YAB Datuk Seri Hj. Mohd Ali Mohd Rastam
Ketua Menteri Melaka, dan
YABhg. Datuk Wira Datin Seri Hjh. Asmah bt. Abdul Rahman
YB Ahli-ahli Dewan Undangan Negeri
YB Datuk Wira Ismail Saleh
Setiausaha Kerajaan Negeri Melaka
Y Bhg. Tan Sri-Tan Sri,
Hadirin yang dihormati sekalian.
Asalamualaikum Warahmatullahi Wabarahkatu dan salam sejahtera.
Terlebih dahulu saya ingin merakamkan setinggi-tinggi penghargaan dan mengucapkan terima kasih kepada Kerajaan Negeri Melaka yang telah menjemput saya untuk berucap di Majlis pada malam ini. Saya akan menumpukan ucapan saya kepada kemajuan ekonomi negara setakat ini, isu dan cabaran semasa serta dasar dan langkah-langkah untuk menanganinya.
2. Menyentuh mengenai kemajuan, ingin saya mengimbas kembali kepada zaman kegemilangan kesultanan Melaka, dibawah kepimpinan seorang putera Palembang. Di bawah pemerintahan beliau yang berlandaskan kepada tata kesusilaan Islam, negeri Melaka telah berkembang maju daripada sebuah kampung kepada salah sebuah negara perdagangan yang termaju di dunia. Iktibar yang boleh kita perolehi daripada secebis sejarah ini ialah sekiranya kita bersungguh-sungguh menghayati dan mengamalkan prinsip dan nilai etika yang tinggi, seperti dalam ajaran Islam, kita juga akan dapat menikmati kejayaan dan kecemerlangan serta mempertahankan kedaulatan negara, seperti yang pernah dikecapi di zaman kegemilangan negeri Melaka.
3. Dalam hampir lima dekad yang lalu, semenjak negara mencapai kemerdekaan pada 31 Ogos 1957, kita telah melangkah jauh dalam usaha mencapai aspirasi pembangunan negara untuk meletakkan Malaysia di kalangan negara-negara di mana rakyatnya hidup makmur, bersatu padu serta dalam suasana aman dan damai. Kita juga telah berjaya membina sebuah negara yang berdaulat dan merdeka di atas apa yang termaktub dalam sejarah sebagai robohan kota Melaka. Di sini, saya ingin memetik ungkapan Sasterawan Negara, Allahyarham Usman Awang dalam puisinya bertajuk Jiwa Hamba:
Ingatkah kembali kata sakti
Dari bahang kesedaran berapi:
'di atas robohan Kota Melaka
kita dirikan jiwa merdeka'
4. As we look back at the path of development that Malaysia has traveled, we recognize immediately that Malaysia's economic transformation has been remarkable. We have been able to transform the nation from an agro-mining primary producer to a vibrant broad based economy to become what is one of the economic miracles of East Asia. Our development has also been holistic. It includes capacity building with heavy investments on social infrastructure, education and basic needs. Equally important, the Government has always been conscious of the need to ensure a socio-economic environment where all Malaysians from all walks of life would benefit from the rapid expansion of the economy.
5. Towards this end, the New Economic Policy (NEP) was enunciated in 1970, with its implementation stretched over 20 years to 1990. During this period, Malaysia has achieved much progress, particularly in terms of poverty eradication as well as restructuring of society, particularly for Bumiputera. But more needed to be done. Today, as we stand here at the dawn of the new century, we look forward with a high degree of optimism towards achieving VISION 2020 and beyond, where all our children and grandchildren will continue to live happily under the Malaysian sun.
6. Malaysia has achieved a rapid rate of economic expansion, with strong growth in Gross Domestic Product (GDP) spanning over a period of more than three decades. Our GDP growth averaged 7.5 percent in the 1970s, 6 percent in 1980s (despite experiencing two recessions) and 7.1 percent in the 1990s. Since the financial crisis of 1997, we have also been blessed with 7 years of steady economic growth, and able to sustain an average GDP growth of 5.4 percent. We even managed to eke out some growth in 2001, when most economies in our region contracted during the global IT-led recession. In 2000, GDP growth strengthened by 8.9 percent, the highest since the post crisis period. Last year, our economy grew by 7.1 percent.
