Malaysia: As a high income economy MGM 4136
High-income economy • A high-income economy is defined by the World Bank as a country with a Gross National Income per capita of $11,906 or more in 2008. While the term "high income" may be used interchangeably with "First World" and "developed country", the technical definitions of these terms differ. • The term "first world" commonly refers to those prosperous countries that aligned themselves with the U.S. and NATO during the cold war. Several institutions, such as the Central Intelligence Agency (CIA) or International Monetary Fund (IMF), take factors other than high per capita income into account when classifying countries as "developed" or "advanced economies". According to the United Nations, for example, some high income countries may also be developing countries. The GCC (Persian Gulf States) countries, for example, are classified as developing high income countries. Thus, a high income country may be classified as either developed or developing.
NEW ECONOMIC MODEL (NEM) • FIRST ANNOUNCED IN MID 2009 BY PM • INTRODUCED IN RMK 10 CABINET MEETING • WILL BE LAUNCED IN MARCH 2010
NEW ECONOMIC MODEL (NEM) • "Our new economic model will shift the emphasis from industrial manufacturing, which depends on semi-skilled and low-cost labour, to one that is based on high technology and modern services, driven by skilled and highly paid workers.“ • NEM aims to turn Malaysia into a developed country by 2020.
NEM STRATEGIES/DRIVERS • NEM will be based on • Greater Competitiveness therefore increase activeness in the stock market and role of private sector • innovation, increase R & D • creativity and high value added, • focus on growth areas such as private education, health tourism, Islamic finance, ICT (information and communication technologies), creative industry and bio-technology and green technology • the role of foreign investors to raise the level of competition and innovation.
KL STOCK MARKET • liberalise the commission-sharing arrangements between stockbrokers and remisiers in two stages to enhance retail participation in the bourse.Tabling the 2010 Budget in the Dewan Rakyat today, the prime minister said 100 per cent foreign equity participation would also be allowed in corporate finance and financial planning companies.All public-listed firms too would be required to offer e-Dividend to shareholders to increase efficiency of the payment system.
ISLAMIC FINANCE • Existing tax incentives for financial services, particularly Islamic finance, will be extended until 2015, with new measures put in place comprising a 20 per cent stamp duty exemption on Islamic financing instruments and deductions on expenditure incurred in the establishment of islamicstockbroking firms.On the Ar-Rahnu micro-credit programme, the government will encourage all Syariah-compliant financial and banking institutions such as Bank Muamalat and Bank Islam to offer this scheme to assist those unable to secure financing from financial institutions and to obtain business capital fast
INFRASTRUCTURE INVESTMENT • To support implementation of private sector projects in regional corridors, the government will allocate RM3.5 billion next year as part of efforts to ensure they are developed according to schedule.Planned investments totalling RM221 billion have exceeded the Ninth Malaysia Plan target of RM145 billion.The government will issue 1Malaysia Sukuk (Islamic Bond) totalling RM3 billion to all Malaysians aged 21 and above, with a minimum investment of RM1,000 and a maximum of RM50,000 plus a maturity period of three years, with a five per cent annual return paid quarterly.To further promote the construction industry, Najib said RM9 billion has been allocated to finance infrastructure projects including RM4.7 billion for road and bridge projects and RM2.6 billion for water supply and sewerage services. • He said RM899 million will be allotted for rail facilities, RM820 million for ports and sea services and RM276 million for airport projects.
PRIVATISATION • The government will also privatise companies under the Ministry of Finance Inc and other viable government agencies to enable them to operate more efficiently and ease financial dependence as part of efforts to gradually phase out involvement in economic activities especially in areas where it competes with the private sector.
INNOVATION • To move to a higher income-based economy, we have to move towards a knowledge and innovation-based economy where skilled labour is needed,” Nor Mohamed said
“Malaysia has been very successful as an exporting nation but has also been very export dependent. About 90% (of products) are being exported to the United States, Europe and Japan,” he said, adding that Malaysia needed to diversify its exports:Arizona State University economist Professor Edward C. Prescott
GDP growth • To achieve a developed nation status by 2020, a 7.5% economic growth needed to be sustained from here on, he said, adding that this was only possible if the economy was re-energised towards higher income and growth trajectory.
PENDAPATAN PER KAPITA • MenteridiJabatanPerdanaMenteri, Tan Sri Nor Mohamed Yakcop, berkatapendapatan per kapitaituperlulahditingkatkansekaligandadaripada AS$7,733 pada 2008 bagimencapaihasratitu. "Berdasarkandefinisi Bank Dunia, tahap minimum yang ditetapkanuntukmencapai status negaramajuialahdenganmencapaipendapatan per kapita AS$14,800.
MINIMUM WAGE ISSUE • A minimum wage will not contribute to the development of a high-income economy, says an academic from the National University of Singapore. • “Instead, a high-income economy is driven by technology and key competitive industries, and maintained through a stable human capital,” said Assoc Prof Shandre M. Thangavelu, who is with the university’s Economics Department. • “The more developed human capital is, the higher wages can go, in line with increased productivity,” he added, emphasis on human capital through quality and industry-relevant education and training to keep the labour force updated. • “Instead of setting a minimum wage, the social and welfare policies should support those in need by training and retraining them to be equipped and relevant to fit into industries.”
MINIMUM WAGE ISSUE • Human Resources Minister Datuk Dr S. Subramaniam said his ministry wanted to study the minimum wage mechanism in line with efforts to move to a high-income economy. • IS MINIMUM WAGE IS VIABLE IN OPEN ECONOMY? • minimum-wage policy was to ensure the lower rungs of the job market had enough for a decent living.