Invest Malaysia 2021- Rebuilding A Sustainable Economy Series 1 :Economic Reform
Yang Amat Berhormat Dato’ Sri Ismail Sabri Yaakob,
Prime Minister of Malaysia,
Yang Berbahagia Datuk Syed Zaid Albar,
Executive Chairman of the Securities Commission Malaysia,
Yang Berbahagia Tan Sri Abdul Wahid Omar,
Chairman of Bursa Malaysia,
Yang Berbahagia Tan Sri Zamzamzairani Mohd Isa,
Chairman of Maybank Group,
Members of the media,
Ladies and gentlemen,
Assalamualaikum Warahmatullahi Wabarakatuh and a very good morning.
1. Foremost, allow me to express my gratitude to Bursa Malaysia for the honour of delivering this morning’s special address.
2. In the period since we last met at Invest Malaysia last year, it is heartening to see the world economy experiencing an exceptionally strong recovery.
3. However, the IMF’s recent downward revision of global growth prospects for 2021 reflects the challenges from vaccine inequality and in normalising socio-economic activities, particularly in emerging and developing economies. The emergence of inflationary pressures, combined with shortages of everything from natural gas to micro-chips, further pose a challenge to a smooth global recovery.
4. In this respect, Malaysia continues to contend with both the direct healthcare impact and economic effects of COVID-19. To-date, the country has recorded over 2.3 million cases and lost over 27,000 lives. The economic cost has been equally significant, with a registered GDP contraction of 5.6% in 2020.
5. Furthermore, the pandemic has dramatically transformed lives and businesses, be it how we earn a living, transact with customers or interact with loved ones. Equally concerning is the way the pandemic has widened socio-economic inequalities and disparities, both within and between countries.
6. Despite these challenges, I am confident that we are at the cusp of recovery, driven by the National Recovery Plan, the upcoming Budget 2022, and the recently announced Twelfth Malaysia Plan.
THE GREEN SHOOTS OF RECOVERY
Ladies and gentlemen,
7. The pathway to recovery begins with the National Recovery Plan, or NRP. Introduced in June this year as a comprehensive approach to preserving lives while allowing the economy to open safely, the NRP will set the nation firmly on the path to recovery.
8. Dynamic and inclusive, the NRP reflects nothing less than a whole-ofgovernment and a whole-of-nation approach. Recent developments include:
- the allowance of both inter-state and overseas travel for those fully vaccinated; and
- ongoing efforts to simplify SOPs to just ten (10)
9. These developments are on the back of a robust vaccination programme, with Malaysia currently having one of the fastest vaccination rates in the world. As of 13 October, more than 21 million people or over 90% of the country’s adult population are fully vaccinated. As a result, we have seen a decrease in hospitalisation and ICU rates in recent weeks.
10. Insya Allah, we are on track to have nearly 100% of the adult population fully vaccinated by the end of this month. We have also started vaccinating our teenagers, with over 74% of those aged 12 to 17 receiving at least one (1) dose.
11. The next evolution of the NRP will prepare Malaysia for the next normal of living with COVID-19 as an endemic disease. In this regard, the Government has recently:
- updated public healthcare protocols via the adoption of Test, Report, Isolate, Inform and Seek, or TRIIS;
- made self-testing more widely available and affordable; and
- passed the National Trust Fund (Amendment) Bill 2021, which will maintain the use of Kumpulan Wang Amanah Negara for vaccine procurement and any expenditure related to it.
12. In maintaining livelihoods, the Government has introduced eight (8) assistance packages in addition to Budget 2021 throughout the pandemic. All in, over 340 billion ringgit has been disbursed as of September 2021, saving 2.7 million jobs while benefiting over 20 million rakyat and 2.4 million businesses. Approximately 300 billion ringgit remain for the rest of the year, including an additional 10 billion ringgit worth of direct aid for B40s, M40s, gig workers, the hardcore poor, and the unemployed.
13. Via the NRP, we have begun seeing the green shoots of recovery in the wider economy such as:
- a stronger GDP growth in the second quarter of 2021, including a 40.1% and 19.8% growth in the months of April and May 2021, respectively;
- improvements in the labour market with unemployment improving to 4.6% in August 2021 from 5.3% at the height of the pandemic;
- an increase of 6.8% year-on-year in manufacturing sales value to 126.5 billion ringgit as at August 2021;
- an uptick in trade activities, including a 23.0% year-on-year increase in exports to 97.3 billion ringgit in August 2021;
- continued improvements in the capital markets, with approximately 2 billion ringgit in net inflows from foreign investors in the equity capital markets for the months of August and September; and
- the continued attraction of high-value, high-tech investments including 107.5 billion ringgit in FDI and DDI in the manufacturing, services, and primary sectors in the first half of 2021, a near 70% increase over the same period last year.
