logging in or signing up 9MPlan Peppar Download Post to : URL : Related Presentations : Share Add to Flag Embed Email Send to Blogs and Networks Add to Channel Uploaded from authorPOINTLite Insert YouTube videos in PowerPont slides with aS Desktop Copy embed code: Embed: Flash iPad Dynamic Copy Does not support media & animations Automatically changes to Flash or non-Flash embed WordPress Embed Customize Embed URL: Copy Thumbnail: Copy The presentation is successfully added In Your Favorites. Views: 354 Category: Education License: All Rights Reserved Like it (0) Dislike it (0) Added: March 26, 2008 This Presentation is Public Favorites: 0 Presentation Description No description available. Comments Posting comment... Premium member Presentation Transcript Slide1: Ninth Malaysia Plan: Towards Sustainable Economic Growth in Sabah Friday, 28 April 2006 FEA, University of Malaya, School of Business and Economics, Universiti Malaysia Sabah Bank Negara Malaysia by Datuk Seri Panglima Andrew L.T. Sheng Tun Ismail Ali Professor of Monetary and Financial Economics Faculty of Economics and Administration University of Malaya The Changing Landscape: The Changing Landscape Since Berlin Wall in 1989, over three billion workers and consumers have joined the market economy. Brazil, Russia, India and China (BRIC) are expected to become larger than G6 in less than 40 years. China overtake Japan in 2016, India overtake Japan in 2032 1.02 trillion Internet users (15.7% of world population) pushing spread of knowledge and global market. Trade and financial liberalization have resulted in larger capital flows. Global trade in physical goods and services reached US$11 trillion in 2004, but trading in foreign exchange amounted to US$ 1.9 trillion daily. Asian Supply Chain Network: Asian Supply Chain Network Information technology, automation, innovation and competition have converged so manufacturing has become more flexible, with higher quality standards and greater responsiveness to consumer needs. IT has driven globalization through its networks, so that the global is increasingly operating as one global net where ideas, capital and products flow with less and less concerns for geographical borders. Through World Wide Web, manufacturers are able to source production, restructure operations and delivery system to serve global customers. This means that production and services can be shifted out very quickly.Slide4: Economies of Scale Supply side - Biggest producer wins Demand side - Biggest buyer determine standards Critical Mass Aggregation of local knowledge and skills Best combination of skills create economies of scale Critical Mass = Clusters = skills concentration Supply Chain Management - where in the chain is real value? Network EconomicsThe Knowledge Economy: The Knowledge Economy Commoditization means that low-knowledge products and services have high competition, low prices and are easily duplicated and therefore “taken away”. Network Economy demonstrates “winner-take-all” situation. See value of Vijay Singh today vs Vijay in Sabah. Markets are all about “branding” and “high knowledge content products”. Knowledge content needs governance - value creation needs total inputs at production, design, packaging and marketing levels. Knowledge is value. How Malaysia and Sabah become Knowledge Economies determines our competitiveness and wealth. Slide6: Hierarchy of Information Robert W Lucky, “Silicon Dreams: Information, Man and Machine”, St Martin’s Press, 1991.Sequencing and Hierarchy of Domestic Financial Markets: Sequencing and Hierarchy of Domestic Financial Markets Asset-backed securities and derivatives Corporate bond and equity markets Government bond market Treasury bill market and foreign exchange markets Money market Source: Karacadag, Sundrarajan & Elliot, 2003Intra-Asian Trade is Growing(Trade Flows as a percent of Total Asian Trade, 2004): Intra-Asian Trade is Growing (Trade Flows as a percent of Total Asian Trade, 2004) Source : David Roland-Holst, Mar 2006Asia’s Growth and Its Sources, 2005-2025 (%): Asia’s Growth and Its Sources, 2005-2025 (%) TFP means total factor productivity - Source : Asian Development Bank 9MP GDP: 6%; TFP 7MP 1.1%, 8MP 1.3%, 9MP 2.2%Great Gains in Real Income if Liberalization(% change from baseline in 2025): Great Gains in Real Income if Liberalization (% change from baseline in 2025) Source : Asian Development Bank Great Gains in Real Exports(% change from baseline in 2025): Great Gains in Real Exports (% change from baseline in 2025) Source : Asian Development BankSabah: Changing Patterns in Exports: Sabah: Changing Patterns in Exports Source Sabah Statistical Yearbook9MP: Key Objectives: 9MP: Key Objectives Move up Value Chain Raise Capacity for Knowledge [first class mentality] Address Inequalities Improve Quality of Life Strength Institutional Capacity1. Moving Up Value Chain: 1. Moving Up Value Chain When China is having 9.5% and India is having 7.5% growth on average, targeting 6% growth for Malaysia means that we are not taking advantage of growth poles around us. We should look at competitive opportunity from fast growing neighbours. US will slow in 2007 