opportunities to businesses that employ green technology to produce and supply eco-products and services. Therefore, employing green technology, as Malaysia’s new growth engine, is no longer an option, but a must. So, while the last fifty years we have had ‘brown growth’, the next fifty years will be an era of ‘green growth’. Such growth will help sustain the quality of life of our citizens, in line with our third strategic development thrust. And, aligned to the first strategic thrust of moving up the economic value chain, green technology and renewable energy will allow Malaysia to enter into higher value-added industries.
However, greening the economy is more than just a development strategy. It is about transforming the way society thinks and treats the environment. We need to foster green values that promote environmental sustainability. The old mind-set that grips our society is that since the earth is so large, we shall never run out of resources. Now, we have to inculcate among us the new mindset that resources are in fact finite - which indeed they are. People must know that we cannot continue to consume natural resources without making efforts to conserve them. We cannot keep on taking without giving back, in terms of conservation. These ethics of conservation are as much a matter of stewardship as they are a matter of trusteeship. As stewards of resources, we are entrusted to use and 207
conserve the earth’s resources responsibly. As trustees, we are accountable to our future generations for leaving to them a world that is as habitable, if not more so, as the one that was left to us.
Protecting the Environment Malaysia is one of the first countries to introduce a law to protect the environment, coming in the form of the 1974 Environmental Quality Act. Sustainable development has been our clarion call since the early seventies, long before it became a world-wide mantra. Since 1979, Malaysia has had the National Energy Policy to ensure our energy supply is adequate, secure and cost-effective as well as to ensure an efficient energy use while not forgetting the environment. The Malaysian Industrial Energy Efficiency Improvement Project (MIEPP) and the Biomass-based Power Generation in the Palm Oil Industry Project were initial efforts by the government to walk its talk in managing our resources efficiently and diversifying our energy resources. These projects have yielded positive results, making the government more receptive towards the efficient use of energy resources and more serious about the quest for large-scale deployment of alternative fuels. Making this transition from fossil fuels to renewable energy will create a firm foundation for a greener economy. To facilitate this, we have formulated the Fifth Fuel Policy that aims to diversify energy resources for power generation.
To ensure the systematic development of green technology in this country, the government introduced a National Green Technology Policy. The Green Technology Council, under the chairmanship of the Prime Minister, ensures that this national green technology policy is implemented effectively. GreenTech Malaysia, a government-owned company, will function as a focal point for setting standards and formulating a roadmap for promoting green technology. It also acts as the secretariat for the Clean Development Mechanism that addresses issues of climate change.
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To ensure all our efforts are well-coordinated and streamlined, we have established a dedicated ministry - the Ministry of Energy, Green Technology and Water. This ministry will also formulate policies and promote research and development in green technology. The New Economic Model and the 10th Malaysia Plan will take the pursuit of alternative energy further. Additionally, the Government has approved the Renewable Energy Policy and Action Plan to spur the growth of renewable energy industry in the country. A dedicated statutory body called the Sustainable Energy Development Authority, or SEDA Malaysia, and the Renewable Energy Act will facilitate and regulate the growth of renewable energy in the country. Through the Renewable Energy Policy and Action Plan, we are targeting that by 2015, about 6 per cent or 985MW of the national energy mix will be from renewable sources. By 2020, we expect renewable energy to comprise 11 per cent, or 2 gigawatt of the overall electricity generation in the country.
Working Together in Forging a Green Economy The Government, the private sector and the public must work together in forging a green economy. Of course, we are well aware that in order to encourage wider adoption of green technology across different industrial and economic spectra, incentives must be given. Accordingly, we offer tax breaks and financing for businesses that manufacture and supply green technology and eco-products and services.
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The government has also initiated a RM1.5 billion investment fund for green technology financing, under a scheme which will provide soft loans to companies that supply or use green technology. For suppliers, the maximum loan will be RM50 million while consumer companies will be eligible up to RM10 million. The Government, while bearing 2 per cent of the interest rate, will guarantee 60 per cent of the loan amount. The rest will be guaranteed by the banks. We are encouraged by the response of foreign and local banks to this green financing initiative. By 2012, it is hoped that the scheme will have benefited over 140 companies. In the pursuit of the envisioned green economy, investments in green technology are critical. Research shows that green technology investments will be able to reduce global greenhouse gas emissions by as much as 30 per cent come 2020 without harming business profitability and economic growth. Increased investments in green technology will make available a wider scope of ecoproducts and services. That being the case, over the next decade, we intend to focus on increasing the flow of foreign and domestic direct investments in green technology.
The government is determined to make Malaysia the regional centre for green energy, specifically solar energy. Our investment-friendly policies, coupled with the availability of the necessary skilled human resources, have led to an increase in the number of large investment projects in this field. To date, Malaysia has attracted over RM12 billion in foreign direct investments to the solar photo-voltaic industry. Indeed, it can attract even greater investments in green technology if we offer the right incentives. One key area of opportunity is in green-tech research and development. Academic institutions, in particular, must be roped in and their capacity to contribute in this area strengthened, if we want to make headway in innovation and commercialization towards environmental
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sustainability. Partnerships need to be intensified between learning institutions and businesses to ensure the commercialisation of research findings across a wider segment of the economy. While we are definitely moving forward, the finishing line is nowhere near. The journey is still far and the challenges are enormous. When it comes to nature, everything is interconnected. We cannot approach the problem of environmental sustainability in isolation. We need to take a holistic approach that encompasses the development of green technology and green energy, the enhancement of resource productivity and conservation, and the inculcation of green values. In climate change, perhaps more than any other issue, it is clear that we must work co-operatively across the globe to find solutions. This is because the policies of one country to reduce emissions will have little impact if the rest of the world does not act in tandem. International consensus over the nature of action to counter climate change is a daunting challenge. But, with commitment, cooperation and perseverance, we can attain the future we seek – a future where our global environment is protected and nations are energy-secure.
- THE INTERNATIONAL GREENTECH & ECO PRODUCTS EXHIBITION & CONFERENCE MALAYSIA (IGEM 2010) Kuala Lumpur Convention Centre (KLCC) October 13, 2010
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The 2011 Budget Driving The Nations’ Development Path
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T
he 2011 Budget is formulated with firm determination to bring significant changes to the nation’s development and the well-being of the people. It is based on the concept of 1Malaysia which is the fundamental philosophy in driving the nation’s development path.
The Government Transformation Programme (GTP) and Economic Transformation Programme (ETP) will be a guiding force in this journey. The six National Key Result Areas (NKRAs) and the New Economic Model (NEM) with its eight Strategic Reform Initiatives will be the framework for the nation’s economic transformation. The implementation of the development programmes will be realised through the 10th and 11th Malaysia Plans (10MP and 11MP). Since the era of “the Government knows best” has passed, the government, in formulating this Budget, has consulted and took into considerations views from various parties comprising the public and private sectors, focus groups, media, 1Malaysia blog as well as lab sessions.
Economic Performance and Challenges Malaysia has recovered from the global economic recession resulting from proactive measures undertaken by the government and the successful implementation of two Economic Stimulus Packages amounting to RM67 billion. The effectiveness of these measures is reflected by the 9.5 per cent expansion in gross domestic product (GDP) in the first half of 2010 compared with 5 per cent during the same period last year. The global economy is also expected to recover 4.8 per cent compared with -0.6 per cent in 2009. Likewise, international trade is expected to expand 11.4 per cent compared with 11 per cent in 2009. On the domestic front, key indicators also reflected strong economic growth. The FTSE Bursa Malaysia KLCI surged to 1,496 points on 14 October 2010-the highest since February 2008. Trade performance was encouraging in the first eight months of 2010, with exports increasing 22 per cent and imports 28 per cent, particularly imports of capital goods which rose 18 per cent. 213
The ringgit is among the best performing currencies in the region, strengthening 11 per cent against the US dollar since 31 December 2009 to RM3.0833 on 14 October 2010. Malaysia’s international reserves remained strong at RM310.8 billion or USD100.7 billion on 30 September 2010, sufficient to finance 8.5 months of retained imports and 4.3 times the nation’s short term external debt. In line with these positive developments, the government revised growth for 2010 to 7 per cent compared with 6 per cent previously. It is significantly higher than -1.7 per cent in 2009. The sterling performance is contributed by the expansion of the manufacturing sector at 10.8 per cent, services 6.5 per cent and construction 4.9 per cent. Private investment expenditure is expected to increase 15.2 per cent, private consumption 6.7 per cent and exports 11.6 per cent. In 2011, the global economy and trade are expected to grow moderately by 4.2 per cent and 7 per cent, respectively. In line with this, the Malaysian economy is expected to expand between 5 per cent and 6 per cent. However, the government will strive to achieve growth of 6 per cent. Growth will be supported by private investment, expanding 10.2 per cent, private consumption 6.3 per cent and exports 6.7 per cent. The manufacturing sector will continue to spearhead growth, expanding 6.7 per cent and the services sector 5.3 per cent. Income per capita will increase 6.1 per cent to RM28,000 while income in terms of purchasing power parity to USD16,000. These estimates are based on moderate inflation of 2 per cent to 3 per cent and low unemployment rate of 3.5 per cent. Â
2011 Budget Strategies To attain developed nation status, both the government and the people cannot remain complacent. We must change our mindset. Success demands drastic changes, not incremental. It requires a quantum leap. The choice before us is clear. Change is not an option but an imperative. We must change or risk being left behind. We have succeeded in transforming Malaysia from an agricultural economy to become among the largest exporters in the world. Therefore, the challenge now 214
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is to make a quantum leap to the next stage of development. This is possible with careful planning and clear strategies. Indeed, we shall succeed. The trend of external trade is increasingly challenging, while there is heightened competition to attract foreign investment. The global economic environment is rapidly changing. To rise to these challenges, the private sector must be dynamic, creative and innovative to drive economic growth. They must be bold to undertake risks and seize opportunities. The government will, in turn, provide a conducive ecosystem to facilitate the private sector activities.
The 2011 Budget will emphasise efforts to transform the nation into a developed and high-income economy with inclusive and sustainable development, spearheaded by the private sector as well as focus on the well-being of the people. With the theme “Transformation Towards a Developed and High-Income Nation”, the 2011 Budget will centre on the following four key strategies: First : Reinvigorating Private Investment; Second
:
Intensifying Human Capital Development;
Third
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Enhancing Quality of Life of the people; and
Fourth
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Strengthening Public Service Delivery.
First Strategy: Reinvigorating Private Investment The government has been assuming a significant role in driving economic growth since the financial crisis in 1997/98. Now, the time has come for the private sector to resume its role as the engine of growth. In this context, the government announced and strategised that the 10MP commencing in 2011 will emphasise the role of private sector. In 2011, private investment is estimated to expand 12.5 per cent to RM86 billion. The implementation of the 12 National 215
Key Economic Areas (NKEAs) is expected to generate investment exceeding RM1.3 trillion or USD444 billion and create 3.3 million job opportunities. The private sector will finance 92 per cent of the NKEAs and the remaining by the government.
Public-Private Partnership Initiatives In order to enhance private sector involvement in economic activities, the government will further intensify the Public-Private Partnership (PPP) initiative. Allocation will be provided as a tipping point for infrastructure support to ensure viability of private sector-led projects. Several PPP projects identified under the 10MP will be implemented in 2011 through private investment of RM12.5 billion. The government will allocate RM1 billion from the Facilitation Fund. Among the PPP projects are: First : Construction of highways such as the Ampang-Cheras-Pandan Elevated Highway, Guthrie-Damansara Expressway, Damansara Petaling Jaya Highway, Pantai Barat-Banting-Taiping Highway, Sungai Dua-Juru Highway and Paroi-Senawang-KLIA Highway; Second : Construction of a 300-megawatt Combined-Cycle Gas Power Plant in Kimanis, Sabah to increase electricity generation capacity to meet rising demand; and Third : Development of projects such as the International Islamic University Malaysia Teaching Hospital in Kuantan, Pahang, the Women and Children’s Hospital as well as the Integrated Health Research Institute Complex in Kuala Lumpur. Another PPP project identified is the Academic Medical Centre. This project is a joint venture between Academic Medical Centre Sdn. Bhd. and Johns Hopkins Medicine International as well as Royal College of Surgeons Ireland. This project involves private investment of RM2 billion.
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High-Impact Strategic Development Private investment has increased through various strategic high-impact projects. Recently, the 1Malaysia Development Berhad (1MDB), in collaboration with Mubadala Development Company, an investment arm of the Government of Abu Dhabi, agreed to develop the Kuala Lumpur International Financial District (KLIFD) valued at RM26 billion. Major international banks and professional financial services firms, including syariah experts will be located in the KLIFD. This strategic development will further strengthen Malaysia’s position as the premier international Islamic financial hub and the government is prepared to consider special incentive packages to attract investors to the KLIFD. The Mass Rapid Transit (MRT) in Greater KL (Klang Valley) will be implemented beginning 2011. This project, with an estimated private investment of RM40 billion, is expected to be fully completed by 2020. Upon completion, the utilisation rate of public transport is expected to increase to at least 40 per cent. This project will provide an efficient and comfortable transport system, reduce travelling time as well as strengthen connectivity in the Klang Valley and be integrated with other modes of transportation, including buses and taxis. Another major project is the development of the Malaysian Rubber Board land in Sungai Buloh covering an area of 2,680 acres. The Employees Provident Fund (EPF) will undertake mixed development comprising affordable houses as well as commercial, industrial and infrastructure facilities. The entire development is estimated at RM10 billion and is expected to be completed by 2025. We take pride in our national icon, the Petronas Twin Towers. It signifies the spirit of Malaysia Boleh. Another landmark to be developed by Permodalan Nasional Berhad is Warisan Merdeka, expected to be completed by 2020. This is an integrated development project comprising a 100-storey tower, the tallest in Malaysia. The project will retain Stadium Merdeka and Stadium Negara as national heritage. The total project cost is RM5 billion, with the tower expected to be completed by 2015.
