Aiming High – Navigating the next stage of Malaysia’s development

Official Address and Launch of Report by

YB Senator Tengku Datuk Seri Utama Zafrul Aziz
Minister of Finance Malaysia

VIRTUAL REPORT LAUNCH BY THE WORLD BANK GROUP
Aiming High – Navigating the next stage of Malaysia’s development

Tuesday, 16 March 2021
10:00am – 10:20am

SALUTATIONS

Madam Victoria Kwakwa,
Regional Vice President of the World Bank Group

Yang Berhormat Dato’ Sri Mustapa Mohamed,
Minister in the Prime Minister’s Department

Esteemed guests Ladies and gentlemen

INTRODUCTION

1. It gives me great pleasure to be speaking this morning on the launch of another flagship report by the World Bank Group.

2. Aptly named “Aiming High - Navigating the Next Stage of Malaysia’s Development”, the report sets out a roadmap for Malaysia to fulfil its potential, transition to high-income status, and sustain equitable growth beyond the COVID-19 pandemic.

3. As we look ahead, allow me to also reflect on how far we have come as a nation and where we are today, especially in light of the COVID-19 pandemic, before sharing my thoughts on the way forward.

Ladies and gentlemen,

4. When I was born in the seventies, Malaysia was a low-income country known largely for its exports of tin and rubber.

5. In less than 30 years, it transitioned to a lower-middle, and then later, to an upper-middle income economy.

6. In this time, Malaysia’s economy transformed from being agriculture-focused to one based on manufacturing and services. At its peak, Malaysia accounted for about 5.6% of the world’s exports of electrical machinery and appliances.

7. Correspondingly, millions of Malaysians began enjoying higher living standards. From 1960 to 2017, our Gross National Income (GNI) per capita grew 14 times, making it one of the fastest-growing economies in modern history. In that period, extreme poverty declined to less than 1% of the population. Average life expectancy improved from 59 years in the 1960s to 75 years in 2019. Educational attainment and labour productivity also improved substantially.

MALAYSIA TODAY

8. Today, Malaysia’s economy is open, trade-oriented, and well-diversified, supported by two decades of current account surpluses, adequate levels of international reserves, and sizeable external assets held by pension funds, banks, insurers and corporates.

9. Malaysia remains more open to trade than nearly 90% of countries in the world today and ranked number 12 on the World Bank’s Doing Business 2020 report.

10. Malaysia is home to the largest rubber glove manufacturing companies in the world and continues to be a major global manufacturing hub for semiconductors and microelectronics.

11. Beyond manufacturing, Malaysia is home to the largest Sukuk market, accounting for more than 45% of the world’s outstanding amount of approximately 258 billion US dollars. Last August, the Government of Malaysia issued its first-ever award-winning digital Sukuk, the Sukuk Prihatin.

12. Malaysia has also emerged as one of the world’s leading Islamic fintech hubs. Based on the Malaysia Digital Economy Corporation’s Islamic Fintech Report, 26 Islamic fintech providers were operating in Malaysia in 2019, higher than in the UK, United Arab Emirates, Indonesia and the US. Today, Malaysia is also one of the main sources of reference for over 150 countries in areas such as the Halal industry’s development and governance.

13. All in, Malaysia’s strategic location in the heart of Asia, its diversified economy, skilled workforce, rule of law, supportive business environment, competitive service sectors, well-developed infrastructure, and openness to international trade are factors that will serve Malaysia well in the decades ahead.

COVID-19

Ladies and gentlemen,

14. Similar to most economies across the world, Malaysia was impacted by the “triple shock” of COVID-19, namely, the direct health impact of the virus, the economic impact of movement restrictions, and a global recession. Trade, tourism and commodity prices have been facing headwinds due to closed borders and disrupted supply chains.

15. Subsequent to MCO 1.0, unemployment increased to 5.3% in May, the highest for 2020. And Malaysia’s GDP contracted 5.6% in 2020, slowing our economic development.

16. To cushion the impact of the crisis, in 2020, the Government of Malaysia responded with multiple stimulus packages totaling 305 billion ringgit, or 20% of GDP, comprising direct cash transfers, wage subsidies, loan moratorium and various other assistance.

17. More than anyone, I recognize that what Malaysia’s economy needs most is a return to growth. Already we are seeing signs of vibrancy returning.

18. Our export sector is showing robust expansion with the revival of global trade, particularly with our major trading partners. A rebounding global economy also means better commodity prices, a key part of Malaysia’s tradable sectors. With the gradual loosening of restrictions under various control orders, the domestic economy is also coming back to life, but always with strict SOPs in place.

19. International organizations such as the World Bank and the IMF expect that Malaysia will bounce back strongly in 2021. With the systematic roll-out of our National Covid-19 Immunisation Programme, coupled with our economic recovery plans that stipulate strict adherence to SOPs, I am confident that our economy is firmly set on a path towards recovery, revitalization and a rebound in 2021.

