Assalamualaikum Warahmatullahi Wabarakatuh.
A very good morning, Salam Sejahtera and Salam Satu Malaysia,
Yang Berhormat Ministers and Deputy Ministers,
Yang Berbahagia Tan Sri Dr. Ali Hamsa;
Chief Secretary to the Government of Malaysia,
Yang Amat Berbahagia Tun Mohamed Dzaiddin Hj Abdullah;
Chairman of Bursa Malaysia,
Yang Berbahagia Tan Sri Megat Zaharuddin;
Chairman of Maybank Group Berhad,
Yang Berbahagia Dato’ Ranjit Singh;
Chairman of Securities Commission,
Yang Berbahagia Dato’ Tajuddin Atan;
Chief Executive Officer of Bursa Malaysia,
Ladies and gentlemen.
1. I am delighted to be here once again. This is my fifth Invest Malaysia conference, and yet the invitations keep coming. I can only assume none of you were in the audience last year!
2. Before we begin, I wish to thank everyone at Bursa Malaysia who has made this event possible. And I feel I should also offer my sincere apologies to the conference partner, Maybank, for poaching their Chief Executive!
3. I have taken the liberty of appointing Datuk Seri Abdul Wahid Omar Minister in charge of the Economic Planning Unit. Let me put one rumour to rest: that wasn’t a prelude for a job swap. I’m not moving to Maybank, no matter how appealing the remuneration package might be!
4. But Wahid’s appointment – taking over from Tan Sri Nor Mohamed Yakcop, to whom we owe our gratitude – was an indication of the depth of talent and experience in our financial sector.
5. Today, in this room, we play host to a much wider collection of talent. It is my pleasure to extend the hand of hospitality, and to welcome you all to Invest Malaysia.
6. The next two days will be filled with an impressive roster of corporate presentations and panel discussions. But before the programme begins, I would like to take this opportunity to offer my thoughts on investment in this age of Asian ascendancy.
Ladies and gentlemen,
7. At this point, it is customary to regale you with a long list of statistics and rankings to demonstrate our nation’s progress. This time, I thought I would do something a little different. I would like to start with three reasons why the world will be different by the end of this decade.
8. Firstly, by 2020, China will be the world’s largest economy. Four decades of double-digit growth will culminate in restoration on an historic scale. The modernisation of China’s economy, and its effects on the global economy, will be one of the defining stories of the decade.
9. So too will the emergence of new competitors. By 2020, BRICS countries will command a greater share of global GDP – and have a larger middle-class – than the US, Canada and Western Europe combined. With wealth and development come greater influence. By the end of this decade, we will be living in a multipolar world.
10. Third, by 2020, ASEAN’s single market will celebrating its fifth anniversary; boosting trade, investment and opportunity for half a billion people; reducing tariffs, harmonising rules, and opening up the flow of goods and services. A dream twelve years in the making, ASEAN’s single market will enhance our regional competitiveness, helping South East Asian firms to flourish into global corporations.
11. These three changes – China’s modernisation, the rise of emerging economies, and the Southeast Asian single market – will fundamentally alter Asia’s investment landscape. They pose challenges for policymakers, and opportunities for investors. The way we react to them will determine our prosperity for decades to come.
12. In charting a path to a more prosperous future, I believe we share similar concerns: the risks – be they political, structural or systemic – that can derail growth. For policymakers, our task is to pre-empt these threats with stability. To insure our economies against systemic shocks and prepare for a new balance of global power. And to make the long-term decisions that give investors the certainty they need.
13. I believe we must choose a flexible and open economy; engaging more with our regional partners, securing inward investment, and opening our industries up to greater competition. We must strengthen domestic investment, building our government-linked and private sector companies into global and regional champions, and giving our small and medium sized enterprises the means to compete on the world stage.
14. That means building a sustainable economy, with an open market that allows for both stability and growth. And it means attracting and developing the talent needed to compete in a more connected world.
15. That is the central economic ambition of my second term in office. Today, I want to talk about how we will achieve it – starting with creating a sustainable economy.
