2nd OECD-AMRO Asian Regional Roundtable

1. 2nd OECD-AMRO
Joint Asian Regional Roundtable
By
Allauddin Hj. Anuar
Economic Planning Unit,
Prime Minister’s Department, Malaysia
19th July 2013
1

2. 0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2008
2007
2009
2010
2011
GNI Per capita income
(USD)
GNI Per capita income by countries, 1987 - 2011
High income
Upper middle income
Lower middle income
Low income
Singapore
Korea
Mexico
Malaysia
USA
East Asia Developing
World
Malaysia has been in the upper middle income league since 1988, but has
yet to transform into high income country status…
2

3. Slower Growth Post Asian Crisis
Relatively Slow Growth in Recent Years
"Stuck in the Middle"
7.4
7.3
7.3
6.8
6.3
4.2
5.0
5.6
2.9
3.3
2.5
1.5
0
Japan
UK
US
Philippines
India
Thailand
Indonesia
Taiwan
Korea
Vietnam
%
8642 10
Malaysia
Singapore
China 9.8
1 3 5 7 9
GDP growth 1990-2000*
5.1
4.2
6.6
3.8
3.5
4.7
3.9
6.8
4.3
1.4
1.5
0.7
0 2 4 6 8 10
%
9.5
GDP growth 2000-2010*
3rd highest
growth
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
1970 1975 1980 1985 1990 1995 2000 2005 2010
Vietnam
Thailand
Taiwan
South Korea
Singapore
Philippines
Malaysia
Japan
Indonesia
Hong Kong
China
USD
GDP/capita 1970: 2010 (PPP)**
1997 crisisSources:
* World Economic Outlook Database, April 2012
** The Conference Board Total Economy Database™, January 2012, http://www.conference-
board.org/data/economydatabase/
7th highest
growth
Asian Financial
Crisis 1997/1998


3

4. 0
5
10
15
20
25
30
35
Private
Public
• … largely due to a decline in
private investment
Private and public investment,
percent of GDP
% Percentage
Private Investment Declined Significantly After the Asian Financial Crisis 1997/1998...
-15
-10
-5
0
5
10
15
20
1995 2000 2005 2010 2011
Private saving minus investment
Public saving minus investment
% Percentage
• Savings exceed investments by
significant amounts….
Balance as percent of GNP
4

5. Productivity-led growth yet to gain its momentum
37.8 34.5 37.5 17.4
46.9 45.4 57.3
58.2
33.2
30.8 24.0
29.0 34.7 38.5
53.1 54.6
42.7 41.8
58.7
100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
8th MP 9th MP 10th MP JAPAN Korea S'pore UK USA
%
Source: EPU, EIU
 Slow progress in contribution of TFP to economic growth, low
compared to the high-income economies
 The economy still highly dependent on traditional factor inputs,
i.e. labour and capital
(2011-2015)(2006-2010)(2001-2005)
TFP
L
K
5
TFP
K + L
(2006-2010)

6. Low R&D Expenditure in the Economy…
R&D Expenditure,
% of GDP
Source : World Development Indicator, World Bank
Note: *2010 6
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
1.7
3.4
3.7
1.1
2.4
2.9
1.8
2.2
2.5
1.5
1996
2000
2005
2009
• R&D expenditure recorded at only 1.06% of GDP in 2010, lower than
Developing Asia & Pacific average

7. Note LowSec=PMR, UpSec=SPM, PostSec=STPM, Tertiary=Diploma, degree
Source: Department of Statistics, Korea IntenationaLabor Organisation, Taiwan Department of Statistics
7
Workforce today still relatively unskilled . . .
77% of workforce educated up to
SPM or equivalent only
%
4
1998
4
2001
3
2007
4
LowSec
Primary
4 None
2009
0
Tertiary
100
PostSec
20
UpSec
40
60
80
1990
0
100
20
40
60
80
%
3%
9%
5%
1%
0%
-3%
5.7%
5.0%
2.6%
2.9%
CAGR
’90 – ‘07
Singapore
1997
Singapore
2008
Taiwan
2007
Korea
2007
0
100
20
40
60
80
%
CAGR
’98 – ‘07
Tertiary
PostSec
UpSec
LowSec
Primary
None
Unskilled
Semi-skilled
Skilled
77% 28%
Management &
professionals Semi and
unskilled
Management,
professional
and other skilled
Only 28% of Malaysian jobs are in
the higher skilled bracket
Developed economies have
significantly higher proportion
of higher skilled jobs
20092007
Developing & retaining a first-world talent base

