Rehda Institute

ECONOMIC TRANSFORMATION PROGRAMME

ECONOMIC TRANSFORMATION PROGRAMME 

  • Is a comprehensive effort that tranform Malaysia into a high-income nation by 2020
  • To lift gross national income (GNI) per capita from USD6,700 or RM23,700 in 2009 to more than USD15,000 or RM48,000 in 2020
  • Need GNI growth of 6% per annum
  • Is builds on the direction outlined in the Tenth Malaysia Plan to develop a markedly different approach to deliver Government’s objectives
 

Economic Transformation Report

 

Supporting Policies

 

OIL, GAS AND ENERGY

The oil, gas and energy sector has been a mainstay of Malaysia’s growth and contributes approximately 20 percent of national GDP. With the prospect of decreasing production from a maturing asset base, we will have to pursue sector-wide opportunities to reach the ambitious real annual-growth target and provide a sustainable energy platform. Targets and aspirations The Oil, Gas and Energy NKEA is targetted to raise total GNI contribution to RM241 billion by 2020 from RM110 billion in 2009. As the base case projects a natural 2 percent decline in oil and gas production, this GNI target will require the NKEA to grow at an ambitious rate of 5 percent. In achieving this, an additional 52,300 jobs will be created. A significant proportion of these jobs will be highly-skilled jobs with an estimated 21,000 jobs for qualified professionals such as engineers and geologists, with monthly salaries in the range of RM5,000 to RM10,000.

PALM OIL 

Malaysia’s palm oil industry is the fourth largest contributor to the national economy and currently accounts for RM53 billion in GNI. The industry spans the value chain from upstream plantations to downstream processing. The development is mainly private sector driven and remains heavily skewed towards upstream activities. However, with limited land available to expand plantations, Malaysia will need to enhance upstream productivity and capture the full potential of existing downstream opportunities to sustain growth in this sector.

Targets and aspirations

The Palm Oil NKEA is targetted to raise total GNI contribution by RM125 billion to reach RM178 billion by 2020. In achieving this, an additional 41,000 jobs will be created, of which 40 percent will be high-skilled jobs earning average monthly incomes of RM6,000.

FINANCIAL SERVICES

The importance of the financial services sector to the Malaysian economy has been growing over the past decade, with the financial services sector’s share of GDP growing from an average of 9.9 percent of GDP between 2000 and 2005 to an average of 10.9 percent over the period 2006 to 2009. However, the sector faces critical challenges, including lack of scale, lack of liquidity and diversity in the capital markets, low levels of financial literacy and competition from regional financial centres such as Singapore, Hong Kong and increasingly Indonesia.

Targets and aspirations

The Financial Services NKEA is targetted to raise total GNI contribution by RM121 billion to reach RM180 billion by 2020. In addition, through this NKEA, an additional 275,000 jobs will be created, with 56 percent of them offering an average income of above RM4,000 per month.

TOURISM

Malaysia is one of the world’s top destinations, in the top 10 arrivals and top 15 in global receipts. Tourism  is our fifth largest industry, generating RM37 billion in GNI in 2009. The industry is expected to continue growing with arrivals rising from 24 million in 2009 to 36 million in 2020.

Target and aspirations

The tourism industry is targetted to raise total GNI contribution by RM 67 billion to reach RM 104 billion in 2009. The incremental increase is driven by 12 EPPs, which will deliver RM 28.4 billion in incremental GNI and three business opportunities that will deliver RM28.6 billion in incremental GNI. In achieving this, an additional 497,000 jobs will be created.

BUSINESS SERVICES

Malaysia’s business service sector contributes RM 20 billion to GNI in 2009 or 2.9 percent, creating significant scope of growth. In other emerging markets, like China and the Philippines, the business services sector is forecasted to grow by around 11 percent over the next decade. Malaysia should aim to match or even surpass these levels, if it expects to meet its GNI growth rates.

Targets and aspirations

We aim to grow the GNI contribution of the business service sector by RM 59 billion to reach RM 79 billion in 2020. This incremental increase is driven by six EPPs and three business opportunities that will deliver an additional 246,000 jobs by 2020.

ELECTRONICS & ELECTRICAL

The Electronics and Electrical sector (E&E) is an important contributor to the national economy, accounting for RM 37 billion in GNI (6 percent if national GNI), 522,000 jobs and 41 percent of Malaysia’s total exports in 2009. The sector has spawned successful local firms and virtually  every leading global firm operates here.

Target and aspirations 

E& E sector is targetted to increase GNI by RM 53 billion to reach RM 90 billion by 2020 and provide an additional 157,000 jobs (both high-skilled and medium-skilled).

WHOLESALE AND RETAIL

Malaysia wholesale and retail sector is significant contributor to GNI. It contributed about RM57 billion to GNI in 2009 and also contributed around 500,000 jobs. To achieve 2020 GNI target, retail will be key driver of domestic consumption, which in turn will lead to economic growth.

Targets and aspirations

Wholesale and Retail aim for the Retail NKEA to raise GNI contribution by RM108 billion o reach a total contribution of RM165 billion per annum by 2020. The Retail NKEA EPPs will also create around 370,000 new jobs over the next 10 years. Of this, 7,800 will be senior management post, 11,600 managerial, 19,000 professional and technical, 19,000 executive, 37,000 supervisory, 18,000 clerical and the rest operational. In addition, business opportunities will create around 225,000 jobs.

