Working towards a holistic change

Excerpts from the 10th Malaysia Plan speech by Prime Minister Datuk Seri Najib Razak in the Dewan Rakyat yesterday

OUR journey towards Vision 2020 is full of challenges and uncertainties at the global level. The global economic landscape today has changed significantly and Malaysia can no longer depend on a low-cost structure to remain competitive internationally. Globalisation, liberalisation and the emergence of countries, such as China, India, Brazil, Russia, the Middle East and countries in the region have intensified the competition for trade and investment.

Apart from external factors, Malaysia faces various internal challenges to drive economic growth to a higher level, while having to implement a prudent fiscal policy. The nation is confronted with the challenge of providing a conducive investment environment as well as developing high quality human capital, which are critical to enable the shift to a higher level of value added and productivity.

During the 10th Malaysia Plan, the gross national income per capita is targeted to increase to RM38,850, or US$12,140, in 2015. This requires achieving real GDP growth of 6 per cent per annum.

Growth will be led by the services and manufacturing sectors, in addition to revitalising the agriculture sector towards higher value-added as well as the adoption of information communications technology (ICT), biotechnology and other relevant technologies.

A key challenge of the 10MP is to stimulate private sector investments to grow at 12.8 per cent per annum or RM115 billion per annum. At the same time, the government is committed to reducing the fiscal deficit from 5.3 per cent of the GDP in 2010 to less than 3 per cent in 2015. In addition, the government will ensure that the living standards as well as the quality of life of the rakyat continues to improve, particularly for the bottom 40 per cent household income group.

Transforming the nation towards achieving Vision 2020 requires a holistic and focused approach. We can only succeed if we put our hearts and minds to it. This plan is based on 10 ideas, which have been translated into 10 Main Premises:

- Internally driven, externally aware.

- Leveraging on our diversity internationally.

- Transforming to a high-income nation through specialisation.

- Unleashing productivity-led growth and innovation.

- Nurturing, attracting and retaining top talent.

- Ensuring equality of opportunities and safeguarding the vulnerable.

- Concentrated growth, inclusive development.

- Supporting effective and smart partnerships.

- Valuing our environmental endowments.

- Government as a competitive corporation.

To achieve the aspirations of the 10MP, five key strategic thrusts have been identified. These thrusts are holistic and comprehensive strategies to achieve the objectives and targets set in the 10MP. The five thrusts are as follows:

- Designing government philosophy and approach to transform Malaysia using NKRA methodology.

- Creating a conducive environment for unleashing economic growth.

- Moving towards inclusive socio-economic development.

- Developing and retaining a first-world talent base.

- Building an environment that enhances quality of life.

FIRST STRATEGIC THRUST: The transformation of the nation requires the transformation of the government machinery to support changes in the economic landscape. To emerge as a competitive nation at the global level, the government needs to increasingly act as a competitive corporation.

In pursuing our aspiration to become an advanced and high-income country, we can no longer resort to mere incremental measures but instead, the government must implement transformational measures, while, at the same time, pursuing its social justice agenda. For these reasons, the government will uphold four main pillars, that is, the “four by four” formula:

- The 1Malaysia, People First, Performance Now philosophy.

- The Government Transformation Programme or GTP.

- The Economic Transformation Programme or ETP, which rests on the New Economic Model.

- The five-year development plans, which are the 10th and 11th Malaysia Plans.

These four main pillars are supported by four complementary values:

- Acculturation of creativity and innovation.

- Emphasis on speed of decision-making and execution.

- Value for money.

- Integrity values.

The government’s transformation measures currently being undertaken began with the implementation of the six national key result areas, or NKRAs. Through the NKRAs, the government is determined to reduce crime, fight corruption, improve student outcomes, raise living standards of low-income households, improve rural basic infrastructure and urban public transport.

The consultative approach with the public and private sectors as well as non-governmental organisations (NGOs) has been adopted to ensure that the wants and needs of people are taken into account.

