Conference for Competitiveness: Driving Innovation for Competitiveness Malaysia Productivity Council

Transcription

1 Conference for Competitiveness: Driving Innovation for Competitiveness Malaysia Productivity Council Driving Towards High Income Economy Dato Dr Mahani Zainal Abidin Institute of Strategic and International Studies 30 November 2010

2 Contents Targets for high income economy The New Economic Model Strategies t to achieve high h income Expansion of the economy Conclusion 2

3 Targets for high income economy ECONOMIC GROWTH RATE GDP/GNI PER CAPITA WAGE TEXT INCREASE INCOME DISTRIBUTION PRODUCTIVITY TEXT GROWTH GDP must grow at least 6% per annum to achieve high income economy GNI per capita to reach RM48,000 by 2020 Real wage growth to match pre crisis rates Gini coefficient to reduce further to in 2015 Contribution of TFP to GDP to increase to 38.5% in

4 Economic growth rate to grow at least 6% per annum Per Capita Income USD ~$15,000 ~$13,500 Value Drivers Enhancing Growth Gradient Enhanced Growth of 6% Expected Growth of 4.5% as is basis High Income economies Low range end Middle and lower Income economies ~$7,000 Current Income 8 Strategic Reforms Initiatives

5 GDP and GNI per capita to increase to USD15,000 by 2020 Source: 10 th Malaysia Plan, EPU Source: PEMANDU 5

6 Real wages must increase and recover the growth rates pre-asian Financial Crisis Export Oriented Industries (EOI) Domestic Oriented Industries (DOI) Increase in real wages per annum (%) Pre crisis Post crisis Average Increase for EOI Electrical and Electronics Petroleum, chemical, rubber, plastic products and real estate Textiles, wearing apparel and leather products Wood products, furniture,paper products, printing and publishing Average Increase for DOI Transport Equipment and other manufactures Food, beverages and tobacco Non metallic mineral products, basic metal and fabricated metal Total Manufacturing The growth in real wages has been significantly reduced post Asian Financial Crisis Source: Reshaping Economic Geography Report in East Asia Source: Malaysia Economic Monitor,2010 6

7 Income inequality need to be reduced to achieve inclusiveness 7

8 Growth to be driven by productivity rather than higher capital and labour inputs 100% TFP 29.0% GDP % p.a. 4.7 = GDP % p.a. 4.2 = GDP % p.a Country 34.7% 38.5% Switzerland 6.0 = TFP growthgdp growth Ratio % % Labour 24.0% Germany Japan New Zealand USA Capital 37.8% % % 2.3 Malaysia ( ) Ratio of Total Factor Productivity Growth to GDP Growth of selected OECD countries, 2007 Achieved Source: 10 th Malaysia Plan Target Source: OECD and 10 th Malaysia Plan 8

9 Contents Targets for high income economy The New Economic Model Strategies t to achieve high h income Expansion of the economy Conclusion 9

10 High Income is an element in NEM Targets USD15,000 - USD20,000 per capita by 2020 HIGH INCOME GROWTH + WEALTH CREATION Enables all communities to fully benefit from the wealth of the country Rakyat Quality of Life Meets present needs without compromising future generations SUSTAINABILITY FIXING THE FOUNDATIONAL ISSUES INCLUSIVENESS NARROWING DISPARITY 10

11 The NEM consists of 8 Strategic Reform Initiatives (SRI) and 12 National Key Economic Areas (NKEA) Ensuring Sustainabilit y of Growth Re- energising Private Sector y of Growth 8 1 Developing Quality Workforce 2 Enhancing Sources of Growth 7 6 Building knowledge base infrastructure 8 Strategic Reform Initiatives (SRIs) 5 Transparent & Market Friendly Affirmative Action 4 3 Strengthenin g Public Sector Competitive Domestic Economy 11

12 1 NKEA provides immediately required boost to the identified sectors Immediate Growth 131 Entry Point Projects (EPP) 2 KL International Financial District (NKEA Financial Services) Boosting identified sectors/projects Malaysia Truly Asia Centre (NKEA Greater KL /KV) Iskandar (NKEA Education 60 Business Opportunities Boost under NKEA (examples) (BO) Integrated Eco nature Zone for Integrated Aquaculture Resort in (NKEA Sabah (NKEA Agriculture) Tourism) TUKAR Programme (NKEA Wholesale & Retail) 12

13 Without SRIs, NKEA projects will not achieve their full potential 1 NKEAs (Growth Drivers) Current 7,000 GNI per capita (USD) Target 15,000 17,000 NKEAs involve Entry Point Projects (EPP) and business opportunities to raise income levels 2 SRIs (Foundational measures) Re energising the private sector Developing quality workforce Competitive domestic economy Strengthen the public sector Transparent and Market Friendly Affirmative Action Building knowledge base infrastructure Enhancing sources of growth Ensuring sustainability of growth 2009 NKEA 1 NKEA 2 NKEA 3 NKEA 4 NKEA 5 OTHERS 2020 NEM has Strategic Reform Initiatives (SRIs) that are cross cutting to remove barriers and structural deficiencies 13

