Malaysia’s goal of high-income status by 2020 requires, among others, achieving an average GDP growth of 6% per annum during the 10th Plan period. This target cannot be achieved without a comprehensive economic transformation.
The imperative for change is driven by two major factors: first, changes in the global competitive landscape; and second, past strategies are proving inadequate.
Malaysia risks getting caught in a middle-income trap, being neither a low-cost imitator nor a high-value-add innovator.
Carrying on with the status quo is not an option. It will only put Malaysia at risk of being overtaken by other countries, just as we had overtaken others in the past.
The central themes of the 10MP are encapsulated in 10 Big Ideas.
1 Internally driven, externally aware
Rationale
• Globalisation has intensified competition, and we must embrace the rules of the game. Transformation will involve temporary short-term economic dislocation.
Policy/strategy
• Implement Competition Law, remove distortionary price controls and liberalise market, especially in services. Emphasise tradeables, export-orientated sectors and services that support trade. Review labour laws, other regulations to facilitate well-functioning market economy.
• Emphasise ease of doing business, facilitate private investments and enable private sector to be engine of growth.
Measure/programme
• Facilitate availability of funding, support micro-enterprises, venture capital for innovation, export-related financing.
• Prioritise public sector investments with high spinoff potential, especially in strategic sectors.
2 Leveraging on our diversity
Rationale
• The three major ethnic groups provide natural linkage to China, India and Indonesia, fast-growing economies in region. Islam links Malaysia with the Organisation of the Islamic Conference (OIC). Facilitating greater global and regional economic integration is key to strengthening competitiveness.
Policy/strategy
• Promote trade, enhance regional connectivity, trade agreements and strengthen links with traditional export markets, eg Australia, Europe, US.
Measure/programme
• Support Malaysian companies to become regional champions, open new markets. Mida and Matrade empowered to secure new investment, trade openings. Intensify G2G collaboration, especially in infrastructure projects.
• Pursue bilateral investment collaboration such as 1Malaysia Development Bhd’s MoUs with China, Qatar agencies.
• Establish Talent Corp to tap Malaysian diaspora for advisory roles, business networks, assistance for Malaysian companies entering overseas markets.
3 High income through specialisation
Rationale
• Malaysia’s success in transforming itself from a poor country at Independence to high middle-income economy today was driven by sectoral diversification strategy. Next phase of transformation requires shift towards higher-value-add and knowledge-intensive activities.
• Necessitates specialisation for critical mass and ecosystem of firms and talent to drive economies of scale.
Policy/strategy
• Focus resources on National Key Economic Areas (NKEAs), specific sub-sectors. Thrust of specialisation strategy to build on existing strengths, core competencies.
Measure/programme
• Focus on quality and strengthening value chain, eg, international accreditation of healthcare providers, developing E&E centres of excellence.
• Drive reform through productivity, innovation, attracting talent, developing clusters with agglomeration economies.
4 Productivity-led growth through innovation
Rationale
• Income of Malaysians can effectively grow only through sustained productivity improvements.
Policy/strategy
• Special emphasis on productivity enablers:
- Focus on skills development
- Promote development of concentrated industrial clusters, supporting ecosystem
- Target quality investments
- Increase public investment in innovation enablers, especially R&D and venture capital funding
Measure/programme
• Invest in creativity, stimulate entrepreneurship, revamp school curriculum, promote risk capital and provide more funding for venture capital.
• Review bankruptcy law to give entrepreneurs second chance. Relax rules for small knowledge-based enterprises.
5 Growing our talent
Rationale
• Human capital development key to economic transformation.
Policy/strategy
• Undertake comprehensive reform across entire life-cycle of human capital development, from early childhood education through to upskilling existing adult workforce.
Measure/programme
• Schools, principals to be increasingly accountable for student performance.
• Mainstream technical education, vocational training.
• Expand on-the-job training programmes.
• Ensure that no child is denied opportunity to succeed.
• Establish high-performing schools.
• Talent Corporation to secure top talent to drive key sectors.
• Strategies to promote liveable cities, develop specialised industrial clusters.
6 Equal opportunity, protection for the vulnerable
Rationale
• Economic development framework based on growth with equity needs fresh approach due to changing circumstances.
• The bumiputera development agenda, while still relevant, will need to be market-friendly, merit-based, transparent and needs-based.
• The incidence of poverty has been reduced from 49.3% in 1970 to only 3.8% in 2009.
