Keynote address at the GSIAC-Khazanah Distinguished Lecture Series
1. I am delighted to be back in London, one of the world’s great cities, and one for which I have a close personal affinity. It is a pleasure to join you here at the Shard, a great addition to the London skyline.
2. I was happy to receive the invitation to speak here today as it provides the chance to make a key point to the global community – that due to the implementation of our reform agenda, Malaysia is on course to achieve our goal of becoming a high income status nation by 2020.
3. Three weeks ago I presented the government’s National Transformation Programme’s report card, which showed we had met or exceeded virtually all of our key performance indicators.
4. Despite the global economic turmoil and the drastic fall in the price of oil, which affected the Malaysian ringgit, growth last year alone was five percent, making Malaysia one of the fastest-growing countries in the region. The OECD forecasts Malaysia to average that same rate – far higher than the global average – over the next four years.
5. Between 2009 and 2015, Gross National Income increased by nearly 50 percent. 1.8 million jobs have been created, inflation kept low, while Foreign Direct Investment has been growing at 22 percent per annum.
6. We can see plenty of other signs that our economic plan is working. Malaysia’s export growth in February 2016 rebounded by 6.7 percent to RM56.72 billion, or 10 billion British Pounds. Imports by comparison increased by 1.6 percent to RM49.4 billion, 8.3 billion British Pounds.
7. The trade surplus widened to RM7.5 billion, or 1.3 billion British Pounds, in February this year – the 220th consecutive month of trade surpluses since November 1997. This achievement is particularly encouraging considering the challenges posed by low commodity prices, currency fluctuation and the economic slowdown in China.
8. Other parts of Malaysia’s economy have demonstrated similar resilience. In 2015, the capital market rose in value to RM2.8 trillion, some 400 billion British pounds, and stands at two and a half times Malaysian GDP – a 150 percent increase since 2009.
9. As Bloomberg recently reported: “Overseas inflows into Malaysia are the biggest in Southeast Asia” and “Kuala Lumpur has the lowest volatility among the region’s markets.”
10. Some who ought to know better have been talking Malaysia down. Indeed, they do know better because the data are indisputable.
11. But don’t just take my word for it. Let me cite some of the accolades that show the enthusiasm for and confidence in Malaysia.
12. They come from an array of respected international bodies, and demonstrate in no uncertain terms that when it comes to competitiveness, Malaysia is now firmly ranked among the top nations around the globe..
13. Last year, we rose to 18th among 140 countries in the World Economic Forum’s Global Competitiveness Report.
14. The International Institute for Management Development or IMD ranked us 14th most competitive of 61 economies in its survey.
15. And the Global Manufacturing Competitiveness Index, recently published by Deloitte, placed Malaysia 17th among the top 40 nations and predicts a rise to 13th place by 2020.
16. That report, based on a survey of over 500 leading corporate executives worldwide, sees the “Mighty Five” countries of Malaysia, India, Thailand, Indonesia and Vietnam as an emerging Asian powerhouse.
17. Together, said the report, we represent what they call “a New China” in terms of low cost labour, agile manufacturing capabilities, favourable demographic profiles, markets and economic growth.
18. The World Bank ranked Malaysia the 18th easiest place to do business out of 189 economies in 2015 and 4th in the world for investor protection.
19. A recent study by ACCA and KPMG on corporate governance ranked Malaysia joint first among the developing countries they surveyed, and joint 4th overall, just below the UK, US and Singapore. And we were ranked first in the Global Islamic Economy Indicator list.
20. To quote the World Bank regional director for Southeast Asia last December: “The international community continues to have confidence in Malaysia. That’s why Malaysia continues to attract interest from businesses – both domestic and foreign.”
21. It is a confidence shared by The International Monetary Fund, which said in its most recent report earlier this year: “Malaysia’s economy continues to perform well. The authorities have been able to maintain macroeconomic and financial stability, while making significant progress in improving the foundations for sustained economic growth.”
Ladies and gentlemen,
22. Our achievements have been based on three solid, inter-related principles: innovation, sustainability and inclusivity.
23. After independence, we embarked on a series of ambitious programmes in nation-building and sustainable socio-economic development.
24. Thanks partly to our friends in the UK, Malaysia has long been a powerhouse in the cultivation of palm oil and rubber. Rubber was introduced by an Englishman, Henry Wickham, from the Amazon. Similarly, oil palm was brought to our country from West Africa.
25. Through research and development, particularly in plant breeding and agronomy, Malaysia is today a top producer of rubber and oil palm, commodities that have helped reduce rural poverty dramatically.
26. In more recent years, we have successfully moved beyond an economy based on agriculture to one built on manufacturing and services as well. Our challenge now is to move to the next step: to grow through innovation and the more effective use of knowledge for greater economic and social development.