and will put pressure on Asia to increase consumption and be engine of growth. China and India will need natural resources. Therefore, we must target growth markets in our areas of comparative advantage Overall, manufacturing will meet strong competition, commodities will benefit from regional demand, services potential underestimatedMalaysia’s Comparative Advantage : Malaysia’s Comparative Advantage Strategic Location in Fastest Growing Zone; Political Stability, Cultural Diversity Underpriced talent pool in human capital - Malaysia is feeding professionals abroad Huge Natural Resource base - oldest tropical jungle, relatively unspoilt reef resources; Good physical infrastructure and relatively strong soft infrastructure (eg Common Law framework) that fits with globalisation. Sabah’s Comparative Advantage : Sabah’s Comparative Advantage Strategic Location between North Asia and Australia/East Indonesia; Cultural Diversity and Political Stability Underpriced talent pool in human capital - Sabah talent world-wide Huge Natural Resource base - oldest tropical jungle, relatively unspoilt reef resources - gateway to Pacific Islands; Improving infrastructure and common law property rights that fits with globalisation. Manufacturing: Manufacturing Can no longer rely on cheap labour as comparative advantage. Not sure that competition from China and India will erode share of manufacturing as % of total exports to 80%. Manufacturing 30% of employment. Vulnerable to production shifts. Huge Manufacturing capacity increase in China and India in last 5 years. This will put threat to manufacturing margins How do we move up value-added chain in global supply chain manufacturing? Need careful study. Agriculture: Squeezed in Middle: Agriculture: Squeezed in Middle Must move up Value Added Chain - even palm oil prices are threatened by soya bean and other vegetable oil substitutes Palm Oil and Rubber - Indonesia has land and labour - will provide huge competition R&D is vital, but must be market-oriented - How do we ensure that R&D can be nurtured and commercialized is test of governance structure Look at high value crops, including jungle biodiversityServices: the next frontier: Services: the next frontier ICT - Internet SME growth is the wave of the future. Why is broadband usage only around 1%? Malaysia moving from 53.9% of GDP in 2000 to 59.2% by 2010 (58.1% in 2005) Sabah service sector less than 50% of GDP US services sector 78.3% of GDP. Higher service sector growth is inevitable for developed country (say 70% by 2020, therefore national 63% by 2010).Financial and Commercial Services: Financial and Commercial Services Malaysia as Global Islamic Financial Centre - watch the competition. Make KL Asset Management Centre for Asia - Labuan is already booking centre. Commercial Services - why don’t we be outsource subcontractors in accounting, secretarial, cartoons, sound, film, book production etc to high cost centres? This can only be achieved if we have widespread and stable broadband. Tourism: Malaysia truly Asia: Tourism: Malaysia truly Asia Tourism earned RM32.4 bn or US$8.8 bn based on 16.4 mn tourist arrivals. Thailand earned US$11.6 bn on 13.4 mn arrivals. Tourism earns 80% more than palm oil, 6 times more than rubber and only 30% less than oil and natural gas (a depleting commodity). Where is our share of China and India’s outward tourism? 2000-2010: 3.8% to 6.1%; 1.3% to 1.8% (India lower than Taiwan?) Tourism: Sabah a truly success story: Tourism: Sabah a truly success story Tourism earned Sabah RM2.2 bn or 6.8% of national total. Sabah has very good brand for Eco-tourism and adventure travel. Can build on this. In 2004, tourism earned as much as Plywood + Sawn Timber + Veneer Exports (RM1.5 + 0.6 + 0.1 = 2.2 bn). We sell only our lifestyle! Tourism worldwide is growing business. Tourism attracts FDI (your eco-tourist is your highly educated, high income top management group who makes decisions on FDI). We have what India, China and many countries do not have - tropical eco-systems - highest mountain in SE Asia.Sabah Macro-Story - improving with great potential: Sabah Macro-Story - improving with great potential GDP growth - 6.5-7%, should be able to grow faster because of our comparative advantage. Balance of Trade - in 2004, trade surplus of RM6.5 bn or 26.8% of GDP, compared with deficit in 1997. State is in full employment because of imported labour, but we have graduate unemployment Timber and Oil/Gas are non-renewable resources, whereas the future of Agriculture and Services must be dependent on Value-Creation. But development indicators suggest there is room for improvement: But development indicators suggest there is room for improvement Development Composite Index by State: Ranked 14th. (9MK Table 17-1) GDP growth in 8MP - 4.3%, (5th after Selangor, Johor, Penang and Sarawak). 