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Monday, July 31, 2023

Madani economy for a better Malaysia

THERE are numerous structural weaknesses, challenges and issues hindering Malaysia’s current and future growth trajectory.

These include a complexity of business regulations and investment climate; a lack of private investment dynamism; slower productivity growth and capital efficiency; a low level of technology adoption, lack of innovation and technological advancement; shortage of talent and skilled manpower; high dependency on low-skilled foreign workers; corruption; income inequality and regional growth disparity.

Pressures from external sources are getting more complex and intensified on the aspects of competitiveness, geo-economic complexity, economic security threat as well as the disruption of environmental and climate change.

The state of the nation needs a fundamental reset to cope with external shocks and seize new opportunities. It is no longer a choice but a must take fundamental re-orientation.

The “Madani Economy: Empowering the People” framework navigates our desired economic development path (mission, execution and targets) over a 10-year period to rebuild a Better Malaysia that is sustainable, competitive and resilient.

The re-engineering of Malaysia will be anchored on Madani values – sustainability, care and compassion, respect, innovation, prosperity and trust. The seven targets to be achieved over a 10-year period are:

> Top 30 largest economy (currently at 37),

> Top 12 in global competitiveness (currently at 27),

> Top 25 on the Human Development Index (currently at 62),

> Increase labour share of income to 40% (currently at 32.4%),

> Improve Malaysia’s position in the Corruption Perception Index to Top 25 (currently at 61),

> Towards fiscal sustainability, targeting deficit of 3%, or better (currently at minus 5.6% of gross domestic product or GDP in 2022), and

> Increase female labour force participation rate to 60% (currently at 55.5%).

The Madani Economy framework offers clarity on what we aim to achieve; what are the broad strategies and enablers to get there from where we are now.

It consists of two pillars:

> “Raise the ceiling” – which is aimed at restructuring and elevating the economy through greater regionalisation and enhancing competitiveness, driving foreign direct investment (FDI) and domestic direct investment (DDI), digitalisation, sustainable green investment (climate resilience, renewable energy, electric vehicles and food security) as well as moving up the value chain, and

> “Raise the Floor” – ensuring inclusive growth, quality jobs and higher wages and equality of opportunities for all the vulnerable households regardless of race and geographical location.

The narrative serves a framework for current and future actions. It is a call to action to move the agenda forward; to address a broad spectrum of critical issues that we collectively face; and aiming to shed light on what future we face, what future do we want and what must be done to get there.

The initiatives and strategies for addressing the structural problems must be formulated in a coherent way, providing a mapping of macroeconomic policies and constructive policy proposals on the “no finishing line” transformations agenda, and the reshaping of the Malaysian economy is a continuous process.

We know what went wrong and what needs to change. We have to endure the painful transition costs and adjustments when making radical reforms and overhauling the system.

The consideration of our development, economic and social priorities require new systemic changes, reforms of state intervention to facilitate private sector’s growth dynamism, more radical welfare reforms and well-being policies, competitive and high-quality and durable taxation measures and rising awareness of climate change, ecosystem degradation and pollution destroying the environment.

Towards this end, public sector and fiscal reforms are urgently needed to rebuild the fiscal buffers through broadening a narrow revenue base (tax revenue at 12% of total GDP), re-prioritisation of non-critical expenditures, containing high public debt (more than 60% of GDP) and targeted subsidy rationalisation.

We need strong fiscal resources and effective administration capacity. Good fiscal governance is needed to plug leakages, strengthen public delivery efficiency with enhanced tracking of fiscal programmes and spending.

Political rhetoric, including populist rhetoric, must not be deviating from realism. The government needs to carefully weigh on the fiscal budget deficit and ballooning debt sustainability when considering the populist measures as fiscally unsustainable measures can undermine investors’ confidence in the soundness of managing the country’s public finance.

The rollout of the National Energy Transition Roadmap (Part 1) has identified 10 flagship catalyst projects and initiatives (an estimated total investment of more than RM25bil and 23,000 job opportunities) to accelerate the pace of the energy transition.

The New Industrial Master Plan 2030 will map out a comprehensive industrial direction as well as strategies with the aim of positioning Malaysia for new catalytic sectors and industries.