7. During the course of this year, growing uncertainties has marked the global economy and a more challenging environment, particularly the notable shocks in global oil price increases, rising inflationary pressures and tightening of monetary policy, especially in the US. These developments have given rise to expectations of moderations in the global economic growth. Notwithstanding this development, our economy remained resilient, growing by 4.9 percent during the first half of this year. Given the strategic measures that the Government had put in place to sustain the growth momentum, we expect the GDP to further expand by 5 percent for the whole of this year.
8. In terms of economic transformation, the strategy to diversify the economy has led to a rapid expansion of the manufacturing sector, which currently accounts for almost a third of GDP compared with 12 percent in 1970. Manufacturing exports currently accounts for 83 percent of the nation's total exports compared with 8 percent in 1970. The services sector's share in the economy has also expanded from 5 percent to 58 percent during the period. While the financial sector, both banking and the capital market, has been the pillar of growth in the services sector, the tourism industry as well as trading sub-sector has also provided a strong impetus to the sector's growth.
9. The steady growth of the economy has been accompanied by strong underlying fundamentals. Inflation has been low, with the Consumer Price Index (CPI) averaging below 2 percent over the past 6 years. Although the increase was higher in August and September this year due to rising oil prices, the average for the first 10 months is still below 3 percent. We have achieved virtually full employment since 1992, when our unemployment rate was below 4 percent, a level it has not scaled since then.
10. We also have a strong external balance of payments position. Our current account surplus has remained high throughout the period, exceeding 8 percent of GDP for each of the last 6 years. In fact, the surplus was significantly higher at 12 percent of GDP during each of the past two years. We continue to sustain strong headline export growth although some of our FDI-driven industries have migrated to cheaper locations, like China and Vietnam. We have had sustained large trade surpluses for the last seven consecutive years. A diversified base of exports products as well as trading markets has been the key to the strength of our export growth.
11. Income per capita of Malaysians has also increased by almost 16 times, from 1,132 ringgit in 1970 to an estimated 17,741 ringgit in 2005. In terms of purchasing power parity, it has increased by more than 8 fold from 1,247 US dollars in 1970 to 10,323 US dollars in 2005, reflecting higher real income and improvements in the standard of living of Malaysians.
12. The rising national income and higher purchasing power parity have also contributed to increased national savings of over 36 percent of GNP, higher than the US and comparable to Korea. This comparatively high savings rate has provided ample liquidity for us to finance our investment activities from domestic sources.
13. Our strong fiscal position in the 1990s, as well as our ambitious privatization program, have also helped us create world-class physical infrastructure. We have built among others, the North-South Highway, KLIA as one of the largest airport in the region, as well as ports, while retaining a cost structure found only in the third world.
14. With these achievements, studies by A.T. Kearney have placed Malaysia as the third most attractive destination for offshore services location in the world, after China and India, as well as in the top 20 of most globally integrated countries in the world, among 62 surveyed. Our strengths are largely in trade, direct investment, relatively low costs, particularly for infrastructure, and attractive business environment. In addition, the 2005 World Competitiveness Report has placed Malaysia as the 10th most competitive nation among 30 countries with a population of more than 20 million.
15. Despite this picture of macroeconomic stability and strong underlying fundamentals, we continue to face new challenges, particularly from the fast changing global economic and financial landscape. The rapid pace of globalization and liberalization as well as advances in technology have not only led to large resource flows beyond national boundaries but also brought about significant integration and interdependence across economies, and along with it, heightened competition among economies, businesses and market players.