14. This recovery is bolstered further by a resilient financial sector. Banks, insurers and takaful operators continue to be well-capitalised, with sufficient financial buffers to absorb potential losses in the face of severe macroeconomic and financial conditions, while supporting economic recovery. For the banking sector in particular, this support included 154 billion ringgit in bank financing disbursed to SMEs in the first half of 2021.
15. As a trade-oriented economy, our fate is tied to the prospects of our most important trading partners. In this regard, the recent growth performance of Singapore, America and China in the first half of 2021 bodes well for our own economic recovery in the months ahead.
16. Overall, the domestic economy is expected to be fully re-opened by the of this year, before resuming to pre-pandemic growth in 2022. On the latter, Malaysia’s growth rate has been projected at 5.8% and 6.0% by the World Bank and IMF, respectively.
17. This performance will be supported by a gradual normalisation of domestic economic activities, as well as the positive spill over effects from continued improvement in external demand. Additional growth drivers include increased commodity-related production capacity, a global tech upcycle, and faster progress of large infrastructure projects with high multiplier effects.
18. The pathway to recovery will continue with Budget 2022, which will be expansionary while laying the foundations for the Government’s wider and longer-term reform efforts.
19. Budget 2022 will focus on the 3Rs of speeding up recovery, strengthening economic resilience, and catalysing reform. In the spirit of transparency, the Ministry of Finance recently introduced a pre-budget statement and four (4) consultation papers, a first in our history.
20. To date, we have received over 1,000 responses and comments. And, more than ever, we are engaging and consulting with more Malaysians from all walks of life, and across numerous sectors.
21. While Budget 2022 will be tabled in little over two (2) weeks from today, allow me to share some emerging thoughts based on our engagement sessions thus far.
- Firstly, beginning with Budget 2021, we have mapped our budget initiatives to the Sustainable Development Goals. We will continue to do so in Budget 2022;
- Secondly, financial assistance will remain ongoing for those most impacted, especially the B40 group, the unemployed and the vulnerable;
- Thirdly, support for businesses will remain steadfast be it via affordable financing schemes, better access to credit or grants, to support operations while pivoting them towards increased automation and digitalisation;
- Fourthly, there will be increased focus on sustainability and improving the resilience of our environment and water assets, following increased focus towards ESG, net zero emissions targets and further development of our circular economy;
- Next, we will improve the labour market by, amongst others, focusing on hiring incentives in addition to subsidising wages;
- And finally, we will be enhancing fiscal prudence by improving the Government’s procurement and debt management process while enhancing tax enforcement measures.
THE TWELFTH PLAN
Ladies and gentlemen,
22. As shared by the Yang Amat Berhormat Prime Minister, the Twelfth Malaysia Plan, or Twelfth Plan, lays down fundamental reforms that will transform Malaysia’s development trajectory to achieve “A Prosperous, Inclusive and Sustainable Malaysia.
23. The plan’s immediate priorities will be to catalyse growth, narrow existing socio-economic disparities and ensure environmental sustainability. It will also focus on upholding national security and sovereignty as well as solidifying national unity.
24. Policies, programmes and projects in the plan will continue to be aligned to the Sustainable Development Goals of the 2030 Agenda for Sustainable Development.
25. Overall, the plan will target growth of between 4.5% to 5.5% per annum, resulting in a GNI per capita of more than 57 thousand ringgit by 2025, while regaining full employment.
26. In ensuring better inclusivity, the plan recognises the importance of states like Sabah and Sarawak. The goal is to increase Sabah and Sarawak’s annual GDP growth to 6.5% and 5.3%, respectively. To this end, both states will each continue to receive between 15% to 18% annually of the total basic development allocation for infrastructure and basic facilities. Overall, the plan will allocate at least 50% of total basic development expenditure for the six (6) less developed states.
27. The ambition of multiplying growth in less developed states will also entail, amongst others, enhancing cross-border economic activities, intensifying rural industrialisation and encouraging the use of advanced technology for smart and cluster farming.
28. In ensuring the success of our national agenda over the next five (5) years, the Ministry of Finance is fully committed to provide for the development expenditure of the nation.
BUMIPUTERA EQUITY OWNERSHIP POLICY
Ladies and gentlemen,
29. Since the Second Malaysia Plan, addressing poverty and inclusivity have been important pillars of Malaysia’s socioeconomic development. The latter included initiatives to raise the income and purchasing power of impoverished households; empower minority groups like the Orang Asli; address inequalities and strengthen the Bumiputera Economic Community.