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Revitalising Capital Market To support the financial liberalisation policy, the government will implement bold measures to revitalise the domestic capital market, particularly diversifying investment products, liberalising equity holding requirements and investment limits, providing attractive incentives as well as enhancing cooperation with foreign bourses. In line with this, the following measures will be implemented: First : Government-Linked Investment Companies (GLICs) will divest their shareholdings in major companies listed on Bursa Malaysia to increase liquidity and trading velocity in the market; Second : GLICs will be allowed to increase investment in overseas markets to explore opportunities for better returns. For example, the Employees Provident Fund’s (EPF) investment overseas is currently at 7 per cent and will be raised up to 20 per cent of the total assets managed; Third : Listing of Petronas Chemicals Sdn. Bhd. and Malaysia Marine & Heavy Engineering Sdn. Bhd., subsidiaries of Petronas and MISC, respectively, to offer higher public shareholding this year; Fourth : Bursa Malaysia will launch sukuk and conventional bonds to meet retail investors’ demand for fixed income instruments in order to boost the bond market; 218
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Fifth : Sixth : Seventh :
The Securities Commission (SC) will offer three new stock broking licences to eligible local, foreign or joint venture companies to increase retail market participation; The SC will increase the number of Proprietary Day Traders operating in the market; and The SC will facilitate process and procedures for the listing of companies and products, particularly Exchange Traded Funds.
Islamic Capital Market Efforts will be taken to strengthen Malaysia’s position as a premier Islamic capital market. Bursa Malaysia will develop an international board to enable foreign securities to be listed including syariah-compliant products. To further promote innovation in Islamic securities products, the government proposes that expenses for the issuance of Islamic securities which adopt the principles of Murabahah and Bai’ Bithaman Ajil based on tawarru’ be given tax deduction. This will strengthen Malaysia’s position as the leading sukuk market and promote transactions in Bursa Suq al-Sila, the world’s first syariahcompliant commodity trading platform. The Government proposes that takaful contributions for export credit be given double tax deduction.
Intensifying Venture Capital Industry The venture capital industry plays an important role in contributing towards economic growth, particularly in high technology sectors such as information and communication technology (ICT), biotechnology and the creative industry. For this, the government will provide Entrepreneurship Enhancement Training Programme to train 500 new technopreneurs and attract more angel investors. Both programmes will be managed by Cradle Fund Sdn. Bhd, an MOF Inc. company. Malaysian Technology Development Corporation (MTDC) will be provided a start-up fund amounting to RM100 million to provide soft loans
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which allow loan repayments only after the companies generate income. MTDC will also host an International Venture Capital Symposium in 2011 to enable networking and partnering of foreign and local venture capitalists to boost high technology industries.
Bumiputera Property Trust Scheme To ensure meaningful and sustainable participation of Bumiputera, the Bumiputera Property Trust Foundation (BPTF) will provide opportunities for Bumiputera ownership of prime commercial properties in major towns. The BPTF will establish a fund to enable ownership of prime commercial properties in the Klang Valley, through a group ownership scheme. For this, the BPTF will launch a syariah-compliant Bumiputera Property Trust Scheme this year with a size of RM1 billion. Â
Private Pension Fund To revitalise capital market activities, the government will launch a Private Pension Fund in 2011. This Fund will benefit private sector employees and the self-employed. The existing income tax relief of up to RM6,000 for employee’s contributions to the EPF will be extended to the contributions made to the Private Pension Fund, including the self-employed. Employers will also be given tax deduction on contributions made on behalf of their employees. This will provide an option for the people to invest for their old age.
Enhancing Electrical and Electronics Industry The electrical and electronics (E&E) industry remained the largest contributor to exports with 41 per cent or RM228 billion in 2009. However, the E&E industry is still fosussed on assembling activities. Malaysia should leverage on her strength to develop local E&E companies to compete at the international level. A sum of RM857 million is allocated for local companies to invest in high value-added activities, particularly in Penang and the Kulim High-Tech Park in Kedah. Â
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The Oil & Gas industry contributed 10.2 per cent to GDP with export revenue amounting to RM56 billion.
Propelling Oil, Gas and Energy Industry The oil, gas and energy industry is one of the main contributors to the economy. In 2009, the industry contributed 10.2 per cent to GDP with export revenue amounting to RM56 billion. This industry has the potential to expand, particularly in downstream activities. To achieve this objective, the government will allocate RM146 million to support the sector. Among the projects to be implemented are the establishment of the Oil Field Services and Equipment Centre in Johor with private investment of RM6 billion over a period of 10 years. To meet the increase in gas demand by industries, Petronas will implement a regasification project with an investment of RM3 billion in Melaka, which will be operational in 2012.
Advancing Green Technology In line with its commitment to develop green technology to ensure sustainable development, the government will continue to provide several incentives, which include: Â First : Pioneer Status and Investment Tax Allowance for the generation of energy from renewable sources and energy efficiency activities be extended until 31 December 2015; Â
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Second : Import duty and sales tax exemption on equipment for the generation of energy from renewable sources and energy efficiency be extended until 31 December 2012; Third : Tax exemption on the income derived from trading of Certified Emission Reductions certificate be extended until year of assessment 2012; and Fourth : Full import duty and 50 per cent excise duty exemption was granted to franchise holders of hybrid cars as well as hybrid an electric motorcycles up to 31 December 2010. To further encourage ownership of hybrid cars, import duty and excise duty exemption will be extended until 31 December 2011 with excise duty to be given full exemption. Malaysia is committed to reducing carbon emission intensity to preserve the environment. For this purpose, the government will implement among others, the Programme on Blending of Biofuels with Petroleum Diesel (B5 Programme) on a mandatory basis beginning in Putrajaya, Kuala Lumpur, Selangor, Negeri Sembilan and Melaka in June 2011. The government will also implement the Feed in Tariff (FiT) mechanism under the Renewable Energy (RE) Act to allow electricity generated from RE by individuals and independent providers to be sold to electricity utility companies.
Invigorating Agriculture Sector The government allocates RM3.8 billion in 2011 to increase productivity and generate higher returns in the agriculture sector. For this, the following measures will be taken: First : Develop large-scale integrated Aquaculture Zones in Pitas, Sungai Telaga and Sungai Padas in Sabah as well as Batang Ai and Tanjung Manis in Sarawak that meet standards as well as produce high quality products, with an allocation of RM252 million; 222
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Second : Third : Fourth : Fifth : Sixth : Seventh :
Upgrade the drainage and irrigation system as well as use high quality paddy seeds to enhance productivity in Muda Agricultural Development Area (MADA), Kedah and other areas. For this, RM235 million is allocated; Encourage farmers participation in high value agriculture activities, including swiftlet nests, aquaculture, seaweeds, ornamental fish as well as herbs and spices with an allocation of RM135 million for basic infrastructure; Foster partnership between small-scale fruit and vegetable farmers with anchor companies through an allocation of RM80 million; Improve the Agriculture College in Kubang Pasu, Kedah by constructing a diagnostic lab involving an allocation of RM70 million; Build an International Centre for Crops of the Future in Semenyih, Selangor with an allocation of RM15.7 million; and Extend income tax deduction incentive for investors and income tax exemption for companies undertaking food production activities for another five years until 2015.
Energising Tourism Industry The tourism industry, which generated revenue of RM53 billion in 2009, has the potential to provide more business and employment opportunities as well as further increase the nation’s income. In the 2009 United Nations World Tourism Organisation Report, Malaysia was ranked ninth in the world in terms of tourist arrivals. Efforts will be intensified to attract more foreign tourists by offering innovative tourism packages and products. For this, the government will implement the following initiatives: First : Provide infrastructure facilities with an allocation of RM85 million to facilitate construction of hotels and resorts in remote areas with the potential to attract tourists; 223
Second : Â Third :
Construct several shaded walkways in the KLCC-Bukit Bintang vicinity with an allocation of RM50 million; Restructure the Department of Civil Aviation to Civil Aviation Authority; and
Fourth : Nexus Karambunai, a renowned resort in Sabah is committed to develop an integrated eco-nature resort, the first in the world, by leveraging on the natural beauty and uniqueness of Karambunai. The RM3 billion project will commence next year. To support the tourism industry, the government will allocate RM100 million.  To promote Malaysia as a shopping haven in Asia by providing branded goods at competitive prices, the government proposes that import duty on approximately 300 goods preferred by tourists and locals at 5 per cent to 30 per cent be abolished. Such goods are apparel, handbags, shoes, shampoo, suits, children’s apparel, wallets, hair colourants, golf balls, imitation jewellery, talcum powder, curtains, table cloth, blankets, bed sheets, shirt, undergarments, lingerie, nightwear, perfumes and mosquito netting.
Revitalising Palm Oil and Related Industries Currently, the export revenue from crude palm oil totalled RM37 billion, while
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that of palm oil related products reached RM13 billion in 2009. The industry has the potential to be developed further in downstream activities to generate higher income for estate owners and smallholders. In efforts to propel the palm oil and related products industry, several measures will be implemented: First : Â Second : Â
Enhance productivity by encouraging replanting activity to replace aged trees with high quality new clones, through a fund of RM297 million; and A sum of RM127 million is allocated to support domestic oleo derivatives companies as well as a sum of RM23.3 million to expand downstream palm oil industries including production of vitamins.
Enhancing Information and Communication Technology The Multimedia Development Corridor enters its third phase in 2011. The focus is on creation of an innovative digital economy to achieve the target of a high-income nation. To enhance the potential of the ICT industry, MY Creative Content Programme will be implemented to encourage the development of local content creation, hosting local content and unlocking new channels for content. This programme involves an allocation of RM119 million.
The government will extend the investment allowance period for the last mile broadband service providers. In addition, import duty and sales tax exemption on broadband equipment are also extended for two years until 2012. Â Currently, ordinary mobile phones are subject to 10 per cent sales tax but mobile phones with various applications such as Internet and Personal Digital Assistant (PDA) are exempted from sales tax. For the purpose of streamlining tax treatment, the government proposes that sales tax be exempted on all types of mobile phones.
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Business Services Industry In line with the increasing demand for repair and maintenance of aircraft and helicopters, the government will promote the development of the business services industry. The Sultan Abdul Aziz Shah Airport, Subang will be developed as a centre for maintenance and overhaul of aircrafts as well as provide specific training to develop experts in this field. A sum of RM91 million will be allocated for capacity building in the maintenance, repair and overhaul (MRO) services industry, aerospace and aeronautical engineering training programmes as well as promotion of business outsourcing services.
Corridor and Regional Development Corridor and regional development will be accelerated, focusing on several clusters with specialisation and geographical advantages. Efforts to develop the corridors will focus on joint venture projects between local and foreign investors as well as high-impact industries with competitive edge. A total of RM850 million is allocated for infrastructure support. For Iskandar Malaysia, a sum of RM339 million is allocated, including for the construction of highways, development of housing areas as well as providing and improving public transportation services. The amount of investment committed by the private sector as at June 2010 was RM62 billion, surpassing the targeted RM47 billion. Total actual investment up to June 2010 was RM25 billion. The Newcastle University Medicine Malaysia and Chelsea Factory Outlet are expected to be completed in 2011 while Legoland and Marlborough College in 2012. The Northern Corridor Economic Region (NCER) is allocated RM133 million, which includes the development of an Agricultural Products Processing Centre, Tourism Infrastructure and a Biotechnology Incubator Centre. The East Coast Economic Region (ECER) is allocated RM178 million for projects, including Industrial Parks, Water Treatment Plants, development of tourist areas as well as redevelopment of former Pahang Tenggara Development Authority and Jengka Region Development Authority areas.
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RM 339 million is allocated to Iskandar Malaysia, including for the construction of highways, development of housing areas as well as providing and improving public transportation services. For Sarawak Corridor of Renewable Energy (SCORE), a total of RM93 million is allocated for facilities, including telecommunication, water supplies, airport and roads as well as halal food industrial parks. For the Sabah Development Corridor, a sum of RM110 million is allocated, among others, for palm oil industry cluster projects, agro-industrial precinct and integrated farming centre.
Promoting R & D & C Activity To accelerate the economy towards a high-income nation, research, development and commercialisation (R & D & C) activity will be the platform for enhancing value-added activities across economic sectors. For this, a sum of RM411 million is allocated in 2011. A special unit known Special Innovation Unit (UNIK) is established under the Prime Minister’s Department as a one-stop centre to formulate policies and strategies for a conducive ecosystem to drive innovation. An Act will be formulated to enable UNIK to commercialise R&D findings by universities and research institutions. Several programmes and activities will be designed to enhance innovation, creation and commercialisation of new products. For 2011, a sum of RM71 million is allocated for UNIK.
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Reforming Insolvency Law During the recent economic crisis, there were entrepreneurs and individuals who faced financial problems with a number of them declared bankrupt. They were blacklisted and unable to conduct businesses or apply for loans. To assist these individuals, the new Insolvency Act will consolidate the Bankruptcy Act 1967 and Part 10 of the Companies Act 1965, including introduction of provision relating to relief mechanism for companies and individuals with financial problems. The review will also involve amending the current minimum bankruptcy limit of RM30,000.
