NEAC Inaugural Meeting
NEAC INAUGURAL MEETING PDF Print E-mail
Yang Berhormat Tan Sri Senator Amirsham A. Aziz;
Chairman of the National Economic Advisory Council
Distinguished Members of the Advisory Council;
Tan Sri – Tan Sri;
Dato’ – Dato’;
Ladies and Gentlemen.
Assalamualaikum warahmatullahhi wabarakatuh, salam sejahtera and a very good morning,
1. First of all, I would like to express my appreciation to Senator Tan Sri Amirsham A. Aziz and the advisory council for inviting me and for arranging introductions to the council members earlier. I appreciate all of their time and collective commitment to Malaysia. I would also like to extend a special thanks to the three international economic advisors that have agreed to assist us in charting the economic future of Malaysia.
2. This inaugural meeting of the NEAC represents an important reform milestone and a turning point for Malaysia. The NEAC’s objective — to provide ideas and direction to transform Malaysia into a higher income country — is far reaching. It will not only reshape Malaysia’s economic activities and planning, but also our society.
3. These activities represent a necessary step to redefine and renew Malaysia’s commitment to achieving developed nation status by 2020 known as Vision 2020. Current goals include increasing the nation’s GDP by 8-fold. This means moving from the then GDP of 115 billion ringgits to 920 billion ringgits in 30 years i.e. by 2020. This would require an annual growth rate of 7%. I agree with Tun Mahathir who said “this is an optimistic projection but we should set our sights high if we are to motivate ourselves into striving hard”.
4. Malaysia has come a long way. The nation has prospered and is now considered an upper-middle income country by the World Bank. When adjusted for purchasing power parity, Malaysia is well placed in the top third among all countries. These sorts of measurements have changed, however, as global dynamics have changed. What remains the same is the objective of achieving developed nation status, but the methods and measurement of how and when this is achieved must be updated to reflect today’s economic realities.
5. To better reflect increasingly liberalised world trade, the World Bank now uses Gross National Income, or GNI, rather than GDP to compare countries for analytical purposes. The advantage of GNI is, it reflects the growth of the capital truly owned by Malaysians, without the perception bias generated by foreign investments in the country.
6. A restatement of our 2008 achievements in Gross National Income terms shows that Malaysia would rank 85th at nearly US 7,000 dollars. The World Bank’s current threshold for High Income Economies is nearly US 12,000 dollars and, and going by the projected growth rate, it will reach over US 17,000 by 2020. So, in other words, for Malaysia to qualify and meet our goals, we must grow at an annual growth rate of 8% over the next ten years. Anything less will delay our goal. For example, annual growth of 6% means reaching high income status would be delayed by ten years — to 2030 rather than 2020.
7. Gross National Income is fine as a measure of wealth, but being richer alone does not define a developed nation. In fact, this measurement falls short of Malaysia’s expectations. To be developed, Malaysians must not only be well-off, but also we must think, act and live in a manner that reflects that status. There are important social and quality of life measurements that must be factored in when considering our objectives and successes.
8. For that reason, we fully support the International Monetary Fund’s adoption of the United Nations’ Human Development Index. The IMF uses this as a yardstick when ranking countries which takes into account both GNI and soft-side measures such as education and health. In 2005, 34 countries were considered to be Advanced Economies. They all had high index scores. Malaysia shared the 63rd position with Saudi Arabia.
Ladies and gentlemen,
9. It is clear that our Vision 2020 objective has to be refined to remain viable. Malaysia’s achieving developed status will depend on meeting two primary criteria. The first requires surpassing the threshold and become a Higher Income Economy. And secondly, we must attain a higher Human Development Index score as an ‘Advanced Economy’ according to the IMF’s ranking. We must not be blindsided by fixating solely on growth at the expense of our social responsibilities.