To date, many of the initiatives under the NKRAs have borne fruit. For example, the overall crime index dropped by 15 per cent in the first quarter of 2010 compared with the target of 5 per cent in 2010. In the effort to fight corruption, the Whistleblower Act was approved by this august house in April 2010.

Under the NKRA on urban public transport, measures to realign the routes linking main towns have increased ridership by 13 per cent. For the NKRA on education, about 18,000 children have benefited from 929 preschool classes.

Continuous initiatives have been identified by Pemudah to enhance government efficiency and procedures. These have resulted in marked improvements in many areas. For example, beginning April 1, the time taken to start a business was significantly reduced to three days from 11 days.

Today, registration of land transfers can be completed in one day compared with 30 days previously.

Effective May 11,  there are 26 locations nationwide where Malaysian international passports can be issued within one hour.

Moving forward, the government will focus on efforts to develop non-physical infrastructure, including human capital development such as skills development and strong innovation capabilities.

Meanwhile, the 10MP allocation for non-physical infrastructure will be increased to 40 per cent, compared with 21.8 per cent in the 9MP. Focus will be given to skills development programmes, R&D activities and venture capital funding geared towards promoting a higher level of innovation in the country.

This approach is also in line with efforts to encourage the private sector to invest in physical infrastructure and provide services such as skills training. To support this objective, the government will shift its focus to the private sector for procurement of services. This means that the private sector will compete to offer skills training services at competitive costs.

To ensure the best talents remain in the civil service, the framework for human resource management and career development will be improved. Opportunities for civil servants to increase their knowledge and field of expertise will be expanded.

In this respect, a world-class civil service college will be established to raise the competency of civil servants.

SECOND STRATEGIC THRUST: The main approach in transforming to a high-income economy will be to adopt strategies based on specialisation, given that strong and sustainable competitiveness is difficult to achieve without specialisation. This plan will focus on 12 national key economic areas or NKEAs which have potential to generate high income.

Apart from 11 sectors, Greater Kuala Lumpur has also been selected as an NKEA as it has the potential to become a world-class city that can be a driver of economic growth. Details of the NKEA will be finalised in the Economic Transformation Programme, which will be announced in October. The following are the NKEAs:

- Oil and gas;

- Palm oil and related products;

- Financial services;

- Wholesale and retail;

- Tourism;

- Information and communications technology (ICT);

- Education services;

- Electrical and electronic;

- Business services;

- Private healthcare;

- Agriculture; and

- Greater Kuala Lumpur.

An Economic Transformation Unit will be established to plan and coordinate the implementation and development of the NKEAs.

In addition, the application of high technology will be emphasised in the development of NKEAs. Technology platforms such as biotechnology, nanotechnology and high-end engineering will further increase the impact of the NKEAs on economic growth.

For economic sectors not listed as NKEAs, such as green technology, automotive, aerospace and logistics, the development of these sectors will continue to be driven by relevant ministries, agencies and councils.

The achievement of the 6 per cent per annum growth target for the 10MP period requires a significant leap in investment activities led by a more dynamic private sector. To achieve this goal, the Malaysian Investment Development Authority (Mida) has been corporatised and rebranded.

In addition, business regulations that are outdated will be abolished. Towards this end, the Malaysian Productivity Corporation (MPC) will be restructured to spearhead a comprehensive review of business regulations and improve processes and procedures to increase the productivity and competitiveness of major economic sectors.

Healthy competition is needed to make the economy more efficient and dynamic. For this, the Competition Law will be introduced to provide a regulatory framework against market manipulation and cartel practices that may affect market efficiency.

A Competition Commission and Appeal Tribunal will be established to ensure more orderly and effective implementation of the law.

China, India and the Middle East are among the rapidly growing economies. Malaysia, which has historical and commercial links with these countries and is strategically located, must strengthen its relationship with these countries, including East Asia. Therefore, Malaysia must focus on building the regional markets through trade promotions and trade agreements. In addition, we will continue to strengthen existing economic relations with Europe and the United States.