It is a mission-based approach with identified mission-based projects to drive the manufacturing industry transformation in four ways, that is by advancing economic complexity, tech-up for a digitally vibrant nation, pushing for net-zero target, and safeguarding economic security and inclusivity.

While we have the elements (diversity strengths, strategically located in Asia, and diversified economic sectors with strong industrial base) to build on to make Malaysia great again based on a whole of nation approach, strong political conviction is needed and all stakeholders must be committed towards making a “total national reset” to secure a better future for Malaysia.

If we continue with “business as usual” and implement half-baked reforms, Malaysia will continue to regress and achieve sub-par economic growth, and continue to lag behind her regional peers.

Can the country rise to these challenges and restore its economic vibrancy?

Radical changes are needed for transformations to be a competitive nation, and to deliver more just, equitable, sustainable and resilient futures.

This requires fundamental cognitive, behavioural and mindset shifts, including rethinking the role of state, rethinking growth dimension, rethinking resources efficiency, rethinking the commons and rethinking as well as upholding justice and ensuring equitable.

Attempts to promote reforms are politically hazardous, especially when the potential losers are politically influential.

Our observations showed that some political interests often override economic consideration, and any push for economic and market reforms will necessarily have to come from within.

The government must regain credibility and trust of our people, businesses and investors when it comes to economic agenda matters to Malaysians.

These include building a sustainable and resilient economy, fixing the middle-income trap, raising the households’ income, reskilling our manpower for future-proof, providing quality and affordable core services (housing, healthcare, education), as well as making our community safer, inclusive and equitable for all Malaysians regardless of race, religion and geographical location.

Lee Heng Guie is Socio-Economic Research Centre executive director. The views expressed here are the writer’s own.

by Lee Heng Guie
Writer

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Saturday, July 29, 2023

Malaysia Madani to Uplifting economy and quality of life

New initiative aims to increase GDP, improve wage levels and quality of life

The Madani Economy framework to restructure the country’s economy is to ultimately provide the people with the benefits to enjoy a better quality of life, says the Prime Minister. Execution is very important as announcements are not new to Malaysia, say trade groups.

KUALA LUMPUR: Taking Malaysia into one of the top 30 economies in the world over the next decade is among the ambitious goals set by Putrajaya under Madani Economy, the latest economic framework.

“This is a framework to elevate the dignity and status of our nation by restructuring the economy towards making Malaysia a leader in the South-east Asian region. This ultimately benefits the people, (who would) enjoy a better quality of life,” said Prime Minister Datuk Seri Anwar Ibrahim.

Anwar, who launched the Madani Economy: Empowering the Rakyat initiative here yesterday, said it was imperative for the country to not rest on its laurels with its 4% to 5% annual GDP growth rate, but instead to become a regional economic powerhouse, beginning with targeting a yearly GDP expansion rate of 5.5% to 6%.

“Malaysia needs to build larger economic integration with our neighbours, especially as the world is facing a supply chain disruption. We need to better equip Malaysian corporations for greater competitiveness and to at least breach into the Asean market,” he said in his keynote address at the Madani Economy launch.

Another important area is to improve wage levels to help everyone have a better quality of life, he added. This includes hauling the country’s Compensation of Employees to Gross Domestic Product (CE:GDP) ratio up from 35% to 45% and improving Malaysia’s standing in the Global Competitiveness Index to 12th or better, said Anwar.

The CE:GDP ratio is generally used to gauge the income-earning power of a country’s citizens and measures the share of compensation paid to employees who make up a country’s GDP.

Apart from that, the Prime Minister said that there should be sensible utilisation of free trade agreements for better movement of goods, capital, human resources and technology-sharing.

He said the government was also looking to introduce tax incentives to reward companies that produce high-impact economic products and activities.

To improve Malaysia’s global competitiveness and expand the economy, Anwar said his administration has allocated Rm100mil to complete the infrastructure at various industrial zones throughout the country. An additional Rm100mil would be allotted to enhance the research, development, commercialisation and innovation ecosystem, he added.

The focus will be on industrial needs, renewable energy and new growth activities – all part of the government’s effort to achieve a gross domestic expenditure on R&D to GDP ratio of 3.5%.

