Page 1 of 15

HIGH INCOME

SUSTAINABLEINCLUSIVENESS

VISION 2020

1 MalaysiaPeople First,

Performance Now

Government Transformation

Programme

Economic Transformation

Programme

10th Malaysia Plan

Figure 1: The 4 Pillars of National Transformation

NKRAs

Fighting Corruption

Reducing Crime

Improving Education

Improving Public Transport

ImprovingRural Basic

Infrastructure

Eradicating Poverty

Figure 2: The NKEAs of the GTP

EXCERPTS OF THE GOVERNMENT TRANSFORMATION PROGRAMME (GTP) & ECONOMIC TRANSFORMATION PROGRAMME (ETP) : KEY THRUSTS TO POWER THE NATION TOWARDS 2020

In my previous article, I penned on the envisaged impact of the future business environment in Malaysia as a result of the New Economic Model (NEM). A quick recap – the NEM it is part of the four key thrusts to

transform the nation into a high-income economy that is sustainable and inclusive, to ensure that the nation is on the right path towards attaining developed nation status by 2020 (Figure 1). The stark realities that local companies are investing more abroad, the rise in competition from China, India, Indonesia and Vietnam, as well as the fact that Malaysia can no

longer rely on its low-cost advantage nor find its niche in the value add-chain, had hit hard and had sent a clear message to Putrajaya – change is not an option. It is a must.

Thus, what began with the launch of the 1Malaysia concept of People First, Performance Now by the Prime Minister in April 2009 to move the country forward towards becoming a united, advanced and progressive society with higher living standards, had soon progressed into a well mapped out sequel of noteworthy transformation programmes – namely, the Government Transformation Programme (GTP) and the much anticipated Economic Transformation Programme (ETP) in order to embrace change and tackle these issues, head on. Acknowledging major weaknesses in the government machinery in terms of implementation and efficiency of delivery, the GTP is indeed a bold step in the right direction to address and rectify these alarming flaws, quickly. Recognizing that the only thing that stays constant is change, the main objective of the GTP is to transform the government through six National Key Result Areas (NKRAs) and measure their outcomes through Key Performance Indicators (KPIs); thus, openly pledging to be accountable to issues that matter most to the rakyat

Page 2 of 15

PHASE 1 (2010 – 2012)

1. Establish a new engine for

change and deliver substantial

outcomes for the rakyat quickly.

2. Setting and achieving targets

within NKRAs.

PHASE 2 (2012 – 2015)

1. The economy should have

evolved in line with the NEM

into higher-value-added

sectors and government

productivity should have been

further advanced.

PHASE 3 (2015 – 2020)

1. Innovative and rakyat-

centric models of public

service delivery –

centered on choice and

competition.

Figure 3: The GTP Roadmap

(Figure 2). Additionally, in order to raise the confidence of business communities with regards to government policies and delivery efficiency to boost a brittle track of lackluster FDI inflow in particular, the GTP hopes to ensure a more competitive and dynamic economic environment en-route to 2020 – a programme which the government plans to take over three phases (Figure 3).

Correspondingly, the GTP intends to bridge the access to opportunities on a merit and need basis, and to work in partnership with the private sector under the watchful eyes of the Performance Management and Delivery Unit (Pemandu) which has been tasked to support and ensure the timely implementation of the programmes and its outcomes. According to Pemandu, the GTP has already delivered results within the last 8 months. For instance, there has been a 15% drop in the overall crime index, a 39% drop in street crime and 192 people have been convicted of corruption. Additionally, a 46% reduction of citizens categorized as hardcore poor and a 2.4 million increase in LRT ridership had been recorded, while a total of 3712 government contracts have been published online. As such, these statistics do demonstrate a step in the right direction.

Similarly, the ETP which was unveiled on Sept 21 and working in unison with the NEM & GTP, set forth an ambitious 10-year economic roadmap to power the country towards becoming a high income nation by 2020. It involves investments worth approximately RM 1.4 trillion (US$523 billion) with an objective to grow the Gross National Income (GNI) at six percent annually to hit RM 1.7 trillion (US$ 523 billion) by 2020, from RM 660 billion (US$ 188 billion) in 2009. As an initial catalyst towards economic transformation, 131 Entry Point Projects (EPPs) would be carried out across 12 National Key Economic Areas (NKEAs), with 60 Business Opportunities (BOs) being made available as a result of it (Figure 4). An introduction to the NKEAs is further discussed below.