Advancing Creative Industry The creative industry has great potential for further development to generate national income. This industry encompasses animation, advertising, films, fashion design, crafts and cultural heritage. To fully tap the potential of this industry, the government will develop a creative industry policy in an integrated manner. A sum of RM200 million is allocated to purchase creative products such as high quality locally-produced films, dramas and documentaries. A strong financial position is crucial to ensure the well-being of the nation. To achieve this objective, the government proposes that the rate of service tax be increased from 5 per cent to 6 per cent. This measure will not burden the people as the increase in the tax rate is minimal. Moreover, the services tax is not imposed on all services. In fact, the sales value thresholds for such services are still retained. In tandem with this aspiration, the government also proposes that service tax be imposed on paid television broadcasting services.
Strengthening the Nation’s Financial Position The government is committed to strengthen the nation’s financial position by increasing revenue collection and ensuring prudent spending. This includes emphasis on value-for-money and value management. Measures undertaken include open tender, restricted tender and competition for best design of government hospitals. The government will strengthen the revenue collection system by increasing enforcement and audit as well as expanding coverage on all parties that should be paying taxes. 228
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Second Strategy: Intensifying Human Capital Development The most important asset of a nation is its human capital. It is proven that a nation without natural resources but which effectively manages its human capital will achieve greater success than a nation that relies on natural resources. Malaysia cannot afford to be too dependent on its depleting natural resources. Although we have successfully managed our natural resources, we have a responsibility to plan human capital development in a sustainable manner, failing which we will not be able to optimise the nation’s potential.
A quality, skilled, knowledgeable, creative and innovative human capital is a prerequisite towards achieving a developed and high-income nation. As such, education and training will be restructured and strengthened. For this, a sum of RM29.3 billion is allocated for the Ministry of Education, RM10.2 billion for the Ministry of Higher Education and RM627 million for the Ministry of Human Resource.
Intensifying Efforts to Attract Talent To increase the number of talented and quality workforce in the domestic market, the efforts will be undertaken to attract, motivate and retain talented human capital from within the country and abroad. For this, the government will establish a Talent Corporation (Talent Corp) under the Prime Minister’s Office in early 2011. Talent Corp will formulate a National Talent Blueprint and develop an expert workforce database as well as collaborate closely with talent networks globally.
Expanding Access to Quality Education The national education system will be revamped to focus on thinking skills, character building, creativity, innovation and competitiveness. For the Ministry
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of Education, a sum of RM6.4 billion is allocated for development expenditure to build and upgrade schools, hostels, facilities and equipment, as well as uphold the status of the teaching profession. A total of RM213 million is allocated to reward high-performance schools as well as for the remuneration of Principals, Head Teachers and Excellent Teachers.
Strengthening Early Education To nurture children with good values and knowledge, human capital development must begin from childhood. To achieve this, pre-school enrolment rate will be increased to a targeted 72 per cent by end-2011 through an additional 1,700 classes, strengthen the curriculum as well as appoint 800 pre-school graduate teachers. A sum of RM111 million will be allocated for PERMATA programme, including the construction of the second phase of Sekolah PERMATA Pintar School Complex, 32 PERMATA Children Centres (PAPN) and financing operations of 52 completed PAPNs as well as continuing PERMATA Pintar, Seni, Insan and Remaja Programmes.
Strengthening Primary and Secondary Education Every child, regardless of race, is a national asset and a future leader. Education must be apolitical. Towards this, the government allocates RM250 million for development expenditure to religious schools, Chinese-type Schools, Tamil National Schools, Missionary Schools and Government-Assisted Schools Nationwide. Recognising the importance of Islamic education, the government will provide assistance per capita for primary and secondary people religious schools with an allocation of RM95 million. To provide competent and quality teachers and instructors to better guide and educate students, RM576 million is allocated in the form of scholarships for those wishing to further their studies. 230
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A sum of RM213 million is allocated to enhance proficiency in Bahasa Malaysia, strengthen the English language as well as streamline the Standard Curriculum for Primary Schools (KSSR). In this regard, 375 native-speaking teachers including from the United Kingdom and Australia will be recruited to further enhance the teaching of English. Â
Strengthening Higher Education Strengthening institutions of higher learning to be world-class is a key agenda in view of its significant contribution to the socioeconomic development of the nation. The following measures will be implemented: Â First : Increase the number of PhD qualified academic staff to 75 per cent in research universities and to 60 per cent in other public institutions of higher learning with an allocation of RM20 million; and Second : Â
Improve opportunities for promotion of lecturers in public institutions of higher learning. Lecturers can be considered for promotion to the highest grade of Staff III, II and I as well as conferred Premier Professors without holding administrative positions.
Intensifying Training and Skills Programmes The Government allocates RM60 million to further intensify the Industrial Skill Enhancement Programme in State Skills Development Training Centres. This programme will enhance skills of engineering graduates and technical employees in line with market requirements. A sum of RM220 million is also allocated to ensure graduates from other fields are able to enhance their competence and employability. These include the Professional Certification Programme, Sports Development, Entrepreneurship Development and Graduate Employability Management Scheme. The Government will also allocate a sum of RM50 million to Multimedia Development Corporation to train graduates in ICT to enhance their employability and to meet the demand of the ICT industry. 231
A sum of RM474 million is provided to enhance productivity and skills of non-graduates, including school leavers, youths and workers as there is high demand for skilled workforce in technical fields.
1Malaysia Training Programme The nation requires human capital that continually enhances knowledge through up skilling and reskilling. In this regard, the government will introduce the 1Malaysia Training Programme which will commence in January 2011 with an allocation of RM500 million. Â The training programme comprises three components. First, a sum of RM200 million is allocated to conduct part-time training in the evenings and weekends in selected training centres nationwide. It will be conducted by Community Colleges, National Youth Training Institutes, Giat Mara Centres and Industrial Training Institutes, utilising the existing facilities. Among courses to be offered in the evenings include language classes in Bahasa Melayu, Mandarin, Tamil, English and Arabic as well as music classes. During the weekends, skills and technical courses will be conducted, including baking, tailoring, spa therapy, mechanical, electrical and welding. Â Second, the 1Malaysia Training Programme also includes an allocation of RM200 million from the Human Resource Development Fund to be used by
Skills Development Training Centres will enhance skills of engineering graduates and technical employees in line with market requirements.
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companies to fund specific training programmes for their employees. Third, the Ministry of Human Resource will provide RM100 million to enable employees to enhance skills in various technical fields.
Enhancing Employees Productivity In tandem with the increase in productivity, employees should be remunerated with higher salaries and wages to enable them to cope with the rising costs of living. In line with this, the National Wage Consultation Council will be established as the main platform for wage determination. The Council will comprise representatives from employers, trade unions, non-unionised employees, government agencies, academia, NGOs and individuals. The Ministry of Human Resource will be the Secretariat for this Council. The National Wage Consultation Council will determine the rate and mechanism of minimum wage. The basic salary of postmen was raised to RM710 on 1 July 2010 from RM610 per month. With this adjustment, the monthly salary of postmen, including fixed allowances, increased to RM1,285 from RM1,035. The government will also enforce basic minimum wages for security guards,to between RM500 and RM700 a month depending on location, compared with RM300 and RM400 currently. With this increase, security guards will now enjoy a monthly salary including allowances exceeding RM1,000. The increase will be effective January 2011. The government will continue to reduce the number of foreign workers by increasing in stages the levy according to sector. It is also mandatory for employers to procure health insurance for their foreign workers.
Expanding Women Participation The government recognises the role of women in the nation’s development. To enhance their participation in entrepreneurship, the government allocates RM30 million, among others, to introduce the Single Mother Skill Incubator Programme and the Prime Entrepreneur and Women Activist Award in conjunction with Women’s Day commencing 2011.
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The Work Regulations (Part-Time Workers) 2010 was enforced by the government effective 1 October 2010 to encourage the participation of more women as parttime workers. In this regard, the private sector is urged to hire female parttime workers, particularly those who are married. The government will also implement a pioneer Small Office Home Office programme to train disabled women in various skills for a period of three months. To assist women obtain quality childcare, the government will provide and rebrand 40 1Malaysia TASKA, managed by the Department of Social Welfare. To improve the maternity leave facility for female civil servants, the government will allow flexibility to self-determine fully-paid maternity leave, not exceeding 90 days from the current 60 days. This facility is subject to a total of 300 days of maternity leave throughout the tenure of service. Â
The government also continues to provide opportunities for qualified female civil servants to hold key executive posts. As at end - 2009, 30.5 per cent of key posts in the public sector were held by women. In this regard, the private sector is urged to provide opportunities for more women to hold post at decision-making level, particularly as Board of Directors and Chief Executive Officers. Â
Developing National Sports The government will continue to encourage sports research and development, organise more international games, provide facilities and expertise to mould competitive athletes and develop high-performance sports. For sports development and management, a sum of RM365 million is allocated to the Ministry of Youth and Sports. To develop football, a Football Academy will be established in Pahang with an allocation of RM20 million to produce quality and highly skilled football players.
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Third Strategy: Enhancing Quality of Life of the People It is widely accepted that the main role of the government is to enhance the well-being of the people. Achieving a developed and high-income economy is meaningless if the quality of life of the people deteriorates. In efforts to become a developed and high-income nation, the socioeconomic development should be strengthened in an inclusive manner. It is important to attain a more balanced development and ensuring a better quality of life.
Assisting the Less Fortunate The government is concerned with the difficulties faced by the less fortunate and will continue to ensure their welfare. In 2011, a sum of RM1.2 billion will be allocated to the Ministry of Women, Family and Community Development to carry out various welfare and community programmes as follows: First : Welfare assistance for senior citizens with an allocation of RM166 million. This group is estimated to increase to more than 15 per cent of the total population by 2030; Second : Children’s assistance programme with an allocation of RM121 million to enable them to receive quality childcare and early education. This programme will benefit 97,000 children; Third : Assistance programme to benefit 80,000 disabled individuals with an allocation of RM218 million; Fourth : Excise duty exemption be increased from 50 per cent to 100 per cent on national vehicles purchased by the disabled; and Fifth : Construction of an intervention centre for the homeless by providing employment opportunities, housing facilities and counselling. Since 2008, the government provided a rebate on electricity bill payment for monthly consumption of below RM20. The rebate has benefited more than
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one million consumers nationwide. The government will continue this rebate programme with an allocation of RM150 million to ease the burden of the lowincome group. Currently, tax relief on expenses incurred for parents is limited to medication in clinics and hospitals including treatment in nursing homes as well as dental treatment. In an effort to lessen the cost burden in caring for parents, the government proposes that the existing tax relief of up to a maximum of RM5,000 be extended to cover other expenses such as day care centre, cost incurred to employ caretakers for parents and other daily needs such as diapers. Â
Increasing House Ownership In order to help the people, particularly the poor and low-income group, own affordable houses, a sum of RM568 million is allocated by the government to build 300 units under (Urban House Assistance Project), 79,000 units under the People’s House Programme and 8,000 units under the House Renting Assistance Project. As for the estate, the government will provide Low-Cost Housing Financing with an allocation of RM50 million, managed by Bank Simpanan Nasional, to help them own houses. The scheme is open to all Malaysian permanent estate workers to assist them to obtain housing loans with a maximum of RM60,000 for the purchase of lowcost houses at 4 per cent interest rate and a repayment period up to 40 years extending to the second generation.
The government is also aware of the difficulties faced by young adults who have just joined the workforce with income less than RM3,000, to own a house. To assist this group, the scheme known as My First House Scheme through Cagamas Berhad will be introduced to provide a guarantee on down payment of 10 per cent for houses below RM220,000. This scheme is for first-time house buyers with household income less than RM3,000 per month. In other words, the house buyers will obtain a 100 per cent loan without having to pay the 10 per cent down payment. Â 236
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In addition, first-time house buyers will also be given stamp duty exemption of 50 per cent on instruments of transfer on a house price not exceeding RM350,000. The Government also proposes that stamp duty exemption of 50 per cent be given on loan agreement instruments to finance such first-time purchase of houses.
Enhancing Quality of Life of Rural Population In efforts to transform the country towards a developed nation, the government will give priority to development projects and programmes aimed at improving the quality of life of the rural population. Towards this end, a sum of RM6.9 billion is allocated to implement basic infrastructure such as water and electricity supply as well as rural roads. Among the main projects to be implemented are to: First : Build and upgrade rural roads in Sabah and Sarawak with an allocation of RM2.1 billion and RM696 million in Peninsular Malaysia; Second : Provide water and electricity supply in rural areas of Sabah with an allocation of RM1.5 billion, Sarawak RM1.2 billion and Peninsular Malaysia RM556 million; 237
Third :
Implement the housing assistance programme to provide comfortable houses for the poor and hardcore poor in rural areas with an allocation of RM300 million. This programme will involve the construction and repair of 12,000 houses nationwide, particularly in Sabah and Sarawak; and
Fourth :
Provide National Registration Department Special Unit to facilitate people in the interiors of Sabah, Sarawak and Peninsular, to register for citizenship.
Easing Burden of the People To increase food production, the government will allocate RM974 million as price subsidy for paddy, fertilisers and paddy seeds as well as RM230 million for production incentives and increasing paddy yield. The government will also allocate RM170 million in incentives for fishermen as well as boat owners and workers to increase fish landing. The Government is concerned with the issue of higher prices of goods faced by the rural population, particularly in Sabah and Sarawak as well as several areas in Peninsular Malaysia due to high transportation costs.
