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“Key Socio-Economic IssuesImpacting National Economic

Resilience & Competitiveness”by

Datuk Nicholas S. Zefferys P.J.N.

Governor & Past President American Malaysian Chamber of Commerce

President & CEO Applied Consulting & Engineering Sdn. Bhd.

Director – Southern Bank Berhad

14 January 2006

ASLI - SEDAR Roundtable Discussion

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2020

2006

Requires 7% Avg. Annual Growth (some years higher-others lower)

Anticipate steady but unspectacular growth

(as reflected in Budget 2006)

9th Malaysia Plan (pending)The march towards

Comparative Advantage

And Jobs

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3rd Qtr 2005 Economic Results• GDP growth @ 5.3% (v. 4.4% 2nd

Qtr); led by Svcs. & Mining• Exports up 7.5% (v.28% in ‘04) led

by E&E (6.8% growth; 84% of all exports)

• Deficit=0.6% of GDP (est. 3.8% for year)

• Inflation tending higher: price increases in chicken, petrol, other

• Monetary policy tracking with expansion); lending rate increased to curb inflation

• Ringgit appreciating slightly; curbs imported inflation

Building a solid economic foundation

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The Malaysian Model

Socio-Economic Dualities

Separate yet integrated economies complimenting each otherTwo interactive societies living/working side-by-side

45% Non-Muslim

55% Muslim

State-ownedEnterprises/Jobs/

Education

PrivateEnterprises/Jobs/

Education

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The Dual Tracks of Malaysia

Social

Economic

Bumi Track

Non-bumi track

Bumi Track

Non-bumi Track

NEP/NDP/Affirm. Actn.Party DominanceGov’t/Bus Alliance

Social-contractEconomic survivalNiche strategies

Syriah LawPriority School seats30% Entitlements

Civil LawVernacular SchoolsGlobal Mobility

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Where the tracks lead?

Bumi

Non-Bumi

This? or . . . This?

Separate, protected --but lesser development.

Malaysians

Joint but balanced, and stronger development

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Driving Forces Below The Water Line

Above SurfaceGoals

SOCIO-ECO SPHERE

Both address structural reforms

Leadership& CollaborationCEO: PMMOF IIKhazanah NasionalPNBEPFLTATLUTH

- To Be Regionally Competitive- Drive Mission Critical Development- Grow the Economy- Meet Regulatory & Social Obligations

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GLC Transformation Manual

1. Enhance Board Effectiveness

2. Strengthen Directors Capabilities

3. Enhance GLIC Monitoring & Management

4. Improve Regulatory Environment

5. Clarify Social Obligations

6. Review & Revamp Procurement

7. Optimise Capital Management Practices

8. Manage & Develop Leaders & Other Human Capital

9. Intensify Management Practices

10.Enhance Operational Improvement

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Khazanah Transformation Plan

• Phase 1: Launched 29 July 2005 by PM

Develop Goals & Initiatives• Phase 2 (Aug. ‘05 - Dec. ‘06):

Execution of initiatives• Phase 3 (2-5 years from now):

Materialisation of sustained benefits • Phase 4 (5-10 years onwards):

GLCs transform into regional champions

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Moving from . . .

To . . .

. . . not just in trade, but also investment

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Borne of poverty reduction & wealth redistribution goalsAs well as preparation for

Globalism.

Perceptions? Realities?

NEP/NDP AFFIRMATIVE ACTION POLICIES

British Legacy: - Downgraded Malays - Intellectual caldron of “isms”):

Malaysian Legacy: Strong Government Central Control

Government decides market winners & losers?

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PM Abdullah’s Presidential SpeechOn The Malay Struggle

WE want to become an advanced nation.

(The rest of the world) will not formulate policies to help Bumiputras.

The global economy does not recognise quotas; it will not allocate special projects for Bumiputras.

The global economic lexicon only acknowledges terms such as competition, competitiveness, productivity, innovation, creativity, originality, excellence and efficiency.

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Paradigm Pliancy (A Model for Change)Paradigm Pliancy (A Model for Change)The ability to stretch the mind The ability to stretch the mind

and break out of the box!and break out of the box!

ExistingParadigm

(A)

Breakingout

of theBox

(B)

Steppinginto a

New Domain

(C)

A + B = CA + B = CEntitlements &Affirmative

Action

Equal Opportunity& Meritocracy

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Changing course or “tacking” yields a shortperiod of turbulence as the sail is reset to

a new course and the wind fills the sail propelling it on its new direction.

Old Course

New Course

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2006

A turning point?

Malaysia has a demonstrated pragmatism for doing the right things.

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Keadilan Supreme Council

Unanimously approved an economic motion to “replace race based NEP” with a New Economic Agenda

Seeking an ideal of universality A racial approach is inadequate to deal

with complex socio-economic inequality in Malaysia

The Edge: Nurihsan Majid

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Keadilan’s New Economic Agenda

1. Emphasis on justice for all Malaysians; eradicating poverty regardless of race;

2. Narrowing the gap in rural & urban development;

3. Provide training & education to all Malaysians to face a K-based economy;

4. Promote entrepreneurship for a stronger small & medium sized enterprise backbone of the economy;

The Edge: Nurihsan Majid

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Keadilan’s New Economic Agenda

5. Promote a delivery system which is worker & business friendly, that inculcates accountability & openness for more sustainable development;

6. Ensure government intervention is limited & strategic by forging positive partnership with the private sector that empowers economic actors for a growth-based economy; and

7. Forge a positive economic strategy to compete in a globalised economy.

The Edge: Nurihsan Majid

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A Paradigm Forward?

Moving From

Entitlements

To

Equal Opportunity

Moving From

Gov’t. Run Business

To

Private Enterprise

SOCIAL ECONOMIC

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Terima Kasih Xie Xie

Nandree Shukriya