Prime Minister cum Finance Minister, Datuk Seri Najib Tun Razak unveiled the New Economic Model (NEM) at "Invest Malaysia 2010" conference.on 30 March 2010. NEM will transform the nation into a high-income economy that is sustainable and inclusive and will position the nation on the right path towards attaining developed nation status by 2020.
The NEM would make Malaysia more competitive regionally and globally with benefits accruing to all Malaysians, with their per capita income increasing to US$15,000 by the end of the decade from US$7,000 currently.
Under the NEM, the Government would no longer tolerate practices that support the behaviours of rent-seeking and patronage, which have long tarnished the altruisic aims of the New Economic Policy (NEP).
The New Economic Policy (NEP) has 3 goals:
(1) Malaysia aims to become a high income advanced nation, lifting real growth rate to an average of 6.5% per annum over the 2011-2020 period, per capita Gross National Product (GNP) will rise to about USD15,000 by 2020.
(2) Growth will be inclusive, i.e. no-one left behind. Target the assistance to the bottom 40% of households – of which 77% are bumiputeras and many are located in Sabah and Sarawak.
(3) Growth will be sustainable in terms of ensuring macro-economic stability and preservation of natural resources and the environment to protect future generations.
Eight Strategic Reform Initiatives (SRIs):
The NEM requires bold changes through an Economic Transformation Programme (ETP). The ETP will be driven by eight Strategic Reform Initiatives (SRIs) which will form the basis of policy measures. Implementation of the ETP will drive Malaysia to achieve the following characteristics. Malaysia will be:
(1) Re-energising the private sector to drive growth –
Firing up the private sector will stimulate a jump in investment in high value added products and services, generating sustained growth and high income.
(2) Developing a quality workforce and reducing dependency on foreign labour–
Policies will focus on generating a talented workforce to meet the needs of a high-value
knowledge economy while wage-restraining labour market distortions, such as excessive
and indiscriminate use of foreign labour, will be removed.
(3) Creating a competitive domestic economy –
Subsidies, price controls and a myriad of distortion-creating incentives will be phased out. The impact on the vulnerable groups will be cushioned with an enhanced social safety net.
( 4) Strengthening the public sector –
Public sector reform programmes will continue to improve and speed up decision making by a lean, consultative and delivery focused government.
(5) Transparent and market-friendly affirmative action –
To truly foster equal and fair economic opportunities, affirmative action programmes will continue but will aim to achieve their objectives by removing the rentseeking and market distorting features which have limited their effectiveness.
(6) Building the knowledge base and infrastructure –
The key focus here is to promote an environment for innovation by strengthening the delivery of high quality education that nurtures innovation and technology.
( 7) Enhancing the sources of growth –
Malaysia will leverage its natural endowment and sectors of comparative advantage as
the main sources of high value added growth maximising spillover effects into new areas of activities.
(8) Ensuring sustainability of growth –
Preserving our natural resources and safeguarding the interest of future generations
will be complemented by sustainable public finances through stringent fiscal discipline.
The following are some of the highlights of what Datuk Seri Najib Tun Razak announced:
* Malaysian Industrial Development Authority (MIDA) will be corporatised and renamed as Malaysian Investment Development Authority to make it more effective as an investment promotion agency;
* State investor Khazanah to sell 32 per cent stake in Pos Malaysia;
* To list stakes in two Petronas units;
* Facilitate foreign direct and domestic direct investments in emerging industries/sectors.
* Remove distortions in regulation and licensing, including replacement of Approved Permit system with a negative list of imports.
* Reduce direct state participation in the economy.
* Divest GLCs in industries where the private sector is operating effectively.
* Strengthen the competitive environment by introducting fair trade legislation.
* Set up an Equal Opportunity Commission to cover discriminatory and unfair practices.
* Review remaining entry restrictions in products and services sectors.
* Phase out price controls and subsidies that distort markets for goods and services
* Apply government savings to a wider social safety net for the bottom 40 percent of households, prior to subsidy removal.
* Have zero tolerance for corruption
* Create a transformation fund to assist distressed firms during the refom period.
* Easing entry and exit of firms as well as high skilled workers.
* Simplify bankruptcy laws pertaining to companies and individuals to promoteo vibrant entrepreneurship.
* Improve access to specialised skills.
* Use appropriate pricing, regulatory and strategic policies to manage non-renewable resources sustainably.
* Develop a comprehensive energy policy.
* Develop banking capacity to assess credit approvals for green investment using non-collateral based criteria.
* Liberalise entry of foreign experts specialising in financial analysis of viability of green technology projects.
* Reduce wastage and avoid cost overrun by better controlling expenditure.
* Establish open, efficient and transparent government procurement process.
* Adopt international best practices on fiscal transparency.
The Government will gather the input from the public and provide them the opportunity to be part of the decision-making progress over the coming 3 - 6 months in transforming the nation's economy.