To standardise the prices across areas, the government introduced the Distribution of Essential Goods Programme for goods such as rice, cooking oil, sugar, flour, gas, petrol and diesel in 2010 with an allocation of RM100 million. For 2011, a sum of RM200 million is allocated for this programme. To help consumers keep abreast with the movement of the prices of retail goods, the government will establish a “1Malaysia Smart Consumer” portal to enable them to check the price goods in almost 7,000 business premises nationwide. Through this portal, consumers have the option to purchase goods at competitive prices. Consumers can also utilise short messaging services (SMS) to obtain latest information on prices of goods.
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To strengthen the wholesale and retail sector, the government will also introduce the Retail Shop Transformation Programme (TUKAR), Automotive Workshop and Community Market projects to upgrade and modernise facilities with an allocation of RM73 million. The assumption that the government is ignoring small contractors is unfounded. The government will continue the implementation of Public Asset Mantenance Project or better known as PIA/PIAS with an allocation of RM500 million. Among the activities are repairing and upgrading of public amenities, drains, drainages, small bridges and rewiring as well as construction of agriculture and kampung roads. The implementation of these small projects will assist Class F contractors nationwide.
Appreciating Contributions of Community Leaders The government has always appreciated the role and contributions of community leaders. In line with this, the monthly allowance for the Chairmen of Village Development and Secutrity Committee (JKKK) and Chairmen of Federal Development Committee (JKKP), Tok Batin, Chairmen of JKKK Orang Asli, Chairman of New Village will be increased to RM800 from RM450 currently. To ensure this allowance is enjoyed by all community leaders, it will also extended to the Ketua Kampung Baru Rangkaian and Ketua Kampung Bagan. The government will also increase the meeting attendance allowance to all committee members from RM30 to RM50. Effective January 2011, the monthly allowance of Imam will be increased from RM450 to RM750, while the monthly allowance for KAFA teachers will be increased to RM800 compared with RM500 currently.
Development of Orang Asli and Pribumi As we are aware, Malaysia is made up of multi ethnicity and cultures. We have never discriminated the minority for they are also citizens of the country.
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Efforts to accelerate the nation to a developed and high-income economy will be implemented inclusively by enhancing the socioeconomic status of Orang Asli (Aborigines) and Pribumi (Natives) . A sum of RM100 million is allocated to implement various programmes, including resolving Orang Asli land rights and border settlement issues as well as formulating a new development model for Orang Asli. In line with this, the Department of Orang Asli Affairs will be restructured and strengthened as Department of Orang Asli Development.
Reducing Transport Cost The government is very concerned with the rising transport cost borne by the people. To alleviate the burden of highway users, the toll rates in four highways owned by PLUS Expressway Berhad will not be raised for the next five years, effective immediately.
Expanding Public Health Services The government is committed to ensure that access to quality healthcare is available to all Malaysians. To achieve this objective, a total of RM15.2 billion is allocated to construct new hospitals, increase the number of doctors and nurses as well as to obtain supplies of medicines and equipment. Since 2009, 51 1Malaysia Clinics are in operation and the government will provide an additional 25 1Malaysia Clinics.
The toll rates in four highways owned by PLUS Expressway Berhad will not be raised for the next five years.
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Combating Crime, Securing Safety Public safety is important in creating a safe environment. In the first nine months of 2010, the street crime index declined 38 per cent, while overall crime index declined 16 per cent. In line with this, the government will allocate RM350 million to implement various programmes to combat crime, including burglary, motorcycle and car thefts as well as promoting safe townships and Voluntary Patrol Scheme in high-risk areas. The government will establish an additional 25 special courts to expedite prosecution. Â
Empowering Non-Governmental Organisations The government recognises the contribution of Non-Governmental Organisations (NGOs) in overcoming social problems and in assisting the less fortunate. In appreciation, the government will provide an allocation of RM70 million to selected NGOs to help them carry out programmes aimed at strengthening family institution and addressing social ills such as baby dumping, mat rempit and gangsterism. The selected NGOs will undertake an integrated programme with government agencies, particularly in high-risk crime areas to prevent crime at its root cause. Â
Preservation of Environment To preserve, sustain and protect the environment, the government will allocate RM1.9 billion to finance environmental preservation projects, including implementing the River of Life Programme and greening of Kuala Lumpur. The government will also undertake efforts to preserve marine sources and coastal areas including Pantai Siring in Malacca, Pantai Sabak in Kelantan, Teluk Lipat in Terengganu and Rompin in Pahang.
Corporate Social Responsibility Corporate Social Responsibility (CSR) is important in the implementation of community projects. In 2011, Khazanah Nasional Berhad (Khazanah), in collaboration with the Ministry of Education, will establish 10 Trust Schools
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which will be managed more professionally to ensure students obtain quality education. Apart from the normal government allocation, the Trust Schools will also receive contributions from Khazanah. To assist children, particularly those from the low-income group excel academically, the 1MDB will provide multi-vitamins for primary school students. It is hoped this programme will enhance the mental development and strengthen the immune system of students. Following a proposal from the youth lab, 1MDB will provide RM20 million to the 1Malaysia Youth Fund. This fund will be utilised to instil the 1Malaysia spirit. In addition, 1MDB will implement 1Malaysia Mobile Clinics with four buses as mobile clinics in collaboration with the Ministry of Health.
Fourth : Strengthening Public Service Delivery In steering Malaysia towards a developed nation, the government, comprising 1.2 million civil servants, needs to continuously improve to enhance productivity.
Facilitating Dealings with Government Agencies The role of the government is to facilitate and not frustrate. Thus, dealings with any government agency should be made easy. In line with this, the government will ease private sector dealings with its agencies. Towards this, the MyCoID Gateway initiative utilising the Companies Commission of Malaysia’s single reference number has been implemented. This initiative will be extended to other ministries and agencies. To facilitate applictions for permanent resident status (PR) the government will introduce a point system. The application for PR may be submitted after five years of residence compared with 10 years previously. With this system, applications for PR will be more transparent, expeditious and objective based on clear criteria. To expedite the process of property registration, the Stamp Act 1949 was amended to enable the Valuation and Property Services Department assess 242
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properties after the payment of stamp duty to the Inland Revenue Board. This improvement will reduce the property registration process from 30 days to one day.
Refining Appraisal System Civil servants are an important component in the nation’s effort to realise its vision. Without efficient, effective and dynamic policy formulators, the nation’s vision will remain a dream. In relation to this, in our continuous effort to provide a more responsible, relevant and holistic framework of assessment as well as taking into account the feedback from civil servants, the government agrees to abolish the Competency Level Assessment or PTK and replace it with a more suitable evaluation system by June 2011, which is acceptable to civil servants.
Appreciating Civil Servant’s Contributions The government appreciates the contribution and full commitment of civil servants in ensuring the success of its initiatives including the GTP and the ETP. In appreciation, the government will: First : Reduce the burden of civil servants in coping with schooling expenses by providing a Special Financial Assistance amounting to RM500. This assistance will be provided to all civil servants from Grade 54 and below, including contract officers and retirees. The payment will be made in December 2010; Second : Increase the rate for Funeral Arrangement Assistance to RM3,000 from the current RM1,000 in line with rising funeral expenses. This assistance is also extended to retired civil servants; and Third : Extend the services of Pegawai Khidmat Singkat (Short Commission Officers) for an additional period of one year from December 2010. However, ministries and agencies are not allowed to increase the number of PKS. To facilitate civil servants in owning houses as well as improving the terms and conditions for housing loans, the government will: 243
First :
Allow the purchase of properties from parents, children and siblings;
Second : Raise the amount of loan from RM10,000 to RM20,000 for additional works on low-cost houses for Support Group II; and Third : Raising the maximum loan eligibility to RM450,000 compared with RM360,000 currently. The above improvements to housing loans will be effective 1 January 2011.
2011 Budget Allocation The government is committed towards accelerating the transformation process by ensuring projects and programmes under the 10MP, NKRAs and NKEA are implemented successfully. To implement these strategies and measures, an allocation of RM212 billion is proposed for the 2011 Budget, which is 2.8 per cent higher than the allocation for 2010. Of this, RM162.8 billion is for Operating Expenditure and RM49.2 billion for Development Expenditure. Under Operating Expenditure, RM45.6 billion is allocated for Emoluments, RM28.2 billion is for Supplies and Services, RM86.4 billion is allocated to Fixed Charges and Grants, and RM1.4 billion is for the Purchase of Assets and RM1.2 billion for Other Expenditures.
As for Development Expenditure, a sum of RM28.3 billion is allocated to the economic sector for infrastructure, industrial, agricultural and rural development. A total of RM15.5 billion is allocated to the social sector, including education and training, health, welfare, housing and community development. A sum of RM4.4 billion is allocated for development of the Security Sector, RM955 million for General Administration and RM2 billion Contingencies. Federal government revenue collection is estimated to increase 2.3 per cent to RM165.8 billion in 2011, compared with RM162.1 billion in 2010. Taking into account the estimated revenue and expenditure, the Federal Government deficit for 2011 is expected to further decline to 5.4 per cent of GDP, compared with 5.6 per cent in 2010. 244
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The strategies and programmes in this Budget have been designed to meet the aspirations of the people. The government wants to build a nation where every Malaysian citizen will be able to enjoy the benefits of development and can attain success through hard work and perseverance.  Members of the Malaysian Cabinet share the vision to continue the noble tradition of bringing prosperity to all segments of society. This is not impossible, neither is it wishful thinking. Facts and history have proven that the government is capable of bringing development.  The government has successfully transformed the nation from a low-income agriculture-based to a modern middle-income industrial-based economy and increased the income per capita from USD260 during early independence to more than USD8,000 today. We have reduced poverty from 60 per cent to 3.8 per cent and are on target to eliminate hardcore poverty as well as succeeded in creating a dynamic middle class. In fact, prudent financial management has enabled us to weather the 1997/1998 financial crisis through firm and unorthodox measures. As a result, criticism has turned to praise and prejudice to admiration. Also, in 2008 the government took immediate measures to revive the economy by introducing the stimulus packages and mini budget when we were hit by the economy’s tsunami. Again the people were insulated from a difficult time and they only felt minimum impact. Despite challenges, the government will not retreat from this noble mission, as truth is in its favour based on its record of excellent performance. Indeed, this Budget is the 53rd Budget after Independence tabled by the same government. Through 53 Budgets, 10 Development Plans, three Outline Perspective Plans and one National Mission, the 2011 Budget is crucial and is the first step towards positioning Malaysia as a developed and high-income economy. We must remember that Malaysia is our blessed homeland where we were born, where we were raised, where we seek opportunities, where we achieve success and here we shall be laid to rest. - THE BUDGET 2011 SPEECH Dewan Rakyat, Parlimen October 15, 2010 245
Sustaining Growth in a Changing and Dynamic Economic Environment
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T
he great gathering of minds at the Global Islamic Finance Forum has provided an opportunity to unlock the true potential of Islamic finance as a force for economic growth and wealth creation in facing the global economic uncertainty. It is hoped that the discourse and ideas generated at the forum would advance Islamic finance to the next level, while helping to strengthen economic and financial cooperation among countries.
The theme of the forum, “Islamic Finance: Opportunities for Tomorrow,” is particularly relevant, as the global financial community continues to undertake significant reforms. These reforms are being designed to prevent the conditions that triggered the recent international financial crisis and to guide nations through an uncertain economic recovery.
The Winding Road to Economic Recovery For emerging and developing economies, including those in Asia, the road to a sustained economic and financial recovery in the immediate term is currently overshadowed by three key concerns. These include the slowing of growth in advanced economies; the large and volatile capital inflows that could potentially lead to asset price inflation; and continued volatility in global financial markets. Nevertheless, in several emerging economies – particularly those in Asia – strong macroeconomic fundamentals, flexible policies and robust financial systems have put us in a better position to navigate the uncertainties and constant change in today’s financial climate. While immediate concerns about the sustainability of the global recovery warrant greater scrutiny, they also provide a reminder of the urgent need to address long-term issues by transforming our existing thinking and practices. There is growing consensus that emerging economies will be the primary growth engine for the global economy, today and in the years to come. But this vision of the future is not guaranteed and it requires clear, long-term strategies. The financial markets are becoming globally more integrated, whereby shocks in one market could rapidly transmit across the world.
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In this new global environment, developing economies must strive for continued resilience through a number of measures. At the most rudimentary level, they must expand efforts to develop solid macroeconomic fundamentals and a robust financial system. Second, as the recent economic shock has shown, they must explore growth strategies that spread our trade relationships across diverse markets, rather than focusing primarily on advanced economies. Ultimately, this will involve shifting the balance of growth from being exportdriven to building a strong consumer base within their domestic markets. Specifically, Asia can capitalise on the rise of its large middle class and complement this with necessary structural reforms to unleash the domestic sector’s potential. Also important are closer economic integration and cooperation among developing countries, both within and across regions. Greater trade integration will allow developing countries to leverage each other’s strengths to achieve sustainable growth.
Trade Integration Trade integration is only the beginning. As developing economies strengthen their trade and investment ties, they must also increase integration of their financial systems.
In the case of Asia, a high savings rate is a fundamental strength that will gain prominence as the region transitions into a key global growth centre. Having more integrated financial systems will enable Asian countries to efficiently channel their large savings into a vast array of investment opportunities both within Asia and across other developing economies. It is estimated that cumulative savings in Asia will reach approximately 80 trillion US dollars over the next ten years, which in turn can fuel productive economic activity in the region.
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This is one of the areas where Islamic finance plays a key role. It is clear that financial integration is being further reinforced by Islamic financing which is expected to contribute to higher and more sustainable economic growth while encouraging greater financial and trade flows – most notably between Asia and the Middle East. The internationalisation of Islamic finance has been instrumental in forging stronger financial ties between developed economies and the Asian and the Middle Eastern regions. Today, while world trade has, on average, expanded by 16 per cent over the period 2004 - 2008, Asia’s trade with the Middle East and Latin America has increased on average by about 30 per cent. Asia’s trade with other emerging economies now stands at 13 per cent of Asia’s total exports.