16. While Malaysia's competitiveness rating has generally improved over the years, there are certain specific weak points that needed improvements. For example, a recent World Bank Report on Doing Business in 2006, had placed Malaysia as 21st among 155 countries, from the perspective of Ease of Doing Business, compared with Singapore, which has been ranked second and Thailand, 20th. We are, however, ahead of Korea, which had been placed 27th, and China, 91st. These ratings are based on criteria with respect to dealing with licenses, starting and closing of businesses as well as registering property. Notwithstanding this, the Report had placed Malaysia ahead of Singapore and Thailand in terms of Getting Credit and Cost of Registering Property. We are also ahead of Thailand in terms of Investors Protection, Paying Taxes and Trading Across Borders.
17. Against this backdrop, it is imperative that we take a new sense of urgency to reposition our economy to not only support growth, but also improve on the quality of growth. The challenge before us is to evolve policies and strategies that will enable Malaysia to be more competitive in the global environment, ensure our economy remains resilient and able to emerge as an integral component of the global economy.
18. In this context, I would like to share with you the Government's perspectives on some of these challenges as well as the medium and long-term responses we are adopting in addressing these challenges. As the year 2006 unfolds, it is indeed timely that we reflect on the way forward as we embark to launch the Ninth Malaysia Plan, 2006-2010, and approach the second phase of our journey towards realizing VISION 2020.
PROMOTING NEW SOURCES OF HIGH VALUE ADDED GROWTH
19. In the 1980s and 1990s, we have been successful in transforming the economy from largely commodity based to an industrialized economy. The manufacturing sector currently accounts for almost a third of GDP and 83 percent of the nation's exports. We have built a world-class manufacturing sector by tapping foreign direct investment (FDI) in export-oriented industry. However, since we have achieved full employment, we consequently, discouraged investments in labour-intensive manufacturing. We recognized that manufacturing employment has peaked, since new investments are increasingly in capital- and knowledge-intensive sectors that generate fewer jobs. The challenge we face is, therefore, the need to seek new sources of growth to reduce our dependence on labour-intensive manufacturing and, at the same time, provide the new impetus to our economic growth. We will have to focus on specific niches, where we can specialize and have natural advantages.
20. In the manufacturing sector, the primary emphasis has been on high technology and greater value added activities and linkages. Sustaining the growth momentum of the manufacturing sector will call for accelerated technology transfer and greater R&D efforts as well as expediting the downstream development of the resource-based industries, such as palm oil, rubber, oil and gas, where we have considerable comparative advantages. One of our long-standing responses has been to hone our fiscal incentives to ensure that Malaysia remains attractive to high-value-added manufacturing. We have had success with this continued strategy, as we remain a leading exporter of electrical machinery and appliances, with 900 companies exporting almost 64 billion US dollars annually, accounting for about a quarter of our total exports.
21. Development in the agriculture sector, once the mainstay of the nation's economy, will require a more focused approach, facilitating the greater and more widespread usage of modern technologies and efficient marketing strategies. We must make fuller use of what we have already been blessed with and not abandon our traditional strengths. We must focus on efforts to leverage on our comparative advantage and build on our rich biodiversity endowments and venture into new high value added activities, such as biotechnology, including agro biotechnology and bio pharmaceuticals. We will also continue to modernize and commercialize as well as improve the supply chain of agricultural activities. Given our expertise in developing plantation agriculture, Government Linked Companies (GLCs) has been encouraged to become the catalyst in the commercialization efforts of the sector. Apart from the Government providing funds, Khazanah Nasional will establish the National Agriculture and Food Corporation which will be the center of excellence in agriculture supply chain management, including production, processing, marketing and distribution.
22. In ICT, we continue to leverage on the leading edge of technology. The Government continues to develop the Multimedia Super Corridor (MSC) to spearhead development in ICT, with its second phase roll out to Bayan Lepas, Pulau Pinang and the Kulim High Technology Park. Our efforts to promote shared and outsourcing services in the country have enabled Malaysia to be ranked as third best location in the world, after China and India. As at end of July this year, we have approved 101 International and Regional Headquarters (OHQs), 172 International Procurement Centers (IPCs), and 9 Regional Distribution Centers (RDCs). In addition, 533 regional offices have also been approved. In term of its contribution to job creation, the industry has created some 7,000 employment during the first half of this year, in addition to 8,000 jobs last year.
