The Rest of the World and Malaysia External Challenges to Malaysia’s Growth

18th June 2013

0

2000

4000

6000

8000

10000

12000

14000

16000

1991 2000 2010 2020

USD

Year

GNI per capita

GNI per capita

Aspiration: USD 15,000

1991: Vision 2020 first unveiled

Where We Are (GNI per Capita)

52 acres yard Headcount: 2,000

Source: The World Bank

Foreign Direct Investments

52 acres yard Headcount: 2,000

Source: World Economic Forum

-10000

0

10000

20000

30000

40000

50000

60000

70000

2000 2006 2011

USD Million

Year

Foreign Direct Investment

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2000 2006 2011

Percentage

Year

Percentage of Total World FDI

Malaysia

Indonesia

Thailand

Singapore

Vietnam

GDP based on PPP share of World Total (percent)

3

M’sia, 0.56%

Brazil, 2.77%

Russia,3.16%

India, 4.63%

China, 10.94

%

USA, 20.94

% EU, 22.24

%

Rest of the World, 34.76

% M’sia, 0.60%

Brazil, 2.83%

Russia, 3.02% India,

5.63%

China, 14.92%

USA, 18.86%

EU, 19.36%

Rest of the

World, 34.78%

M’sia, 0.63%

Brazil, 2.81%

Russia, 2.96%

India, 6.31%

China, 18.27%

USA, 17.94% EU, 16.92%

Rest of the World, 34.16%

2007

2012

2017 Source: International Monetary Fund

2007 2012 2017

China 7,329 12,405 20,440

USA 14,028 15,684 20,077

EU 14,893 16,092 18,932

World 66,982 98,140 111,909

2012 Competitiveness Between Countries

4

Source: World Economic Forum

Rating 1-7 (7 = Best) Malaysia Indonesia Thailand Singapore Vietnam

GCI Global Competitiveness Index 5.06 4.4 4.52 5.67 4.11

Institutions 4.94 3.86 3.82 6.07 3.61

Infrastructure 5.09 3.75 4.62 6.5 3.34

Macroeconomic environment 5.34 5.68 5.55 6.06 4.16

Higher education and training 4.83 4.17 4.35 5.93 3.69

Labour market efficiency 4.82 3.87 4.32 5.8 4.51

Financial market development 5.44 4.07 4.46 5.85 3.85

Technological readiness 4.32 3.56 3.56 6.1 3.33

Market size 4.78 5.27 5.04 4.61 4.63

Business sophistication 5.02 4.3 4.25 5.14 3.57

Innovation 4.38 3.61 3.19 5.39 3.07

ICT usage 3.05 2.23 2.19 6.14 2.73

GDP (US $Billion) 278.68 845.68 345.65 259.85 122.72

GDP per capita (US$) 9699.7 3508.61 5394.36 49270.87 1374.01

GDP (PPP) 0.57 1.43 0.76 0.4 0.38

2012 Competitiveness Between Countries (specific to FDI attraction)

5

Rating 1-7 (7 = Best) Malaysia Indonesia Thailand Singapore Vietnam

Efficiency of legal framework in settling disputes 5.08 3.78 3.8 6.24 3.63

Gov't services for improved business performance 5.25 4.46 3.83 5.89 3.78

Availability of research and training services 5.38 4.34 4.2 5.4 3.14

Extent and effect of taxation 4.75 4.06 3.65 5.46 3.41

Total tax rate, % 34 34.5 37.5 27.1 40.1

No. procedures to start a business 20 87 29 8 97

No. days to start a business 16 125 99 4 124

Prevalence of trade barriers 4.87 4.29 4.32 5.9 3.59

Trade tariffs, % 76 61 78 2 90

Cooperation in labour-employer relations 5.25 4.37 4.66 6.04 4.46

Flexibility of wage determinants 5.59 4.4 4.72 6.01 5.33

Pay and productivity 5.34 4.36 4.49 5.38 4.66

Brain drain 4.73 4 4.14 5.72 3.08

Availability of financial services 5.65 4.82 5.1 6.08 4.35

Ease of access to loans 4.41 3.91 3.55 4.68 2.36

Domestic market size index 4.46 5.18 4.79 4.15 4.36

Quality of scientific research institutions 4.86 3.88 3.74 5.57 3.4

Capacity for innovation 4.64 3.86 3.03 4.44 3.03

So

urc

e: W

orld

Eco

no

mic

Foru

m

Malaysia

6

CHALLENGES

Cost Related • Upward Pressure on RM

versus USD • Increased Cost of Labour • Reduction in Subsidies

Slow down in US and Europe Economies

Brain Drain

Aggressive Emerging

Economies • e.g. Indonesia, Vietnam,

Thailand

Finite Resources

STRENGTHS

Strong Domestic Demand • Cushions economy from external

deterioration

Solid Infrastructure • e.g. Legal and Banking Systems,

IT, Logistics (highways, rail etc)

Political Stability

Supporting Programmes • e.g. GTP to reduce crime, improve

transport etc. Growing a highly skilled labour

force

Conducive Business Environment

Deindustrialisation

52 acres yard Headcount: 2,000

Shifting jobs from the manufacturing sector to the service sector

The natural outcome of successful economic development

Associated with rising living standards

• • Examples of countries: • United States • Europe • Japan • Hong Kong • China • Singapore • Korea

