Transformation in High Gear The Malaysian Economic Model

- Challenges and Opportunities

Dr. Mohd Emir Mavani

Director NKEA Financial Services

Performance Management and Delivery Unit (PEMANDU)

National Transformation Policy Towards Vision 2020

1Malaysia

(People First, Performance Now)

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10th & 11th Malaysia Plan

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NEW ECONOMIC MODEL: Making Us A Rich Country, For Everyone & For A Long Time

High-Income

Inclusiveness Sustainability

Target USD 15,000

GNI per capita by 2020

Enables all

communities

to benefit

from the

wealth of the

country

Meets present

needs without

compromising

future

generations

Quality

of Life

Jobs

Gross National Income (GNI)

Investment

Transformational Actions

True North Of ETP

FOCUS ‘Drivers’ •12 NKEAS •131 EPPs •60 BOs COMPETITIVENESS ‘Enablers’ •51 Policy Measures •6 SRIs & Natural Homes

•USD15,000 (RM48,000) per Capita GNI

•USD523 Billion (RM1.7 Trillion) GNI

•6% GDP Growth per Annum

•USD444 Billion (RM1.4 Trillion) Investment

•92% Private, 8% Public Investment •73% Domestic, 27% Foreign Direct

Investment

•3.3 Million Additional Jobs

SRIs SRIs

&

To Become A High-Income Nation, We Need:

We need “Drivers” to ensure focus on

high-impact areas

FOCUS

NKEAs + NKRAs

We Need “Enablers” To Ensure

Competitiveness

COMPETITIVENESS

Strategic Reform Initiatives National Key Economic Areas

National Key Result Areas

SRIs SRIs

& FOCUS

NKRAs + NKEAs

We Need “Enablers” To Ensure

Competitiveness

COMPETITIVENESS

Strategic Reform Initiatives National Key Result Areas

National Key Economic Areas

We need “Drivers” to ensure focus on

high-impact areas

To Become A High-Income Nation, We Need:

SRIs Provide The Enablers For Malaysia To Be Competitive

37 Grouped In SIX

Clusters For Execution

14 With Natural Homes Within The NKEAs /

NKRAs 51

Policy Measures

Competition, Standards and Liberalisation

Public Service Delivery

Human Capital Development

Public Finance

Government’s Role in

Business

Narrowing Disparities

1 2

3 4

5 6

Competition, Standards & Liberalisation Competition Act

Enforced On 1 Jan 2012

Remove Anti-Competitive

Agreements

Remove Abuse Of A Dominant Position

Development of Standards

Malaysia has 6,260 Standards But Less Than 10% are Enforced

Liberalisation of sub-sectors

Up to 100% foreign equity participation will be allowed in phases in 2012

17 (+1) sub-sectors announced in Budget 2012

for liberalisation

12 sectors fully liberalised: Telco ASP,

TVET, TVET Special Needs, Private Hospitals, Dept &

Specialty Stores, Incineration,

Accounting/Taxation, Skills Training, Courier,

Legal, Medical, Int’l School

Amendments to the Standards of Malaysia Act 1996 gazetted on 9

February 2012 to accelerate development of standards

Adoption of international standards will be reduced to <9 months, compared to >1 year currently

Proposed for local standards to be completed within 1.5 years, compared with three years currently

Public Finance

Improving Tax Collection GST

Developed Nations

10% - 15% Malaysia’s Tax Gap

20%

RM20 Billion *Based On 2009 Collection

Developing Nations

30%

Additional tax revenue collected for 2011 through improved efficiency

Direct tax: RM23.2 b Indirect tax: RM2.1 b

Total: RM25.3 b 2012F: +RM17.6 b

143 Countries have Implemented GST

4%

5%

7%

RM6.3 b

RM9.7 b

RM25.7 b Amounts in first 2 years of implementation

Source: Economic Report 2012/2013, MOF

Public Service Delivery Business Process Re-engineering

785

licences

Real-time performance monitoring

92 police stations in Selangor, extending to Penang & Johor

Open Recruitment & Remuneration Review

Open Recruitment (between Civil Service &

Private Sector) & Remuneration Review Will

Improve Performance

Lean & Efficient

Government

263 licenses to be eliminated or composited

522

licences

-34%

Human Capital Development

Progress

Upskilling/Reskilling - NTEP

• The National Talent Enhancement

Programme (NTEP) was

launched covering 5

states/regions and 650

placements across Malaysia for

E&E & BSvc (Green Tech)