AIMING HIGH – THE WAY FORWARD

Esteemed guests,

20. According to the World Bank, Malaysia is likely to transition to a high-income economy within the next five years.

21. Clearly, success is not guaranteed. Malaysia faces not only a global pandemic and a worldwide recession, but also a looming international debt crisis, a heightened risk of a resurgence in trade disputes, the potential unraveling of global value chains, and the impact of disruptive technologies that could change the socio-economic dynamics of nations.

22. Given these challenges, how should Malaysia best prepare for this transition to a high-income economy?

23. What is certain is that the development model that enabled Malaysia to successfully transition from low- to middle- income needs to be re-examined to meet the challenges of tomorrow. We need to re-look at the way policies are set and the roles of government and institutions to improve Malaysia’s future socio-economic growth.

24. In its report, the World Bank suggests that to boost economic growth, Malaysia will have to:

1. improve competitiveness;
2. create high-quality jobs;
3. strengthen its institutions; and
4. improve its capacity to finance the transition to high-income and
5. developed nation status.

25. Going forward, Malaysia must also chart a new course for more knowledge- intensive and productivity-driven growth.

26. I am also aware that Malaysians aspire to have not just a high-income economy but also one that delivers meaningful improvements in living standards for the whole population. Malaysians increasingly aspire for both economic and social well-being, a high standard of living, not just high incomes. Fulfilling jobs, not just something that pays the bills. And better public service delivery, not just the existence of such services.

27. In that spirit, it is important to reassess not just the speed of Malaysia’s growth, but also its quality, inclusivity and sustainability. For example, we must ensure equal opportunities for all Malaysians, provide upward mobility opportunities and good incentives to remain and work in Malaysia.

28. Greater resources will need to be invested in building high-quality human capital and in facilitating greater economic opportunities, especially for women. Next-generation reforms to increase productivity and innovation-led private sector growth will also be required, along with policies to promote the development of skills and talents to ensure that Malaysians are better placed to embrace the opportunities and challenges of a post-COVID-19 economy.

GOVERNMENT’S POSTURE AND RESPONSES

Ladies and gentlemen,

29. In positioning Malaysia for a post-pandemic economic recovery, rebound and growth, the Ministry of Finance will be focusing on six key priorities in 2021, which are:

1. Firstly, jobs creation. We have established the National Employment Council, chaired by the Prime Minister himself, to look at creating 500 thousand jobs this year;
2. Secondly, to continue ensuring that the rakyat who are still badly affected will be supported through targeted aid, like the Bantuan Prihatin Rakyat, welfare and social assistance for the hardcore poor and targeted loan repayment assistance;
3. Thirdly, on digitalisation, where we will continue with the national connectivity plan, JENDELA, and the accelerate the rollout of our 5G infrastructure development;
4. Fourth, is to revisit the roles and mandates of GLICs and GLCs, where we will focus on, among others, domestic strategic investments, Bumiputra vendor development and corporate social responsibility;
5. Fifth, is to empower SMEs; and
6. Sixth, accelerating the implementation of specific projects to drive economic recovery including supporting small-scale projects and simplifying procurement processes.

30. Aside from all that, we will also continue to:

1. strengthenthecountry'srevenuebaseandimproveourtaxframework;
2. build capacity along the whole supply chain of certain sectors such as agritech, edutech and AI; and
3. strengthen our entrepreneurial and start-up culture to help Malaysia
   progress towards becoming a high-income nation.

31. The Government has also increasingly embraced the UN Sustainable Development Goals (SDGs) in it annual budgets. And Budget 2021 features more measures that promote inclusive socio-economic development and environmental sustainability. This is aimed at achieving a more sustainable growth through a strategic, targeted, on-point and outcome-based medium- term economic plan.

32. As Malaysia positions itself for the next phase of its development, efforts like these will be complemented by the SDG-aligned 12th Malaysia Plan and the Shared Prosperity Vision 2030.

33. Despite the challenges posed by the pandemic, Malaysia remains committed to becoming a high-income nation. To get there, we will require perseverance, an openness to reimagine our future, and improved policies and institutions to achieve quality, inclusive and sustainable growth for Malaysia. Ultimately, becoming a high-income nation will require nothing short of “aiming high”.

34. Reflecting on how far we have come as a nation once known for its exports of tin and rubber, to the open and well-diversified economy it is today, I am confident that we can continue to aim high and look to the future with optimism.

CLOSING REMARKS

Ladies and gentlemen,

35. On that note, allow me to thank and congratulate the World Bank Group on the launch of this report and for its continued partnership with Malaysia. We look forward to our continued close working relationship in the years ahead.

36. Thank you for your kind attention and I hope that you find will this report useful. I wish you a fruitful discussion and a wonderful day ahead.