Let’s do our part to help build Malaysia

Open For Business

Gone are the days where we lived in the comforts of our bordered geographies, choosing to buy and sell only when it serves our purpose. In today’s highly globalised world, we have no choice but to be more interconnected and interdependent if we want growth and economic resilience.
Malaysia has an exceptional history in trade and commerce. We were a trailblazer when it came to trading with outsiders from the early onset of our country’s young history. From strategic and economic perspectives, the Straits of Malacca was one of the world’s geopolitical hotspots. For centuries, the Straits acted as the main shipping channel between the Indian and Pacific oceans, ferrying one quarter of the world’s traded goods.
Like any progressive, ambitious nation, our market has been open and firmly plugged into the global landscape. Our total trade for goods and services last year was at RM1.52 trillion, coming in eighth among Asian countries and third among ASEAN behind Singapore and Thailand.
There are of course valid concerns when a government makes a decision to liberalise sectors and enter into free trade agreements (FTAs). For starters, competition will get a lot stiffer. It is therefore imperative that local businesses produce quality goods and services to be able to compete not only on the domestic front but also in international markets. We must benchmark against the best-in-class to compete effectively.
Some sectors such as tourism, private education, manufacturing services, and health and construction services have been able to capitalise on greater market liberalisation while others may face problems adjusting to the evolving landscape. Sectors are progressively liberalised based on their state of readiness and whether they are mature and capable enough to face the heat of competition.
The Government has signed a number of bilateral and regional FTAs both within ASEAN and beyond. Primarily there are three key reasons why we should ensure our shores stay opened and that we continue to engage on discussions on free trade agreements:
1. Choices
Trading with other nations allow us to bring more products and services to customers, and in this case, you. It’s all about choices. You can choose to buy anchovies from Spain, a Smartphone from South Korea or register to do your degree with a British college in Iskandar.
Living and thriving in a modern society translates to the freedom to make choices we feel is better for ourselves.
2. Competition
We urge for an open and competitive business environment because it allows industries and markets to be more efficient and resourceful. A fair levelled playing field means businesses will work harder to improve their quality and reduce their prices in order to win their customers. At the end of it, it is the customer that benefits.
3. Beyond 2020
I am confident Malaysia will reach its high income targets by 2020. What keeps me awake at night is the challenge to grow the economy beyond 2020. Our net exports in 2013 amounted to RM719.8 billion, which is at about 7.17% as a percentage of GDP. Exports have been growing at about 6.8% per annum (CAGR: 2009-2013) but we need to increase this to 10%-15% in order to be more economically sustainable. The CAGR on export rates for high income countries (2009-2013) was at 8.8% whilst for high income OECD countries (2009-2013), it was at 13.9%.
The more we are able to export our services and products, the more income we generate. If we want other countries to accept our goods, we must also be prepared to open our borders to them. No country reaches developed status by being an autarchy. A ‘developed’ status means welcoming others. If we insist on feeding our insecurities by remaining a closed-market, we will become irrelevant to the global economy.
The Transpacific Partnership (TPP) is an example of a multilateral FTA that will allow Malaysia to compete and benefit from the global trading landscape.
TPP is important for us to embrace but we are cognizant of a few key caveats:
1. We must exercise our rights to carve-outs for example government procurement tenders that are meant for Bumiputera
2. The roles of state-owned enterprises must be recognised
3. There must be allowance for disputes to be settled using local jurisdictions
4. We can also negotiate special agreed-upon margin of preference for local/Bumi companies in competitive bids.
Malaysia’s economic engine is currently shifting gears as we enter the midpoint of our 10-year transformation agenda. With any change of speed and focus, the process even if it is necessary, can be painful.
But the upside is that the world also opens up to Malaysia. Our companies can soldier on to stand shoulder-to-shoulder with their foreign counterparts, to seek ways to create alliances, exchange knowledge and just become better at what they do. That’s the beauty of competition.

Corruption – taking the beast by its horns

Inadvertently when I attend social events, someone will highlight a personal encounter where they paid a bribe to solve a problem. “There you go, Idris, corruption is rampant in this country and the reason why we will fail to progress,” they tell me.

When you have been victimised, it is easy to discount the government’s seriousness to fight corruption. The rant on social media reflects people’s frustration on a system they think lacks honesty, integrity and transparency.

Corruption is a beast. It rears its ugly head in the worst and best of us. If we want to be brutally honest with ourselves; many of us have given, received or tempted one way or another in our lifetime.

I first understood the meaning of ‘transparency’ and ‘values’ when growing up in the longhouse. There was always temptation to commit some form of misdemeanour but there were just too many people watching and ready to report on you! You had no other choice but to behave according to the community’s expectation of good values.

To put a big dent on corruption, we must institutionalise good governance and integrity. Ad-hoc solutions heal a symptom but do not cure the disease. The longer-term work is to deliberately destroy entrenched ways that have, along the decades, become the norm of doing business. This is by no means an easy feat and will require the collective will of all – government, corporations and public.

There are three main categories of corruption, namely regulatory/enforcement corruption, procurement corruption and corruption related to political funding. In some areas, we have made progress but there are stumbling blocks:

1. Reducing regulatory corruption

Under the Economic Transformation Programme (ETP), we implemented 196 projects to date and they function as pathfinders to change processes – by streamlining approvals and reducing bureaucracy and consequently minimising opportunities for corruption.

Meanwhile, PEMUDAH improves the business environment through business process reengineering and automation. When processes can be online and with the least amount of human intervention we will be able to reduce instances for corruption to occur.

The insertion of Corporate Liability provision in the MACC Act will also ensure rigorous monitoring of corruption in the private sector. With the amendments, companies, and not only individuals will be held responsible for corrupt practices within their organisation.