“All the efforts to enhance the country’s economy ultimately leads to the next step, which is to improve the livelihood of Malaysians. The success of the Madani Economy structural renewal has to be measured by how it produces jobs with a meaningful remuneration package for the people,” he said.

The government is also looking into several oft-mentioned initiatives such as enacting a progressive minimum wage system – which has partly been put into effect – as well as reducing the reliance on foreign labour by introducing a tiered-levy system on non-malaysian workers.

Anwar said such efforts will increase the adoption of automation and provide upskilling opportunities for Malaysian employees.

He said his administration is working with a number of government-linked investment companies (GLICS) to invest up to Rm1bil in additional funds, in partnership with private investors, to support local startups and to further spur technopreneurship.

Recognising that approximately 79% of micro, small and medium enterprises (MSMES) consist of micro businesses, he said these small-size endeavours have the potential to expand and penetrate international markets, especially if they get enough facilities and support.

As such, he said the government would prepare an addition Rm100mil in the digitalisation matching grant to help MSMES further digitalise their business models. This is in line with digital economy reforms meant to enhance the online business exposure of such enterprises.

Madani is an acronym for a policy that embraces six core values: kemampanan (Sustainability), Kesejahteraan (Prosperity), Daya Cipta (Innovation), hormat (Respect), keyakinan (Trust) and Ihsan (Compassion).

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Thursday, July 27, 2023

Musk’s Starlink lands in Malaysia

New initiative aims to increase GDP, improve wage levels and quality of life

The Madani Economy framework to restructure the country’s economy is to ultimately provide the people with the benefits to enjoy a better quality of life, says the Prime Minister. Execution is very important as announcements are not new to Malaysia, say trade groups.

KUALA LUMPUR: Taking Malaysia into one of the top 30 economies in the world over the next decade is among the ambitious goals set by Putrajaya under Madani Economy, the latest economic framework.

“This is a framework to elevate the dignity and status of our nation by restructuring the economy towards making Malaysia a leader in the South-east Asian region. This ultimately benefits the people, (who would) enjoy a better quality of life,” said Prime Minister Datuk Seri Anwar Ibrahim.

Anwar, who launched the Madani Economy: Empowering the Rakyat initiative here yesterday, said it was imperative for the country to not rest on its laurels with its 4% to 5% annual GDP growth rate, but instead to become a regional economic powerhouse, beginning with targeting a yearly GDP expansion rate of 5.5% to 6%.

“Malaysia needs to build larger economic integration with our neighbours, especially as the world is facing a supply chain disruption. We need to better equip Malaysian corporations for greater competitiveness and to at least breach into the Asean market,” he said in his keynote address at the Madani Economy launch.

Another important area is to improve wage levels to help everyone have a better quality of life, he added. This includes hauling the country’s Compensation of Employees to Gross Domestic Product (CE:GDP) ratio up from 35% to 45% and improving Malaysia’s standing in the Global Competitiveness Index to 12th or better, said Anwar.

The CE:GDP ratio is generally used to gauge the income-earning power of a country’s citizens and measures the share of compensation paid to employees who make up a country’s GDP.

Apart from that, the Prime Minister said that there should be sensible utilisation of free trade agreements for better movement of goods, capital, human resources and technology-sharing.

He said the government was also looking to introduce tax incentives to reward companies that produce high-impact economic products and activities.

To improve Malaysia’s global competitiveness and expand the economy, Anwar said his administration has allocated Rm100mil to complete the infrastructure at various industrial zones throughout the country. An additional Rm100mil would be allotted to enhance the research, development, commercialisation and innovation ecosystem, he added.

The focus will be on industrial needs, renewable energy and new growth activities – all part of the government’s effort to achieve a gross domestic expenditure on R&D to GDP ratio of 3.5%.

“All the efforts to enhance the country’s economy ultimately leads to the next step, which is to improve the livelihood of Malaysians. The success of the Madani Economy structural renewal has to be measured by how it produces jobs with a meaningful remuneration package for the people,” he said.

The government is also looking into several oft-mentioned initiatives such as enacting a progressive minimum wage system – which has partly been put into effect – as well as reducing the reliance on foreign labour by introducing a tiered-levy system on non-malaysian workers.

Anwar said such efforts will increase the adoption of automation and provide upskilling opportunities for Malaysian employees.