Malaysia’s Growth Strategy
With regards to Malaysian economy and efforts made by the government to transform the nation into a high-income economy, the outlook seems very encouraging. The Malaysian economy expanded strongly - by 9.5 per cent - in the first half of 2010. Moving forward, however, the country recognises that new challenges will emerge. Malaysia’s highly open economy will be impacted by slower growth in the advanced economies. At the same time, overall economic growth is expected to remain robust, driven by continued domestic expansion and a shift in the composition of external trade to reflect increased intra-regional trade as well as sustained demand and firm prices for commodities. Malaysia only recently revised its forecast upwards and is on track to register a remarkable growth rate of about 7 per cent for 2010, and to grow between 5 and 6 per cent in 2011. With the right ingredients, Malaysian economy is expected to grow at an average of 6 percent annually over the next ten years. This is both very real and achievable. Amidst this changing global landscape, Malaysia is committed to ensuring that she is able to meet new challenges. This will require structural reform to adapt to an ever-changing economic and business environment. Recognising this, the government has initiated detailed and comprehensive long-term reforms to transform Malaysia into a competitive and developed economy by 2020. 249
Yet, Malaysia’s aspiration to attain high-income nation status cannot be achieved in isolation. It is equally important for growth and development to be inclusive and sustainable. Inclusiveness enables the benefits of development to be experienced by people from different backgrounds across all communities, while sustainability ensures that current wealth is not obtained at the expense of future generations. The government also recognises that successful transformation requires change on the part of the private sector as well as the government. To that end, the Economic Transformation Programme (ETP) and the Government Transformation Programme (GTP) are being implemented to chart the way forward, so that we can realise our bold vision as a united nation. At its core, the ETP comprises two key components – the National Key Economic Activities (NKEAs), which are the drivers of growth; and the Strategic Reform Initiatives (SRIs), the enablers of growth. They are supported by Malaysia Plans which chart our development over five-year periods. Each is fine-tuned through the national Budget. The ETP ultimately is a shared responsibility between the private sector and the government. A key underlying principle is that the private sector must serve as the primary growth engine. This requires initiative to create business opportunities, investment and to convert innovative ideas into reality. The government will become an active enabler of private sector-led initiatives, ensuring that the operating environment is conducive to business and market forces are functioning appropriately. Importantly, the ETP is not merely a strategic aspiration for transformation. It provides clear platforms in the form of wideranging investment and business opportunities across numerous identified sectors. It includes numerous measures to facilitate private sector efforts. In short, it is a roadmap to help the nation become a high-income economy that is also inclusive and sustainable.
Islamic Finance as an Important Driver of Growth Islamic finance has been identified as one of the important growth areas for the NKEAs. It is one of the fastest-growing sectors in the global financial landscape. While Islamic finance may not single-handedly resolve all the issues in the global financial system, it can play a significant role in fostering greater systemic stability and resilience. 250
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Islamic Finance is one of the fastestgrowing sectors in the global financial landscape. A 2010 IMF study showed that Islamic banks contributed to financial and economic stability during the global crisis of 2008, just as the failure of other financial institutions was reaching its peak. Islamic finance requires financial transactions to be supported by real economic activity and shielded from overleveraging. During the recent crisis, growth in Islamic bank assets and financing doubled on average, a remarkable performance when compared to that of conventional financial institutions. Islamic finance transactions are based on the principle of profit-sharing and risk sharing that conforms to Syariah. This is the core principle of Islamic finance that upholds justice and equitability. Over the past decade, Islamic finance has been growing at an average rate of more than 30 percent per year. This impressive performance has greatly benefited many national economies, irrespective of faith or race, by fostering significant growth and increased employment opportunities.  This is evident by the issuance of the sukuk or Islamic bonds by the World Bank in 2005 for the redevelopment of Acheh following the tsunami. The Kuala Lumpur International Airport in Sepang was also financed by sukuk in 1996. The Government of Malaysia recently issued the second benchmark dollar sovereign sukuk for our domestic funding needs. The government’s investment arm, Khazanah Berhad, recently issued a Singapore dollar sukuk out of Malaysia through its existing multi-currency programme. The Islamic Development Bank has also closed the book-building exercise for a 500 million US dollar benchmark sukuk issue in Malaysia for developmental projects of member countries. In addition, the Dubai Government’s Department of Finance is proposing to launch a multi-currency sukuk programme soon. Malaysia, therefore, is wellpositioned as a multi-currency issuance platform for sukuk. 251
Moving forward, Islamic finance continues to present itself as a viable and competitive funding option to sustain robust economic growth in Asia. Asian countries have projected sizeable funding requirements in their long-term plan. In Malaysia, total funding of over USD450 billion is required for economic transformation over the next decade. This will provide funding for a wide variety of projects – from nuclear energy to a mass railway network. The bulk of it is expected to come from the private sector, with governmentlinked companies and the public sector contributing the rest. Some of these funding would surely need to be addressed through a sukukraising exercise as the global market picks up. Although global issuance of sukuk this year to date has fallen by about 16 per cent from the same period last year, the sukuk market is set to improve as the global debt market recovers and supply increases. As the market continues to face a supply shortage, new issuance of sukuk may be cheaper or else met by a high take-up rate, which will also increase its attractiveness.  There are numerous fund-raising opportunities through the Malaysian International Islamic Finance Centre (MIFC) initiative where Malaysia offers itself as a hub for fund raising. For instance, a foreign company can engage an internationally-renowned lead arranger in Malaysia and issue a US dollar currency sukuk with investors coming from all corners of the world. Malaysia serves as a truly international financial centre as it has access to a wide range of players and investors and is backed by significant tax incentives. Fund-raising can also be done by setting up equity-based funds where fund originators can create project or infrastructure funds in Malaysia and enjoy over 60 double-tax relief agreements that we have with other countries.
Challenges in Islamic Finance Admittedly, Islamic Finance is not without its challenges. Due in large part to the recent crisis, there has been an increase in the number of defaults involving a number of sukuks in the Islamic financial industry worldwide. But a significant component of an established global Islamic financial system is the dispute resolution framework which is crucial to providing the necessary assurances and strengthening confidence in the system, especially in the event of a crisis or transaction default. As part of the effort to strengthen the dispute resolution process for the Islamic 252
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finance industry, Malaysia has already established a dedicated High Court in Kuala Lumpur to adjudicate all muamalat cases. As an alternative dispute resolution channel to the court system, the Kuala Lumpur Regional Centre for Arbitration has been enhanced to serve as a platform to deal with cases involving Islamic finance, particularly within the Asia Pacific region. Having adopted United Nations Commission on International Trade Law Arbitration Rules, it offers speedier settlements relative to the court’s process and freedom to choose governing laws. While Islamic banks have proven their resilience during the global crisis, the supply shortage of Islamic instruments has impacted the effective management of liquidity within Islamic banks. Recognising this, a proposal was made more than a year ago to form a mechanism to support cross-border liquidity management with the intent of both deepening and broadening the global Islamic finance industry. This proposal was initiated by a High Level Task Force on Liquidity Management, which was established by the Islamic Financial Services Board Council. Governor Zeti Akhtar Aziz of the Central Bank of Malaysia chaired this Task Force.  It is worth mentioning that the IFSB has facilitated the establishment of the International Islamic Liquidity Management Corporation (IILM) as recommended by the Task Force. Its primary objective is to facilitate crossborder liquidity management by institutions offering Islamic financial services in a cost-effective manner.
- THE GLOBAL ISLAMIC FINANCE FORUM ON ISLAMIC FINANCE : OPPORTUNITIES FOR TOMORROW Mandarin Oriental Kuala Lumpur October 25, 2010
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Accountants: Sustaining Value Creation
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T
he choice of Malaysia as the host for the World Congress of Accountants 2010 by the International Federation of Accountants reflects the trust and confidence the global financial and business communities have in the professional standing of Malaysia’s accountancy profession. The World Congress of Accountants has been dubbed the ‘Olympics’ of the accountancy profession since it has been held every four years since 2002 and every five years prior to that. It is considered the foremost international event for the accountancy profession. The congress represents a gathering of influential communities, including business leaders who together explore the latest issues and innovative ideas on a platform of regional and international interests.
The Importance of Sound Accountancy Accountants, in their fiduciary positions, play a major role in building and maintaining public confidence in the financial markets of their home countries. As we embark on a new decade, many of the world’s financial markets, particularly in emerging economies, are more liquid and efficient than at any other time before.
However, as we saw in the recent global financial crisis, investors flee when markets are viewed as risky. This shows the importance of sound accountancy rules. It is, in fact, trust and understanding of the underlying financial reporting structure that promote confidence and stability in the market. While the disclosure of the required financial information is a corporation’s responsibility, accountants, in their capacity as gatekeepers, must do their best to ensure the statements and supporting documents provided are accurate and complete in portraying the current state of a corporation. Therefore, the ability of the accountancy profession to facilitate good governance among corporate players is essential to ensure a strong, vibrant and forward- looking financial market.
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By monitoring the market, accountants and auditors help keep fraud at bay. This greatly enhances confidence among investors, who, understandably, tend to avoid companies affected by accounting scandals or with questionable corporate reputations. On the other hand, think about the circumstances surrounding the Enron failure and the recent collapse of established large financial institutions. We can see how the lack integrity and accountability in crucial monitoring responsibilities have negatively affected perceptions about the accounting world. These financial scandals were made worse by unprofessional accountants who were both dishonest and unethical. The boldness of the financial improprieties that came to light in certain cases has highlighted the consequences of accountants pursuing their own financial self-interest, rather than promoting the values, integrity and best practices of their profession. In a time of highly interconnected financial markets, we cannot afford for a few bad seeds to spoil the long established reputation of a large majority of professionals who operate along the highest ethical standards.
Securities Commission Malaysia In fact, these failures have prompted greater scrutiny and oversight and resulted in the need to support the industry with clearer regulation that eliminates grey areas while allowing honest professionals to thrive in their business. Along these lines, Malaysia has strengthened its laws to enable the Securities Commission Malaysia to carry out an oversight function over external auditors of public interest entities. In this regard, the Securities Commission has established an “Audit Oversight Board” that will register, inspect and sanction external auditors of such entities. Also, the crucial role of accountants in detecting fraud is reflected in the number of whistleblowers that have provided information to the Securities Commission under the protection of the Capital Market and Services Act. This Act imposes a mandatory duty upon auditors and specific employees of listed corporations to report breaches of security laws and the rules of the stock exchange to the authority. 256
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 Since the introduction of the whistle blowing provisions several years ago, the Securities Commission has received reports mainly from external auditors of Public Listed Companies. Some of these reports have led to enforcement action being taken against the perpetrators, often the directors and senior management of the company. With this, it is encouraging to note that a stronger culture of public accountability and integrity has been launched.
Global Accounting Standards Every year, globalization manifests itself at a faster rate. Economies are linked to each other faster and deeper and it essential that they are regulated by set of rules that are as homogeneous as possible. When it comes to accountancy, the same principle holds. It is clearly against the public interest to have a multiplicity of accounting and auditing standards around the world that could potentially lead to confusion, encourage error and even, at times, facilitate fraud and arbitrage. It is crucial for us to learn from the lessons of the past. And one of these lessons has been that the broader adoption of a single set of high quality, global accounting standards is of great benefit to society and businesses. A single set of rules creates a level playing field for companies around the world, providing them with more and better opportunities in international markets.
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In this context, Malaysia is well prepared for the adoption of a single set of global accounting standards. This is fully in sync with our national goal to become a high-income and modern nation by 2020. The International Financial Reporting Standards, developed by the International Accounting Standards Board, are becoming the global standard for preparation of financial statements for public companies. In fact, the International Financial Reporting Standards convergence effort in Malaysia, which is predominantly driven by the country’s accountancy professionals, is right on track. This country is set to achieve full convergence with the International Financial Reporting Standards (IFRS) by 1st January 2012. This means that by this date, Malaysia’s accounting standards will be comparable to those in more than 100 other countries. Having a single set of global accounting standards is particularly important to Malaysia as it will help us attract foreign direct investment. Such convergence will make it easier for foreign investors to understand and rely on the financial reports of Malaysian companies. It will also help Malaysian businesses operate in an increasingly globalised environment, since the accounting standards will put Malaysian businesses and capital markets on a level playing field with companies and markets from other countries. The standards will be applicable to all entities, including private firms. They will ensure that financial reporting of Malaysian companies will be trusted
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in global markets and in the eyes of international investors. There are about 1,000 public-listed companies and 20,000 subsidiary and associate companies in Malaysia that will be affected by full IFRS compliance. The benefits of full adoption of IFRS standards are clear through greater transparency and credibility in financial reporting. The accountancy profession itself will be a significant beneficiary of IFRS convergence as accounting professionals will be able to market their talents across national borders. Since 2007, the Malaysian Institute of Accountants has had necessary mechanisms in place to address the complexities associated with the implementation and application of accounting standards in Malaysia through its Financial Reporting Standards Implementation Committee (FRSIC). As we move towards the convergence deadline, the Malaysian Institute of Accountants and the Financial Reporting Standards Implementation Committee (MIA-FRSIC) will continue to play a pivotal role to ensure Malaysia’s smooth transition to IFRS.