• 315 trainees in companies

• Accelerate development of skilled

workforce through partnership via

industry attachment programmes

HR Management in SMEs

• 4,567 SMEs benefited from free

tailored HR solutions via

interactive HR portal

• 7,301 SMEs benefited from HR

Capability Building Programme

Minimum Wage

• PM announced minimum

wage of RM900/RM800

on 30 Apr 2012

• 6 months to implement

post-gazette, 12 months

for micro-enterprises

Employment Act 1955

(Phase 1 & 2)

• Phase 1 of Employment Act

1955 passed in Parliament

includes 28 amendments to

the current provisions, 17 new

provisions and 2 provisions

repealed

• Phase 2 in progress

• Bill on raising minimum

retirement age to 60 passed

on 28 June

Project Flip - O&G NOSS

• MOU signed to leverage

PETRONAS Skills Training (POSS)

to develop National Skills Training

(NOSS) in 7 disciplines

• Enable technical-vocational training

centres to deliver up-to-date,

industry relevant skills training

Up-skilling / Re-skilling – MyProcert

• MyProcert programme launched on 11

Oct 2011 for BSvc & CCI

• 6 partners to date: SAP, Huawei,

Oracle, iTrain, Scicom, SnT

• 1,250 professionals targeted, 754

enrolled

• Catalytic to up-skill Malaysians to global

certification standards

SRIs SRIs

& FOCUS

We Need “Enablers” To Ensure

Competitiveness

COMPETITIVENESS

Strategic Reform Initiatives National Key Economic Areas National Key Result Areas

NKEAs + NKRAs

We need “Drivers” to ensure focus on

high-impact areas

To Become A High-Income Nation, We Need:

A Vertical Take-Off

Comms Content &

Infra

11 Economic Sectors

+

Greater

Kuala Lumpur

Wholesale & Retail

Oil, Gas & Energy

Palm Oil & Rubber

Healthcare

Financial Services

Greater KL/Klang

Valley

Agriculture

Tourism

Education Electrical & Electronics

Business Services

141%

108%

118%

120%

151% 101% 109% 138%

119% 170% 98% 103%

123%

110 Projects

Investment: RM179.2 b GNI in 2020: RM129.5 b

Jobs: 313,741

2011

28 Projects

Investment: RM26.1 b GNI in 2020: RM7.0 b

Jobs: 51,130

YTD 2012

138 Projects

Investment: RM205.3 b GNI in 2020: RM136.5 b

Jobs: 364,871

Total To-date

Progress To-Date

= +

Public Investment Private Investment

1H 2011

1H 2012

Estd 2012 RM33.5b

RM41.7b

RM58.8b

RM75.3b

Note: Based on current prices

24.3%

Investment: 58.9% Targeted Private Investment Realised

28.1%

RM100.0b

RM127.9b

GKL: MRT Making Good Progress

Work Package Tender Status

Awarded In Progress To Be Called

53 (RM22.31b)

7

25

North Sabah & Baram

Delta, Sarawak (EOR)

US$12.5b

Berantai

(Marginal Fields)

US$850m

Balai Cluster

(Marginal Fields)

US$850m

New Explorations

> US$3.0b

Upgrade, Expand &

Build Production

Facilities

US$1.7b

Regasification Terminal

US$300m

OGE: Key Upstream Investments In Execution

Potential Investor A RM24 billion 2,000 acres Refinery Petrochemicals (future

phase)