He said his administration is working with a number of government-linked investment companies (GLICS) to invest up to Rm1bil in additional funds, in partnership with private investors, to support local startups and to further spur technopreneurship.

Recognising that approximately 79% of micro, small and medium enterprises (MSMES) consist of micro businesses, he said these small-size endeavours have the potential to expand and penetrate international markets, especially if they get enough facilities and support.

As such, he said the government would prepare an addition Rm100mil in the digitalisation matching grant to help MSMES further digitalise their business models. This is in line with digital economy reforms meant to enhance the online business exposure of such enterprises.

Madani is an acronym for a policy that embraces six core values: kemampanan (Sustainability), Kesejahteraan (Prosperity), Daya Cipta (Innovation), hormat (Respect), keyakinan (Trust) and Ihsan (Compassion).

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 Geely and Tesla..and conducive ecosystem provide support

KUALA LUMPUR: Malaysia is on the right path to become an electric vehicle (EV) powerhouse in South-East Asia with the government aggressively promoting a conducive EV ecosystem, supported by strong business commitment shown by two world-renowned automotive companies, Geely and Tesla.

Malaysian Automotive Association (MAA) president Mohd Shamsor Mohd Zain said the entry of China’s Zhejiang Geely Holding Group Co, or simply Geely, and United States-headquartered Tesla Inc into the Malaysian market serves as a clear indication of the country’s relevance in the regional automotive landscape.

He said the two auto makers, with their vast global experience and access to leading technologies, could introduce new ideas and ways of doing businesses to the local automotive sector, such as high-tech research and development (R&D) in new products that might not be currently available in the country.

“For example, electrification means a change in vehicle components, with more focus given to battery manufacturing and other specialised components for EVs.“We would also see the industry adopting new skillsets and infrastructure suited to varying degrees of electrification – from mild hybrids to fully electric vehicles – besides reskilling or upskilling the automotive workforce, whilst opening up new opportunities for innovation, R&D and high-value manufacturing of components,” he told Bernama.

He added that with the right government support, infrastructure and policies in place, Malaysia is well positioned to be a regional hub supporting the global growth of EVs given its strategic positioning and favourable economic conditions.

Malaysia is a major electrical and electronics manufacturing hub in South-East Asia; therefore, he said, automakers and automotive investors can seamlessly leverage on this capacity to secure their supply chains for growing their production of next-generation vehicles.

The components sub-sector can be capitalised on to service the whole automotive value chain, covering semiconductors, sensors, automotive electronics, transceivers, batteries, and vehicle assembly.

Mohd Shamsor said with more than 40 brands in the domestic market currently, the entry of new players would undoubtedly add greater excitement to the market and generate more interest among consumers.

Besides, it would also create a buyer’s market by providing more choices and increasing competitiveness, keeping all automotive players on their toes and resulting in better services and offerings for consumers.

“Malaysia may be new to the EV industry, but with the solid support of the current government and progressive national policies coupled with fast-growing consumer uptake, we foresee rapid holistic growth in our local EV market.

“New players in the EV space will lead to greater competition, which in turn will spur more investments from automotive players and improvements in the quality of products and services offered,” he pointed out.

Additionally, Mohd Shamsor said, with more EVs, including the completely knocked down models, coming into the country, there would also be new business opportunities for the vendors.

Meanwhile, Icats University College pro vice-chancellor Prof Datuk Dr Shazali Abu Mansor said EV is still considered as a niche market for the domestic automotive landscape, and that strong demand and supply are equally important for the industry to penetrate the Malaysian market at a meaningful rate.

He said as Malaysia manages its competitive advantages according to world standards, major adjustments in the structure of employment, tax, and subsidy allocation are inevitable in the journey towards creating critical mass.

“In some prominent EV countries, carbon tax is implemented to encourage both consumers and manufacturers to shift towards more environment-friendly vehicles.

“Malaysia used to be an agriculture and commodity-based country, but now the economy boasts robust manufacturing and service sectors, and is going to be a high-tech nation by 2030.

“We must move on and make way for new changes,” he reckoned.