Our continued rise in the World Bank’s Doing Business survey where we came in 6th for 2014, is evidence of this success. In 2010, we were at 23rd position, in 2012 at 18th, 2013 at 8th. In the 2014 survey, we moved up 3 notches to 16th position in the ‘Starting a Business’ category, whilst we rose 56 notches to be 43rd in ‘Dealing with Construction Permits. These improvements mean that we have been able to drastically reduce the opportunity for corruption.

2. Greater Procurement Transparency

In 2013, Malaysia’s AG office rated the government at 92% in its Procurement Accountability Index. That’s pretty impressive! But it is the eight percent non-compliance that is getting the attention.

Malaysia is the only country in the world that provides a comprehensive AG report full of exacting details, tabled in Parliament three times a year.

Just recently, a new initiative led by Chief Secretary Tan Sri Dr Ali Hamsa, was put in motion to get Secretary-Generals to address inconsistencies highlighted in the AG’s report in a Q&A session with the media. I hope this inquisition-of-sorts, spurs a new era of more prudent procurement practices from the government.

The AG’s online dashboard launched recently to track issues highlighted will also help create a more accountable procurement environment.

There is also the Putrajaya Inquisition. Chaired by the Prime Minister, these sessions are meant to clear backlog cases in the AG Report that have been pending.

3. Political Financing

Surveys show that Grand Corruption, i.e. corruption committed by high-level Government officials or individuals who distort the central functioning of the state, can be the most worrying type of corruption. We agree, which is why we proposed that:

1. All political financing meant for political parties must be held in party accounts, not individual accounts.
2. The immediate issuance of receipts upon receiving contributions to political parties will be mandatory.
3. All donations must be properly recorded and accounted in detail according to Generally Accepted Accounting Standards. Party accounts are to be externally audited.
4. When donations are collected or held by third parties on behalf of political societies, all funds must be transferred to party accounts within 14 days of collection.

While Barisan Nasional has pledged support towards this initiative, the Opposition is still dragging its feet and refusing to commit. I hope they will reconsider.

The prevailing sentiment bandied about is to say that if we are able to plug leakages in the government system there is no need to implement GST and rationalise subsidies. Just solving corruption will in itself solve Malaysia’s finances.

Let’s look at the numbers. A World Bank study (2010) estimated that corruption in Malaysia could cost the government in the vicinity of RM10 billion per year, an amount equivalent to one or two percent of GDP.

This loss doesn’t in any way offset our debt as our subsidy bill alone is RM40 billion a year. We need to do both – continue with fiscal reforms and tackle corruption at the same time.

Back to Bario. It is about the safest, most honest community you will ever encounter. Its people and lifestyle are as untarnished as its streams and mountains. But Bario also grapples with the real issues of daily poverty.

It would be ideal to correlate growth and wealth with zero corruption. But if economic well-being is solely determined by being rid of this evil, then all the countries in the world should only have one economic theory.

Solutions to prosperity go beyond corruption. Bario is a fine example of that.

Malaysia’s economy is doing quite well, thank you

Bloomberg columnist William Pesek is curious as to whether Malaysia’s economy will crumble because Oxford Economics ranked us the riskiest country in Asia in a survey. I want to assure Mr Pesek that we have our eyes on the ball. In fact, we are so determined to get the economy right, that in 2010, we […]

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Malaysia improving economic resilience; on track to meet 2020 income, investment & job targets

Recently, I was interviewed by the Prospect Group and we talked about the Economic Transformation Programme’s (ETP) goals for 2014, which includes Gross National Income (GNI), investment, and job creation, and ensuring Malaysia’s economy is resilient in the face of global uncertainty. You can view the video and read the transcript of the interview here: http://www.theprospectgroup.com/malaysia-improving-economic-resilience-track-meet-2020-income-investment-job-targets-82142/

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Tackling income inequality

Chandrasekaran Ramaiah fell into hardship when he suffered a stroke some years ago. Now partially recovered, he runs a food kiosk in Melaka after having secured help under the Azam Tani programme. When we met last month, he told me his income has doubled to RM100 per day. Chandra is one of 145,630 households that […]

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All it takes is ‘critical mass’ for the ETP to take off

Since the Prime Minister launched the ETP’s Annual Report 2013, I have been reading some news headlines decrying that the ETP is “losing steam”, “losing momentum” and “struggling”. Far from that, and I want to set the record straight. Where we are today in terms of investments within the ETP is by design and not […]

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Entering the Mid-Point

Idris Jala

Malaysia’s transformation journey evolves to the next phase Tonight the Prime Minister will report on the nation’s government and economic transformation results for 2013. I urge you to tune in as he will share insights on the nation’s progress and how that translates into opportunities for businesses, families and society. What are we transforming Malaysia […]

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A radical revamp of our education system

The Education Blueprint is comprehensive but implementation is key I was probably luckier than most kids who grew up in rural Malaysia. My father was both my teacher and the village school headmaster which meant learning was not just confined to school. Classes continued at home too. He instilled in me a strong learning discipline […]

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Living with the environment

We cannot have development without taking care of our surroundings The recent weeks of choking haze due to peat and bush fires triggered by a long drawn-out drought, and excessive rain which led to flooding in Pahang, Terengganu, Kelantan and Johor, suggest that the normality of our weather has been affected. In the Klang Valley […]

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RM70 billion committed to Pengerang, progress made

It is an important project to take us towards high income by 2020 How many of us set out to achieve the impossible? This involves goals that seem too difficult to conquer but could bring us great benefit if we manage to pull through and get to the finishing line. Back in June 2010, we […]

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