Policy/strategy
• Build competitive bumiputera enterprises, raise bumiputera participation in senior management.
• Ensure better standard of living for bottom 40% of households through capacity building in income generation.
• Broaden wealth measurement to include equity, property ownership, representation in enterprises and high-income skilled jobs.
Measure/programme
• Income generating opportunities, eg in agropolitan schemes.
• Micro credit schemes for urban poor.
• Skills training and entrepreneur development programmes for low-income and low-skills groups in workforce.
7 Concentrated growth, inclusive development
Rationale
• Liveable cities important driver in competition for high-skilled talent on global stage.
Policy/strategy
• Include initiatives to address crime and improve public transportation under the national key result areas (NKRAs) in broader concept of liveability to create vibrant environment to live, work and play.
• Strengthen existing clusters to create economies of scale and innovation.
• Emphasise rural development by improving access to education and utilities, connectivity and upgrading rural economic activities.
Measure/programme
• Undertake major projects to transform Greater Kuala Lumpur conurbation into leading global city, including international financial district, redevelopment of Sg Besi airport, Sg Buloh township development, integrated convention facilities.
• Invest in public transport, expand KL LRT network, mass rapid transit system, improve connectivity.
• Restore, protect heritage buildings and unlock development value of land, eg Kampung Bharu project in KL.
• Specific strategies for Georgetown, Johor Bahru, Kuching, Kota Kinabalu, strengthen industrial clusters, eg E&E cluster in Penang.
8 Smart partnerships
Rationale
• Smart partnerships between public and private sectors needed to drive economic transformation agenda.
Policy/strategy
• Catalyse, accelerate strategic private investments.
• Partnering to advance industry and economic development.
• Collaborate to support public development and social development.
Measure/programme
• RM20b facilitation fund to catalyse private investments in strategic areas, eg transportation, education, healthcare, tourism, through infrastructure, grants, offtake agreements.
• New wave of privatisations, with more equitable sharing of risks and returns.
• Co-invest in high growth and strategic sectors, through Mavcap, MTDC, Ekuinas.
• Collaborate in human capital development, co-fund post-grad courses, R&D and centres of excellence.
• Special financing schemes for foreign knowledge SMEs to set up operations in Malaysia.
• Collaborate between GLCs and private sector to pursue overseas opportunities.
• Greater collaboration between public sector, private sector and civil society for delivery of social objectives.
9 Valuing our environment
Rationale
• Environmental factors need to be mainstreamed in economic planning to ensure sustainable use of resources.
• Key to sustainability is proper valuation of environmental resources, through assessing opportunity cost and environmental impact of investments.
Policy/strategy
• Move energy policy towards market pricing of gas by 2015. Restructure water tariffs towards full cost recovery.
Measure/programme
• Introduce feed-in-tariff to help finance renewable energy investments.
• Provide fiscal incentives, funding for green technology investments.
• Promote projects eligible for carbon credits.
• Promote eco-tourism, facilitate greater participation of local communities in eco-tourism activities.
• Public-private CSR initiatives for protection of flagship species.
10 Transforming government
Rationale
• For Malaysia to be a globally competitive high-income country, government needs to act like competitive corporation.
• Transformation based on four principles: culture of creativity and innovation, speedy decision-making and execution, value for money and integrity.
Policy/strategy
• Customer focus to be reflected in consultative approach to policy formulation.
• Create compelling value proposition for Malaysia as a place to do business.
• Shift from physical hardware to soft infrastructure.
• Focus on sustainability of public finances by managing balance between growth and systematic reduction of fiscal deficit.
• Special focus on attracting top talent to public sector. Whole-of-government approach, being aligned in objectives and cutting across silos to deliver outcomes.
Measure/programme
• Efficiency and timeliness of government procedures by international benchmark.
• Devolution of authority.
• Driving performance through competition, by ranking of schools, police stations, local authorities.
• Increase proportion of development funding to 40% from 22% in 9MP.
• Reduce subsidies, drive efficiencies and transparency in procurement, drive productivity in ICT and broaden tax collection base.
• KPIs for ministers and ministries, from national level to implementation, with close monitoring and reporting to PM.
• Establish Economic Delivery Unit under Pemandu, to drive and monitor economic transformation, anchored on NKEAs and key enablers for New Economic Model.
Written by The Edge Financial Daily
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