Potential Investor B RM30 billion 4,000 acres Refinery Petrochemicals

PETRONAS RAPID RM60 billion 6,500 acres Refinery Petrochemicals 2016 commissioning

DIALOG-VOPAK RM5-10 billion 700 acres reclaimed land Petroleum Terminal LNG Regasification Plant 2014 Phase 1 commissioning

Total Potential RM170+ billion of investment 21,000 acres of industrial area

OGE: Pengerang Integrated Petroleum Complex

741 acres reclamation

Deepwater (24 metres)

jetty facilities capable of

handling VLCCs & ULCCs

Sheltered harbor

Storage capacity 5m m3

Phased investment of

about RM5 billion

Centralised Terminal

Facility for refining and

petrochemical industry

Phase 1 commissioning Q1

2014

Phase 1 : 150 acres + Capacity of 1.3 million m3 + 7 berths = RM 1.7 billion

OGE: Storage Ramp-Up Progressing Well Dialog-Vopak Independent Deepwater Petroleum Terminal in Pengerang started

construction in late 2011

Solar Cluster

Electric Vehicle

Test & Measurement Hub

Solar

Test & Measurement Electric Vehicle

Approved investment:

RM282 million (to date)

Approved investment:

RM13.76 billion (to date)

Proposed investment:

RM 382 million (in future)

E&E: New & Emerging Clusters

POR: Upstream & Downstream Progress

83,200 ha of plantation backlog replanted, 87,327 ha YTD 2012

20% OER in 2011, 20.34% YTD 2012

RM1.35b commitment in oleo derivatives and food & health segment up to 2014

Before After

W&R: Improving Livelihood Of Sundry Shop Owners

1,070 shops transformed since 2011 (519 in 2011 + 551 YTD in 2012)

Impact On Confidence & Economy

Steady Growth…

2007 2008 2009 2010 2011 1H 2012

Real GDP Growth % (YoY)

Real GDP Growth % (YoY)

6.5

4.8

-1.6

7.2

5.1 5.1

GDP Demand Side Breakdown

Private Consumption Public Consumption Private Investment Public Investment Trade

Inventory

48.6%

11.6%

16.5%

12.7%

60.2%

Investment The Key Driver Domestic Strength A Cushion Against External Vagaries

Note: 1H 2012 GDP at current prices

FY 2011 (%)

1H 2012 (%)

Real GDP 5.1 5.1

Private Consumption

7.1 8.1

Public Consumption

16.1 8.4

Private Investment 12.2 22.7

Public Investment -0.3 19.5

Exports 4.2 2.5

Imports 6.2 7.5

9.1%

1.5%

25.6%

Note: Based on constant prices

GDP Supply Side Breakdown

Agriculture

Mining

Manufacturing

Construction

Services

24.6%

3.6%

49.5%

10.1%

Services, Manufacturing major contributors Construction Boost, Mining Recovery in 1H 2012

11.1%

FY 2011 (%)

Q1 2012 (%)

Real GDP 5.1 5.1

Agriculture 5.9 -1.5

Mining -5.7 1.2

Manufacturing 4.6 5.0

Construction 4.6 18.9

Services 7.0 5.8

Note: 1H 2012 GDP at current prices

Note: Based on constant prices

Consumer Remains Optimistic…

81

87

96 95 98 99

103

107 105

110

101 101

107 110

101

70

75

80

85

90

95

100

105

110

115

120

Q1 09

Q2 09

Q3 09

Q4 09

Q1 10

Q2 10

Q3 10

Q4 10

Q1 11

Q2 11

Q3 11

Q4 11

Q1 12

Q2 12

Q3 12

Source: Nielsen Consumer Confidence Index

Source: Bank Negara Malaysia

Business Loans Leads Total Loans Growth Household Loans Moderate On Tighter BNM Rules

10

11

12

13

14

15

16

Sep 11 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mac 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12

