MALAYSIAN NEW ECONOMIC MODEL ADDRESSING CHALLENGES OF THE

MALAYSIAN NEW ECONOMIC MODEL ADDRESSING CHALLENGES OF THE GLOBALISATION Muhd Shahrulmiza Zakaria Director, Trade Division Malaysian Friendship & Trade Centre, Taipei

CONTENT Background Issues & Challenges New Economic Model Moving Forward Conclusion 2

BACKGROUND

BACKDROP • Dato’ Sri Najib Razak took the office in April 2009 as the sixth Prime Minister of Malaysia. • Pledge to continue the growth & development with new approach, continuous improvement of Government’s delivery of services, performance-oriented measures and closer focus to the people. • Introduce the clarion call: “ 1 Malaysia, People First, Performance Now” • The NEAC was first mooted by the Prime Minister after he came into office in April 2009, to evaluate the fluid state of the economy, and to recommend medium-to long-term strategic prescriptions for structural reform aimed at propelling Malaysia to a higher level of competitiveness and efficiency.

• The National Economic Advisory Council (NEAC) is mandated by the Prime Minister of Malaysia to formulate an economic transformation model for the country. • To provide a fresh, independent perspective in transforming Malaysia from a middle income economy to a high income economy by 2020. • In the midst of the global economic crisis, the NEAC is entrusted with the responsibility of providing a fresh view on Malaysia’s strategic position in the global economic arena and recommending a transformational strategy for the country. • Bridging the gap between public and private sectors; create a new public-private partnership; intensify regional cooperation; and increase global competitiveness. • To provide a directional and strategic guidance on the implementation of the transformation plan to ensure that the recommendations can be effectively executed at all levels.

ISSUES & CHALLENGES

ISSUES & DEVELOPMENTS The global landscape has evolved at such a drastic pace over the past decade that economies are grappling to find elusive niche areas to excel and prosper. The formula used to drive Malaysia’s success in the past no longer applies in today’s environment. Regional competitors have overtaken us in the competition for investment and growth. We not only have to regain lost ground; we need to step up to the next stage of our country’s development while moving ahead of our competitors. In these challenging times, Malaysia must seek new opportunities • The global economic crisis / financial tsunami (2007 -present). • Emergence of China (PRC) as new economic superpower & major economic partner for Malaysia. • The increasing importance of BRIC countries (Brazil, Russia, India + China) as large scale economies, trading partner and investment destinations. • Increasing competitiveness of neighbouring ASEAN countries. • Other developmental issues - climate changes, political instability, terrorism, developed countries VS developing countries VS less developed countries, etc

IMPACT OF GLOBALISATION TO MALAYSIA • Inflow of foreign investments • Trade as major sources of economic growth • Free flow of goods to Malaysian market – ASEAN, China, Japanese, ROK • Malaysia as popular tourism destination • Socio-economic impact – demography, economic distribution, changes in the lifestyle, the way of doing business, culture

PRE-NEM ISSUES & CHALLENGES • Middle income trap. • Slower economic engine & emergence of other developing economies. • Declining investment & attractiveness as investment destinations. • Composition of exports were mainly commodities and low value-added manufactured products. • Slow productivity growth due to low creativity and product innovation (less focus on R&D). • High dependency on low skilled workers & foreign labours. • Critical stage of human capital – brain drain, migration. • Wider gap between the rich and poor. • The Government is burdened with subsidies.

MALAYSIAN PROGRESS Today Last year: Malaysia: - implementation of the RM 67 billion stimulus package; World in Recession; Fears of depression -GDP Q 4 2009: 4. 5%; -GDP 2009: -1. 7%. GDP 10

CURRENT SCENARIO • • GDP growth (2009) : -1. 7% Total Trade : RM 988. 23 million Total Exports : RM 553. 29 million Total Imports : RM 434. 94 million Consumer Price Index : 1. 3 Unemployment Rate (2009) : 3. 7 Industrial production index : lowest (93. 4), currently 102. 2 • Population (2009) : 23. 8 million SOURCE: Department of Statistics, Malaysia