8. Skilled2 labour force
Percentage, 2008
SOURCE: World Bank Education Statistics, Economic Intelligence Agency, International Labour Organisation, Korea Ministry of Labour, Singapore Ministry of Manpower,
US Bureau of Labour Statistics 8
Malaysia needs to close the gap to achieve the
characteristics of a First-World Talent Base
1 Adjusted to Purchasing Power Parity
2 Management, professional and other skilled occupations
3 Tertiary education is the educational level following the completion of secondary education, i.e. after 11-12 years of basic schooling. Colleges, universities, institutes of
technology and polytechnics are the main institutions that provide tertiary education
Malaysia
(2009)
S’pore
Korea
Finland
USA
Australia
UK
H.Kong
Country
OECD average = 37.6
36.0
42.5
42.9
36.3
43.8
29.3
51.0
28.0
Labour force with tertiary
education3
Percentage, 2007
OECD average = 27.4
25.6
31.9
32.7
34.1
34.8
35.0
35.9
23.4
Labour productivity
US$ PPP1 ’000 per employee,
2009
67.2
71.7
92.9
66.5
52.9
60.8
26.6
OECD average = 64.8
78.6

9. Economic Agenda
Different
approach
Concentrated
growth
strategy
Import Talent
Home-grown
talent
TEVT
Autonomy to
universities
Reform labour law
Multiple Angles
New Approach
Inclusiveness
Well-being and
liveability
Environmental
Sustainability
Good governanceEfficient, dynamic & responsive governmentSmart partnerships
Moving towards
inclusive socio-
economic development
~ ensure income &
wealth are distributed
in an equitable
manner
Building an
environment
that enhances
quality of life ~ raise the
quality of life of the
rakyat commensurating
with high income
status
Developing &
retaining a first-
world talent base
~ develop, attract &
pertain quality
human capital
Creating the
environment to unleash
economic growth ~
foster economic growth
with the private
sector as main
engine driver
High-
Income
Advanced
Economy
The Transformation Agenda
9
1 2
4 3

10. 0
2
4
6
8
10
12
14
16
18
20
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
USD$(Thousand)
Malaysia
Minimum
HIC
-68.9%
Malaysia is on track towards a High Income Country
GNI per capita income (USD$)
Note: Minimun HIC year 2020, estimates: USD$15,300
Sources: World Bank, IHS Global Insight & EPU
2018
USD$15,398
2000
USD$3,420
2010
USD$8,346
2020
USD$17,378
1990
USD$2,370
2013
USD$10,687
1990
USD$7,621
2000
USD$9,266
2010
USD$12,276
-63.1%
-32.0%
2013
USD$13,172
-18.9%
2020
USD$15,280
10

11. GNI per Capita*
2010 2012 2013 2015 2020 2010 2012 2013 2015 2020
RM33,010
(USD10,687)
Long-term Targets
2011-2020
Real GDP
* At current price
RM26,882
(USD8,346)
RM30,812
(USD9,976)
RM38,237
(USD12,379)
11
RM890.0b
RM749.1b
RM789.9b
RM674.9b
RM1,150.0b
RM53,300
(USD17,400)

12. 12

13. Linked-Charts
13

14. WHERE WE ARE HEADING….
Economic agenda
-private sector led ~ Creating the
environment for unleashing economic growth
~ enhancing the role of financial sector
-innovation ~ ensure that Malaysia becomes an efficient, flexible, and
vibrant business environment
-role of government in business ~ as facilitator
Need a different approach
-review of business regulation ~ Modern & market friendly business
regulation
-remove subsidies ~ Remove market distortions
-introduce competition law ~govern all firms including GLCs against anti-
competitive practices
The Pillar for Transformation
Continue…
14