Ladies and gentlemen,
16. In February 2007, Lehman Brothers stock was trading at 86 US Dollar, and Greek government bond yields were just over 4%. The subsequent financial crisis, which tore through so many economies, brought home a familiar lesson: in an interdependent global economy, historic growth rates offer no protection against systemic risk.
17. It is, after all, a basic principle of investment: past performance is no guarantee of future results. If structural faults are exposed, economies can crumble, irrespective of previous gains. What matters is not how well you perform during good times, but whether you can cope during the bad. That is the true measure of a sustainable economy.
18. It is against this backdrop that I launched the Economic Transformation Programme in 2010, a comprehensive plan to raise Malaysia’s gross national income to US$530 billion by 2020, and meet the World Bank’s threshold for a ‘high income nation’.
19. The Economic Transformation Programme has a definite vision of the kind of economy it is intended to create. We want to stimulate more foreign investment, boost domestic demand, and ensure the rewards of sustainable growth are made available to all Malaysians. We want to revise costly and inefficient subsidies. And we want to reduce the state’s role in private enterprise, to avoid warping markets.
20. The programme envisages substantial investments by the private sector, which is why investors were involved from the very beginning – helping to identify economic priorities, and the reforms needed to improve competitiveness. Services are being liberalised; sub-sectors ranging from accounting to telecoms are being opened up to full foreign equity. Significant government run companies are being divested, to slim down the state and free up opportunities for private investment.
21. We are supporting our domestic businesses, with policies to increase local participation. Big infrastructure projects – such as the Mass Rapid Transit system and River of Life initiative here in Kuala Lumpur – bring big opportunities for local companies to feature in Malaysia’s growth story. So does policy support for our national key economic areas; twelve sectors including tourism, health and retail, where Malaysian businesses and entrepreneurs are making impressive gains. And our facilitation fund to support private investment continues apace.
22. We are also speeding up decision making at the heart of government. The Economic Council, which meets every monday, offers a forum for fast and responsive decision making, helping to push through the most important projects.
Ladies and gentlemen,
23. This policy package is accompanied by government and political transformation programmes, designed to reduce crime and corruption; improve education, infrastructure and public transport; and remove outdated and repressive laws. Together, these reforms will open up Malaysia politically and economically, allowing us to remain competitive and on course to reach developed nation status.
24. This ambition will not be without its challenges. At 53%, our debt to GDP ratio is manageable; but to ensure the transformation is sustainable, it must be driven by private sector investment, with public finance playing a catalysing role rather than carrying the bulk of the load.
25. We must also address the deficit. In the 2013 budget, we made a commitment to reduce the deficit to 4% this year, and 3% by 2015. And we backed that up with policies to strengthen the tax system and rationalise subsidies. We are working towards a balanced budget, and I have pledged that our debt will never exceed 55 per cent of GDP.
26. Hard choices await as we continue to draw down subsidies, rebalancing our spending away from ‘broad brush’ initiatives in favour of Direct Financial Assistance to those most in need, including households earning less than RM3,000 per month. More focused support, as opposed to general subsidy, will bring better value – and better outcomes.
27. In the medium term, we must make our affirmative action programmes more market friendly and meritocratic. Foreign direct investment, which has grown over much of the past decade, has not yet fully recovered from the 2008 financial crisis. To offset dips in our major export markets, we must concentrate on boosting domestic demand and productivity.
28. We must also continue our efforts to build Malaysia into a regional energy hub. Recent advances in Enhanced Oil Recovery show that investment innovation and expertise are paying off. The energy industry contributes more than 40% of our national income; further growth in this key industry is essential to safeguard the nation’s medium and long-term position.
29. Evidence suggests our policy approach is working: between 2009 and 2012, GDP grew more than 50% in term of value. Despite global uncertainty, the IMF revised our 2013 growth projection upwards, from 4.7 per cent to five per cent. In the first quarter of 2013, domestic demand rose 8.2% year on year, offsetting weakness in exports and external demand. Inflation is low and so is unemployment. Investment is up, interest rates are stable, and foreign investment is almost six times higher than it was in 2009.
