Thursday, December 03, 2009

BRAVO! Great Speech Mr Minister... Now let's see some beef!

Sorry for posting this long speech but I couldnt help it. The speech is of such great importance to the survival of the nation that I want everyone to read it (the text highlights are mine). But much what the Minister says is critical to the success of future Malaysia, it would come to naught if no follow up actions in terms of revamped policies are carried out. 

The message is clear! We got to bite the bullet once and for all!   

Salam, DARD


The need for competition — Ahmad Husni Hanadzlah

The government intends to revise its estimate for next year’s GDP growth from 3.0 per cent upwards. We have identified several sources of growth and we will enhance our capacity through domestic demand. We are also looking to strengthen the private sector’s contribution to the GDP through government-linked companies. We have identified several projects in the pipeline and we will bring them forward for implementation in the first quarter of next year. We are reasonably confident that a target of 5.0 per cent is achievable.

Next year we will unveil the Tenth Malaysia Plan. We will focus on initiatives to revitalise private initiative as the primary engine of growth. In this respect, we will improve the dynamics of competition in the domestic marketplace, focus on technology and innovation in niche areas including green and bio technologies. We will develop these niches on existing comparative advantages and provide soft and hard infrastructure for the knowledge economy.

With all these, we will create new catalysts of growth, boost demand for knowledge workers and skilled labour, raise private and social returns to education and skills upgrading, and a more balanced internal economic structure with a bigger role for domestic demand. Externally, we will also continue to further promote closer economic, trade and financial linkages within the region.

For the longer term, our Prime Minister has tasked the New Economic Advisory Council (NEAC) to develop a new economic model to transform the country into a high income economy. This journey will be an exciting as it would represent the single biggest transformative process since the introduction of the New Economic Policy in 1970.

There will be many changes. Quoting the Prime Minister, business is not as usual. Fundamental and structural economic reforms are critical if our economy is to be transformed successfully. Malaysia is trapped in a low-value-added, low-wage and low-productivity structure. While Singapore and Korea’s nominal per capita GDP grew within the last three decades by 9 and 12 times, respectively, ours only by a factor of 4.

Amongst our peers, China, India, Vietnam, Indonesia, Philippines and Thailand, our real GDP growth in the last three years was the second lowest at 5.5 per cent. Our manufacturing sector is not investing up the value chain while our services sector remains low in growth and under-developed.

The transformation is particularly urgent when we take the external environment into account. The global environment is changing. We can no longer rely on our traditional trading partners and we need to address the competitive pressure from other emerging markets on our existing exports.

Our economy has been stagnating in the last decade. We have lost our competitive edge to remain as the leader of the pack in many sectors of the economy. Our private investment has been steadily in decline. Our private investment is now half of what it was since the Asian crisis while both manufacturing and service sectors have become less capital intensive. For the period 2000 to 2007, our investment per value-added in percentage nominal terms in manufacturing dropped from 30.6 per cent to 21.7 per cent while the services sector, the decline is from 26.8 per cent to 22.1 per cent.

We need to restore the private sector’s role in the economy, serving as the primary engine of growth. How do we re-catalyse the private sector? In this regard, I wish to take this opportunity to articulate the concept of 1 Malaysia in economic terms. There are some quarters, the cynics and the pessimists, whom view the 1 Malaysia concept as another slogan gimmick. I assure you, it is not. We know that the Bumiputeras do not hold the bulk of Malaysia’s wealth. A simple analysis of our capital account will show that there has been a continuous outflow of capital from our shores. In this mobile world, capital will always flow to jurisdictions that are perceived to be more secure, not necessarily the ones that give a higher return.

Therefore, we have to rebuild an environment that gives confidence to the private investors. The critical pillars for us to restore confidence are leadership and governance, macroeconomic stability, market driven resource mobility, strong and effective institutions and a knowledge and innovation society. Allow me to articulate these five pillars, one by one.

First: Leadership and Governance
Political stability is a necessary component of leadership, especially so in a government that is based on a coalition of component parties. If there is to be continuity in a leadership structure that has the track record of a successful economy manager, Malaysians have to embrace acceptance of our differences and diversities which have been the base of our coalition. We also recognise that all Malaysians must be given equal opportunity to participate in the economy.

Performance must be the primary rod of measurement. In this regard, we have announced that there will no longer direct negotiations for any public projects unless it is for the procurement that is related to national defence and security matters. There have been concerns that the government is abandoning the Bumiputeras. This will not happen. The responsibility to develop and improve the economic standing of the Bumiputeras is the bedrock of this Administration’s mandate.

Nevertheless, we have to do it differently. There may have been a number of Bumiputeras who are awarded contracts who are not genuine entrepreneurs. Yes, we encourage collaboration, of course. Consortiums and strategic alliances are a good thing but there must be a demonstrable element of genuine collaboration. For years the government has denounced this “Ali Baba” syndrome. It’s about time we got tough on it.
Meritocracy must prevail. This is necessary for the long-term economic survival of the Bumiputeras, of ourselves.

If we are to ensure there is fairness in the marketplace, there must also be a corresponding strengthening of our public institutions. Transparency and adherence to the highest standards of governance is something that we must strive towards. In this regard, we wish to see greater participation from all races in the public institutions, where performance is the key measurement. The introduction of NKRAs and KPIs is the first step in that direction.