10. That said, where there is a will, there is a way. We as a nation have consistently found ways to advance our lot and reach our objectives. We successfully moved from an agricultural-based economy to a commodity and industrial exporting economy in the late 1980’s. In that effort, the manufacturing sector took the lead. During the same decade, we implemented the Look East policy which conditioned our society to strive harder. It laid the foundation for the private sector to be the main driver of economic growth. With the first of three industrial master plans, Malaysia continued its transformation to become a more diversified and resilient economy.
11. In recent years, we continued on this progressive path and built our reputation as a leading Asian tiger, becoming the world’s 18th largest trading nation. Our comparatively well educated population and large middle class provided a distinct advantage. We can all be proud of that achievement.
12. Ironically, that success now creates a dilemma. Our economic focus over the last two decades had been to attract investment as a low cost producer. We have since become a victim of our success, since our industrial base has lacked the will and foresight to advance its capabilities despite the government’s best efforts to introduce incentives for a knowledge based economy.
13. As a result, our economic infrastructure and expertise remain under developed. For most in industry and many in government, moving beyond this comfort zone means stepping into unknown territory. The NEAC will propose pathways out of this loop and will help us develop a clear picture of our shared future as well as new guidelines to reach it.
Ladies and gentlemen,
14. Our past success has provided a level of comfort which could lead to complacency. While Malaysia continues to meet expectations, other countries have worked overtime to exceed them. Today, many of our regional counterparts have overtaken us. Their worker requirements and pricing structures have evolved beyond our standards. We must realign our economic strategy to accommodate today’s competitive environment.
15. Many believe that the currency for commerce and world trade in the near future will be based on carbon footprints, not just on dollars and cents. Distance to markets and shortened supply chains will become increasingly important. Almost 70% of the carbon footprints of transactions are in the transportation of goods. Our export markets could change significantly as the West realigns its supply chains to be closer to home in an effort to reduce that footprint and related costs.
How we position ourselves today relies very much on how we interpret the new world order and realities affecting shifting markets. The potential impact of climate change could dictate that Malaysian companies turn green and seek markets closer to our shores.
16. Malaysia needs to integrate further within the region and encourage others to integrate with us. If our economy is to expand, it is unlikely that satisfactory growth rates will be found solely in the domestic market. Do we pursue regional markets with over 500 million people or the domestic market’s 28 million people? If we include China and India in the equation, there are 3.5 billion potential customers. The numbers speak for themselves.
17. The rapidly developing economic environment mandates that Malaysia transform itself yet again. Previously, we set the pace while others stood still. This time, simple self improvement is not going to be enough. We must benchmark ourselves against other countries, especially within the region. And we must provide guidelines to measure both development and achievements. Economically, Malaysia is under pressure on all fronts. Our rules remain overly cumbersome and, in certain sectors, restrictive.
18. Malaysian quality, efficiency, and productivity have all been matched or surpassed. Our pool of highly trained workers remains small relative to the needs of industry. The list goes on. We need to regain our competitive edge and become more business friendly if we want to attract investors. It is not that we must choose to change – we have no choice but to change. In this instance, government responsiveness has not been an issue. We have been aggressively pro active in addressing economic challenges. Since 2000, the government has worked to improve the institutional framework that underpins our economic infrastructure.
19. Led by Bank Negara, the Securities Commission and Bursa Malaysia, reforms of the financial industry and capital markets began in earnest. The Financial Market Master Plan and The Capital Market Master Plan in 2001 fostered the transformation of Malaysia into a free market economy. The 2002 K-Economy Master Plan changed our outlook and economic focus. This identified knowledge, creativity and innovation as critical components to promote growth. This year, ongoing efforts have liberalized a number of sectors, introducing tenets of meritocracy and performance measurements.
20. As a key influence on our workforce, the government infrastructure cannot be rescued from improvement and performance requirements. Much remains to be done, but we have made vast improvements in addressing inefficiencies and reducing bureaucracy. The work of PEMUDAH, for instance, is well underway to create a more business friendly Malaysia. These measures were all designed and implemented to build support for our domestic economy and to allow both the public and private sectors to adjust systematically. A ‘big bang’ approach was never considered.
