Closing Address YAB Dato’ Seri Ahmad Husni Hanadzlah Minister of Finance II PTD Alumni 2009 Economic Forum 10th Malaysian Plan : A NEW PARADIGM – RISING TO THE CHALLENGES
Closing Address YAB Dato’ Seri Ahmad Husni Hanadzlah Minister of Finance II PTD Alumni 2009 Economic Forum 10th Malaysian Plan A NEW PARADIGM – RISING TO THE CHALLENGES 19 November, 2009
YBhg Tan Sri Sallehuddin bin Mohamed President PTD Alumni
YBhg Tan Sri, Tan Sri, Dato’, Dato’, distinguished guests, ladies and gentlemen
1. It is my pleasure to address you this evening at today’s Closing Session on the 10th Malaysian Plan: A New Paradigm – Rising to the Challenges.
2. I congratulate PTD Alumni for organizing this forum. It is indeed timely. At this end of the last quarter of this very difficult year, we can breathe a sigh of relief that our economy is showing credible signs of recovery.
3. As our GDP growth moves into positive territory next year, we will also be embarking on a process of transformation that will be unprecedented in our economic history since the introduction of the New Economic Policy in 1970.
Ladies and gentlemen
4. In any transformation of the economy, the role of the private sector is critical – the key economic growth driver has to be the private sector. Public expenditure cannot and should not carry the weight of providing the inputs for the economy. We understand that the major factors hindering private sector investment are a severe shortage of skilled workers, lack of investment in R & D, as well as low levels of productivity. These are legacy problems and these problems can only be solved when there is a strong enough will to change. Paramount to the agenda of change is confidence.
5. The private sector will invest if there is confidence that there will be, at least, an equitable return on the resources invested. The private sector will have confidence to invest if they perceive that there is fair competition in the marketplace. The private sector will have the confidence to invest if they know that their time to market will not be hampered by bureaucracy and flip-flops in the regulatory structure of the industry they operate in.
Ladies and gentlemen
6. Allow me to address these three manifestations of confidence.
7. First: The private sector will invest to change if there is confidence that there will be an equitable return on the resources invested.
8. An equitable return on investment made is directly related to the profit margins inherent in the business operated. From the supply-side, we cannot compete with the emerging economies of Vietnam, India and China, whom provide cheaper labour costs. Therefore, in order to secure the required margin, the investor needs to introduce higher value to his products. Removal of off-balance sheet costs such as leakages due to corrupt demands by rental seekers can also improve an investor’s margins.
9. There is also margin arbitrage between the region’s markets. An investor would prefer to be in a market where he can sell his goods and services in line with the world’s market price and not where the price is dictated by any regulatory requirement or persuasion.
10. Second: The private sector will have confidence to invest if they perceive that there is fair competition in the marketplace.
11. Since the administration of our new Prime Minister began, we have introduced a “no direct negotiation” rule, with exception to procurement exercises related to defence and security interests. Perception is reality and we must be seen to be fair and equitable in our dealings in so far as public procurement is concerned.
12. There is also widespread believe that due to the substantial role of the GLCs in the marketplace, the private sector, the true entrepreneur-run private sector, believes he is crowded out. The private investor will not be interested to compete in an economy where large parts of the economic value chain are dominated by government-sponsored entities that may be thought as parties acting in concert.
13. Third: The private sector will have the confidence to invest if they know that their time to market will not hampered by bureaucracy and flip-flops. 14. Since the establishment of PEMUDAH in 2007, the level of bureaucracy has lessened. Nevertheless, the WEF Global Competitiveness Index 2009/2010 states that out of the top five most problematic factors for doing business in Malaysia, at second place is inefficient government bureaucracy and at fourth, policy instability.
15. If we wish to restore confidence, we have to relook at how we do things in this country. We have to see how we can make things easier for the private investor do business. It takes 261 days for Malaysia to issue construction permits while Thailand 156 days, the United States 40 and Singapore 25. We need to look hard at how we can review our strategies and implementation plans. There is obviously room for improvement.
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Ladies and gentlemen
16. If I am to sum up the issue of confidence in one single word, it would be governance. If we are to resolve all the three manifestations of confidence as I stated earlier, it would all come to nothing if we do not address the issue of governance.
17. From the word Government, comes governance. Confidence in our public institutions and systems must be reinforced further. I have been made to understand that already legal agreements for projects in Malaysia are to be arbitraged in other jurisdictions, Singapore being one popular choice.
18. If integrity is compromised, confidence is eroded; credible investors would not come in even if there is probable chance of extraordinary profits. This is already demonstrated in a number of the African states and several in Asia too.
Ladies and gentlemen
19. I have a nephew whom graduated from a very good university abroad and is now holding a respectable position in a financial institution in London, Alhamdulillah. Having worked for several years there, he is now telling his family that he wants to apply for permanent residence in the United Kingdom, causing his mother to be very upset.
20. His family has invested heavily in him, giving him love, support and material comforts. The proceeds of our economy were invested in his education. It is now another foreign country that is reaping the benefits of this country’s investment. If we cannot convince an intelligent young man to have confidence in his home country for him to invest his future in, how can we expect foreign private investors to put money in our economy? How can we make Malaysia so special that we stand head and shoulders above our competitors? This is a question that we must ask ourselves.
21. Malaysia’s future is bright. I am convinced that we have the capacity to re-structure ourselves for the future. As members of the public service, we dedicate our lives to the betterment of this beloved country of ours. It is for this reason and this reason alone, that I do what I am doing.
22. I am of the generation that there is no country for me other than this land where my forefathers were born. I am sad that in this mobile world, the young may not think such so. But I cannot force my nephew to think like me.
23. All I can do is do my job, in whatever position that I happen to be in, may it be high or low, as best as I can, to shape this country in ways and means so that someone like my nephew would want to come home to.
24. I thank Tan Sri Sallehuddin, President PTD Alumni for giving me the honour to close this Forum. My thanks also to Dato’ Halipah Esa for heading the team that organized this Forum to its successful conclusion. Congratulations. To all delegates and participants, thank you for sharing your thoughts and knowledge.
25. With the words, syukur Alhamdulillah, I know officially close this PTD Alumni 2009 Economic Forum, thank you.
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