Business Loans Household Loans Total Loans

13.2%

11.9%

12.2%

Source: Bank Negara Malaysia

Jan 12

Feb 12

Mac 12

Apr 12

May 12

Jun 12

Jul 12

Aug 12

Sep 12

Loan Applications

-2.7 47.3 14.1 5.8 15.1 9.7 -6.0 -9.9 9.1

Loan Approvals -2.9 17.6 -2.2 -11.4 18.2 -3.0 -2.0 -13.0 -1.1

Loan Disbursements

5.6 35.5 8.9 17.6 35.4 18.9 25.6 8.7 12.7

Loan-to-Deposit Ratio (%)

79.3 79.0 80.2 79.6 81.3 82.1 82.1 82.1 82.0

Net Impaired Loan Ratio (%)

1.9 1.9 1.7 1.8 1.6 1.5 1.5 1.5 1.5

Robust Financial Health Enables Lending

Private Investment Recovers…

0

20

40

60

80

100

120

2009 2010 2011 2012F

Public (RM b) Private (RM b)

51.7%

48.3% 43.0%

57.0% 22.7% 1H 2012

12.2% FY 2011 Average 6.7%

2000-2010

Source: Department of Statistics, at constant prices

56.1%

43.9%

FDI, Trade Steady Despite Headwinds…

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Total FDI

RM678.2b 1H 2012

4.8%

RM647.2b

1H 2011

Trade

3.2

2.8

4.6

4.1

6.1

8.6

7.2

1.4

9.1

12.0

(US$ b)

Sources: UNCTAD, Matrade

FDI Confidence Rising

.

Source: AT Kearney Foreign Direct Investment Confidence Index®, 2012

Easing Doing Business

Getting credit: #1 (unchanged)

Protecting investors: #4

(unchanged)

Getting electricity: #28 from #59

Registering property: #33 from #59

Paying taxes: #15 from #41

Trading across borders: #11 from

#29

Dealing with construction permits:

#95 from #113

Ahead of Sweden, Taiwan, Germany,

Japan & Switzerland

2010 (n=183)

2011 (n=183)

2012 (n=183)

#18

#23 #23

2013 (n=183)

#12

World Bank

Doing Business 2013

#14 out of 59 countries globally

#4 amongst 13 Asia Pacific

countries

#5 of 29 economies with more

than 20 million population

#2 after Taiwan among 29

economies with GDP per capita

less than US$20,000

Ahead of Australia, UK, South

Korea, Japan & France

Institute for Management Development

World Competitiveness Yearbook 2012

Becoming More Competitive

2010 (n=58)

2011 (n=59)

2012 (n=59)

#14

#10

#16 #18

2010 (n=57)

World Economic Forum

Global Competitiveness Report 2011 #25 out of 144 countries globally

#8 amongst Asia Pacific

countries

#2 in ASEAN

Upgraded to transition stage

between efficiency-driven

towards innovation-driven

Ahead of Israel, Ireland & China

Still On Competitiveness

2009 (n=133)

2010 (n=139)

2011 (n=142)

#21

#24

#26

2012 (n=144)

#25

Although We Face Serious Challenges In This Difficult Global Economy…

The Transformation is a comprehensive & holistic effort that tackles both

focused actions &

strategic reform initiatives

Being “Character”

Doing “Action”

• 12 NKEAs

• 131 EPPs

• 60 BOs

• Cities & Corridor

• Rural Transformation Programme (RTP)

• 51 Strategic Reform Initiatives under the NEM

• Other initiatives under the GTP e.g. Corruption NKRA, Education NKRA, Crime NKRA, Urban Public Transportation NKRA

We Have Concrete Programmes To Weather The Challenges…

... And We’ve Made Great Strides In A Short Space Of Time

THANK YOU + etp.pemandu.gov.my + www.facebook.com/etpmalaysia + @etp_roadmap + @gtp_roadmap + http://etp.pemandu.gov.my/form_how_to_participate.aspx