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Saturday, July 22, 2023

Largest ever Australia-US joint military exercise a ‘paper tiger,’ experts say

 

Artillery is fired during joint military drills at a firing range in northern Australia as part of Exercise Talisman Sabre, the largest combined training activity between Australia and the US, in Shoalwater Bay, Australia, on July 22, 2023. Photo:AFP

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The largest ever ongoing Australia-US joint military exercise, which involves 13 countries, has been deemed as a "paper tiger" by Chinese experts. Though impressive on paper, the exercise cannot really persuade all participants to serve the US' purpose, experts said.

The two-week-long military exercise, known as Talisman Sabre 2023, officially commenced on Friday. It is the largest since 2005, with more than 30,000 military personnel from 13 countries participating, according to media reports. Reuters described it as a "show of force and unity at a time when China has emerged as an increasingly assertive power in the Indo-Pacific."

"The most important message that China can take from this exercise and anything that our allies and partners do together, is that we are extremely tied by the core values that exist amongst our many nations," US Secretary of the Navy Carlos Del Toro was quoted as saying by Reuters during an opening ceremony in Sydney.

The US' purpose of roping in countries such as Australia and other allies in its Indo-Pacific military encirclement of China, as well as preparing for future military adventures, is evident through the "unprecedented" military exercise, Chen Hong, executive director at the Asia Pacific Studies Center of East China Normal University, told the Global Times on Saturday.

Chen criticized the US for continuously exacerbating regional tensions and insecurity.

The military exercise also coincides with the upcoming visit of US Defense Secretary Lloyd Austin to visit Papua New Guinea and Australia next week, during which Austin plans to join US Secretary of State Blinken to attend Australia-US Ministerial Consultations (AUSMIN) and observe military exercises.

However, the military excise that has been labeled by the West as "the largest in the 18-year history of the exercise" that is intended to send a clear message to China was more of a "paper tiger," Chen noted.

US officials often brag about the "core values" shared by their allies and partners. However, Chinese military expert Song Zhongping told the Global Times that the US has been trying to coerce these countries in the name of "defending their security and democratic values" and kidnap them by hyping up threats involving China, Russia and North Korea.

By playing word games, the US is only aiming to maintain its own global hegemony and participating countries also have their own petty calculations, Song noted.

Though impressive on paper, the exercise cannot really persuade all participants to serve the US' purpose, even Australia has certain reluctance, not to mention the rest, the two experts noted.

Media reports claimed this year is the first time that Germany has participated in the exercise, sending 210 paratroopers and marines. Chinese experts said since Merkel left office, Germany's diplomatic independence has been undermined, but they questioned whether Germany would really take more actions to back the US military adventure and the symbolic significance of Germany's participation in the exercise far outweighs the substantive significance.

For Australia, Chen said located in the South Pacific region where is safe and peaceful, Australia can be hardly challenged in terms of security, but unfortunately, it has been growingly pushed into a blind alley by the manipulation of the US and has become a pawn in the US' chess game. Australia will be equipped with nuclear-powered submarines under the AUKUS deal and has become more aggressive militarily by investing more in the development of military equipment, the expert noted.

Chen reminded Australia to maintain its strategic independence in order to protect its national interests. Excessive military adventurism will only put Australia on a more insecure position and hinder its own development, Chen warned.

Japan's Self Defense Force is scheduled to conduct a live fire demonstration of its Type 12 Surface-to-Ship missile (SSM) at a weapons range at Jervis Bay, south of Sydney on Friday, according to ABC.

South Korea has brought two warships and self-propelled howitzers as well as a multiple launch rocket system (MLRS) known as Chunmoo to the exercise. It will showcase its rocket technology during the Talisman Sabre, the ABC report said.

Song told the Global Times that both Japan and South Korea have their own intentions in developing their military industries by attending the Talisman Sabre. Testing equipment in Australia is taken as a way to prove their equipment can well adapt to different climates and be utilized across the globe, which will boost their arms exports.

Chinese experts also slammed Western hype surrounding the sailing of a Chinese ship off the coast of Australia that labeled it as a spy ship.

Rebuking commentators from the US and Australia who described China's act of sending ships to regional waters as "aggressive," Chen said such claims are baseless and unfounded, and that the US and Australia should respect the right of other countries to exercise freedom of navigation and overflight in international seas and airspace,

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