Notably, the ETP would be private sector driven – expected to fund 92% of the NKEA projects while the remaining funds would come from the government which would also act as an enabler and catalyst. As a result of this, GNI per capita is expected to increase by 103% to reach RM 48,000 (US$ 15,000) within 10 years from RM 23,700 (US$ 6,700) in 2009.

Page 3 of 15

NKEA No. of EPPs US$ Bil RM Bil No. of BOs US$ Bil RM Bil Jobs Created

Oil, Gas & Energy 12 45.8 141.4 7 19.1 58.9 52,300

Palm Oil 8 39.2 121 4 23.3 71.9 123,400

Financial Services 8 41.8 129 6 24.8 76.6 275,000

Tourism 12 20.9 64.5 4 8.9 27.5 497,200

Business Services 8 17.8 54.9 9 6.1 18.8 245,500

Improving Electronics & Electrical

15 16.8 51.9 4 4.3 13.3 157,000

Wholesale & Retail 13 34.1 105.2 1 14.1 43.5 595,000

Education 13 10.4 32.1 4 4.5 13.9 536,000

Healthcare 6 11.1 34.2 5 4.6 14.2 181,000

Communications Content & Infrastructure

10 11.9 36.7 4 3.7 11.4 43,162

Agriculture 16 9.1 28.1 11 1.1 3.4 74,000

Greater Kuala Lumpur 10 121.8 376 1 62.1 191.7 520,438

Total 131 381 1,175 60 177 545 3,300,000

Expected EPP GNI Contribution in 2020 *

Expected BO GNI Contribution in 2020

* Includes multiplier effect from EPPs

Figure 4: ETP NKEAs – 131 EPPs & 60 BOs

A total of 106 EPPs would largely benefit the urban communities, while the remaining EPPs would benefit communities in the rural areas. The ETP is also expected to create 3.3 million jobs over the next 10 years. Among other projects in the pipeline include the creation of a high-speed rail track link between Kuala

Lumpur and Singapore, and revitalizing the Klang River. Similarly, there are programmes in place to make Malaysia a regional hub for oil and gas services and a global biodiversity hub. Furthermore, the capital market would also be revitalized to boost investor confidence. Plans are also on-going to attract and retain talent necessary to support a high-income economy through the Malaysian Talent Corporation and to implement a minimum wage policy by next year.

Thus, there is no doubt that the momentum of change and economic transformation has been building up since the unveiling of the Part One of the NEM, GTP and most recently – the ETP. With the full and final roadmap of the ETP scheduled to be released by the Prime Minister on October 26, all eyes will certainly be focused on its implementation plan. The intentions for these transformation programmes seem to be sincere and clear. In any case, there are no two ways around it. However, in the final analysis, the business community at large will need convincing and assurance that the Government’s role in business would be reduced whilst paving the way for a level playing field for both domestic and foreign investors – with clear rules and policies, and in the spirit of healthy competition. Until then, the road ahead may perhaps be a long and bumpy ride. Nevertheless, it is not an impossible feat to achieve if there is belief and the will to act as a collective. After all, Rome was never built in a single day.

A snapshot of the 12 NKEAs, its EPPs and BOs is stipulated in the corresponding pages of this article. Please note that these programmes and statistics have yet to be finalized by Pemandu; however, we will provide a summary of the finalized ETP roadmap upon its launch on October 26.

Page 4 of 15

Source: Pemandu

NKEA 1: Oil, Gas and Energy (OGE)

The Oil, Gas and Energy NKEA which is key to the Malaysian economy as it contributes 20% of the Gross Domestic Product (GDP), is aimed at raising the sector’s output and meet energy demand over the 10-year period. It is also aimed at enhancing downstream growth, making Malaysia the number one hub for oil field services and building a sustainable energy platform for growth. Requiring an investment of RM 217 billion from the private sector, the targeted EPPs & BOs include the following:

NKEA 2: Palm Oil

Similarly, the Palm Oil NKEA is aimed at improving upstream productivity and expanding downstream expansion, whilst focusing on its sustainability. Statistics by Pemandu indicate that 81.5% of Malaysia’s palm oil export value came from upstream activities, while 18.5% were from downstream activities. Furthermore, as the world’s second largest producer of palm oil in 2009 and with 365,414 hectares of oil palm trees above 25 years old, replanting will also need to be accelerated to avoid backlog. The EPPs would focus on:

Page 5 of 15

PALM OIL NKEA ENTRY POINT PROJECTS (EPPs)

PALM OIL NKEA BUSINESS OPPORTUNITIES

Page 6 of 15

Source: Pemandu

NKEA 3: Financial Services

Next, the Financial Services sector will require strengthening its core which includes revitalizing capital markets, deepening and broadening the bond markets, transforming developmental finance institutions and creating an integrated payments ecosystem. It would then evolve to serve the needs of a high income society by accelerating the growth of the private pensions industry and spurring the growth of the wealth and asset management industry. Additionally, it is also aimed for Malaysia to become an indisputable global hub for Islamic finance.

FINANCIAL SERVICES NKEA ENTRY POINT PROJECTS (EPPs)

Page 7 of 15

Source: Pemandu

FINANCIAL SERVICES NKEA BUSINESS OPPORTUNITIES

NKEA 4: Tourism

As the fifth largest industry and one of the fastest growing sectors in the country, the Tourism NKEAs would focus on increasing tourist arrivals and growing yield in terms of receipts. Requiring a funding of RM 204 billion, the Tourism EPPs & BOs been developed across five themes to deliver significant results within a 10-year timeframe.

Page 8 of 15

Source: Pemandu

TOURISM NKEA BUSINESS OPPORTUNITIES

NKEA 5: Business Services

The Business Services sector, encompasses a vast array of industries and professions, covering 41 sub-segments – healthcare, IT services, Consulting, Engineering, Accounting, Law, Construction, Advertising, Events Management and Fashion to name a few, that is fast growing and is driven by a series of powerful global trends which include globalization and outsourcing, climate change, rise of social media and IT enabled services. Thus, in order to increase skilled workforce to meet the service sector growth, the ETP also aspires to grow the pool of skilled labor to 46% of Malaysia’s workforce to support the skills demand from the sector.

Page 9 of 15

Source: Pemandu

NKEA 6: Electrical & Electronics (E&E)

Further, there are also programmes to revitalize the E&E sector and to deepen the value chain capabilities in research and development (R&D), manufacturing, assembly, packaging, testing, as well as sales and distribution within four target sub-sectors; namely the semi-conductor, solar, light-emitting diode (LED) and industrial electronics industries, with a focus to grow and build a strong international distribution network. A total funding of RM78.4 billion over 10 years is required for this programme. The strategy is to also focus the 15 EPPs across four geographic clusters in the Northern Corridor, Klang Valley, Johor and Sarawak.

E&E NKEA ENTRY POINT PROJECTS (EPPs)

Page 10 of 15

Source: Pemandu

NKEA 7: Wholesale & Retail

In 2007, Malaysia ranked eighth in a global index for retail business opportunity. Notably, the global economic crisis had not affected investment opportunities in the retail sector of emerging economies. For one, the ETP plans to support the expansion of large retail businesses like hypermarkets and malls in their bid to expand domestically and overseas while mitigating the effects of large format expansion on small and medium-sized local players by supporting the latter to transform their efficiency and service levels. In addition, the ETP intends to make most imported retail products duty free to encourage consumer spending. Based on research by Pemandu that migration to urban areas and the overall growing population will drive future retail demand, thirteen EPPs have been developed to deliver the intended GNI growth.

WHOLESALE & RETAIL NKEA ENTRY POINT PROJECTS (EPPs)

Page 11 of 15

Source: Pemandu

NKEA 8: Education

The education sector contributes 4% of gross domestic product (GDP). Thus, the focus of the Education NKEA will be on strengthening the private education services sector by increasing private consumption and investments, as well as expanding education exports. As public sector growth is expected to be limited, this goal will require the private education sector to grow six-fold. A total of 13 EPPs have been developed across three themes to raise overall education standards and deliver significant results within a 10-year timeframe.