21. Recent financial scandals and mismanagement in overseas financial centers remind us that the regulatory regime in Malaysia must remain vigilant in our efforts to safeguard the economy. One of our paramount goals is maintaining the integrity of our federal institutions and regulatory framework. To protect the confidence of investors, I call upon all participants in this framework – regulators, auditors, civil servants, legal professionals, and our judiciary – to maintain their high standards in discharging their duties. In 2009, Malaysia was ranked 4th by the World Bank in terms of Protection of Investors Rights. I encourage all to keep up, if not even improve, their good work.
22. The work of reform is ongoing and, by its nature, never ending. The recent global financial crisis and subsequent and lingering recession have not spared Malaysia. However, crisis provides a catalyst for change and this one is no different. Our efforts for reforms must be intensified. My personal performance objective is to ensure they are made.
23. The NEAC’s work is critical to this effort. Malaysia requires a fresh view on its strategic position in the world. To do this, our reform efforts must incorporate both best practices and out of the box thinking. To provide the necessary flexibility, NEAC will have a high degree of independence. I have resisted the temptation to build within the government’s current structure where individual organisations are more appropriately focused on domestic markets. To ensure a depth of service and the ability to act, the NEAC will be part of the government and staffed by technocrats to ensure functionality. But these technocrats will be guided by experts from outside the government.
24. These are professionals from renowned institutions and think-tanks who are being selected based on their capabilities and exhibited commitment to Malaysia. As individuals, they are experienced and acknowledged experts in their fields. Combined, they are a formidable group, worthy of this challenge. In their roles as economic advisors, they will not represent their respective institutions but instead will serve the NEAC and Malaysia in a personal capacity. As Tan Sri Amirsham has so kindly reminded me, they are placing their professional reputations at stake here. I thank them for this commitment and acknowledge the importance of the task that lies ahead.
25. To support their success, the executive will provide leadership and the civil service will implement, as appropriate. As an agent of change, the NEAC will identify and propose what must be done, and I have pledged the government will deliver. Key performance indicators, or KPIs, will be updated to ensure delivery. Nothing will stand in the way of the rakyat’s business.
26. With the introduction of the NEAC, I believe it is crucial to review the importance of traditional relationships and responsibilities in the economic sphere. Government’s role is to manage the economy and ensure an economic environment that is conducive to long term, stable growth. Governments are somewhat limited in the speed with which they can react to dynamic global markets. The private sector provides a strong engine for growth, as it is able to react almost immediately to changes in market conditions, much faster than any government.
27. In times of economic crisis, when the dynamic private sector retreats, the government must step in and increase its investments to fill the void. Of late, governments have implemented a broad range of stimulus packages to jump-start the flagging economy and boost a battered private sector. In Malaysia, the lackluster participation of the private sector in stimulating growth since the Asian crisis has required the government to bear an unprecedented burden in driving growth. Malaysia’s private sector has not been playing its part.
28. I pledge that the government will continue institutional reforms to provide an environment that’s receptive to business. With the assistance of the NEAC, we will strengthen the government focus and effectiveness. I look forward to greater participation of the private sector in fostering growth. I encourage the captains of industry present here to take note of that.
Ladies and gentlemen,
29. The government has many tools in its arsenal to facilitate change. The NEAC is a new tool that will bridge the gap between the public and private sectors and ensure that both fulfill their commitment to all Malaysians. The challenge for the NEAC is great and the stakes are high. Its work, and our work, will move Malaysia forward. Together, we will reach our goal of developed status and create a new relationship of public/private partnership, regional cooperation, and global enterprise. I have every confidence in the NEAC as I have confidence in every Malaysian to look beyond the comforts of today toward our children’s and their children’s success.