MALAYSIAN NEW ECONOMIC MODELMALAYSIAN NEW ECONOMIC MODELADDRESSING CHALLENGES OF THE GLOBALISATIONADDRESSING CHALLENGES OF THE GLOBALISATION

Muhd Shahrulmiza Zakaria Director, Trade Division Malaysian Friendship & Trade Centre, Taipei

2

New Economic Model

Issues & Challenges

Moving Forward

CONTENTCONTENT

Background

Conclusion

BACKGROUNDBACKGROUND

• 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:

“1Malaysia, 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.

BACKDROP

• 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 & CHALLENGESISSUES & CHALLENGES

ISSUES & DEVELOPMENTSISSUES & DEVELOPMENTS

• 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

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

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.

10

MALAYSIAN PROGRESSMALAYSIAN PROGRESS

World in Recession;

Fears of depression

Malaysia:- implementation of the RM67 billion stimulus package;-GDP Q4 2009: 4.5%; -GDP 2009: -1.7%.GDP

Today

Last year:

CURRENT SCENARIOCURRENT SCENARIO• GDP growth (2009) : -1.7%• Total Trade : RM988.23 million• Total Exports : RM553.29 million• Total Imports : RM434.94 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

US Dollar – US$SOURCE: MIDA

FDI2009

New Expansion / Diversification Total

Number of projects 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

- Domestic (US$ mil) 1,653.5 1,414.4 3,067.9

- Foreign (US$ mil) 4,794.3 1,680.8 6,475.0

FOREIGN INVESTMENTS TO MALAYSIA IN 2009

COUNTRY

2009

No. of projects

Foreign Investment

(US$)

Japan 54 2,058,886,863

Hong Kong 7 1,554,289,782

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

FOREIGN INVESTMENTS BY COUNTRY 2009

NOTES: • Summation of totals may not be exact due to rounding difficulties.• 2009 : US$1 = RM3.42

NEW ECONOMIC MODELNEW 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 10th 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.

15

The New Economic Model

From a Middle Income to a High Income Economy by 2020.

New Economic Model is expected to be anchored on:innovationcreativityhigh value sources of growthmodern services sectorskilled manpower

OVERALL FRAMEWORK NATIONAL TRANSFORMATION

NEM PRINCIPLES

HIGH INCOME

SUSTAINABILITY INCLUSIVENESS

Market friendly

Merit based

Transparent

Need based

NEM GOALS

NEM GOALS & CHARACTERISTICS

STRATEGIC REFORM INITIATIVES

MOVING FORWARDMOVING FORWARD

2222

Private sector leads, Government Facilitates,

Review of subsidies,

Innovation, creativity, value-added activities

THE WAY FORWARD

2323

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

23

24

Objectives: to transform the Government delivery

system into people-centered and outcome-oriented; and

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.

GOVERNMENT TRANSFORMATION PROGRAMME (GTP)

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 • 1Malaysia : www.1malaysia.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.

Prepared by:Trade Division (MATRADE)MALAYSIAN FRIENDSHIP & TRADE CENTRE, TAIPEIE-mail : taipei@matrade.gov.myWebsite: www.matrade.gov.my© MMX. All Rights Reserved.

THANK YOUFOR YOUR ATTENTION

謝 謝