30. On the last point, significant progress has been made over the last half century. Since the New Economic Policy was introduced in 1971, poverty amongst the Bumiputera has decreased by 89% to a level below 7.2%. In 2020, 61.6% of Bumiputera were employed in skilled occupations, and 73.7% of Bumiputera households owned a home.
31. Then, there is the issue of equity ownership. A key policy instrument to increase Bumiputera ownership of Malaysian companies includes the establishment of agencies like Permodalan Nasional Berhad, or PNB, which manages the Amanah Saham Bumiputera funds. This has been a resounding success.
32. From managing 30 billion ringgit in assets in 2001 to over 323 billion ringgit today, PNB has grown more than ten (10)-fold, and owns approximately 10% of companies listed on Bursa Malaysia. Between 2016 to 2020, 52.4 billion ringgit in dividends were distributed to more than 12 million-unit holders.
33. Having said that, it is important to remember that the Bumiputera Economic Community is multi-dimensional. Yes, it refers to equity ownership. However, it should also include other aspects of Bumiputera’s economic participation and contribution, such as human capital development, entrepreneurship, employment, the supply chain, and innovation in new industries, particularly in halal foods and services.
34. As of 2020, nearly 290,000 Bumiputeras were enrolled in TVET, management, or professional programmes. At the same time, over 28,000 participated in programmes provided by the Yayasan Peneraju Pendidikan Bumiputera. In terms of tertiary education, Majlis Amanah Rakyat, or MARA has provided scholarships to 240,000 students to complete their studies between 2016 and 2020.
35. Ultimately, we must acknowledge that establishing the Bumiputera Economic Community is a multi-dimensional national endeavour, one that is critical to Malaysia’s long-term stability and growth. And, if the Bumiputeras are to become a rising economic force, well-intended plans like the New Economic Policy must be modernised. Given that the challenges Malaysia faces today are very different compared to those fifty (50) years ago, new benchmarks and targets will need to be considered. Therein, we must strive for policies that emphasise outcomes, one that will benefit the entire nation.
COMPLEMENTING THE TWELFTH PLAN
Ladies and gentlemen,
36. Wider government efforts to complement the Twelfth Plan will entail strengthening our fundamentals to be a more open, trade-oriented and service-driven economy.
37. Let us begin with the core ingredient of investment. The National Investment Aspirations, or NIA, led by the Ministry of International Trade and Industry, was introduced earlier this year to promote a sustained flow of quality investments.
38. At its heart, the NIA will be the basis for comprehensive reforms in all investment-linked initiatives and policies and will act as a foundation for Malaysia to become a regional investment hub.
39. An increasingly digital age will demand both an integrated digital infrastructure and digital ecosystem. On the former, the implementation of the Pelan Jalinan Digital Negara, or JENDELA, will enhance digital connectivity while achieving full 4G coverage and 100% broadband coverage in populated areas. In the case of Sabah and Sarawak, over 1,000 new digital infrastructure sites will be established to improve broadband connectivity.
40. The establishment of Digital Nasional Berhad, or DNB, will further accelerate 5G coverage, beginning with a pilot launch by December 2021 with a target of 80% coverage by end-2024 with full-fledged 5G capabilities.
41. Bringing the hardware full circle is the ‘software’. In this regard, efforts are well underway to strengthen the digital ecosystem, be it in areas of supporting digital adoption to privacy and data protection.
42. Given Malaysia’s ongoing transition to a knowledge and innovation basedeconomy, comprehensive future talent development will be crucial, be it in highly skilled talent or in technical and vocational education and training. Here, the Ministry of Finance will continue to intervene in upskilling the labour market and supporting the country’s human development plans.
43. Of course, our GLICs and GLCs are unique drivers of the Malaysian growth story and form a key pillar of Malaysia’s reform agenda. In that regard, the Perkukuh Pelaburan Rakyat initiative, or PERKUKUH, was recently established to reform and optimise the GLICs setup. Delivered via 20 initiatives led by the Ministry of Finance, PERKUKUH will sharpen the focus of our GLICs, set them up for success, and redefine the role of government in business.
44. You will be hearing more on PERKUKUH in the panel session later today, including how it will benefit corporate Malaysia, the investment community and the wider economy.
ANNOUNCEMENT: PLC TRANSFORMATION PLAN
Ladies and gentlemen,
45. In complementing PERKUKUH, it gives me great pleasure to announce the PLC Transformation Program, or PLCT in short, which aims to deliver a high performance, corporate Malaysia.
46. This initiative, spearheaded by Bursa Malaysia, will focus on enhancing five (5) pillars in our PLCs, namely:
- Firstly, for our PLCs to be Performance Driven,
- Secondly, grow as Sustainable, Socially Responsible and Ethical organisations;
- Thirdly, feature Strengthened Corporate Governance;
- Fourthly, be Digitally Enabled; and
- Lastly, support the Nation-Building drive to advance the Malaysian economy and community
47. The PLCT involves the issuance of five (5) digital guideline books, one for each of the pillars, the first of which will be issued by end-2021.