I am confident that the measures we will implement can make Malaysia one of the best countries to do business in, particularly in the Asian region. According to the World Bank Report, Malaysia is now ranked 23rd out of 183 countries for ease of doing business. The government believes that the country will be ranked among the top 10 by 2015.

This is not impossible given that Malaysia has leaped to become the 10th most competitive country within a year based on the recent report of the Institute for Management Development. Malaysia is the only Organisation of the Islamic Conference (OIC) and Non-Aligned Movement country in this top 10 list.

However, the government will not rest on its laurels and will continue to strive to be among the top five in the world in the future.

Smart and effective partnerships between the public and private sectors will be established to drive the economic transformation agenda. This new wave of public-private partnership (PPP) will ensure equitable sharing of risks and returns.

To date, 52 high-impact projects worth RM63 billion have been identified for implementation. These include:

- Seven highway projects at an estimated cost of RM19 billion ringgit. Among the projects are the West Coast Expressway, Guthrie-Damansara Expressway, Sungai Juru Expressway and Paroi-Senawang-KLIA Expressway.

- Two coal electricity generation plants at an estimated cost of RM7 billion ringgit.

- Development of the Malaysian Rubber Board’s land in Sungai Buloh, Selangor covering an area of 3,300 acres at an estimated cost of RM10 billion ringgit.

The private sector will also have the opportunity to participate in the development of several projects led by government-linked companies (GLCs). These include projects such as the Kuala Lumpur Strategic Development by 1Malaysia Development Berhad (1MDB) covering the Sungai Besi Airport area, the KL International Financial District in Kuala Lumpur, construction of the liquefied natural gas regasification plant by Petronas in Malacca at an estimated cost of RM3 billion, as well as two aluminium smelters in SCORE Sarawak with an estimated cost of RM18 billion.

To help the private sector finance these projects, a Facilitation Fund of RM20 billion will be provided under the 10MP. This fund aims to help bridge the private sector viability gap with respect to projects that have a strategic impact and those with huge economic spillover. The fund is expected to attract private sector investments worth at least RM200 billion during the plan period.

Projects being considered for financing under this fund include Land Reclamation in Westport in Port Klang, Malaysia Truly Asia Centre in Kuala Lumpur, and Senai High Technology Park in Iskandar Malaysia, Johor.

As we all know, economic growth thus far has been driven by factors of production, mainly investment, energy and labour. The shift to high income will need growth that is based on productivity and led by innovation. For that purpose, the government will establish a special unit under the Prime Minister’s Department to set the direction and drive the National Innovation System and innovation policies and strategies.

An important measure in the 10MP is improving the method of financing for public venture capital companies. Currently, government financing for public venture capital companies, such as the Malaysian Technology Development Corporation and Malaysian Venture Capital, is provided through long-term loans.

In this plan, financing will be in the form of equity to match the risk profile of venture capital investment. For this purpose, the Mudharabah Innovation Fund (MIF), with an allocation of RM500 million, will be introduced to provide risk capital to government venture capital companies. To bridge the financing gap between the early stage of commercialisation and venture capital financing for high tech products, the government will set up a Business Growth Fund with an initial allocation of RM150 million.

The aim of this fund is to support these companies until they can generate sufficient commercial value to attract venture capital financing and other forms of financing.

We realise many entrepreneurs have failed due to unexpected business risks. It will be a tragedy if a high-calibre and credible entrepreneur who fails once, is not given a second chance to recover and become a successful entrepreneur. We are aware of many individuals, businesses and innovation initiatives that failed the first time, but became successful later.

Hence, bankruptcy laws will be simplified to support a risk-taking culture, eliminate the stigma of failure and allow high-calibre and credible entrepreneurs who fail to become active again.

The 10MP will continue to focus on the provision of infrastructure to support national growth, while ensuring that it benefits all segments of the rakyat. The implementation of the high-speed broadband project will cover major towns, priority economic growth areas and industrial areas.

This will be complemented with the roll out of the Broadband for General Population, to provide coverage for sub-urban and rural areas. For the rural population, last-mile broadband services will be provided through wireless infrastructure, offering a variety of affordable packages.