EDUCATION

Education is one of the most critical drivers for our transformation from a middle-to high-income nation due its impact on productivity and human capital development. It is also an engine of growth in its own right. The sector contributes approximately RM27 billion or 4 percent of GNI in 2009. There are several important opportunities for improvement as the current education sector is filled with sub-scale SMEs, has limited international focus and lacks harmonised regulations.
 

Target and aspirations

The Education NKEA is targetted to raise total GNI contribution by RM 34 billion to reach RM 61 billion by 2020. As public sector growth is expected to be limited, this goal will require the private education sector to grow six-fold.

In achieving this, an additional 536,000 jobs will be created, with the majority of them in professional and technical fields. Education also aspires to triple the foreign student enrolment from around 70,000 today to 200,000 by 2020.

HEALHCARE

The healthcare industry has become a powerful engine of economic growth, due to demographics shifts such as extended longevity and a rise in lifestyle diseases such as hypertension and cardiovascular ailments and diabetes. Malaysia’s spending on healthcare, at 5 percent of GDP, is above regional peers, and public spending is a disproportionate contributor to healthcare costs. Currently, the sector contributes to RM 15 billion in GNI.

Targets and aspirations

Healthcare aspire to generate RM 35 billion incremental GNI contribution to reach RM 50 billion by 2020. The Healthcare NKEA is also targetting to welcome.

COMMUNICATIONS, CONTENT AND INFRASTRUCTURE

The Communications Content and Infrastructure sector spans a wide ecosystem, from content generation to networks, services and devices. In 2009, the sector contributed RM 22 billion of GNI from telecommunications, TV and broadcasting as well as post and courier.

For Malaysia to transition from a middle-income to high-income economy the continued development of the communications content and infrastructure sector is fundamental. The sector should now build on the infrastructure investments of the past and shift to providing applications and content on order to enable the knowledge-based society.

Targets and aspirations

We will raise the sector’s GNI contribution by RM 36 billion in 2009 to reach RM 58 billion by 2020. This incremental increase is driven by 10 EPPs that will deliver RM16.6 billion in incremental GNI and four business opportunities that will deliver RM11.7 billion in incremental  GNI. In achieving this, an additional 43,000 jobs will be created.

AGRICULTURE

The agriculture sector plays an important role in Malaysia;s economic development – providing rural employment, uplifting rural incomes and ensuring national food security. Excluding industrial crops such as palm oil and rubber, the agriculture sector contributed RM 20 billion or 4 percent of Malaysia’s GNI in 2009. Traditionally labelled as the poor man’s sector, the face of agriculture is slowly changing as entrepreneurs in diverse businesses like swiflet nest-ranching and large scale paddy (rice) farmers are able to move up to Malaysia’s high-income group.

Targets and aspirations 

The Agriculture NKEA is targetted to raise total GNI contribution by RM34 billion to reach RM49 billion by 2020. The NKEA will create an additional 75,000 jobs, mostly in rural areas, where we target to increase the incomes of farmers participating in our initiatives by two or four times.

GREATER KUALA LUMPUR / KLANG VALLEY

Greater KL/KV is already on the global map as one of the iconic citiesof Southeast Asia. It boasts world-renowned landmarks such as the Petronas Twin Towers, a unique blend of diverse cultures and heritage, an extensive road network and high quality basic services such as water and electricity. However, it now faces fierce competition from neighbouring cities in attracting talent and multinational corporations. Its livability lags many other Asian cities, public transport remains inadequate and many natural assets remain untapped.

Targets and aspirations

Our economic aspiration is to grow GNI contribution from approximately RM258 billion to RM650 billion per year. This should move GNI share from approximately 30 percent of the nation’s GNI to approximately 40 percent. Growth in Greater KL/KV economic activities will increase total employment from 2.5 million in 2010 to 4.2 million by 2020. Additional aspirations include increasing per capita GNI from RM40,000 to RM70,000 per year, achieving a top-20 ranking in the EIU Liveability Index survey and growing the population from 6 to 10 million, with a focus on growing the foreign talent base from 9 percent to 20 percent of the population.

Nine EPPs along four dimensions have been identified to deliver on the Greater KL/KV aspirations.

1. Greater KL/KV as a magnet

Dynamic international and regional multinational companies that are emerging leaders within targetted sub-sectors will be encouraged to locate their global or regional headquarters in Greater KL/KV. This will be supported by internal and external immigration programmes to grow Greater KL/KV’s population to 10 million by 2020, with a focus on higher-value jobs.

2. Greater KL/KV connect

Regional connectivity will be accelerated by deploying a high-speed rail system to connect Greater KL/KV and Singapore. At the same time, intra-city connectivity will be improved with a mass rapid transit system.

3. Greater KL/KV new places

High potential destinations within Greater KL/KV will be identified as attractions and upgraded to enhance liveability for residents and draw tourists and migrants looking to visit or relocate to Greater KL/KV. For instance, downtown KL City is blessed with two rivers and valuable waterfronts that will be exploited as retail and commercial centres. In addition, we will increase the amount of green space essential to improving the city’s overall quality of life. Also, Greater KL/KV has many natural assets that can be leveraged as points of attraction (e.g. the old Pudu Jail site with its iconic gate). Strategic redevelopment with sharply defined boundaries has the potential to create more iconic places within Greater KL/KV.

4. Greater KL/KV enhanced services

Gaps in basic services will be addressed to ensure a well-functioning and liveable city. Pedestrian walkways within KL city are woefully inadequate and not integrated. Fixing this will enhance not only the liveability of the city, but also boost tourism and commercial potential. We will also improve provision of adequate solid waste management collection and processing.