23. The policy to diversify the economy has also focused on the services sector. The sector will have an increasingly important role in generating rapid expansion in economic activities. This sector needs to transform from its supporting role to the manufacturing and resourced-based sectors to play a leading role as one of the drivers of economic growth.
24. A spectacular manifestation of our success in developing our services sector is the enormous increase we have seen in visitor arrivals to Malaysia. Our foreign visitor arrivals have leapt almost tripled, from 5.5 million in 1998 to 15.7 million in 2004; and 8.2 million during the first half of this year. By contrast, our neighbour Singapore received 6.2 million visitors in 1998, but saw a much more modest increase to 8.3 million in 2004. The significant increase in tourist arrivals has contributed towards higher earnings from tourism and tourism related activities to 30 billion in 2004 and expected to reach 38 billion this year.
25. Our innovative approach to tourism encompasses health tourism, i.e. encouraging foreigners to use our health-care system as a cheaper alternative to the west; education tourism i.e. inviting foreign students into our universities and their twinning programs with foreign universities as well as the Malaysia My Second Home program. These programs are beautifully encapsulated in our global advertising campaign, Malaysia, Truly Asia that highlights the strength of our unity in diversity, and has particularly appealed to new tourists from China, the Middle East and India.
26. Efforts at promoting health tourism have resulted in attracting almost 175,000 foreigners seeking treatment in Malaysia last year compared with just 39,000 in 1998. Similarly, the promotion of education tourism has attracted some 41,000 foreign students from 150 countries currently studying in our public and private higher learning institutions.
STRENGTHENING THE SMALL AND MEDIUM ENTERPRISES (SMEs)
27. As in many industrializing economies, SMEs in Malaysia represent an important segment of the economy as they play an important role in strengthening both the forward and backward linkages in the nation's industrial development, particularly through their support to larger companies, including the MNCs. Currently our SMEs account for more than 90% of companies in the manufacturing sector, comparable to those of Japan, Taiwan and Germany of around 99%. However, their contribution to the nation's GDP remains small at some 6 percent in comparison to between 30 to 40 percent in Australia, Japan and Germany; and exports at some 12 percent, significantly lower than those in the European Union of 55 percent of total export.
28. Obviously, our SMEs have not moved fast enough from their traditional role of suppliers of parts and components to large companies. Indeed, the upside for the growth of SMEs is tremendous. Our large SMEs base would itself provide tremendous opportunities for SMEs to grow and become growth catalyst in the economy, and even becoming global players. The successes of Japan and Taiwan's SME sectors, as well as the Mittelstand of Germany should be an inspiration to those of us committed to the growth of the SME sector.
29. SMEs must enhance their capacity and capability to become regional and ultimately, global entities, and compete for access to global supply and production chains. Today, outsourcing has become an important part and fast growing business strategies of large conglomerates, including MNCs, in manufacturing as well as in services. These companies are increasingly outsourcing the supply and management of their non-core businesses across regions. These activities provide potential opportunities, particularly to SMEs, to become suppliers and participate in global outsourcing activities.
30. The Government has focused on a comprehensive approach towards SMEs development by increasing their access to capital, providing greater access to business services and improving their business enabling environment. In terms of funding, to date, a sum of about RM13 billion has been put in place as special funds for the development of SMEs. This incorporates the Funds for Small and Medium Industries, New Entrepreneurs Fund, Shipping Fund, Food Fund as well as the Tourism Fund. In addition, venture capital has also been established, especially for start-ups in high growth and high technology ventures. These funds include those managed by MAVCAP, Malaysian Debt Ventures, and MSC's ventures, as well as MTDC.
31. Recently, the Government took another strategic direction with the establishment of the SME Bank. This bold measure to merge two development financial arms, namely Bank Pembangunan & Infrastruktur Malaysia Berhad and Bank Industri & Teknologi Malaysia Berhad, is aimed at creating a larger and stronger development financial institution specializing in infrastructure, maritime and high-technology sectors; as well a specialized bank for the SMEs, to provide attractive and more cost effective financing schemes and products.