9MP - 5.8% versus national target of 6% (Table 17-2) Mean Household Income, RM2,487 (8th rank) vs national average of RM3,249 in 2004. Incidence of poverty at 23.0% in 2004, slight improvement from 23.4% in 1999, but highest in Malaysia and vs 5.7% national average [Tble 17-3]. Urbanisation rate 49.5% vs 63% national average. Highest urbanization growth of 3.1% in 8MP.Urbanization: Urbanization Japan and Korea accomplished industrialization in 1973 and 1999 respectively. In 1971, Japan’s per-capital GDP exceeded US$2000, and its primary industry made up 6.5% of the GDP and its urbanization rate reached 72.1%. In Korea, in 1991 the urbanization rate reached 74.4%, primary industry in the GDP amounted to 7.1%, and the per-capital GDP surpassed 6,000 dollars. By 2005, Malaysia’s GDP per capita in PPP terms reached US$10,000, but urbanization rate is only 63% and targeted to be 63.8% by 2010. International Lesson: Growth is a function of governance: International Lesson: Growth is a function of governance Natural Resources not a guarantee of growth [eg Middle East, Africa and Latin America]. Neither is cheap labour [Myanmar, Vietnam and Bangladesh]. In last 50 years in Asia, richest economies are Hong Kong (US$52,000 per employee and Singapore (US$54,000), which had no natural resources and also overpopulation [higher than Korea and Taiwan]. Hence, governance and political stability key to growth with stability. Global competition means that countries in middle will be squeezed by China and India, where labour is both cheap, and with FDI inflows, capital and modern technology is also no constraint. Slide27: The greater the friction cost, the more the market moves to areas with lower friction costs The lower the friction cost, the higher liquidity Friction costs depend on the following:- Time [speed to market] Factor costs [Labour, Capital, Taxes] Infrastructure costs - how good is physical utilities? “Government costs” - are rules & policies costly? Barriers to Entry - competition policy Markets are a function of Liquidity & Friction CostsStructural Costs Compared: Structural Costs Compared HKSAR China US Japan Production Costs High Low High High Transaction Costs Low High Low Medium Infrastructure Cost High Medium Low Medium Saving Rate Medium High Low High Expected Investment Return Low High Medium Low Speed to market Slowing Improving Good Slow “Government Costs” Low High Low High Barriers to Entry Rising Lowering Low HighABC of Knowledge Economy: ABC of Knowledge Economy ACADEMIA - Holders of Knowledge, but bogged down in teaching. Segmented from market or government BUSINESS - Close to market, but do not use Academia for R&D and sees Civil Service as hindrance rather than partner CIVIL SERVICE - Holder of massive public information and resources that can help growth. Currently, rarely uses Academia for R&D and policy work. Focuses more on regulation rather than BUSINESS facilitation. Competing internationally means that transactions costs of doing business in Malaysia must come down. Its all about teamwork. We have to operate as truly Malaysia Inc. IFC Doing Business Global Index: IFC Doing Business Global Index Development and Growth is a Process. To have Sustainable Growth, you need a Process to Manage Development Process: Development and Growth is a Process. To have Sustainable Growth, you need a Process to Manage Development Process Development is complex, because those who face most problems are those who are closest to the problem [the poor, SMEs, private sector, grass root public servants]. It’s not about QUANTITY OF GROWTH, BUT QUALITY. In the past, development has been top-down. Aid, not trade. Today, we understand that we have to use market forces to lead growth. Therefore, the key to sustainable growth is to have inclusive, transparent and accountable processes to manage the growth process. This is a co-operative venture, not public-private competition. Get Partners in order to win knowledge, experience and credibility: Get Partners in order to win knowledge, experience and credibility There are both foreign and domestic partners. We could consider a COUNCIL OF INTERNATIONAL ADVISERS at State Level. Bring renowned foreign experts who can help Sabah link to rest of world. Example: Sipadan was made famous by Jacques Cocteau. We should get top ranked universities, working in cooperation with UMS, to study our biodiversity and reefs. Be the most serious eco-tourism centre in the world. Since we are top palm oil producer, let’s work with palm oil companies to relocate R&D centres in Sabah. Let Sabah be Malaysia-My Second Home to top scientists, research workers, educationists working in areas of Sabah comparative advantage. CONCLUDING THOUGHTS: CONCLUDING THOUGHTS In the global world, development is too complex to be undertaken even by a small team. It has to be a process of discovery and execution. Be clear in objectives and have constant feedback on whether the objectives and implementation are meeting the targets. Development is about getting the right incentives in place. Teach a man to fish, not to eat fish. Value our heritage, our heritage will give us value. There is no one right way to development - just “pick important problems, fix them and tell everyone….” Harvard Professor Malcolm Sparrow. Slide34: Thank you Questions to firstname.lastname@example.org You do not have the permission to view this presentation. In order to view it, please contact the author of the presentation.