48. These books will provide best practices and guidance with benchmarks and case studies for PLCs to spearhead their transformation journey. The guidelines will be relevant to all PLCs, regardless of size, in becoming better and stronger corporates which, in turn, will enhance their attractiveness to global investors.
49. The PLCT will run from 2021 to 2025. It will see our PLCs progress in numerous areas including building a stronger financial position and enhancing their Board composition, thereby better positioning them to contribute to the national agenda.
50. The monitoring of PLCs’ efforts and progress will be shared via a digital dashboard, to promote transparency and effective achievement of the intended outcomes.
51. Throughout the programme, support by industry champions and corporate leaders will be vital. Therefore, I urge all of our PLCs to support this programme to improve our corporate Malaysia, our capital markets and our economy.
52. Collectively, these efforts – from PERKUKUH, the National Investment Aspirations to the PLC Transformation Programme – will ensure that the fundamentals of the Malaysian economy become stronger, while positioning the nation on the path of prosperity, inclusivity and sustainability.
Ladies and gentlemen,
53. I would like to speak briefly on sustainability. Recent flooding in Sabah and landslides in Kemensah Heights serve as reminders that we too, are vulnerable to climate change. Dealing with the climate emergency is no longer an option or one that is limited to only the Government.
54. In order to address climate-related issues, the Government first introduced the National Policy on Climate Change in 2010, five (5) years prior to the signing of the Paris Agreement. Since then, we have made significant progress in reinforcing our commitment to the environment at the global and domestic stage.
55. Moving forward, the next few years will be critical. In this regard, the National Renewable Energy Policy remains committed to achieving a 20% renewable energy capacity mix by 2025. Similarly, we have also pledged to reduce our green-house gas emissions intensity to 45% of GDP by 2030. We remain committed to the Helsinki Principles by promoting national climate action through fiscal policy and the use of public finance. In the long run, these will help us reach our goal of becoming carbonneutral by 2050.
56. As I previously stated, sustainability will continue to be a major focus in Budget 2022, as how it is in the Twelfth Malaysia Plan. Ultimately, climate change necessitates that we all do our part to reduce carbon emissions, drive change, and protect our natural capital.
CLOSING: THE CASE FOR MALAYSIA’S RESILIENCE
Ladies and gentlemen,
57. I have spoken at length on Malaysia’s developmental path ahead, guided by the Twelfth Malaysia Plan but also wider and ongoing efforts by the Government, from promoting quality investment to the upcoming Budget 2022.
58. However, I recognise that the future remains fraught with challenges.
59. And, more than ever, Malaysia’s resilience is put to the test. How will we fare? And can we emerge from this crisis more resilient? In looking forward, I lean in to our nation’s history.
60. Looking back, Malaysia’s real GDP grew 5.2% per annum from 1991 to 2020. No small feat, given it had to overcome the Asian Financial Crisis, a global electronics downturn, a Global Financial Crisis and a global pandemic in that period.
61. In fact, it was after the Asian Financial Crisis that the Malaysian economy reformed, producing over two (2) decades of current account surpluses since, including its largest ever trade surplus in 2020 of 184.8 billion ringgit, an achievement made all the more remarkable given the context of the pandemic.
62. Despite adopting a floating exchange rate regime more than half a decade ago, our international reserves remain robust, registering 115.2 billion dollars as at end of September.
63. Despite changes and challenges in our political arena, Malaysia’s policy delivery and institutions have remained resilient.
64. Despite the ebbs and flows of globalisation in recent years, Malaysia remains more open to trade than nearly 90% of countries in the world today while remaining a steadfast participant in major trade pacts like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
65. And, despite the rise of our regional neighbours, we continue to be competitive, registering 25th on the 2021 IMD World Competitiveness Yearbook.
66. Ranking 12th on the World Bank’s Doing Business 2020 report, we remain as open to business as we ever were.
67. In view of a Malaysia that has remained open, trade-oriented and competitive; of a Malaysia that grows ever more resilient with each challenge it faces, I look to the future with confidence.
68. To that end, I call upon the investment community to be the catalyst for reform, to drive sustainability and to contribute to our collective goal of shared prosperity.
69. On that note, allow me to thank and congratulate Bursa Malaysia and Maybank Investment Bank for successfully organising Invest Malaysia 2021.
70. Thank you for your attention and I wish you a fruitful discussion ahead.
Wabillahitaufiq Wal-hidayah Wassalamualaikum Warahmatullahi Wabarakatuh