32. More importantly, the new Bank has been tasked to function as a one-stop centre to integrate the business advisory needs of SMES and continuing education and training programmes, especially for start-ups. It will also promote the creation of entrepreneurs in new areas, including commercialization of research and development to enable them to become big businesses. Indeed, SMEs are the spawning ground for entrepreneurs and MNCs of tomorrow.
33. To further promote SMEs to venture abroad and expand their exports of goods and services, the Government is also strengthening the availability of credit supply and exports insurance of EXIM Bank and Export Credit Insurance Berhad (MECIB). This move is part of the Government's efforts to develop Malaysian exporters' competitiveness in the increasingly challenging global market.
34. We will continue to build on the enabling infrastructure and address the many divergent issues in accelerating SMEs development. In this regard, Government's policies and strategies will increasingly focus on promoting the SME businesses aimed at preparing them to develop and grow into strong, efficient and viable enterprises, able to contribute more significantly to the economy.
DEVELOPING NEW AVENUES FOR DOMESTIC INVESTMENT
35. The nation's persistently large current account surplus in the balance of payments, amounting to over 12 percent of GDP, implies that our national savings rate far exceeds our investment to GDP ratio. In the pre-1997 phase, Malaysia, like the rest of East Asia countries, had a massive construction boom that has largely built most of the physical infrastructure we will need for the next 10 years. Construction investment is, therefore, likely to grow much slower, leaving a larger gap between our national investment and savings rates.
36. In this regard, we encourage the outward investment by our companies. This is especially so as we continue to strive to move our economy up the value added ladder. Malaysian companies' outflows of direct investment overseas have remained small, at about 1-2 percent of our GDP. We are not only constrained by a much smaller market than China and India, but also even relative to the size of the domestic market available to some countries in this region, such as Japan, Thailand and even Korea. The smaller size of our market makes it more difficult for us to make a domestic economy the arena of competition among multiple players within an industry.
37. Malaysian companies investing abroad will also contribute towards the eventual creation of Malaysian MNCs. As such, we must seek to expand opportunities for the private sector to invest overseas. Petronas has already led the way by internationalizing over the past decade and is now an increasingly globalize oil MNC. Khazanah Nasional Berhad is also playing a leading facilitative role in our overseas corporate forays. Indeed, Petronas is already in the Fortune 500. But we need more. We need to produce more world-class corporations that will remain firmly anchored in Malaysian soil, while building global scale through internationalisation.
38. In our next phase of economic development, therefore, Malaysian corporates will increasingly need to become MNCs themselves, building judicious international networks of assets. The experience of Korea and Japan shows that one pre-requisite to building a domestically anchored MNC is to have vigorous competition at home, so that the local company builds up both the skills and the sharp elbow necessary to withstand competition. The smaller size of our local market necessarily reduces our ability to ensure the optimal combination of viable market size and number of domestic players.
39. In the telecommunications sector, however, the large number of licenses issued originally has resulted in hectic competition in the early years, preparing Malaysian telecommunication companies for external forays. Similarly, banks, fund managers and stockbrokers are also facing competition not only from domestic players but also from foreign players within their sectors. Consequently, they are better prepared to venture overseas.
40. As our companies venture overseas, however, we will need to develop the expertise to internationalize successfully, building a deeper reservoir of culturally sensitive and internationally aware management executives. This cannot happen overnight, but the large pools of Malaysians educated overseas in past decades, but who have continued to live abroad, represent one good source of talent that we should be able to tap. A second source of international expertise will come from the rapid growth of our own internationally competing services, including tourism, financial services, transportation and educational institutions, whose talents can be deployed in the service of our externally oriented companies.
