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

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 Governments 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.

 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 Malaysias 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 Malaysias success in the past no longer applies in todays 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 countrys 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 RM67 billion stimulus package; World in Recession; Fears of depression
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-GDP Q4 2009: 4.5%; -GDP 2009: -1.7%.GDP

CURRENT 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
FOREIGN INVESTMENTS TO MALAYSIA IN 2009
2009

FOREIGN INVESTMENTS BY COUNTRY 2009

2009

FDI
Number of projects

New
471

Expansion / Diversification 295

Total
766

COUNTRY
Japan Hong Kong USA Singapore

Potential Employment
Total Capital Investment (US$ mil) - Domestic (US$ mil) - Foreign (US$ mil)

39,706
6,447.8 1,653.5 4,794.3

24,624
3,095.1 1,414.4 1,680.8

64,330
9,542.9 3,067.9 6,475.0

No. of projects
54 7 19 92

Foreign Investment (US$) 2,058,886,863 1,554,289,782 685,668,785 582,588,744

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

Taiwan
Netherlands Korea,Rep.

32
21 11

209,384,375
140,262,261 133,193,666

US Dollar US$ SOURCE: MIDA

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 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.

The New Economic Model

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

Private sector leads, Government Facilitates, Review of subsidies,

New Economic Model

10th Malaysia Plan

Innovation, creativity, value-added activities

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

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GOVERNMENT TRANSFORMATION PROGRAMME (GTP)

Objectives: to transform the Government delivery system into people-centered and outcomeoriented; 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.
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upgrade living standards of low-income households upgrade rural basic infrastructure

Reduce crime
Combat corruption

6 NKRAs
widen access to quality education

upgrade urban public transportatio n

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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 todays 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.

THANK YOU
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.