27. We need to find better ways of producing goods and services, and delivering them more effectively, and at lower cost, to a greater number of people.
28. For Malaysia to become a developed, high-income status nation, able to compete with the best, regionally and globally, we need the transformative power of science and technology; and we need the dynamism of entrepreneurs, innovation and creativity to propel both public and private-sector performance.
29. This is what motivated our decision to launch the Science 2 Action, or S2A, initiative in 2013. Its goal is to intensify the application of science and technology for the development of industry and for the well-being of the people.
30. We want to reinvigorate all aspects of science in Malaysia so that it contributes to generating the new ideas and game changing strategies that will create sustainable wealth and jobs for our people.
31. Part of the S2A initiative was the establishment of the Newton-Ungku Omar Fund, a joint initiative between the Malaysian and British governments.
32. It has already created new opportunities to enhance our bilateral relationship, and for scientists from both countries to work together on potentially life-changing research and innovation initiatives.
33. Since the fund was started in 2014 seven main collaborative programmes have been established looking at the areas of human capital development, research and development and – most importantly – the translation of research outputs from the laboratory to the market.
34. Researcher Links and Institutional Links programmes have already started building strong network linkages between Malaysia and the United Kingdom. We look forward to further developments and successes from this far-sighted partnership.
Ladies and gentlemen,
35. A sustainable economy is one in which we take care of our environment, and we in Malaysia have placed great emphasis on striking the right balance in terms of socio-economic development and environmental health, in particular the conservation of biodiversity and ecosystems.
36. This is particularly important to us since Malaysia is officially recognised as one of the world’s 17 megadiverse countries. Our rainforests harbour an enormous range of plants and animals, with massive trees towering more than 80 metres above the forest floor.
37. Our seas teem with an extraordinary diversity of marine life. Our coastlines are fringed with productive mangroves and spectacular coral reefs. All these help maintain the health of our natural environment and represent incalculably valuable ecosystems.
38. In the past, the forest clearing that was required in order for us to develop was not always done with sufficient respect for our environment. Forest fragmentation posed a threat to the conservation of our biodiversity.
39. In response, Malaysia is embarking on a national initiative called the Central Forest Spine. The initiative will link four main forest complexes around the central mountain range in Peninsular Malaysia.
40. This long term plan aims to conserve and rehabilitate small forest fragments, and increase their connectivity with the main forest to ensure species survival.
41. It is estimated that the Central Forest Spine will cover 5.3 million hectares in all – that’s some 40 percent of the area of Peninsular Malaysia – and 80 percent of it will be designated as Permanent Forest Reserve.
42. In East Malaysia, the Borneo states of Sabah and Sarawak are well known to tourists who go to see orang utans, proboscis monkeys and pygmy elephants in their natural habitats.
43. These too must be preserved, and Malaysia, Indonesia and Brunei have come together in the “Heart of Borneo” Initiative to conserve approximately 200,000 square kilometres of forest, about 30 percent of which is in Malaysia.
44. We have set a target of recycling 40 percent of our waste by 2020. We have also pledged to reduce our national carbon emissions by 40 percent by the same year – although I am told that by the end of 2015 we had already achieved a reduction of 35 percent.
45. We take these targets seriously, and this shows the work that goes into meeting them.
Ladies and gentlemen
46. Sustainability not only makes environmental sense. It also makes economic sense. It is a driver of new technology, of innovation, and of a sector that is becoming increasingly important worldwide. We have seen the results in Malaysia.
47. Our Green Technology Financing Scheme has successfully supported 188 projects, which have not only saved the equivalent of 2.31 million metric tonnes of carbon emissions, they have also helped to create nearly 4,000 jobs.
48. So this is why we have introduced tax incentives to encourage industries to adopt green technology; set targets for installed capacity of renewable energy; and made green growth an integral part of the 11th Malaysia Plan, which will guide us over the next four years.
49. The government also encourage the financing of socially-beneficial and sustainable ventures, such as the Sustainable and Responsible Investment Sukuk framework introduced by the Securities Commission, and the Environmental, Social and Governance, or ESG, Index launched by Bursa Malaysia.
50. In addition, Malaysia continues to develop new financial assets, such as carbon credit-based solutions based on the principles of Islamic finance.
51. These assets are sustainable and reward-generating to investors, they are underpinned by real economic activities; and they are end-to-end Shariah-compliant, and can be sold to the world’s carbon buyers.
52. We want to encourage this further, and we will consider providing incentives to companies that offset their carbon footprint with Malaysian rainforest credit.
