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

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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:

“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 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 RM67
billion stimulus package;
World in -GDP Q4 2009: 4.5%;
Recession; -GDP 2009: -1.7%.GDP
Fears of
depression

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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 FOREIGN INVESTMENTS BY
2009 COUNTRY 2009
 FDI Expansion /
New Total 2009
Diversification
Number of projects 471 295 766 COUNTRY No. of
Foreign
Investment
Potential Employment 39,706 24,624 64,330 projects
(US$)
Total Capital
6,447.8 3,095.1 9,542.9 Japan 54 2,058,886,863
Investment (US$ mil)
- 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

NOTES:
• Summation of totals may not be exact due to rounding difficulties. Singapore 92 582,588,744
• 2009 : US$1 = RM3.42
Taiwan 32 209,384,375

Netherlands 21 140,262,261

Korea,Rep. 11 133,193,666

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

Private sector leads,

Government Facilitates,

Review of subsidies,

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 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.

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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 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.
 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.