The development of a wider and efficient multimodal transport network is also needed to support national growth. Among the major projects being implemented is Phase 2 of the East Coast Expressway from Kuantan to Kuala Terengganu, which will be completed in the plan period at a total cost of RM3.7 billion. This expressway will also be linked to the Kuantan Port, which will be upgraded to spur growth in the east coast.

Road networks to the hinterlands will also be improved.

Among them are the roads linking Kuala Lipis to Cameron Highlands and Jerantut to Sungai Lembing. In addition, the electrified double track rail project from Gemas to Johor Baru, estimated to cost RM8 billion, will be implemented to complete the electrified double track rail project from Padang Besar in the north to Johor Baru in the south.

Apart from these, will be the construction of a sewage treatment plant using green technology in Lembah Pantai, Kuala Lumpur and at a later stage, similar plants throughout the country.

In this plan, energy supply will continue to be strengthened by creating a more competitive market and reducing energy subsidy in stages. The New Energy Policy has identified five approaches:

- Rationalising energy pricing gradually to match market price, taking into account current economic conditions and affordability to the rakyat.

- Undertaking a more strategic development of energy supply by diversifying energy resources, including renewable energy resources. Nuclear energy will also be considered as an alternative source of energy.

- Accelerating the implementation of energy efficiency initiatives in the industrial, commercial, residential and transport sectors.

- Improving governance to support the transition to market pricing, while providing assistance to mitigate impact on the low income group.

- Ensuring that the New Energy Policy is implemented based on an integrated approach and according to schedule to achieve energy supply security.

Regional economic development will focus on a number of dense urban clusters with high-value industries to attract investments and skilled workforce. This is intended to transform several cities in Malaysia as destinations to attract high-tech investments, talent and knowledge workers.

The cluster-based development approach that will be adopted in the corridors will exploit the potential and available resources and serve as a catalyst to growth. Cluster development will focus on selected sectors as well as identify key investors, including GLCs and the private sector, to lead the development of clusters in the corridors.

In addition, connectivity and linkages between the clusters and their suburban and rural hinterland will be improved to ensure direct benefit to these areas.

The government will continue to support SME development, including small companies still in the early stage, and companies that have the potential to become global. We will also encourage foreign SMEs to collaborate with local SMEs, particularly in modern technology, so that they can mutually benefit from the transfer of technology and access to wider markets.

To ensure that the SMEs have better access to financing facilities, the government established the Working Capital Guarantee Scheme totalling RM7 billion and the Industry Restructuring Loan Guarantee Scheme totalling RM3 billion, which I announced under the Second Economic Stimulus Package. The entire RM7 billion under the Working Capital Guarantee Scheme has been approved.

In view of the encouraging response to the Working Capital Guarantee Scheme, the government will provide an additional RM3 billion under 10MP, making it a total of RM10 billion ringgit.

The government is aware that there are local SMEs that have penetrated international markets but face problems gaining a foothold locally. There are also SMEs that have obtained domestic recognition or international awards in terms of quality and innovation. Such SMEs will be given green-lane access or priority in the procurement processes of the government and GLCs.

The government views seriously the provision of credit facilities for SMEs to facilitate their participation in key economic activities. In this regard, the government will consider increasing the financial resources of the SME and the Agro Bank to enable them to provide effective services to SME entrepreneurs. In addition, SME Corp will be provided adequate financial allocation to ensure that SMEs with potential to succeed receive appropriate assistance.

The government will continue to undertake relevant initiatives in ensuring a better future for the rakyat. Development policies will be driven by the principles of progressiveness and pragmatism in the interest of the rakyat. However, we will always abide and uphold the Federal Constitution with the highest regard and sanctity.

The Bumiputera development agenda will continue to be addressed in line with the concept of growth with distribution. In view of the increasingly challenging global and domestic economic environment, there is a need to transform the Bumiputera development agenda to enhance participation among competitive and resilient Bumiputera companies.

This new approach will be based on four key principles: market-friendly, needs-based, merit-based and transparency.