Above all this, the successful development of a strong and credible accounting industry must also be premised on the ability of accountants to play an active role in exercising sound professional judgment in the application of global accounting standards; ensuring that accounting accurately reflects the substance of a transaction and not merely its legal form. Clearly, these efforts cannot be short-term. The international accountancy profession and governments, regulators, standard setters, and the public must all make an ongoing and long-term commitment to establish and promote adherence to high-quality standards. This is, indeed, the best way to build and maintain confidence in the global profession. - THE WORLD CONGRESS OF ACCOUNTANTS 2010 Kuala Lumpur Convention Centre (KLCC) November 08, 2010 259
ASEAN and India: Going Global
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SEAN and India today represent a market of 1.7 billion people with a combined Gross Domestic Product (GDP) of approximately USD3 trillion. These are big facts that businesses worldwide cannot, and will not, ignore. In building a robust ASEAN-India relationship for the 21st century that capitalises on these facts, India as well as the member states of ASEAN must play their respective roles.
At the crossroads of Asia for centuries, Malaysia is, as ever, fully committed to building deeper ties across the region. The country will continue to play a leading role in building upon existing linkages between ASEAN and India. Malaysia’s commitment in this regard is underscored by Prime Minister Dato’ Sri Najib Tun Razak’s visit to India earlier this year as well as the recent visit of his Indian counterpart, Prime Minister Dr. Manmohan Singh, to Malaysia. These significant exchanges have not only brought immediacy to efforts of both countries and cemented close cultural ties, but also resulted in numerous business and investment opportunities.
Country-to-Country Relationship Over the course of 2010 alone, many landmark agreements have been signed and some executed between the Governments of Malaysia and India. These include agreements to complete the Comprehensive Economic Cooperation Agreement or CECA, multiple memoranda of understanding in the fields of tourism, IT & Services, Traditional Systems of Medicine, Research & Development in the fields of biotechnology aggregation and many others. These are very meaningful milestones that will feature prominently in increasing trade and investment flows between Malaysia and India. The country-to-country relationship will manifest itself more intensely and meaningfully as the many initiatives agreed to, take form and generate results. One such result is the projected doubling in trade between India and Malaysia by 2015 as a result of these G-to-G agreements, coupled with other initiatives between the private sectors of both countries. 261
Business leaders from ASEAN and India should recognise that, as competitive as these are, the policies of the respective countries to encourage investment and trade are not limited to tax incentives, grants and world class infrastructure. In the effort to make Malaysia a high income economy, the government of the country also focussed on initiatives that will clearly communicate to the world that Malaysia is a country on the move. Amongst other key strategies, Malaysia will continue to strive to simplify as well as reduce the cost of doing business. Initiatives such as those undertaken by a government-private sector taskforce have proven successful in removing red tape in business registration, reducing evaluation times for business licenses and so forth. Furthermore, in terms of human capital, the Malaysian Government will continue to put the right measures in place to ensure that industry has ready access to a large pool of qualified and skilled Malaysians.
Support for Entrepreneurs To further streamline its interaction with business and creating sufficient human resources, the government will continue to support enterprise through the many dedicated public sector agencies set up and also via consistent engagement with the private sector.
Malaysia will also consistently pursue policies that create an environment where entrepreneurs will not just survive, but thrive. Over a relatively short period of time, many companies under the leadership of Malaysian entrepreneurs have built strong companies and leading brands and so, considerably boosted national growth. Â In this regard, part of the strategy will be to encourage Malaysian companies to go beyond, not only to become national champion, but also regional and global leaders. The government also realises that for entrepreneurs to be successful, adequate access to finance and capital is a prerequisite. Malaysia has embarked on 262
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Foreign entrepreneurs are welcomed to explore opportunities in Malaysia.
measures to provide unique opportunities for businesses to access financial and capital markets. In this regard, Bursa Malaysia is working with the Indus Entrepreneurs (TiE) to encourage Indian and Non-Resident Indian businesses to take advantage of the opportunities Malaysian capital markets have to offer. Furthermore, the Securities Commission and the Stock Exchange Board of India have signed an agreement paving the way for improved opportunities in cross border capital market activities. In finance, foreign entrepreneurs are welcome to explore opportunities in Malaysia’s highly developed Islamic Banking and Financial Services industry which is now complemented by the presence of leading international Islamic banks in Kuala Lumpur. We can confidently say that our financial institutions have more than adequate capacity to support entrepreneurs in their business endeavours. In the coming years, Malaysia’s Economic Transformation Programme (ETP) will ensure that the country is near the forefront, competing with the top economies of the world. The numerous and significant programmes and projects identified under the ETP will provide many opportunities for private business. Entrepreneurs from India, via TiE, as well as through chambers of commerce and other business organisations should pay close heed to the significant ways in which Malaysia and other ASEAN countries are economically evolving, and even transforming. There are many fields and industries in which Indian companies, and the entrepreneurs that drive them, are leading the world. It is in these niche areas that Indian entrepreneurs should direct particular attention to, and thereby play 263
a fosussed, constructive and lucrative role in ASEAN’s onward development. The same thinking applies to ASEAN and Malaysian entrepreneurs devising strategies of business deployment in India.
Gateway Into ASEAN Trade and industry associations in India as well as in Malaysia and ASEAN must also collaborate to bring the regions closer together. Given the connections and insights that these associations can offer, entrepreneurs should be encouraged to engage these associations and therefore, better understand the markets they seek to invest in.
Furthermore, Malaysian chambers of commerce and industry organisations can play a key strategic role to help Indian businesses better understand the broader ASEAN market. In this regard, Malaysia is ready to facilitate the entry of Indian entrepreneurs into South East Asia and execute a role as India’s gateway into ASEAN. Entrepreneurs from India and Malaysia should explore the opportunities arising from growing ties between ASEAN and India as well as arising from the landmark Malaysia-India agreements on trade and cooperation in numerous fields. A more solid partnership will undoubtedly deepen economic bonds between ASEAN and India to the extent that it engenders greater commercial confidence in each other. This in turn will naturally result in tangible improvements in bilateral trade and investment between the two regions. Greater mutual confidence will also result in more partnerships between ASEAN and Indian entrepreneurs that will then, together, seek to compete globally.
- THE TIE ASIA PACIFIC CONFERENCE 2010 Kuala Lumpur Convention Centre November 18, 2010
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Commonwealth and the Business Community
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he Commonwealth is a partnership of 54 countries around the world, covering a population of two billion people and a combined Gross Domestic Product (GDP) of USD7.5 trillion, or roughly 13 per cent of global GDP. Over the last 10 years intra-Commonwealth trade increased from USD2 trillion to USD3 trillion, accounting for 22 per cent of global trade, while investment flows expanded from USD80 billion to USD180 billion. The Commonwealth Business Council sees the potential for intra-Commonwealth trade to grow to USD5 trillion and investment to reach USD250 billion in the next decade. Given these facts, the most important question that one would ask is: Have we tapped into the full potential of the Commonwealth? This body is 79 years old. It started out as a group of nations with roots in colonialism, but the Commonwealth has long since transcended this. The task before us as its members, put simply, is to ensure that as we prepare to celebrate our 80th anniversary, we capitalise on the strengths within this dynamic community to enrich each other and to take measures to expand our collective economies. The time is right for us to chart our course for the future. We must ensure that forums such as this provide the catalyst for networking and collaboration that eventually contribute to wealth creation within our grouping. This should not be just another event on our calendar.
We need to do exactly what our name suggests – namely, create and spread wealth and create a common platform from which to enhance trade and investment in the “prosper-thyneighbour” spirit. The Commonwealth can contribute more significantly to trade and investment through the following measures: First, SME development: In each of our countries, small and medium enterprises account for about 90 per cent of all business entities. Policy objectives must consider the concerns and interests of these local enterprises. Second, focus on growing intra-regional trade and investment by capitalising on the individual assets that this diverse group of countries bring to the table. 267
Third, sharing of best practices in the areas of governance as this is crucial to building investor-confidence. This should include the areas of macroeconomic surveillance, sound financial governance and balanced domestic macroeconomic policies. Fourth, focus on facilitating business. Governments have a key role in creating a favourable environment for business to prosper. However, it cannot achieve any measure of success without the cooperation of the private sector. The private sector must contribute to this process through constructive feedback and by reviewing its own business processes and procedures. Â Fifth, deepening of engagement with organisations in Asia, especilly ASEAN. Three members of the Commonwealth are members of ASEAN and five are dialogue partners. Members of the Commonwealth should build on these relationships to explore the possibilities for economic collaboration between these two organisations. ASEAN, with its significant trade and investment links with the rest of Asia, and its own efforts at regional economic integration, brings with it a significant value proposition that members of the Commonwealth can benefit from.
Remaining Competitive in Challenging Environment ASEAN is well aware that the grouping must sustain its economic dynamism if it is to remain competitive in this increasingly challenging global trade environment. Towards this end, we are working to ensure that ASEAN will realise the ASEAN Community by January 2015 through its adoption of three pillars: the ASEAN Political-Security Community; the ASEAN Socio-Cultural Community and the ASEAN Economic Community, AEC. The ASEAN Community will be a cohesive AND inclusive economic region. Inclusive in this context refers not only to engagement beyond ASEAN, but more importantly by ensuring that no one within the grouping is marginalised. Like the Commonwealth, ASEAN too is a community of countries with varying levels of economic development. We believe that regional economic integration makes sense only if it alleviates poverty and improves human conditions in all member states. ASEAN has thus put in place various initiatives to narrow the development gap among its member states. And I believe the Commonwealth must do likewise.
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Malaysia is at the heart of ASEAN and Asia, yet she retains deep links to the Commonwealth. While 25 per cent of Malaysia’s trade is with ASEAN, our trade with the Commonwealth accounts for about 22 per cent of our total global trade. In 2009, our trade with the Commonwealth countries amounted to USD63.4 billion. In term of investments, as of July 2010, a total of 1,901 projects involving Commonwealth countries’ participation were approved in the manufacturing sector in Malaysia with total investments of USD15.2 billion. It is to our mutual benefit to build on this relationship and expand our economic ties.
Economic Transformation Programme Malaysia looks forward to serving as the bridge to stronger economic relations between the Commonwealth and Asia. There is no question that Asia led the global economic recovery in the first half of this year. But Asia cannot sustain this growth if we remain a production house for the economies of the US and Europe. We must step up regional economic integration and our corporate sector must invest in people, create jobs and, in doing so, create the wealth necessary for a sustainable growth. But private investment is nurtured by government economic policies. In a world of increasing competition, countries must take bold measures and institute reform to unlock corporate spending. In Malaysia, reforms have been the driving force for the transformation of our economy and they have allowed the country to start growing again. Under the GTP, Malaysia has instituted reforms around the way in which the government functions and serves the people and businesses. The Malaysian Government has fully engaged the private sector in coming up with its Economic Transformation Programme (ETP), wherein we have earmarked for the implementation of 131 Entry Point Projects (EPPs) worth RM444 billion and 60 Business Opportunities worth RM358 billion. Together with our private sector partners, we have agreed that only 8 per cent of the investments in ETP would come from the public sector. Our transformation programmes are beginning to bear fruit.
- THE GLOBAL BUSINESS LEADERS FORUM 2010 Kuala Lumpur Convention Centre November 22, 2010 269
ASEAN - Towards a Larger and Cohesive Investment Area
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ince 2004, the ASEAN Finance Ministers’ Investors Seminar has allowed investors from various regions to engage directly with the Finance Ministers of the ASEAN countries as a group, as well as individually in separate country sessions. This provides an important venue to share perspectives on the ASEAN markets and a deeper appreciation of our regional strengths and value proposition as a global investment destination. This is especially true in the current economic environment, where ASEAN is playing an important role in contributing to the global recovery.
Sustainable and Inclusive Growth ASEAN has established a reputation of rewarding investors with stable and profitable returns on investment, not only for portfolio managers, but also for longer-term direct investors in both real and financial sectors. Foreign investors’ stake in ASEAN has been a key factor in supporting investment and growth of new sectors which have been crucial for ASEAN’s economic development.
Foreign investment in ASEAN has gone beyond simple provision of capital by bringing in new technology, skills and connectivity to the global market place. In return, foreign investment in ASEAN has yielded very attractive returns, with net profit and dividends for non-residents ranging from USD500 million to USD14 billion across the various ASEAN countries in 2009. Moving forward, ASEAN aims to progressively improve investment opportunities through promoting sustainable growth and accelerating the integration of ASEAN capital markets. While not having been put directly under stress by the global financial crisis, ASEAN regulators have initiated regulatory changes to enhance investor protection, foster markets’ resilience and sustain investor confidence. The various approaches to economic transformation and regulatory changes in ASEAN countries will result in better investment climates across the region.
