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New Economic Model Prospects & Challenges

New Economic Model Prospects & Challenges. Datuk Nicholas S. Zefferys, Member: Pemudah & NEAC President AMCHAM 9 April 2010. 21st Century. WAVE. Globalisation Capitalism Privatisation Liberalisation Deregulation Democratisation.

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New Economic Model Prospects & Challenges

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  1. New Economic ModelProspects & Challenges Datuk Nicholas S. Zefferys, Member: Pemudah & NEAC President AMCHAM 9 April 2010

  2. 21st Century WAVE Globalisation Capitalism Privatisation Liberalisation Deregulation Democratisation “Optimising the opportunity for the individual human spirit to hope, strive, achieve, & profit.”

  3. VISION 2020 New Economic Model 10MP 10 Year “Window of Opportunity” Achieving a High-Income, High-Value Fully Developed Economy 2010

  4. VISION 2020 “By the year 2020, Malaysia can be a united nation, with a confident Malaysian society, infused by strong moral and ethical values, living in a society that is democratic, liberal and tolerant, caring, economically just and equitable, progressive and prosperous, and in full possession of an economy that is competitive, dynamic, robust and resilient.” Working paper by former P.M. Tun Dr. Mahathir bin Mohamad

  5. Macroeconomics of Malaysia The “Hardware” of Economic Measurement Aggregate Output of a country Fixed investment in residential & non- residential structures, Equipment, & change in business inventory Net Exports GDP = C + I + G + ( X - M ) Government purchases Personal consumption expenditure Value of all goods & services produced in 1 year

  6. Socio-Economics of Malaysia A Paradigm Shift In “Software” or Mindsets Gross Domestic Mindset of Malaysia Innovation (Creativity + Investment In R&D); Funding of “ideas” Net Talent Gain GDM = 1 + I + E + ( BG - BD ) “All for one and one for all” or Unity (Valuing vs. Tolerating differences) Education (Talent & Knowledge) Investment (Quality from Primary to Tertiary & Advanced Degrees) Good “career” opportunities

  7. Socio-Economic Perspectives The future of the country is ultimately dependent on: • Confidence & Will • High Aspirations • Competitiveness • Openness • Attractiveness These are essential elements of a prosperous investment climate in Malaysia

  8. Employment Structure Over Time Share of Employment Agriculture Services Malaysia: 58% Svc’s Today 70% by 2020 Industry Time, Per Capita Income Source: IMF, 1997

  9. 3 Central Goals High Income; Inclusiveness; Sustainability 8 Strategic Reform Initiatives

  10. DNA Code of the Future 1 I + 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 One Malaysia Innovation 1 1 1

  11. Wherefore Malaysia In 2020? • National Mission • MSC • MDEC • 9MP, 10MP, 11MP • Stimulus Packages • Corridors • Budget 2010 • GTP • 6 NKRA’s/KPI’s • Affirmative Action • NEM • Pemudah • NEC, NEAC 1Malaysia, People First, Performance Now

  12. Malaysian Force Field Legacy Forces Change Drivers Rote Learning Socratic Debate Market Driven Protectionism Opportunity Entitlements Authoritarianism (Napoleons) Stakeholder Representation Top-Down Gov’t. Driven Bottom-up Enterprise Weak Judicial System Rule of Law; Independence Fear Driven Opportunity Driven Media control Free Press Weak Institutions Professionalism Sovereignty Human Rights Ali Baba/One-Eye Closed Transparency/Governance

  13. Growth Drivers? Talent Productivity • GDP Growth • Quality Jobs Growth • Career Opportunities • Ability to Fund Ideas FDI Domestic Inv. R&D Note: 60% of population is below 30; rising expectations for themselves & their children. Innovation

  14. Domestic Investment Has Dwindled • Private Domestic Investment is not driving growth. • Loss of confidence? • Loss of opportunities? • Greater ROI’s abroad? Private Investment Abroad Significant outflows Domestic Investment % GDP 1996-97: 37% range 2000-08: 7 to11% range.

  15. R&D Has Not Gained Traction“A Failure To Launch” Low-Value Adding Economy R&D Progress 2010 R&D goal = 1.5% of GDP (currently only = 0.5%) Goal of 60 researchers/10,000 pop. (currently one of lowest) Japan = 3.2% of GDP USA = 2.6% Sing. =2.4% China = 1.6% Microsoft = 30% of Revenue

  16. Talent Shortage & Brain Drain Loss of talent abroad Shortages of Local Talent • Poor English & “Soft” skills • Univ. Education Quality/Focus • Primary/Secondary School Failure • Engineer, IT, Technical Shortages • Real Careers Opportunities Better outside of Malaysia • Severe shortages in various skill areas

  17. Relationship Between Government, Business & Rakyat • Inevitable mutual dependence between government and business in national productivity • Ongoing dialog needed to remove obstacles, lower unnecessary business costs, create appropriate inputs, information, & infrastructure PEMUDAH: Solid example of successful PPP

  18. Malaysian Growth Market Prospects? • 2 Billion new Asian consumers • Bottled-up demand that will resurface out of necessity • Return of greater risk-taking • Emerging industries: health care, renewable energy, bio-tech, fin. services, other.

  19. What’s Needed? • Improved policies • Sound implementation • Policy coordination amongst various Government Ministries & Agencies Positive responses from Investors, Private sector, and the Public.

  20. 5 Comfortable Habits Addictions& Systemic Barriers Prime Minister, Nov. ‘09, Bankers Club speech • Addicted to cheap labour • Addicted to subsidies • Addicted to oil funding the government • Addicted to oil as a major source of energy • Addicted to opaque top-down government

  21. 5 Comfortable Habits (cont’d) • Cheap Labour: Must move beyond low- wage & low-value into new technology to be globally competitive • Subsidies: Skews the marketplace; Innovation is driven by competition on a level playing field. • Oil Funding: Need broader based funding of gov’t. • Oil Energy: Need alternative sources of energy & environmental sustainability. • Peoples’ Government: Gov’t shut off from the people is shut off from their realities. The new Internet connected & worldly-informed society calls for participatory gov’t that shares information & drives greater innovation; openness to new ideas.

  22. 3 Important Drivers • Greater Market Orientation Focus on delivering what markets/customers need; entrepreneural, innovative, productivity driven • More Open Economy Private sector encouraged to invest domestically & to expand abroad. FDI welcomed in a liberalised business environment across all sectors. Benchmarking to global standards, Open to expertise. • Private Sector Driven Less Government direct/indirect ownership in private sector domain. Government to facilitate vibrant private sector driven growth. Private sector to drive the growth.

  23. Bottom of the Business Pyramid

  24. Business Current Situation Proposed Engagement

  25. Ministerial/Government/Regulatory Institutional Transformation Moving from THIS . . . . . . to THIS ! Treating Symptoms (i.e. reforming with one eye closed) Strategic Cooperation (i.e. constructive collaboration)

  26. Mgt/Business Transformation Moving from THIS . . . . . . to THIS ! Horizontal Symbiotic Partnerships (with Employees also) Vertical Command Control

  27. At the end of the day . . . . . . it’s all about the proper balance between Government, Private Enterprise, and Society that will determine if Malaysia is a follower or and innovating country that creates new spaces. “A Forward Thrust”

  28. Xie Xie Terima Kasih Thank You Nandree Shukriya

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