Priority will be given to enhancing Bumiputera capabilities. In this regard, emphasis will be given to leveraging on past achievements. Support will be given to potential Bumiputera enterprises that have demonstrated their capability and credibility to enable them to move towards higher value-added activities in line with the government’s aspiration.

The objective of Bumiputera ownership restructuring in the early 1970s was focused on equity ownership. Going forward, the measurement of Bumiputera participation in the economy will be enhanced to include financial and non-financial assets, such as real estate and business premises as well as professional employment.

This holistic and comprehensive approach focuses not only on the aspect of wealth ownership, but also the aspects of income enhancement, in line with the government’s aspiration to become a high-income nation. At the same time, the target of achieving at least 30 per cent Bumiputera corporate equity ownership at macro level remains.

Accordingly, five strategic initiatives to strengthen the Bumiputera development agenda have been identified for implementation as follows:

- Increasing Bumiputera equity ownership through institutionalisation. In this regard, private equity programmes in government-linked investment companies, such as Permodalan Nasional Berhad (PNB), Lembaga Tabung Angkatan Tentera and Tabung Haji will be renewed, strengthened and expanded to consolidate and pool various funds to broaden ownership and control of Bumiputera equity.

In this context, Ekuinas was established as a Bumiputera private equity investment institution.

Ekuinas has a similar function as PNB, with special emphasis on investment in high potential medium-sized companies, to be supported to become champions and leaders in their respective sectors.

Ekuinas will adopt a new approach which is more market-friendly and merit-based. In this regard, the government will support credible Bumiputera entrepreneurs and capable Bumiputera professionals to expand their businesses to a higher level at the domestic, regional and international arena.

- Increasing Bumiputera property ownership. In this context, Pelaburan Hartanah Berhad will establish a Real Estate Investment Trusts (REITs) to facilitate Bumiputera investment in commercial and industrial properties and benefit from property appreciation.

In addition, Kampong Baru, a valuable Bumiputera asset in the heart of Kuala Lumpur, will be redeveloped to enable landowners to realise and unlock the value of their properties without affecting the Malay ownership.

- Improving skill and entrepreneurial development programmes and funding through various Bumiputera development agencies. An integrated development package will be provided to the Bumiputera Commercial and Industrial Community to strengthen their competitiveness and resilience.

The package will include entrepreneurial training, technical assistance, financing, consulting services, promotion and marketing. To improve access to financing facilities, RM1.5 billion or half of the additional Working Capital Guarantee Scheme of RM3 billion ringgit, which I announced earlier, will be allocated to Bumiputera entrepreneurs.

In addition, entrepreneurial development organisations, such as Mara and Perbadanan Usahawan Nasional Berhad (PUNB), will be strengthened. For this, an allocation of RM3 billion will be provided;

- Developing professional Bumiputera employment in a more holistic manner. In terms of employment creation, we have successfully produced large numbers of Bumiputera professionals, including accountants, engineers, medical specialists, lawyers and others in the corporate sector.

Currently, Bumiputeras participate in all professions and even lead in the fields of engineering, medicine, law, surveying and architecture. During the period 2000-2008, Bumiputera overall employment increased from 56 per cent to 63 per cent, while in the managerial and professional category, it increased from 46 per cent to 51 per cent.

- Establishing a high-level council to plan, coordinate and monitor the implementation of the Bumiputera development agenda. I will lead this council, made up of relevant cabinet ministers, senior government officials and the private sector.

The Economic Planning Unit in the Prime Minister’s Department will be the secretariat to the council. The Project Management Unit in the Finance Ministry will monitor the implementation of programmes to ensure their efficient and effective implementation.

The intention of my walkabouts is to receive feedback on difficulties faced by the rakyat.

The 10MP will focus on raising the income and quality of life of the bottom 40 per cent household income group. Bumiputera form the largest number, that is 73 per cent of the 2.4 million households in this group.