41. To be part of the global integrated production system, and as Malaysian companies compete for positions in the global market place, we must recognize the importance of strategic branding to the nation. We must work towards becoming the manufacturers of our own brands of products, particularly those meeting international quality standards so as to achieve global appeal and acceptance. Better global branding has tremendous pay off not only domestically, even more in international ventures. Since Malaysia is a small economy, our ability to leave an imprint on the world has been limited in the past. As with all latecomers to development and industrialisation, we began as adaptors and adopters of others' technology, ideas, products and brands.
42. However, to enable us to tap the global market from a position of strength, we must now create products that are distinctly Malaysian through building on the creativity of our people to create brands, products, ideas and technology that are recognisably as our own. The challenge will be to channel investments that help us to build Malaysian brands, Malaysian companies and Malaysian technology that are not only concerned with technical and physical attributes of their products, but also able to craft brands and reputations that match market expectations. In essence, there is certainly a great deal of room for innovation to seek new ideas and accelerate the pace of brand development for Malaysian products.
DEALING WITH THE EMERGENCE OF CHINA AND INDIA
43. China is increasingly emerging as the preferred destination for manufacturers, especially for assembly of final products and most labour intensive manufacturing. In our effort to reach new opportunities in the international market place, we must not lose sight of the potential of China, as its emergence as a new economic power cannot but make it a great market place. We believe that China's prosperity is not a threat but an economic opportunity. Its huge domestic market and its abundant low cost labour provide opportunities for Malaysian enterprises to seek production facilities in China. At the same time, China has a large Muslim community. Malaysia is in a good position to make inroads to supply not only halal food but also other halal products.
44. Similarly, as India increasingly emerges as the preferred provider of software and IT-enabled services to the world, we have the opportunity to fill important niches in those market sectors, since we too have a large English-speaking population, and a telecommunications infrastructure that is better than India's. We must strive to ensure both these relative strengths are developed further in order to enhance our competitiveness. Our construction companies have taken the lead in India's highway development programme. We will continue to encourage our construction and infrastructure companies to deploy their expertise profitably in India as well as in other emerging economies.
45. Our multi-ethnic population provides us unique strengths that will enable us to capitalize on the opportunities arising from the rapid growth of China and India. We have more Indians than any other country outside the Indian sub-continent and a larger population of Chinese than any country outside Greater China. We have cultural affinities, which our population shares with these largest and fast growing markets. Free Trade Agreements with China and India will help to formalize and institutionalize our network of relationships with these nations.
46. Islam and our closer economic and political ties with the OIC also give us unique links to the Arab world, central Asia and south-west Asia and north Africa. We are a Muslim nation in which the oil exporting nations of the Muslim world and all other members of the Muslim Ummah feel equally comfortable. In addition, we have the heritage of the English language, which we share with the vast Commonwealth nations, giving us yet another network of nations in Africa, the Caribbean, Australasia and the Indian sub-continent that we could seek business opportunities in.
COMPLETING THE REHABILITATION AND LIBERALISATION OF THE FINANCIAL SECTOR
47. Our financial services sector has provided important intermediation services in the mobilization of funds to finance the nation's economic activities. It must now evolve from this intermediary function to become more expansionary and dynamic, able to contribute towards growth generation and enhance their competitiveness to serve regional and even global marketplace. In this context, a major challenge we face is the need to complete the rehabilitation of our financial sector, which began in 1998 after the financial crisis, and prepare it for the opening and liberalization of the financial market.
48. Since the financial crisis in 1997, our initiatives to restructure and strengthen the domestic financial system have led to greater efficiency and resilience in the banking sector. Firstly, we had established Danaharta, an asset management company to lead the work-out of banking system non-performing loans (NPLs), i.e. obliging banks to sell NPLs at a discount that reflected their underlying recoverable value. Since bank managements and shareholders were explicitly 'punished' for their past transgressions, moral hazard was effectively dealt with. Only after this, did Danamodal come in to inject fresh capital. This initiative has strengthened the banking system, which now has seen higher capitalization, improved asset quality and better profitability.