FOREIGN INVESTMENTS TO MALAYSIA IN 2009 FOREIGN INVESTMENTS BY COUNTRY 2009 FDI New Expansion / Diversification Total 471 295 766 Potential Employment 39, 706 24, 624 64, 330 Total Capital Investment (US$ mil) 6, 447. 8 3, 095. 1 9, 542. 9 Japan 54 2, 058, 886, 863 - Domestic (US$ mil) 1, 653. 5 1, 414. 4 3, 067. 9 Hong Kong 7 1, 554, 289, 782 - Foreign (US$ mil) 4, 794. 3 1, 680. 8 6, 475. 0 USA 19 685, 668, 785 Singapore 92 582, 588, 744 Taiwan 32 209, 384, 375 Netherlands 21 140, 262, 261 Korea, Rep. 11 133, 193, 666 Number of projects NOTES: • Summation of totals may not be exact due to rounding difficulties. • 2009 : US$1 = RM 3. 42 US Dollar – US$ SOURCE: MIDA 2009 COUNTRY No. of projects Foreign Investment (US$)

NEW ECONOMIC MODEL

OVERVIEW • The overall framework of New Economic Model was unveiled on 30 Mac 2010, during Invest Malaysia 2010. • The first part of NEM has been presented on 30 Mac, while the second part of the report will be presented together with 10 th Malaysia Plan & Malaysian Government Budget Proposal in October 2010. • For the first time – a strategic plan was created in dynamic manner – seeking consultation / feedback from all quarters, including general public.

The New Economic Model § From a Middle Income to a High Income Economy by 2020. § New Economic Model is expected to be anchored on: ü innovation ü creativity ü high value sources of growth ü modern services sector ü skilled manpower 15

OVERALL FRAMEWORK NATIONAL TRANSFORMATION

NEM PRINCIPLES HIGH INCOME SUSTAINABILITY INCLUSIVENESS Market friendly Transparent Merit based Need based

NEM GOALS

NEM GOALS & CHARACTERISTICS

STRATEGIC REFORM INITIATIVES

MOVING FORWARD

THE WAY FORWARD Government Transformation Programme, New Economic Model 10 th Malaysia Plan ØPrivate sector leads, Government Facilitates, ØReview of subsidies, ØInnovation, creativity, value-added activities 22

Our economic and social goals will be achieved through the 1 Malaysia concept. 23

GOVERNMENT TRANSFORMATION PROGRAMME (GTP) Objectives: Ø to transform the Government delivery system into people-centered and outcomeoriented; and Ø to move Malaysia forward to become an advanced, united and just society with higher living standards for all. • GTP is in line with the national mission of achieving Vision 2020. 24

upgrade living standards of low-income households upgrade rural basic infrastructure Reduce crime Combat corruption 6 NKRAs upgrade urban public transportatio n widen access to quality education 25

THE NEXT STEP FORWARD • • Educate the people Initiate the change Detail out specific programmes Implement the programmes Performance measurement Continuous development Dynamism and flexibility

POST-NEM ISSUES & CHALLENGES • “Change” is today’s buzzword - and with good reason. However, the underlying challenges for a “change”: – – – Mindset Culture & way of doing things Institutional changes Political will Satisfying all quarters? Sustaining the change • Integration of all strategic initiatives • Monitoring the progress and success stories • External environment – global economy, trade & other pressing issues (e. g. terrorism, climate change)

REFERENCES: USEFUL WEBSITES • • Prime Minister Department : www. pmo. gov. my National Economic Advisory Council: www. neac. gov. my Government Transformation Programme : www. transformation. gov. my 1 Malaysia : www. 1 malaysia. com. my Malaysian Official Statistics : www. statistics. gov. my Ministry of International Trade & Industry : www. miti. gov. my Malaysian External Trade Development Corporation : www. matrade. gov. my Malaysian Industrial Development Authority : www. mida. gov. my

• Malaysia faced big challenges due to globalisation. • New Economic Model (NEM) is a dynamic and strategic action plan to bring Malaysian economy to greater heights. • The success of NEM depends on how the people (Malaysians) manage and overcome the challenges for the change.

THANK YOU 謝 謝 FOR YOUR ATTENTION Prepared by: Trade Division (MATRADE) MALAYSIAN FRIENDSHIP & TRADE CENTRE, TAIPEI E-mail : taipei@matrade. gov. my Website: www. matrade. gov. my © MMX. All Rights Reserved.