Tuesday, March 30, 2010

'Now' Economic Model

It's the New Economic Model for Malaysia now, aimed at transforming the country into a high-income nation.

Under the NEM, the Government will no longer tolerate practices that support the behaviours of rent-seeking and patronage, which have long tarnished the altruisic aims of the previous national economic policy (NEP).

najib-nemPrime Minister Najib Abdul Razak unveiled the NEM at the Bursa Malaysia Invest Malaysia seminar here on Tuesday, as part of the four key thrusts of the national agenda.

The others are the 1Malaysia, People First, Performance Now concept; the Government Transformation Programme (GTP); and the 10th Malaysia Plan (10MP).

At a similar function last year, Najib announced various liberalisation measures to make Malaysia more business friendly, including doing away with Foreign Investment Committee requirements

The NEM recommendations were drawn up by the nine-man National Economic Advisory Council, headed by former Maybank chief and ex-minister Amirsham A. Aziz. The NEAC was formed on June 1.

The framework unveiled is the first part of the NEM. The NEAC is expected to submit the second part of its report on how the model should be implemented after studying all feedback on the first framework from various groups.
NEP's original policies still relevant
Najib, who is also Finance Minister,  said the process of change is never easy and there will be painful moments.
"But for the long-term strength of our nation, we cannot afford to duck these issues any longer," he said.

"While the NEP's original policies are still relevant, it is time to review its implementation.

"We will chase the same goals but transform the way we do things," he said.

The renewed affirmation action policy will be market-friendly, merit-based, transparent and needs-based.

A notable point under the NEM is that a competitive and transparent tender process with set and clear rules for the bumiputera community - made up of both Malay and other indigenous groups - is developed, said Najib

He also said there would be a renewed affirmative action policy in the NEM with a focus on raising income levels of all disadvantaged groups.

They include those living in longhouses in Sabah and Sarawak, poor rural households in Peninsular Malaysia as well as fishermen, petty traders and small farmers and "not forgetting the Orang Asli and low-income urban dwellers seeking out a livelihood in tough economic circumstances."

najib-invest-1The NEAC has suggested that  focus be placed on the bottom 40% of Malaysia's income strata -- both individually and regionally. These are the disadvantaged groups of people special attention is still required.
The ultimate goal for Malaysians
"The ultimate goal in time is that no Malaysian lives in poverty, that all get the chance to succeed and share in prosperity," he said, stressing that NEM wil be "inclusive" with all Malaysians contributing and benefiting from economic growth -- a fundamental element of any new economic approach.

Najib said the NEM would make Malaysia more competitive regionally and globally with benefits accruing to all Malaysians, with their per capita income increasing to US$15,000 by the end of the decade from US$7,000 currently.

'It will be no easy task, but the rewards will be great if we make this transformation...the challenge is how we will do it," he said.

He said that creating a high-income nation will mean higher wages throughout the economy as growth is derived not only from capital, but from greater productivity through the use of skills and innovation, improved coordination, stronger branding and compliance with international standards and intellectual property rights.
Rising out of 'middle income trap'
Najib said  Malaysia should rise out of the "middle-income trap" that will be a precarious position for any nation in the new global economy, which means pursuing economic policies in knowledge industries of the future with high-wage jobs and prosperity that can be shared by all.

He lamented that 80% of the workforce today have education only up to SPM qualification -- Malaysia's equivalent of the O-levels, which "is not in line with the high income economy that Malaysia aspires to be."

The prime minister also said under the NEM, no one would be left out in contributing to and sharing in the creation of wealth as the country progresses.

"Not only do I want the rakyat to earn better but they must also live better" which is why raising the quality of life is an integral part of the economic model, he said.

Najib also cautioned that Malaysians will have to experience some short-term pain for long-term benefits as certain economic sectors might experience adverse effects.

The prime minister said the NEM  will be integrated into the 10MP with a longer term vision that will be delivered through the 11th Malaysia Plan.

"These can transform the economy to become one with high incomes and quality growth over the next decade," he said.

The NEAC report says the previous mechanism which concentrates on target- setting should now focus on structured and dedicated capacity-building investment that allows  bumiputeras to take advantage of new opportunities in the economy.
The NEAC team

Besides Amrisham, the members of the council include London School of Economics head of department Dr Danny Quah, finance expert Dr Yukon Huang and the World Bank’s East Asia chief economist Dr Homi J Kharas. All three are advisers to the World Bank.

Dr Zainal Aznam Yusof, a distinguished fellow of the Institute for Strategic and International Studies (ISIS) Malaysia, is also on the council.

Joining Zainal from ISIS are current director-general Dr Mahani Zainal Abidin and its former research director Dr Hamzah Kassim.

The other distinguished members are China Bank Regulatory Commission chief adviser  Andrew Sheng and Universiti Sains Malaysia vice-chancellor Prof Dzulkifli Abdul Razak.

The sole corporate representative is Nicholas S Zefferys, the past president of the American-Malaysia Chamber of Commerce.

Among highlights of the NEM are:
*Employees Provident Fund (EPF) will be allowed to invest more in overseas assets;

*Malaysian Industrial Development Authority (MIDA) will be corporatised and renamed as Malaysian Investment Development Authority to make it more effective as an investment promotion agency;

*Government and EPF to form a joint venture to promote the development of 1,200 hectares of land (3,000 acres) in Sungai Buloh into a new hub for the Klang Valley;

*Several parcels of land in Jalan Stonor, Jalan Ampang, Jalan Lidcol in Kuala Lumpur will be tendered out and developed by private sector, failing which it will be wasteful if the assets were not developed as the government will incur cost of maintaining them;

*The land development in Sungai Buloh and development of parcels of land in the city centre is expected to generate new investments worth over RM5 billion;

*The Ministry of Finance Inc companies such as Percetakan Nasional Malaysia, CTRM Aero Composites Sdn Bhd, Nine Bio Sdn Bhd and Innobio may be privatised;

*Petronas has identified two sizeable subsidiaries with good track record to be listed this year on Bursa Malaysia, a move that will reduce government's presence in business and enhance private sector's role;

*Khazanah Nasional Bhd will divest its 32 per cent stake in Pos Malaysia Bhd through a two-stage strategic divestment process. — Malaysian Mirror

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