30. Government linked companies continue to make strong and significant progress – not just as national, but increasingly as regional champions. In the last financial year, the 20 largest GLCs posted combined earnings of more than RM25 billion, an increase of 25% over the previous year. This sterling financial performance also brought benefits to society as whole: over the past 8 years, government-linked companies have paid more than RM78 billion of dividends, and RM49 billion in taxes.
31. Over the next few years, as we move towards to high-income status, further opportunities await. The economic transformation programme, and the political and institutional reforms that accompany it, are designed to unlock them. Together, they will help build a sustainable economy for Malaysia; one that is able to weather external storms and deliver our development objectives.
Ladies and gentlemen,
32. At the heart of our economic vision is an open market, one which is rich in opportunity for investors and citizens alike.
33. A vibrant financial services industry is springing up here in Kuala Lumpur, one which – thanks to our experience of the 1997 Asian financial crisis– is already well capitalised and properly regulated. Last year our stock exchange linked with Singapore and Bangkok, creating a virtual market with US$1.4 trillion of combined market capitalisation.
34. Investors flocked to the KL exchange, tempted by a succession of blockbusting public offerings. US$7.3 billion was raised in a series of bumper IPOs, including the world’s third biggest; our stock exchange closed the year at an all-time high, up more than 10% on 2011. Total foreign holdings of outstanding Malaysian bonds reached a record 22% at the end of 2012.
35. In an uncertain world, Malaysia stood out as an attractive investment destination; home to one of the leading capital markets in the region, boasting the fourth most active corporate bond market in Asia, and the fifth largest IPO market in the world. Combined, they are two and a half times greater than GDP, providing vital funding for domestic and international businesses.
36. Indications are that this interest in Malaysia will be sustained. The primary market is expected to remain robust this year, with the bulk of funding coming from the bond market. The IPO pipeline is also anticipated to remain strong, with even more issuers than last year.
37. This year has already seen large net foreign inflows into both markets. Assets under management have grown to RM505 billion, and the unit trust net asset value has been steadily rising, reaching 20% of equity market capitalisation. This year, foreign participation on Bursa Malaysia topped USD1 billion for the first time; companies listed on the KL Composite Index now generate 45% of their revenue from overseas.
38. The quality of the institutional structure and regulation in Malaysia has boosted investor confidence. Our regulatory framework was extensively assessed by the International Monetary Fund and the World Bank in the Financial Sector Assessment Programme 2012, achieving “fully implemented” status for 34 out of the 37 global principles, and an overall rating of 92%, the highest amongst countries that have undergone such an assessment. Congratulations to the Securities Commission and all parties for outstanding results.
39. So our market infrastructure is strong, and is attracting sustained international interest. But we should do more to encourage wider participation; to give more investors a stake in our nation’s future. Over the coming years, we will work to open up our markets to a wider spectrum of individuals, communities and businesses.
Ladies and gentlemen,
40. Past measures to make the capital market accessible have been successful: the development of FELDA, our federal land agency, included funding structures allowing it to pool financing and distribute it amongst small holders. Retail and Islamic finance bonds have allowed a wider range of investors, in particular the people of Malaysia, to participate in nation building projects.
41. In fact, many Islamic capital market products are structured around promoting inclusiveness and serving society. A decade ago, Malaysia issued the world’s first sovereign sukuk, or Islamic bond; today, we command nearly three-quarters of the global share, leading the world in Islamic financial regulation, standards and training.
42. We now have the opportunity to build on those successes; to improve participation, and ensure that the capital market meets the needs of all segments of society and enterprise.
We should redouble our efforts to provide a comprehensive range of Islamic financial products, and accelerate our efforts to internationalise the Islamic capital market.
43. We can also make financing – the lifeblood of any economy – more inclusive. Over the last five years, the top 10% of firms in the Malaysian equity market captured an average of 82% of the capital raised. Funds were mostly raised by existing listed companies through rights issues and private placements. Efforts are already underway to promote greater inclusiveness of financing and ensure better access for start-ups, aspiring entrepreneurs and small- to medium-sized entities. The launch of alternative structures like business trusts will further open up the capital market.