53. These examples all show how sustainability and green growth are not just about doing what is right – protecting one of our greatest assets, our spectacular land and sea-scapes, which are not just our natural heritage but are also at the heart of our thriving tourist industry.
54. But sustainability also makes financial sense. Conserving and recycling save money, and new green businesses offer huge and growing opportunities.
Ladies and gentlemen,
55. Ensuring our people have the right skills, investing in training, making sure that basic foodstuffs, housing, healthcare and other necessities are available at low prices – these are all policies that we have enacted and are still working on.
56. The results have been good. We have virtually eliminated absolute poverty to less than one percent. The income of the bottom 40 percent households has increased by a compound annual growth rate of 12 percent, substantially higher than the national average of 8 percent, since 2009 when I took office.
57. In our efforts to alleviate poverty, Malaysia introduced the Federal Land Development Authority scheme, or FELDA, in 1956, opening up the jungles to establish rubber and oil palm smallholdings for those living in the countryside.
58. In fact, the story of FELDA started with the dream of one man, my late father, Tun Abdul Razak, the second Prime Minister of Malaysia. His aspiration was that there would be “land for the landless” and “jobs for the jobless” to eradicate the poverty prevalent in the rural sector then.
59. In Malaysia, we realised early on that the only way for people to break free from the vicious circle of poverty was for planned and coordinated development to ensure that economic development went hand in hand with social development.
60. But we are always striving to do more to continue to raise income levels so that all share in the fruits of our success and are able to cope with rising costs of living.
61. Through the implementation of minimum wage legislation, the government has lifted 2.9 million people immediately out of absolute poverty.
62. Next we have to reduce our dependence on cheap foreign labour. In particular, we need to be very serious about raising the level of education and skills in our country, so that growth and higher wages come from increases in productivity.
63. We need a real focus on research and development and on better processes in industry. We need a focus not just on innovation, but on commercialising innovation. And we need a focus on being at the forefront of using – and inventing – new technology, so that we gain and maintain a long term competitive edge.
64. These are big tasks – and they cannot all just be a matter for government. The private sector must play its part, including in training at all stages of life. The government will continue to assist and support, of course.
65. But we need to form a new partnership so that all significant actors in our economy are united in making Malaysia the destination for investment. And that means our citizens being empowered by having the skills and aptitude to adapt to a world in which standing still is not an option.
66. Making sure that no one is left behind is not just a matter of our duty to our fellow citizens. It also benefits the whole economy if as many people as possible live useful, productive lives.
Ladies and gentlemen,
67. When I talk about global competitiveness and Malaysia, I must mention our role as a gateway to the region and beyond. ASEAN, the Association of Southeast Asian Nations of which we were a founding member, is already a market of 625 million people, with ever freer trade.
68. It is a region expected to have a middle class numbering 400 million people by 2020, and the world’s fourth largest economy by 2050 – although one forecast ASEAN to reach that mark as early as 2030.
69. ASEAN is also the gateway to the Regional Comprehensive Economic Partnership being negotiated with Australia, China, India, Japan, South Korea and New Zealand.
70. And Malaysia is a gateway to the Trans Pacific Partnership, which will give exporters preferential access to a market of 800 million people with a combined GDP of US $27.5 trillion.
71. A study by PriceWaterhouseCoopers predicted that the TPP would see Malaysia’s GDP almost double to USD211 billion between 2018 and 2027, and that the country would realise additional investment of between US $136 to 239 billion.
72. Where there are opportunities for free trade, Malaysia wants to be part of them. Under any such system, of course, there will be winners and losers. But those ready to innovate and improve will reap the advantages.
Ladies and gentlemen,
73. There are external factors which we cannot control. For every US $1 drop in the price of oil, for instance, our government loses revenue of 450 million ringgit. And for every one percent slowdown in the Chinese economy, ours shrinks by 0.4 percent – since China is our biggest trading partner.
74. But we are nimble and timely in our responses. This is why we recalibrated the Budget earlier this year to take account of changing circumstances; to ensure the economy remains on a strong growth trajectory, and to safeguard the welfare and well-being of the people.
75. We have an economic plan that has worked and continues to do so. It is a plan that works for the benefit of Malaysians not just today, but the years and decades to come.
76. The challenges of sustainable economic development and growth in an ever more competitive global economy will test Malaysia, and cannot be met without political will and a commitment to co-operation, to invest the needed time and resources.
77. But I believe we will do it. I believe in both Malaysia’s potential and its ability to find well balanced, sustainable growth models that create opportunities for all.
78. Over the past decades, great change has come to Malaysia; but even greater change awaits. By choosing to work together, by honing our competitive edge, while looking not for dividing lines but for common ground, we can ensure that change brings better lives for our people, and better futures for our countries.