In order to enhance competitiveness and market efficiency, as well as ensure more optimal utilisation of resources, price controls and subsidies need to be reduced in stages to eliminate market distortions and abuses. However, any subsidy reduction will only be undertaken after taking into consideration the feedback from the rakyat.

I wish to give the assurance that the lower-income group and those most vulnerable will continue to be given assistance to mitigate the impact of any subsidy reduction on their cost of living.

Specific focus will be given to disadvantaged groups, especially those living in the interior, those who live in longhouses in Sabah and Sarawak, as well as the Orang Asli and estate workers in Peninsular Malaysia.

There are still pockets of people living without electricity and water supply, and with limited access to health facilities. There are school-children who have to make arduous daily trips to schools. I assure you that we will address issues of the less fortunate and free them from the poverty trap.

I want to ensure that the prosperity resulting from the country’s development will be enjoyed by all Malaysians, to those in a Malay kampung in Grik, Perak; to Orang Asli communities in Pos Titom, Cameron Highlands; Indian estate workers in Mary Plantation Estate, Kuala Selangor; residents of Chinese new village in Pasir Hitam, Perak; Iban communities in Mujong Balleh, Sarawak; and Rungus communities in Kudat, Sabah.

For this, the government will intensify the implementation of economic programmes and the provision of basic amenities. It is also considering granting land titles to the Orang Asli and Bumiputeras of Sabah and Sarawak. This will enable them to benefit from integrated agricultural development programmes through the agropolitan and contract farming approaches.

They will also be given better access to infrastructure and public facilities, such as roads, education and skill training.

Focus will also be given to improving the quality of life of workers in estates and displaced estate workers. Water supply will be provided to 182 estates, up to 1,000 acres in size and located less than 5km from the water mains, costing RM109 million.

Skills training will be provided, especially to school dropouts, to enhance their employability. Those interested to venture into small businesses will be given appropriate access to AIM and Tekun micro-credit facilities and this will help to address urban poverty. This loan scheme will be packaged together with entrepreneurship training to develop their capabilities in areas such as financial management, preparation of business plan, marketing and promotion.

The training will be conducted in Institut Keusahawanan Negara (Insken), Pusat GiatMara and Institut Kemajuan Desa (Infra).

Residents of Chinese new villages will also be given assistance. Currently, there are about 280,000 households in these new villages. The residents will be provided soft loans to assist them to pay their land premiums and renewals of leasehold. The loan will be channelled through Bank Simpanan Nasional and an initial fund of RM100 million will be provided.

In addition, the cabinet committees for Indians as well as Sabah and Sarawak Bumiputera affairs will continue to address the issues of the respective communities.

Many countries, particularly developed nations, have adopted comprehensive and open policies in attracting the best talent, including Malaysians. A skilled and knowledgeable workforce is the cutting edge of a nation’s competitiveness.

In this regard, the government will implement holistic measures to strengthen education and training systems, from early childhood to tertiary education. Aside from providing the best teaching and learning infrastructure, it will also ensure that the quality of teachers and educators are of a high level.

To improve the quality of pupils, the proportion of graduate teachers in primary schools will be increased from 28 to 60 per cent. The performance of pupils in critical subjects, particularly Bahasa Malaysia, English, Science and Mathematics, will also be improved by increasing the number of quality teachers.

To achieve this goal, the programme enabling non-graduate teachers to attain degrees will be intensified. To improve the quality of preschool teachers, the qualification requirement  will be raised to a diploma and bachelor’s degree.

The government will also implement measures to establish teaching as a profession of choice.

In order to meet the demand for quality Mandarin language teachers in Chinese vernacular schools and national schools, those with Unified Examination Certification and Sijil Pelajaran Malaysia (SPM) will be considered for enrolment into the Chinese Language Programme in Institutes of Teacher Education.

The same consideration will also be given to those with Sijil Menengah Agama or Sijil Tinggi Agama and SPM to become teachers in J-Qaf and Islamic Education Programme.

The government has also established high-performing schools to enable students to achieve excellence in all aspects of education. Twenty schools have been awarded the status of high-performing schools based on their achievement and performance. This number  will be increased to 100

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