49. A second prong of our response was to induce the consolidation of our banks, finance companies and stockbrokers. This was aimed at both eliminating our weakest players, and enabling larger institutions to compete against existing foreign players as well new entrants. We are also selectively encouraging some of our stronger banks to acquire overseas assets in order to develop regional scale and expand their overseas network, especially in ASEAN, northeast Asia and south Asia.
50. We have also carved a unique niche for ourselves by encouraging the parallel growth of both an Islamic banking system and a conventional banking system that benefits from the substantial presence of foreign as well as local players. With our growing expertise in Islamic banking, we will continue to develop Kuala Lumpur as the main repository of expertise on Islamic banking in the world.
51. In the capital market, we have a clear vision to strengthen the foundations and enhance the quality of our capital market. We have put in place a corporate governance framework that is rated as highly advanced as well as ensure our capital market intermediaries possess sound management, strong leadership as well as strong balance sheet. Above all, they must be committed to shareholder value creation. In this regard, Khazanah is leading the efforts at transforming GLCs performance and increasing the levels of their shareholder value creation.
52. Priority in the development of the capital market has been on establishing a deeper and broader as well more efficient bond market that provides greater diversity of products and a wider range of tenors, especially to meet long term funding needs of investors. The bond market has since 1997 expanded rapidly by 3 fold to reach 363 billion ringgit last year. Malaysia has also emerged as a significant area of growth in Islamic capital market and we must capitalize on Malaysia's role as the emerging world's Islamic capital market centre.
53. We have also taken measures to enhance market access through increasing international participation in our capital market. In this regard, our liberalization policy has the objective of creating an optimal mix of strong domestic intermediaries and foreign participants with diverse capabilities to maximize growth. This approach provides the necessary competition to incentivise our domestic intermediaries to enhance the quality of their services. Towards this end, we have recently issued licenses to five foreign brokers and fund managers to create growth opportunities. These global players will contribute towards accelerating the development of our capital market through expanding trading volumes, upgrading industry standards and practices, enhancing product innovation as well as strengthening Malaysia's international profile. Indeed, the beneficiaries will be our domestic investors and issuers who will have access to world-class products and services from the capital market.
BUILDING WORLD CLASS HUMAN CAPITAL
54. Another priority area is the development of the softer part of our economic infrastructure, i.e. the intellectual capital component. As such, human resources development will remain the bedrock of our future development efforts. A strong human resource base to support a knowledge-based and high technology economy will have to be the winning strategy towards enhancing productivity and competitiveness. The Government will ensure that Malaysia produces an adequate supply of workforce that is equipped with the necessary skills and expertise and high level of thinking skills.
55. Towards this end, education and training capacity, particularly in science and technology, will be considerably expanded. More importantly, the education and training system will be further reoriented to ensure that not only the manpower output match the requirements of new technology and knowledge-based economy, but also nurture creativity, innovativeness, versatility and able to produce multi-skilled workforce.
56. Our skills development programme will be further intensified. We need this capability to gradually transcend from being an investment driven economy to an innovation driven economy. A highly qualified and skilled workforce is indispensable to be innovative and for us to enhance competitiveness. Our skills development programs need to be continually honed to stay in tune with market demands, in particular the newest sources of FDI. In sectors such as plantations, hospitality and construction, where we have a shortage of unskilled workers, we keep the door open to temporary foreign workers. We have selectively opened up to foreign skilled workers and professionals, whose expertise can help us, fill gaps in the labour market that Malaysians currently cannot fill.
57. We recognize that the quality of human capital is the key determinant of the pace at which we can move up the value-added chain. We are fortunate, as we still have a very young and vibrant population who will contribute to the vigour of our work force. We are reforming the education system, beginning the teaching of English at a much younger age, encouraging multilingual skills, and promoting a greater focus on science and technology.
REMAINING COGNIZANT OF INCOME DISTRIBUTION
58. The Malaysian social contract since 1970 has been underpinned by a consensus that was encapsulated in the New Economic Policy (NEP), which provided the basis for redistribution of income and asset-ownership to the majority Bumiputera community. With regard to socio-economic progress, we have come a significant way in redressing socio-economic imbalances through improvements in the standard of living and distribution of income of all Malaysians. But more needs to be done.