15. - National Key Economic Areas
15
Concentrated growth strategy

16. 16
Early
childhood
Pre-school Basic
education
Tertiary
▪ University / Colleges
▪ Polytechnic
▪ Community colleges
▪ TEVT
Professional
working life
Retirees/
Second
career
Themes
▪ Mainstreaming and
broadening TEVT
▪ Enhancing the competency of
tertiary graduates
▪ Accelerating labour reform
▪ Attracting & retaining top
talent
▪ Upgrading existing talent
pool
Integrated Talent Development
Ages 0+ 4+ 6+ 17+ 20+
Revamping education system to
significantly raise student outcomes
Raising skills to increase
employability
Reforming labour market to
transform M’sia into a high-
income nation
SOURCES: EPU
▪ Ensuring every child succeeds
▪ Holding schools accountable for
outcomes
▪ Investing in great leaders for schools
▪ Attracting and developing the best
teachers
1 2 3
Integrated Human Capital and Talent Development Framework for Malaysia
Nurturing, attracting and retaining top talent

17. Principles of new approach to affirmative action
▪ New affirmative action instruments will
allow resources to be optimally allocated
and will not cause, contribute or perpetuate
economic distortions
Market-friendly
Needs-based
▪ Households in the Bottom 40% of income
distribution including specific
disadvantaged groups with clear needs will
be targeted
Merit-based
▪ Programs will encourage competition and
award opportunities to the most qualified
individuals and businesses
Transparent
▪ Policies, procedures, and criteria will be
made clear and public
Multiple angles in addressing inclusiveness
1Malaysia perspective
Aim to provide all
Malaysians with equitable
opportunities to participate
in economic growth
Social perspective
Ensure that disadvantaged
groups are supported to be
active participants in society &
where necessary, adequately
assisted to raise their quality
of life
Geographic perspective
Regardless of location,
citizens will be able to enjoy
equitable access to basic
infrastructure & services
Income perspective
Focus on households in the
Bottom 40% income group
to enable their income to
move in line with mean
national income
Inclusive
Development
The new approach to addressing inclusiveness will require re-orientation of affirmative
action instruments
Ensuring equality of opportunities & safeguarding the
vulnerable
17

18. People-centric public transport system - to make public transport an
attractive mode of choice
Public
transport
Transforming healthcare to improve quality and universal access. –
emphasises on wellness & disease preventionHealth
Access to quality and affordable housing - matching demand & supply
for affordable housing, & promoting an efficient & sustainable housing
industry
Housing
Provision of efficient public utilities & essential services - driving
efficiency & productivity gains in the provision of reliable services
Public
utilities
Making our streets and communities safer. Reducing crime &
improving people’s sense of securitySafety
Valuing the nation’s environmental endowments - prudent
management & conservation of existing resourcesEnvironment
Living spaces
Vibrant and attractive living spaces - to live, work and play with a focus
on cities
Building an environment that enhances quality of life
18

19. The Financial Sector as An Enabler Towards Achieving
High Income Country
19
• Main objectives are being to achieve sustainable growth and
development, as well as overall prosperity
• Banking institutions as the backbone of the financial system,
while insurance and other specialized institutions and the capital
market will increase in importance
• New growth areas, increased role of SMEs will demand wider
range of specialised products & services
• As domestic corporates expanding, regionally & globally, more
capital investment in technology will be required to increase
productivity – increase in demand of long-term financing
• Trade financing facilities demand to finance the expansion in the
international trade and cross border activities
• Financing needs to cater the physical infrastructures
development Continue…

20. The Malaysia’s Financial Sector Masterplan
20
Financial
Sector
Efficiency
Effectiveness
Stability
Prudential
Infrastructure
• Greater penetration of efficient & low cost delivery
channels
• Scale advantages in operation
• Leveraging on world-class skills
• Greater investment in technology & skill
enhancements
• Broaden range of products & services
to meet the needs of customers
• Financial innovation
• Innovation & conducive operational
environment
• Sound & stable financial system to
withstand economic and financial
shocks
• Efficient, effective & robust financial
institutions, strong prudential
regulations & supervision, and
efficient & reliable infrastructure
• Effective prudential regulations &
supervision, amid providing an
conducive environment to development
of efficient & innovative financial
system
• Strong infrastructure the backbone to
the overall stability of the financial
system