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These developments are contributing to an emerging ASEAN single identity of shared values and goals for economic prosperity. Through these shared values, each country is a gateway to investments in the ASEAN region. Several concrete factors support an optimistic outlook for investment in this region: First, in addition to growing the ASEAN market organically, ASEAN countries have established partnerships with international players to expand their outreach. Investment in many ASEAN countries is a gateway not only to investment within ASEAN, but also to hedge and arbitrage via products unavailable in domestic exchanges. For example, Malaysia’s recent partnership with the Chicago Mercantile Exchange offers a global platform for hedgers to leverage trade in US dollar and ringgit based palm oil derivatives. Second, ASEAN’s market potential is continuing to grow. With a total population exceeding the EU, the ASEAN market is further enriched by being a geographical and cultural bridge between the even larger markets of China and India. Within ASEAN, as the more matured ASEAN economies move towards high income status, purchasing power is increasing and reinforcing a virtuous cycle of higher incomes. Higher incomes amidst a culture of sustained savings across all ASEAN countries mean more demand for investment instruments, as well as demand for investment advisory and management services. Third, ASEAN is committed to deregulation and liberalization of its markets. It is committed to moving forward on new free trade pacts and additional liberalization in financial services. It is committed to policies of domestic deregulation and liberalization. Malaysia, for example, is broadening the range of FTAs and has begun negotiations of the Trans Pacific Partnership (TPP). Thailand, Malaysia, Singapore and Indonesia have also put in place legislative frameworks to promote highly competitive and fully secure markets. This will provide broader and more lucrative opportunities for investors in ASEAN. Fourth, ASEAN has a clear early mover advantage in Islamic finance. As the global community embraces Islamic finance as an alternative financial model, ASEAN offers unique opportunities for new Islamic finance instruments and fund management businesses. Big international fund managers like Saturna
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ASEAN market is further enriched by being a geographical and cultural bridge between the even larger markets of China and India.
and Franklin Templeton have begun offering Islamic finance services out of Malaysia. We also see great potential for ASEAN as the gateway to tap Islamic investment funds from across the Middle East. Fifth, ASEAN countries are also a growth bed for new markets and products, particularly in the pension fund services. While the demographics in ASEAN remain skewed towards a younger population, we need to plan ahead to develop a private pension fund industry and enable workers to plan and manage their wealth for retirement. For investors, pension fund reform initiatives offer participation in a new industry and create new opportunities for partnerships in an emerging aspect of fund management in the region. Finally, high incomes have been achieved in economies driven by innovation and creativity. More resources in ASEAN are being allocated to incentivize innovation and creativity which will drive ASEAN aspirations to reach a higher income status. Public policy will support new opportunities in private equity and venture capital finance in sectors beyond ICT. In Malaysia, there is a new focus for innovation in services and agriculture, the latter to leverage on research in bio-tropics and other new product lines with synergies to a vibrant pharmaceuticals industry. This in turn provides new areas of interest for venture capital funds and angel investors as well as opening exciting new sectors for more traditional investors.
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Integration of ASEAN Capital Markets ASEAN is moving towards greater integration. Recent decisions by ASEAN leaders will indeed enhance the longer-term financial rewards for investments in the region. The initiatives recently reviewed by leaders in Hanoi are many and explained below are a few of those that impact most on investment and financial matters. First of all, important achievements have been made in implementing the Roadmap for an ASEAN Community by 2015. A new organizational framework and legal basis are giving “teeth” to the implementation of the programmes in all the three self-reinforcing pillars -ASEAN Political-Security Community, ASEAN Economic Community and ASEAN Social-Cultural Community. The ASEAN Economic Community (AEC) will have most impact on the investment climate. In this field, ASEAN leaders noted that the prompt regional economic recovery is having a positive impact on the establishment of the ASEAN Free Trade Area for trade in goods, services and investments as well as in implementing the ASEAN single window and trade facilitation programmes. Physical and trade connectivity took a major step forward in October. The leaders’ adoption of the Master Plan on ASEAN Connectivity will expedite the move towards AEC.
This connectivity plan, designed with international expertise, will improve infrastructure linkages, reduce regulatory barriers to movement of goods and improve ease of travel. This will enhance regional trade and investment and foster competitive growth within ASEAN and with ASEAN’s neighbours like India, China, Japan and South Korea. A major initiative that will achieve ASEAN connectivity objectives as well as develop ASEAN’s capacity to raise funds is the creation of the ASEAN Infrastructure Fund. The Fund target size of USD800 million aims at supporting 274
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infrastructure projects in ASEAN to catalyse economic integration. Malaysia has pledged USD150 million, which has been matched by the Asian Development Bank. To date ASEAN states have pledged USD335 million to the fund. The outcome of infrastructure financing support is important to ASEAN’s growth. A 1 per cent increase in infrastructure spending in Asia can increase private consumption by 1-2 per cent of GDP, an important result that will benefit the wider investment community as well as ASEAN’s nations and their people. The effort to increase regional capital market connectivity has also progressed significantly. One of the key thrusts of the ASEAN Capital Market Forum Implementation Plan is to improve regional market connectivity through an electronic trading link. This will be known as the ASEAN Common Exchange Gateway. The link aims to increase the global profile of ASEAN markets by providing instant access through an electronic gateway to all ASEAN markets. Further, the ASEAN link will enhance the ability to trade across markets allowing investors to better diversify their investments and increase their overall trading liquidity in the region. It is also recognised that regional companies meeting international benchmarks on governance standards are becoming more important if we are to attract outside investors. The ASEAN Capital Market Forum has recently embarked on an initiative to rank ASEAN companies based on compliance with international standards of corporate governance. The aim is to develop a culture of governance among PLCs within the ASEAN countries as one of the approaches to develop “quality performance” companies being traded in ASEAN exchanges. 275
With so much progress being made on the institutional front, it now remains for the private sector to take advantage of these improved regimes implemented by the capital market regulators. Private sector investors can now develop more products that will have regional appeal, conduct more-cross-border offerings and explore mutual opportunities to conduct greater cross-border business. Â
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ASEAN as a Responsible Member of the Global Community While pursuing initiatives on many fronts towards ASEAN integration and a larger and cohesive investment area, ASEAN must be a responsible player in the global community. This is and will be demonstrated not only by the way we respond to economic downturns, but also by the way we respond to broader challenges like climate change, natural disasters and pandemics. ASEAN has an important role to play in the globalised world. By exercising “a common but differentiated responsibility”, ASEAN is becoming a region of choice for investors seeking socially responsible investments. Post the Global Financial Crisis, it is through trade opening measures that we can bring back prosperity to the developed, emerging and the developing economies, and hence, to the global economy as a whole. ASEAN has expressed its desires to see a revival of trade talks. On its own, ASEAN will continue to pursue trade agreements beyond the WTO. The opening of markets in a fair and balanced manner will correct imbalances in the longer-term, while raising opportunities for job-creation in the short and medium-term. In conclusion, ASEAN is implementing a range of measures to build an integrated capital market and to create an ASEAN asset class for investors, while at the same time fostering its position as a modern and responsible resource for the global community. At this juncture of the business cycle, we fully understand that ASEAN’s strength and ASEAN as a place of choice for investments, is enhanced as ASEAN responsibly takes the right actions to support global growth and investment. In turn, ASEAN looks forward to equally responsible actions by domestic, regional and international investors as they share in the economic benefits ASEAN has to offer.
- THE 7TH ASEAN FINANCE MINISTERS’ INVESTORS SEMINAR (AFMIS) Shangri-La Hotel, Kuala Lumpur November 30, 2010
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The New Economic Model The Concluding Part
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he first part of the New Economic Model (NEM) has laid out the new course that Malaysia is taking, based on inputs from the National Economic Advisory Council (NEAC) and others which will enable Malaysia to achieve her aspiration of becoming a high-income nation with an economy that is both inclusive and sustainable by the year 2020. Now, the broad direction for economic policy from the NEM has by and large been incorporated into the government policy under the 10th Malaysia Plan and implementation has begun through the Economic Transformation Programme (ETP). The Concluding Part of the NEM report represents a significant milestone, as it completes the roadmap of the Economic Transformation Programme. Launched last month, the ETP was designed as a two-component approach to achieving the economic growth targets of the New Economic Model (NEM).
The first component, the National Key Economic Areas (NKRAs), an effort to identify, prioritise and align support for the key sectors and major projects that will drive quantifiable economic growth is already moving forward. The second component, a set of Strategic Reform Initiatives (SRIs) designed to remove blockages to growth, is what I am here to discuss today. In this journey to become an advanced nation, the ETP’s growth drivers are akin to cars while the NEM is the highway which is free from impediments. One cannot succeed without the other. The NEAC must be congratulated for completing the arduous task mandated to it a year and a half ago. By setting up the NEAC, staffed by eminent economists in their personal capacities, the independence of their assessment of the nation’s economy has been assured. The candid assessment prepared by NEAC in its report should also be commended. The NEAC’s economic assessment has identified many areas where improvements must be made if Malaysia is to escape the middle income trap. Most of these issues are known to the government. Piecemeal attempts to
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address them have proven ineffective; hence the need for a concerted, holistic effort as represented by the Government Transformation Programme (GTP) and the ETP.
NEAC’s Performance to Improve The frank economic assessment by the NEAC has highlighted improvements required for this nation to make a quantum leap into the future. Their report clearly lays out a case for a burning platform, in spite of the fact that everything on the surface may seem fine. For example, consider these nine areas of concern: • Malaysia’s economic growth engine has gradually been slowing, even before the global economic crisis in 2008. • The growth in private investment has slowed over the last decade. • Our outdated business regulations and rules have not created an environment conducive to attracting investment. • Many of our manufacturing businesses remain inward-looking and are using the low-cost business model that Malaysia had been known for in the past, and there is a distinct lack of drive and incentives to move up the technological ladder. • The dismal level of investment in innovation and R&D falls far short of the amount required for a country aspiring to become an advanced nation. In the area of human capital: • Management practices related to human resources are outdated which has led to issues in developing and retaining talent. • Our labour market is not functioning very well, which is impeding productivity growth. As a result, many people are stuck in low-skill jobs that pay low wages. Two additional factors: • Controlled pricing systems and subsidies have led to misallocation of resources and inefficiencies that have resulted in unwarranted wastages, and • Our distribution policies, although successful in lifting many out of poverty, have created implementation issues in the form of rent-seekers. 280
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The list goes on. The NEAC’s report reminds us that we have our work cut out for us on our journey to become an advanced nation.
Increased of Revenue Fortunately, in spite of the recent global crisis, Malaysian economy remains robust and resilient. The economy has rebounded, achieving 8.1 per cent growth in the first three quarters of the year. For the full year, we expect to exceed our 6 per cent annual growth target. It has been cautioned that growth of 6 per cent is the bare minimum average required to meet our goal to become a high-income nation. Unfortunately, there is much uncertainty in the global economic recovery and that is bound to affect a small, open and trade-reliant country like Malaysia. We also note that the pace of growth is slowing once again, as signs of weakening are emerging in external conditions. The economy grew 10.1 per cent in the first quarter and 8.9 per cent in the second quarter, but only 5.3 per cent in the third quarter. We need to be in a position to counter the cyclical performance of world markets. To do this, we must maintain growth levels in excess of 6 per cent, so we can build up reserves to buffer the inevitable underperforming years.
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It will take quite some time before the advanced economies, many of which are the main destinations for Malaysia’s exports, can once again achieve the growth rates they had before the crisis. Clearly, the advanced economies are being challenged by economic conditions, so they will grow at a slower rate in the near future. It would be naïve of us to think otherwise. Going forward, competition for trade and investments will only get more intense regionally and among developing countries around the world. Most, if not all, countries are revisiting their growth strategies and are getting their economic houses in order, just as we are doing with the GTP and ETP. We must be prepared to face this increasingly competitive environment headon. Competition, as the adage goes, is both about threats and opportunities. The importance of economic restructuring, as advocated by the NEM, cannot be stressed enough – as it will chart a new era of economic advancement.
The NEM will help us create a high-income nation that is sustainable and inclusive. Put more simply, our goal is to make Malaysia a prosperous country that benefits everyone, now and for future generations. The NEM won’t be an overnight panacea that can solve all issues, however. It represents a journey that all of us - the government, the private sector and the people - must undertake together. This is a national agenda and, as such, there is a role for each of us to play. To opt out would only result in this nation languishing and falling behind our regional counterparts. We must all focus on the goal of becoming the high-income, sustainable and inclusive nation that we aspire to be.
Strategic Reform Initiatives (SRIs) The NEM is very clear about what we need to do. It spells out the key policy areas we must address in the form of eight Strategic Reform Initiatives (SRIs). They will help us remove impediments and barriers that hold the economy back from reaching its full potential. 282
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It is important to note that the Strategic Reform Initiatives are cross-cutting in nature, so their impact will be felt across all economic sectors. The SRI initiatives deal with foundational economic issues that must be addressed to drive economic growth and transformation. As such, they must be implemented consistently and holistically to ensure the results envisioned in the 10th Malaysia Plan and the NKEAs are achievable. The required economic transformation is premised on a simple strategic framework that must address both growth and inclusiveness. There are four key thrusts. The first three deal with the need to accelerate growth, while the fourth focuses on inclusiveness and social cohesion.
NEAC’s Policies The first NEM thrust involves the creation of a competitive, sustainable and innovative environment that will reinvigorate private investment. The related policy measures recommended by the NEAC address the following: • The importance of continuing a managed liberalization programme. This will help attract inbound investment and encourage domestic firms to compete on an international basis. • The need for Malaysian companies to penetrate global markets and adopt international standards and best practices in terms of quality and sustainability to ensure that they are competitive internationally. For a start, these standards should be made applicable to goods and services in the domestic market. • The need to create an innovative and creative culture. This requires strengthening the ecosystem to foster entrepreneurship and risk-taking, which necessitates a revamp of our current insolvency laws to be more accommodative. There must also be a concerted effort by the Government, GLC’s and the private sector to support home-grown products and services that are innovative. The second NEM thrust addresses the need to develop a conducive workplace and quality workforce. Policies relating to creating a workplace conducive to development entail the following elements:
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Enhancing the safety net for employees through the introduction of unemployment insurance.