59. The mean monthly household income of Malaysians has increased 11 fold from 269 ringgit to 3,011 ringgit during the period 1970-2002, with a higher rate of increase for rural agricultural households, where Bumiputera form the overwhelming majority. It is in this sector that the per capita income was the lowest and the incidence of poverty was the highest, accounting for some 60 percent of poor households in 1970. The gains in rural income have been achieved from productivity increases brought about by the Government's deliberate efforts at modernizing, improving technology and commercializing smallholder agriculture as well as diversifying their sources of income.
60. The trickle down of income distribution from the rapid economic development and substantial increase in the nation's income have subsequently, brought about a remarkable reduction in the incidence of poverty to 5.1 percent in 2002 from 49.3 percent in 1970. As a result, more than half a million poor households, equivalent to more than 2 million Malaysians, were lifted out of poverty during the period. For Bumiputera, the poverty incidence has also been reduced significantly from 65 percent to 7.3 percent during the same period. The overall incidence of hardcore poverty was also reduced from 4 percent in 1990 to 1 percent in 2002. We have one of the best, if not the best, record of upward mobility in the world.
61. Another key objective in addressing socio-economic imbalances has been the restructuring of Bumiputera equity ownership in the corporate sector. In this regard, Bumiputera equity ownership has increased significantly from a mere 2.4 percent in 1970 to 18.7 percent in 2002. In absolute term, it has increased from about 126 million ringgit to 73 billion ringgit. Notwithstanding this, the percentage share of Bumiputera equity ownership is still short of the NEP's target of 30 percent. We, therefore, need to work even harder to increase Bumiputera wealth, not only in terms of equity ownership but also property ownership, employment as well as knowledge and skills to ensure that the Bumiputera community gets its appropriate share of the nation's economic pie.
62. Efforts at increasing Bumiputera participation in the corporate sector, thus far, has largely been emphasised on their equity ownership, particularly through their shareholding in listed companies. This alone, however, is not a sufficient reflection of their ownership of the nation's wealth. In this regard, the Government has established the Yayasan Amanah Hartanah Bumiputera, to enable Bumiputera to increase their ownership of commercial properties in strategic locations in major towns.
63. The employment restructuring efforts have provided Bumiputera with upward mobility opportunities to acquire knowledge, expertise and skills. In this regard, the number of Bumiputera professionals has increased significantly in all professions, including doctors, accountants, engineers, architects and lawyers. Bumiputera professionals as a percentage of total number of professionals has increased to about 37 percent in 2002 compared with only 5 percent in 1970.
64. Selaras dengan pembangunan pesat negara keseluruhannya, negeri Melaka di bawah kepimpinan Ketua Menteri, YAB Datuk Seri Mohd Ali Mohd Rastam, juga telah dapat meraih kemajuan yang berterusan. KDNK negeri Melaka telah bertambah kukuh semenjak tiga tahun yang lalu dan telah mencapai kadar pertumbuhan yang tinggi sebanyak 7.4 peratus pada tahun 2004. Usaha untuk menyediakan infrastruktur yang mencukupi dan cekap telah dapat menarik pelaburan swasta, terutamanya pelaburan asing yang telah meningkat dengan pesat, terutamanya di sektor pembuatan, pelancongan dan pendidikan.
65. Saya percaya dengan strategi pembangunan Kerajaan Negeri, Melaka akan terus maju dan mencapai tahap kejayaan yang lebih cemerlang. Saya memberi jaminan Kementerian Kewangan akan terus memberi sokongan kepada usaha Kerajaan Negeri ini.
66. Akhirnya, saya sekali lagi ingin mengucapkan setinggi-tinggi penghargaan kepada Kerajaan Negeri Melaka yang telah menjemput saya pada malam ini.
Sekian, terima kasih.
Wabillahi taufik walhidayah wassalamualaikum warahmatullahi wabarakatuh dan salam sejahtera.
26 November 2005