EDUCATION NKEA ENTRY POINT PROJECTS (EPPs)

EDUCATION NKEA BUSINESS OPPORTUNITIES

Page 12 of 15

NKEA 9: Healthcare

With total healthcare expenditure representing 4.8% of GDP, the ETP aims to grow three sub-sectors within the healthcare industry; namely the pharmaceutical, health travel and medical technology products segment. Quick-wins include to mandate health insurance for foreign workers and to create an eco-system to support clinical trials. In addition, the Healthcare NKEA intends to develop and pursue exports in generic drugs and reinvigorating our health travel segment with an investment of RM 23.2 billion within 10 years.

HEALTHCARE NKEA ENTRY POINT PROJECTS (EPPs)

HEALTHCARE NKEA BUSINESS OPPORTUNITIES

Page 13 of 15

NKEA 10: Communications Content & Infrastructure (CCI)

The CCI sector spans a wide ecosystem, from content generation to networks, services and devices. In order to achieve a high-income economy, the continued development of the communications content and infrastructure sector is therefore fundamental. It would be critical to ensure smart deployment of next generation infrastructure throughout the country and capitalize on opportunity to develop Telecommunications as an enabler to other sectors. Capital expenditure is estimated to amount to RM 51.5 billion over the 10 year period.

CCI NKEA ENTRY POINT PROJECTS (EPPs)

CCI NKEA BUSINESS OPPORTUNITIES

Page 14 of 15

Source: Pemandu

NKEA 11: Agriculture

The agriculture sector’s contribution to the Malaysian economy is low relative to countries similar such as Thailand, Indonesia and Vietnam and lags behind these regional peers in percentage contribution to gross domestic product (GDP) due to lack of scale, production-driven farming and low-value products. The aspirations of the ETP are to double the country’s national income from agriculture and increase farmer’s income by two to four times. By 2020 agriculture will be transformed into agribusiness, moving towards a model that is inclusive but simultaneously anchored on market needs, economies of scale and value chain integration.

AGRICULTURE NKEA ENTRY POINT PROJECTS (EPPs) & BUSINESS OPPORTUNITIES (BOs)

Page 15 of 15

Source: Pemandu

NKEA 12: Greater Kuala Lumpur (KL)

Greater KL comprises of 10 authorities namely:

� Dewan Bandaraya Kuala Lumpur (DBKL) � Majlis Perbandaran (MP) Klang

� MP Kajang � MP Selayang

� MP Ampang Jaya � MP Subang Jaya

� Majlis Bandaraya (MB) Shah Alam � MB Petaling Jaya

� Putrajaya � Majlis Daerah Sepang

The rationale for Greater KL is the fact that urbanization is a driver of gross national income (GNI) growth.

Additionally, it is also the largest contributor at a GNI per capita level, both today and in 2020. The Greater

KL NKEA’s vision can be summarized as 20-20 by 2020 – that is, to be a city that simultaneously achieves

a top-20 ranking in city economic growth while being among the global top-20 most livable cities by 2020.

GREATER KL NKEA ENTRY POINT PROJECTS (EPPs) & BUSINESS OPPORTUNITIES (BOs)

As a summary, Figure 5 on the corresponding page depicts the ETP roadmap in terms of total GNI contributions of EEPs and BOs by the 12 NKEAs amounting to RM 1.7 trillion – the 2020 GNI target towards a high-income economy and nation.

Page 16 of 15

121

64.5

51.9

141

28.1

129

54.9

105.2

32.1

34.2

36.7

376

71.9

27.5

13.3

58.9

3.4

76.6

18.8

43.5

13.9

14.2

11.4

191.7

1,700

OGE

PALM OIL

FINANCIAL SERVICES

TOURISM

BUSINESS SERVICES

E&E

WHOLESALE & RETAIL

EDUCATION

HEALTHCARE

CCI

AGRICULTURE

GREATER KL

2020 GNI TARGET

Figure 5: 2020 GNI Contribution by NKEA EEPs & BOs

RM

Bill

ion

s

* GNI Contributions from EPPs include its multiplier effects

EPPs

BOs

LEGEND:

ENTRY-POINT PROJECTS (EPPs)

BUSINESS OPPORTUNITIES (BOs)

Please note:

Figures shown were published based on ETP labs that were recently carried out and have yet to be finalized by Pemandu. Therefore, all figures stated herein and in this article may not be representative of statistics revealed during the official and final launch of the ETP roadmap on October 26, 2010.