• Setting up an expert group to modernize and align labour legislation and regulation, so they are consistent with international standards and best practices. They have the dual objectives of reducing costs of labour management for businesses and increasing the effectiveness of worker protections. • Strengthening strategic human resources management, especially for SMEs, by establishing a Strategic Human Capital Management Centre. In this way, the government can assist SMEs with their much needed HR requirements. • Enhancing the safety net for employees through the introduction of unemployment insurance. • Establishing a National Wage Consultative Council to monitor and report on wage trends. It also includes policies and strategies that will help us create a high-quality workforce. This will be done by: • Undertaking a labour market forecast that will assess future demand for skills, and • Up-skilling and upgrading the current workforce through standardization and certification of semi-skilled workers. The third NEM thrust deals with the imperative to transform government. Where the GTP deals more with socio-economic issues, the SRIs that focus on “Transforming Government” deal primarily with the economic aspects of the public service delivery system as it forms the lynchpin needed for the economy to advance. Among the recommendations of the NEAC are these three: 284
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• • •
Undertake bureaucratic reforms to strengthen the government’s facilitative role in support of business; Improve the quality of human resources in the civil service by reforming the Public Service Commission and define strategic human resource policy and management processes in the public sector; and Undertake reforms to instil fiscal discipline and better financial management
The fourth NEM thrust deals with inclusiveness and the need to reduce disparity, so all citizens can enjoy the benefits of growth and prosperity. Central to this is the fact that social cohesion, harmony and stability must exist for growth to occur. For without growth, there can be no distribution. They go hand-in-hand. The policy recommendations of the NEAC focus on: • Offering additional social assistance programmes for transportation and housing, which will alleviate the bulk of household expenditure for the bottom 40 per cent of households • Enabling the bottom 40 per cent to break the cycle of poverty through education. One way will be by offering incentives for teachers to increase the number willing to serve in rural areas and, where necessary, providing financial assistance to rural parents to keep their children in school. • Providing capacity building programmes for SMEs in the Bumiputera Commercial and Industrial Community (BCIC); and • Offering ongoing support to successful Bumiputera firms to grow through partnerships with the business community, including the GLC’s, with a view to raise the performance of the entire Bumiputera Commercial and Industrial Community. Let me remind you that the policy recommendations in these four thrusts are not exhaustive, but they represent the major, high-impact policies involved. Our goal is to reach a critical mass through cohesive and synchronised implementation of these policy measures. They can help generate the momentum that will transform the economy in a profound and lasting manner and create positive benefits for all Malaysians. 285
The NEM has provided a fresh perspective on economic areas that require improvement and has reaffirmed the benefits of policies currently in place. It is serving as a catalyst for broad-based economic reform. Since its launch in March, most, if not all of NEM’s growth framework, has been incorporated into the 10th Malaysia Plan and no doubt, it will be reflected in the 11th Malaysia Plan as well. Positive actions have been in line with its recommendations. Malaysians are rest assured that this government is, as they say, walking the talk. Below is review of a few related initiatives: • In line with the NEM's call to cultivate risk-taking and an entrepreneurial spirit, the government intends to reform insolvency laws, including relief provisions for companies and individuals with financial problems. So this was included in the recent budget. How else can we hope to become an innovative and creative economy and society, if failure is punished by archaic insolvency laws?
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We constantly preach to ourselves and to our children to persevere, improve and not let failure be a barrier to striving again, until successful. Our legislative framework must be amended to reflect these values. We have learned from the experience of successful economies that vocational training is critical to future development, so it must be addressed and improved in Malaysia. So the government has budgeted RM474 million in the next year to enhance the technical skills of non-graduates. We especially want to target school leavers and the young people who will form the backbone of the skilled workforce for our industries in the future. Such training is important because there is high demand for a skilled workforce in technical fields. In addition, continuous improvement and training will be beneficial for workers who may be displaced from low value-added jobs.
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As with a rolling budget adopted by the government to improve financial management, ongoing allocations for vocational training will be provided in coming years, along with more effective monitoring and a management framework to stem wastages.
• On the issue of “Rationalising Government’s Participation in Business” as advocated by the NEM, a divestment strategy is underway. It will be implemented on a gradual basis, taking into account the price-sensitive nature of such an exercise. In addition, Initial Public Offerings of two Petronas subsidiaries have been successfully concluded as I had predicted earlier at the launch of the NEM in March. Earlier I mentioned the need for greater momentum in making policy reforms. This may not necessarily mean that all policy recommendations will be implemented in one go, as this won’t be the case. Different policies require different resources and involve varying degrees of difficulty. The very nature of SRIs, being cross-cutting in nature, points to the importance of sequencing policy measures in order to achieve optimal results. What is important to note here is that this is a continuous process. For policies that can be immediately implemented, the early wins as I call them, they will be implemented post-haste. One such policy was the requirement for medical insurance for foreign workers. This issue has long strained the capacity of our national welfare system.
NEM’s Goal One of the NEM’s goals for the private sector is to strengthen the capacity of Malaysian firms so that they can be competitive internationally and succeed independently. Their viability depends solely on market terms, without subsidy, and with the adherence to international standards and best practices. Without a doubt, companies will have to restructure their operations and business models accordingly.
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We recognize that transitions of this nature will result in some workers being displaced, hence the need for reforms to provide safety nets to assist them financially and retrain them for gainful employment. For the nation to achieve its targeted growth targets, the labour force must be at full employment which will contribute positively to economic growth. In addition, in less developed regions, we are committed to improving social services, such as education and healthcare, so that the people in those areas can benefit from national growth too.  Ten years is a short time. The planning stage of the roadmap is now complete, with today’s launch of the NEM report. Implementation will follow and must be executed effectively if this nation is to progress. At the same time, we must not lose sight of our policy objectives and the guiding thrusts of the NEM.Â
Accelerate Implementation of ETP The government will expedite the implementation of the ETP. The Performance Management and Delivery Unit (PEMANDU) will serve as a coordinating and
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monitoring agency. It will keep implementation on track, as undertaken by various ministries and agencies. The nation’s future will not be determined solely by those who govern it but also by the very fabric of society and our culture. Our individual actions, the choices we make, what we do and choose will collectively shape the nation for the future. We all have a role to play, as we are all stakeholders in achieving the NEM goals of becoming a high income nation known for inclusiveness and sustainability. Just as we have high expectations for governance, we should also raise the bar for every citizen and business in this country. The transformational journey that has begun will profoundly affect all sectors, corporate players and participants in the Malaysian economy. In the short term, major adjustments will bring about losses to some. But in the long run, the benefits that materialise will benefit all, and we will be stronger for it. The government is working to facilitate an enabling environment and to cushion the impact of change, where possible. It wants to see individuals and businesses taking the initiative to work together to move the nation forward. We must look past what sets us all apart and instead focus on our common interests and goals in order to drive this transformation for our collective prosperity. It is the same spirit of dynamism and cooperation that facilitated national development over the past five decades which brought us to where we are today. Under the umbrella of 1Malaysia, let us rekindle that same spirit of united dynamism and cooperation to achieve our aspiration of becoming an advanced nation and an inclusive, sustainable and high income country.
- THE NEW ECONOMIC MODEL FOR MALAYSIA – THE CONCLUDING PART Putrajaya International Convention Centre (PICC) December 3, 2010
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INDEX Abdul Razak, Tun, 109 Abdullah Ahmad Badawi, Tun, 21, 75, 109 Agro Bank, 124 AIM, 129 America, 47 ASEAN, 28, 59, 61, 63, 91, 107, 153, 159, 160, 261-264, 268-269, 271-276 Asia, 11, 33-36, 36, 47, 62, 120, 137, 159, 202, 224, 247-249, 252, 261, 264, 268, 269, 275
Bank Negara Malaysia (BNM), 48 Bank Simpanan Nasional, 129, 236 Brazil, 111 British, 21 Bumiputera Commercial and Industrial Community (BCIC), 126, 285 Bumiputera Property Trust Foundation (BPTF), 220
Canada, 98 Comprehensive Economic Cooperation (CECA), 157, 261 Confederation of Indian Industries (CII), 158 China, 11-12, 27-28, 62-63, 111, 118, 153, 207, 272-274, 273
Denmark, 98
East Coast Economic Region (ECER), 153, 226 Economic Transformation Plan (ETP), 37, 44, 61, 75, 90, 113-116, 187, 213, 218, 243, 250, 263, 269, 279-280, 282, 288-289 Ekuiti Nasional Berhad (EKUINAS), 126 Employees Provident Fund (EPF), 51, 217-218, 220 Energy Efficiency (EE), 15, 208 Europe, 47, 89, 118, 269
Feed in Tariff (FiT), 222 Free Trade Agreement for Asia and the Pacific (FTAAP), 159
Giat Mara, 129, 232 Global Islamic Finance Forum, 247 Government Linked Investment Company (GLCs), 52-54, 119, 124, 218
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Government Transformation Programme (GTP), 21, 27, 30-31, 37-38, 40-46, 59, 66, 90, 113-114, 169-177, 187, 213, 243, 250, 269, 284 Green Technology Council, 208, 280 Gross Domestic Product (GDP), 83, 90, 213, 259, 261, 267, 275
Hu Jintao, 11 Human Resource Development Fund, 232 Hussein Dato’ Onn, Tun, 109
Idris Jala, Datuk Seri, 22 India, 27, 63, 111, 118, 153, 157-158, 160, 261-264, 272, 274 Initial Public Offers (IPO), 171 Institut Kemajuan Desa (INFRA), 129 Institut Keusahawanan Negara (INSKEN), 129 International Halal Integrity Alliance (IHI), 147 International Federation of Accountants, 255 International Financial Reporting Standards (IFSR), 258-259 International Islamic Liquidity Management Corporation (IILM), 253 Iskandar Malaysia, 48, 120, 226-227 Islamic Financial Services Board Council, 253 Islamic Real Estate Investment Trusts (REITs), 126
Jakarta, 83 Japan, 63, 65-70, 207, 274
Key Performance Indicators (KPIs), 134 Khazanah Nasional Berhad, 241, 251 Korea, 63, 93, 207, 274 Kuala Lumpur International Airport (KLIA), 118, 216, 251
Lembaga Tabung Angkatan Tentera, 125 Look East Policy, 65-67
1Malaysia Development Berhad (1MDB), 9, 119, 217, 242 1Malaysia, 9-12, 27, 30-31, 37, 54, 57, 66, 79, 113-114, 119, 139, 163-177, 187, 199-200, 213, 217, 232234, 238, 240, 242, 289 Mahathir Mohamad, Tun, Dr. 21, 109 Mahatma Gandhi, 15 Malaysia Green Forum (MGF2010), 73
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Malaysian Industrial Development Authority (MIDA), 51-52, 89, 117 Malaysian Industrial Energy Efficiency Improvement Project (MIEPP), 208 Malaysian International Islamic Financial Centre (MIFC), 252 Malaysian Productivity Corporation (MPC), 91, 117 Malaysian Technology Development Cooperation (MTDC), 219, 220 Manmohan Singh, Dr., 261 MARA, 127 Meiji University, 68-70 MKPI, 21 Mubadala Development Company, 9, 217 Muda Agricultural Development Area (MADA), 223 Mudharabah Innovation Fund (MIF), 120 Muhyiddin Yassin, Tan Sri, 23
Najib Tun Razak, Dato’ Sri, 10-12, 261 NAM, 118, National Economic Advisory Council (NEAC), 37, 279-283, 285 National Green Technology Policy, 75, 208 National Key Economic Activities (NKEAs), 45-46, 116-117, 138, 165, 216, 250, 283 National Key Result Areas (NKRAs), 22, 27, 41-46, 60, 66, 112, 114, 213, 216, 244 New Economic Model (NEM), 27, 37-38, 41, 45, 50, 54, 60-61, 66-67, 75, 94-95, 102, 111, 113, 151, 163, 169, 171-177, 206, 209, 213, 279, 282-284, 286 New Economic Policy (NEP), 41-42 Non-Communicable Disease (NCD), 198 Northern Corridor Economic Region (NCER), 226
Organisation of Islamic Conference (OIC), 82-87, 118, 147, 151
Pakistan, 153 Pelaburan Hartanah Berhad, 126 PEMANDU, 46, 61, 289 PEMUDAH, 115 Perbadanan Usahawan Nasional Berhad (PUNB), 127 PERMATA, 132, 230 Permodalan Nasional Berhad, 125, 217 PETRONAS, 119, 218 PLUS, 53, 240 Pos Malaysia, 54
Renewable Energy (RE), 222 Retail Shop Transformation Programme (TUKAR), 238
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Russia, 111 Sarawak Corridor of Renewable Energy (SCORE), 11, 119, 227 Saudi Arabia, 11, 53 SIRIM, 79 Small and Medium Enterprises (SMEs), 93-94, 123, 133, 151, 173-174, 284-285 Small Renewable Energy Program (SREP), 16 Special Innovation Unit (UNIK), 227 Standard Curriculum for Primary Schools (KSSR), 231 State Grid Corporation of China (SGCC), 11 Strategic Reform Initiatives (SRIs), 279, 282 Sultan Abdul Aziz Shah Airport, 226 Suria 1000 Program, 17, 84 Sustainable Energy Development Authority (SEDA), 209 Susuk, 91 Switzerland, 98
Tabung Haji, 53 Taiwan, 93 Tan Cheng Lock, Tun, 170 TEKUN, 129 Tenaga Nasional Berhad (TNB), 53 Tunku Abdul Rahman Putra, 109, 170
United Kingdom, 21, 47 United Nations Humanitarian Response Depot (UNHRD), 202 United States, 89
V.T. Sambanthan, Tun, 170
Western Pacific Region, 197 World Health Organisation (WHO), 163, 197, 202 World Trade Organisation (WTO), 160, 276
Yayasan 1MDB, 12
Zeti Akhtar Aziz, 253
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