DEINDUSTRIALISATION

Moving up the Value Chain

Malaysia – The Centre of Excellence

8

* Identified from the Economic Transformation Programme Handbook

NKEAs: 11 Industry

Sectors

Agriculture

Wholesale and Retail

Oil, Gas and Energy

Healthcare

Electronics and Electrical

Financial Services

Palm Oil & Rubber

Education

Business Services

Communications Content

and Infrastructure

Tourism

Oil and Gas News

52 acres yard Headcount: 2,000

• “recoverable resources are estimated to last for the next two centuries at current trends of consumption.” – Tan Sri Shamsul Azhar Abbas (President and group CEO of Petronas) - Bernama

• The oil, gas and energy sector is the mainstay of Malaysia’s growth

• This industry contributes approximately 20% of National GDP

• Petronas is expected to generate RM 31 billion in GNI in 2013

15.8

12.3

12.2

11.2

7.9

7.5

7.4

7.0

3.8

2.2

2.1

1.9

1.8

1.7

1.7

1.6

1.1

0.8

0.3

0.3

Keppel Corp

Technip

Saipem

COSL

SapuraKencana

Subsea 7

Sembcorp Marine

Petrofac

Bumi Armada

Dialog Group

McDermott

MMHE

Ezion

Modec

Anton Oilfield

Honghua Group

STX OSV

Ezra

Alam Maritim Resources

Perdana Petroleum

Top Global O&G Services Player

Within Top 10 of Global Service Provider Peer Group by Market Capitalization (1)

(US$Bn)

Note: (1) Peer group consists of a universe of Asian services players plus global EPCIC players

Integrated Services Engineering & Construction

Marine Services Equipment Driller

Source: Bloomberg as at 20 May 2013

10

Top 5 EPCIC Global Players by Market Capitalization

SapuraKencana has been included in the MSCI Asia-Pac index

0.0 5.0 10.0 15.0

McDermott

Subsea 7

SapuraKencana

Saipem

Technip

2.1

7.5

7.9

12.2

12.3

(US$Bn)

Engineering /

Procurement /

Construction

Turbine

Repair

Centre

Shore

Approach

Geophysical

Survey

Topside

Installation /

Heavy Lift

Decommissioning

Diving

Services

Geotechnical

Investigation

ROV Services

Conventional /

Deepwater

Rigid Pipelay

SURF

FPSO

Deepwater

Development

Project –

Flexible

Pipelay

Drilling

MOPU

SapuraKencana – Our Experience in the O&G Industry

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Capabilities Across the Entire O&G Value Chain . . .

Executing Our Growth Strategy

12

Exploration Geotechnical

& Geophysical Services

Development

EPC

IPF

HUC

Production Operate Oilfields

Maintenance Maintenance

Services

De - commissioning

Abandonment E

P C

I C

Typical Life Cycle

Phase Service Offering

Creating a Global

Offshore Driller

21 tender rigs & semi- tenders

Drilling

Positioned as a Global Service provider across the entire O&G

value chain

Growth in project values

Diverse talent base of more than 10,000 from close to 20

nationalities

Investing in Knowledge – manufacturing and operating

ROV’s

Strategic Acquisitions

Our recent Acquisition: SK Drilling

Enterprise Value of USD2.825bn

Becoming a Global player in Offshore

Drilling

56% Market share in tenders rigs

Best in class fleet

Youngest in the industry

Reputable customers - Shell, BP,

Chevron, Hess, Murphy & PTTEP

Highly skilled & experienced

management & operations team

IN SUMMARY : WHAT THE DEAL WILL BRING

Transformative and Sustainable growth

BENEFITS

High EBITDA margin

Greater visibility of earnings provides steady income stream

from long term contracts

Strong & stable cash flow generation

balances current project based portfolio

13

14

Kuala Lumpur

Australia

Middle East

Brazil

UK

USA

Thailand

Angola

Brunei

Trinidad and Tobago

Equatorial Guinea

Indonesia

Additional coverage

Strategic Base Globally to Support Business Growth

India

Order Book – Geographical Breakdown (1)

Note: (1) As at 4 June 2013

Integration of

Seadrill’s tender

rigs business

SapuraCrest &

Kencana

Merger

In Alignment with Malaysia’s Transformation Initiatives

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SKPB fulfils 6 of the 8 EPPs identified under the ETP

Thrust 1 : Sustaining oil & gas production

EPP1: Rejuvenating existing fields through

enhanced oil recovery

EPP2: Developing small or marginal filed

through innovative solutions

EPP3: Intensify exploration activities

Thrust 3: Transforming Malaysia into the number

one hub for oil field services

EPP6: Attracting multi-national companies to

Malaysia to bring a sizeable share of their

global operations to Malaysia

EPP7: Consolidating domestic fabricators

EPP8: Developing engineering, procurement &

installation capabilities & capacity through

strategic partnership & joint ventures

Berantai Field

Development

(1st marginal field

in Malaysia)

Creating a local EPCIC player

Consolidating domestic fabricators

Developing marginal field

Attracting multi-national company

through partnership

Stepping into the role of global

driller and bringing global

operations to Malaysia

Notable transactions / awards

In Summary

16

Currently Malaysia is holding it’s ground with regards to the rest of the world.

Malaysia’s share of the world’s GDP (adjusted for PPP) projected to continue to grow from 0.6% (2012) to 0.63% (2017) – IMF

Leverage On Build On

• Industry specific competitive advantages (NKEAs)

• Efficient legal framework

• Strong financial markets

• Solid Infrastructure

• Political stability

• Business friendly government

• R&D and Intellectual property

• Attract, develop and retain skilled human resource

• Focus on value added services

• Improve productivity and efficiency

Thank You

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