14 Looking closer at SRIs THE INTERCONNECTEDNESS OF SRIs INCLUSIVENESS The Bottom 40% & the BCIC Investments, Competition & Innovation High Income Rakyat Quality of Life Inclusiveness Sustainabiliy NEM Bureaucratic Reforms & Quality of Civil Servants SPURRING GROWTH Labour Market & Upskilling Workforce CREATING THE A COMPETITIVE 8 SRIs INVESTMENT ENVIRONMENT Re-energising energising the Private Sector Creating a Competitive Domestic Economy Building the Knowledge Base Infrastructure Ensuring Sustainability of Growth Enhancing the Sources of Growth - NKEAs DEVELOPING QUALITY WORKFORCE Developing Quality Workforce and Reducing Dependency on Foreign Labour TRANSFORMING GOVERNMENT Strengthening of the Public Sector and Fiscal Sustainability NARROWING DISPARITY Transparent and Market Friendly Affirmative Action 14

15 SRI seeks to address our deficiencies which are preventing us from moving forward Controlled Pricing System Undervaluation of resources results in gross misallocations Education Sector Failing to deliver required talent to the economy Lower Income Group (<RM 3,000) is falling behind and not realising its potential contribution Corruption High level perception Talent Insufficient numbers to drive growth Private Sector Short sighted in business outlook Rent Seeking and Patronage Pervasive behaviour Labour Market Overreliance creates Public Sector distortion and impedes Ineffective and siloed productivity impeding investment 15

16 Contents Targets for high income economy The New Economic Model Strategies t to achieve high h income Expansion of the economy Conclusion 16

17 Investment need to return as engine of growth Private & Public investment as share of GDP Average annual growth ;% ; % Pre crisis Post crisis Private consumption Government expenditure Investment 17

18 High paying jobs need to be created 100% 100% 1.7 million new jobs by 2020 in Greater KL / Klang Valley 57% 37% Low Income Jobs 3.3 million new jobs by 2020 under the ETP, of which: 63% will be in the middle and high income bracket 79% require vocational/ certificate and above One third require degree qualification and above 43% 63% Middle and High Income Jobs NKEA initiatives will create additional 3.3 million jobs, of which 63% will be in middle and high h income segment compared to the current 43% Source: PEMANDU 18

19 To fill in these jobs, more skilled workers in the labour market is needed 3.3 million new jobs by 2020 under the ETP, of which: Source: PEMANDU 1 350,000 2 Need to shift from foreign 1.7 million new dependency on low talent is jobs by 2020 in skilled foreign worker to targeted Greater KL / Klang contribution by high under talent Valley attraction in skilled foreign worker NKEA 63% will be in the Greater KL middle and high 3 The quality of our labour force need to be at par with other income bracket high income countries 79% require Country vocational/ Malaysia certificate and (2009) above Singapore One third require degree qualification and above New jobs require higher educated workforce Republic of Korea Finland United States Australia United Kingdom Hong Kong Labour force with tertiary education, % Skilled labour force, % Labour productivity (US$ PPP 000 per employee) OECD Average = 27.4 OECD Average = 37.6 OECD Average =

20 The economy must be driven by technology and innovation GNI per capita (USD) 75,000 Number of researchers 2006 GNI per capita (USD) R&D articles ,000 Norway Norway 60,000 45,000 30,000 Italy Germany Spain Denmark USA Sweden Canada Japan UK Australia Singapore 60,000 Denmark 45,000 Sweden USA UK Australia Canada Japan Germany Italy 30,000 Singapore Spain 15,000 S. Korea Slovenia Czech Republic 15,000 Slovenia Czech Republic S. Korea 0 Malaysia 0 1,000 2,000 3,000 4,000 5,000 6, Malaysia 10,000 20,000 50, ,000 No. of researchers in R&D (per million people) No. of scientific & technical journal articles 20

21 High productivity will lead to high income while remaining globally competitive 1 At 2000 constant prices Source: 10 th Malaysia Plan 21

22 Contents Targets for high income economy The New Economic Model Strategies t to achieve high h income Expansion of the economy Conclusion 22

23 Expansion of the economy will come from both existing and new sources Existing Sectors / Industries New Sources of Growth More exports in terms of volume and value add Expansion of economic activity High Economic Growth & High Income NKEA industries are our sources of growth, but we Competition in the Expansion of economic cannot just look at projects without building the underlying comparative/competitive advantage global market is no longer based on price but on productivity, quality and services activity will create spillovers which will further spur private consumption and investment Our target is to achieve minimum 6% GDP growth per annum for the next 9 years 23

24 Utilise on trade agreements to increase exports Utilise on trade agreements Multilateral t l Regional Bilateral l 24

25 Contents Targets for high income economy The New Economic Model Strategies t to achieve high h income Expansion of the economy Conclusion 25

26 High Income Economy needs transformation Improvement in economic governance to increase efficiency and investment. Expanding economic activities will create jobs (high paying ones). Benefits will be felt if there is productivity improvement compensated by higher pay. Educational improvement at all levels higher education, technical and skilled work. Targets for TFP improvement? 26

27 Thank You