Second: Macroeconomic Stability
Moving forward, we have to ensure that our fiscal position is restored to a more sustainable level. While the broad objective of increasing private investment in the economy will be continuously pursued, from the Treasury’s point of view, we also need to ensure that we receive optimal return from our hard-earned tax revenue. There have been too many leakages in the past and less than productive spending.

I do not for one minute underestimate the difficulty of achieving this. One of the most difficult things that anyone in management can tell you is “cultural change”. How can anyone change a cultural mindset that has been ingrained for so many years? But I have faith. Malaysians had developed all these centuries a strong survival gene. When push comes to shove, we change. The key is — there must be someone or something to do the shoving. The world is changing and that’s the biggest shove that I can think of.

Third: Market-driven Resource Mobility
The government spends RM8,000 per capita annually in numerous subsidies. Not only this places a huge weight on our operating expenditure but it also creates distortions in our marketplace. We need to realign this. We will re-calibrate the distribution of the subsidies. We want to ensure there is greater precision in its application. Nonetheless, we also want to ensure that there will be no erosion in the standards of living for the underprivileged and the poor, regardless of race or ethnicity.

We must also consider the gradual dismantling of our open-ended protection of specific sectors and industries which have introduced a climate of complacency and artificial levels of supply. The long-term success of the nation’s economy must take precedence over the short term interests of a few protected groups.

Fourth: Strong and Effective Institutions
Entrepreneurs need to know that the public institutions are transparent and are run by the highest standards of governance. Entrepreneurs need to know that they do not compete in a market whereby their competitors seemed to possess institutional advantage. We need to see better competition policies and better regulatory environment which can allow market forces to operate in an orderly manner.

Fifth: Knowledge and Innovation-Driven Society
One of the biggest challenges that we face is the development of an innovative knowledge-driven society. Fortunately, we have a substantial middle class whom understands the value of knowledge. Unfortunately, our institutions of higher education have proven to be a disappointment. The mismatch between our industry’s needs and the output from the local universities has resulted in Malaysia having the highest unemployment rate of graduates, at close to 4.0 per cent compared to, for example, Ireland, Korea and Singapore.

We have to consider introducing greater competition in our halls of higher learning. We have to introduce greater diversity in the range of capabilities in the members of the academia. If there is a lack of self-induced factors in our in our undergraduates and academics to strive for greater performance, maybe we should introduce external factors to drive excellence.

If there is one operative word that runs through consistently in all the points that I have just put across to you just now, the word would be competition. 1 Malaysia equals inclusivity and by being inclusive, we introduce competition. We have to increase the level of competition in all the relevant sectors of our economy. To those that compete and win, there will be a set of rewards in terms of higher wages and awards. A performance-based culture does not accept mediocrity. We want to see a steady decline in those that suffer from the “dependency syndrome”.

Countries that have made successful transition into a high-income economy such Japan, Korea and Singapore have a single commonality — their workforce has strong work ethics, a disciplined mind and the hunger to succeed.

Historically, Malaysia never subscribed to any dogmatic approach to any particular ideology or economic school of thought. We are pragmatic people. Malaysia is a unique country that has its own particular set of dynamics. However, in a globalised world where economic and financial integration is inevitable, there will be a greater level of equalisation in our market economy with other participating economies. We cannot participate in half way measures although in our own pragmatic way, we will participate in ways and means that are prudent and cautious so as not to disrupt the existing equilibrium too much. A measured approach is called for but the end-destination is clear.

The journey ahead is certainly exciting but also daunting. The next decade will prove to be a period of unprecedented change in this nation’s economic history since the last 30 years. Indeed, we are embarking on this adventure in a period where the external environment is also going through a level of transformation that is unparalleled since the conclusion of World War II. The challenges are great but if we persevere, God willing, we shall succeed.

Address by Datuk Seri Ahmad Husni Hanadzlah, Minister of Finance II, on the occasion of the “National Economic Outlook Conference 2010-2011”, Hilton Kuala Lumpur on Dec 1, 2009.


  1. Tuan,

    Real Malaysian Dream.

    ...pada pendapat saya, mcm baca 'fairy tale' la. Bukan bersikap negative tapi reality pengalaman sendiri...

    -Meritocracy must prevail. This is necessary for the long-term economic survival of the Bumiputeras, of ourselves.

    (system kerajaan kita sekarang tidak pro kpd itu..u know better why)

    -With all these, we will create new catalysts of growth, boost demand for knowledge workers and skilled labour, raise private and social returns to education and skills upgrading,....One of the biggest challenges that we face is the development of an innovative knowledge-driven society.

    (apa cerita dgn 300k org yg migrate, dan ini bukan trend yg baik..they foresee something bad..dont say u dont know about it..saya pasti if the gov walk the talk; e.g dont revert math& sci to BM will do much help)

    akhir sekali..soalan cepu emas..
    "does the current gov provide the right recipes to accomplish the job?"


    kamurang policy maker la yg shape our future, my children future.


  2. JomoKB,

    I dont blame you for being sceptical. I would too if I was promised so many times but still no result. Tajuk yang saya beri kepada artikel ini "Now Let's See the Beef!", menggambarkan perasaan saya seperti itu jugak. Saya minta kerajaan tunjukkan tindakan bukan cakap sahaja.

    Walaubagaimanapun, kali ini saya rasa DS NAjib serius dalam menangani masalah-masalah asas dalam ekonomi dan politik kita. Dan saya rasa bertanggungjawab untuk memberi beliau peluang untuk menjayakan aspirasi beliau itu.




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