Malaysia's Strategic Reform Initiatives

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Discovery Reports

Economic programme set to unlock nation's competitiveness

Discovery Reports - Malaysia's Strategic Reform Initiatives

PUBLISHED : Monday, 24 September, 2012, 5:07pm
UPDATED : Monday, 27 May, 2013, 12:33pm

Competition, in any progressive nation, is not only encouraged but a necessary catalyst for a more efficient and dynamic economy. It promotes better performance and innovation - and more importantly, benefits the end users with high-quality products and services at the lowest possible prices. Applying such a principle in its economic transformation programme (ETP), Malaysia identifies competitiveness as a key to its transition into a high-income, fully developed nation by 2020. With PEMANDU at its helm, the ETP uses a two-pronged strategy founded on focus and global competitiveness.

"In the Olympics, you cannot expect an athlete to join 20 different sports categories and become a champion in each one. With the ETP, Malaysia focuses only on key economic areas and we aim to be the best in these globally," says Idris Jala, CEO, PEMANDU and minister in the prime minister's department. "This means we must create the conditions for competitiveness to exist in the economy so that local companies can become competitive and win in the global market."

Within the ETP, focus is established through 12 national key economic areas (NKEAs), while competitiveness is reinforced by key strategic reform initiatives (SRIs). Cutting across all NKEAs, these initiatives encompass competition, standards and liberalisation; public finance; public service delivery; government's role in business; and human capital development.

Competition, standards and liberalisation

The Competition Act 2010 that came into force on January 1 serves as the anchor of the competition, standards and liberalisation initiative, which aims to foster a competitive environment that deters market manipulation and cartel practices.

"Competitive markets will lead to more efficient production and delivery of goods and services, increase consumers' access to cheaper and better-quality products and ensure better allocation of resources," says Ismail Sabri Yaakob, Minister of Domestic Trade, Co-operatives and Consumerism. He is one of three ministers who oversee the implementation of reforms within this SRI.

Complementing the Competition Act, the adoption of international standards and best practices and the liberalisation of the services sector are also crucial to creating a competitive, sustainable and innovative environment towards a high-income nation. Conforming to international standards is expected to improve the quality of Malaysian goods and services and access to international markets, while liberalisation of services opens markets to foreign investment and encourages competition.

Public finance

With a vision of achieving a balanced budget by 2020, the government is seeking public finance reform through four policy measures: adopt accrual accounting for prudent fiscal management; implement efficient broad-based tax for revenue and fiscal stability; strengthen expenditure control; and improve fiscal policy institution and processes.

"The public finance SRI measures will contribute towards realigning the fiscal deficit to 4.7 per cent this year," says Ahmad Husni Mohamad Hanadzlah, second finance minister. "Over the longer term, we are targeting a fiscal deficit of about 3 per cent by 2015 and a near balanced budget by 2020."

Public service delivery

To ensure the ease of doing business and a competitive landscape, a leaner, efficient and facilitative government and a high-performing civil service institution summarise the goal of the public service delivery initiative.

"Everything is done with one objective, which is to deliver the best services to the people of Malaysia," says Ali Hamsa, chief secretary to the government.

To this end, the government is committed to reducing redundancies, adopting clear governance structures, improving governance processes and seeking greater public involvement. It is also promoting enhanced career mobility and opportunities within the public service to support a motivated civil service.

Government's role in business

Taking a renewed view of the private sector as the "engine of growth" to high-income status, the Malaysian government is gradually shifting its role in business from investor to facilitator.

Three aspects underscore the SRI's objectives: establishing the government's role in business; developing a clear divestment plan via a white room; and establishing governance for government- or state-owned companies.

"Reduced direct participation of government in the economy would minimise the crowding out of the private sector," says Malaysia's Prime Minister, Najib Razak. "This outcome would be positive for turning Malaysian companies into regional and global champions."

Human capital development

Apart from having abundant natural resources, Malaysia takes pride in its rich and diverse talent pool. The human capital development SRI aims to maximise such wealth by implementing strategic programmes.

These include modernising labour laws; upskilling and upgrading the workforce; strengthening human resource management; leveraging women's talent to increase productivity; undertaking a labour market forecast and survey programme; and enhancing the labour safety net by introducing unemployment insurance. "These initiatives will provide Malaysia with a highly skilled talent pool that will be able to compete in an increasingly globalised environment," says Dr S. Subramaniam, Minister of Human Resources.


Acronyms at a glance

ETP - Economic Transformation Programme

Launched in October 2010, the ETP lays out the framework to fulfilling Malaysia's vision of becoming a high-income nation with a per-capita income of at least US$15,000 by 2020.

NKEA - National Key Economic Area

These are 12 of Malaysia's strongest and most competitive sectors, ranging from oil, gas and energy to education and tourism. The NKEAs reinforce the private sector as Malaysia's new champions, in close partnership with the government.

SRI - Strategic Reform Initiative

The SRIs represent policy recommendations and cross-cutting reforms that will allow Malaysia to be competitive on the global stage, all for the benefit of the rakyat, or the ordinary people.

EPP - Entry Point Project

The ETP outlines specific projects that are geared towards catalysing investment, and has identified about 131 EPPs and related BOs to kick-start growth.

BO - Business Opportunities

Alongside EPPs, BOs invigorate high-potential business areas under each NKEA. Together with EPPs, these are expected to fuel up to 1.7 trillion ringgit (HK$4.2 trillion) in gross national income and create more than 3.3 million jobs by 2020.

PEMANDU - Performance Management and Delivery Unit

An agency under the Prime Minister's department, PEMANDU oversees the implementation of the programme. It combines the best talent from both the civil service and private sector.