Ladies and gentlemen,
44. Last July, I announced an initiative to develop a platform for trading unlisted securities. Today, I am pleased to note that the conceptual framework for Malaysia’s first online platform for unlisted securities and alternative investment products has been introduced. The integrated virtual platform, known as myULM, will connect the capital market to various alternative investments products, including innovative ventures, creative works and socially responsible investments. It is designed to help early stage ventures, and businesses at the lower end of the credit spectrum.
45. As demand grows for such risk capital financing, my hope is that myULM – which will be rolled out in 2014 – can be the catalyst for the creation of more inclusive and innovative capital market products for investors.
46. Financing opportunities should also be extended beyond conventional businesses. There is ample scope to finance social enterprises, which aim to give back to the communities that sustain them. Creative solutions can be found for harnessing small contributions from across Malaysian society to finance social enterprises, allowing a large cross-section of Malaysians to take early stakes in promising community ventures.
47. Malaysia possesses a collective savings pool in excess of RM1 trillion. The fund management industry, including public sector funds, is a great mobiliser of capital. It is time for government-linked investment companies, especially the Employee’s Provident Fund, to step up and play a more prominent role, increasing market vibrancy, particularly in good quality mid-cap stocks. By setting a specific objective to increase the velocity of share traded, they can make a significant contribution to overall market vibrancy. Their participation will provide another avenue for companies to access primary and secondary funding to bring their businesses to the next stage of development.
48. Finally, the sustainability of our market depends on making sure that there is enough capacity and resources to support increased market activities. Much effort and emphasis has gone into providing employment opportunities for fresh graduates and the younger generation – allowing them to participate directly in the development of the capital market. One such initiative between the regulator and the industry, the ‘Graduate Representative Programme’ or GRP 1000, will be launched in the coming weeks: bringing a thousand new graduates to meet the needs of the securities and derivatives industry.
49. By encouraging wider participation in capital markets, making financing more inclusive, and boosting the supply of professionals, we can build a more open and modern market: one that promotes opportunity, encourages investment, and gives Malaysian businesses the confidence to compete internationally. That will be vital for our success in this dynamic, fast-growing region.
Ladies and Gentlemen,
50. With a combined population size of more than 600 million, the ten countries that make up ASEAN account for more than 7% of global exports, and more than 3% of global GDP. This vibrant consumer market is expected to grow by 5.4% this year, and 5.7% in 2014.
51. These prospects have attracted significant investor interest. So it is no surprise that integration with ASEAN is a key part of Malaysia’s growth story.
52. We already have a strong presence, with more than 600 Malaysian companies operating in different ASEAN jurisdictions. With the second largest market capitalisation-to-GDP ratio in the region, at 154%, Malaysia is an active advocate for ASEAN integration. We will continue to play a leading role in building ASEAN as an asset class by working together with our Southeast Asian friends and our neighbours.
53. There is much to be done: the current level of cross-border equity and debt investment still remains low, with Malaysian, Singaporean and Thai entities making just 8% of their equity and debt off-shore investments in the region . But this low base suggests significant scope for growth in intra-regional investment, taking us a few steps closer to the realisation of true ASEAN economic integration.
54. We would like new investors into the region to seriously consider using Malaysia as your springboard into ASEAN: we have the experience, connections and market infrastructure to support you. And for those of you already doing business here, I hope you will continue to find Malaysia not just an attractive investment and financing location in its own right, but also a preferred ASEAN venue.
Ladies and gentlemen,
55. We want to put Malaysia at the heart of the 21st century global economy: a country at the centre of the world’s strongest growth markets, fluent in finance and sustainable development, and bridging the gap between East and West.
56. To do so, we must better manage talent; attracting and retaining people in an ever more competitive global environment. In education, equality and employment conditions, we must make Malaysia a land of opportunity.
57. This is partly about the private sector, and its ability to attract the best. But there are things that government can do, too. We are actively modernising current labour legislation focusing on increasing productivity and ensuring that there is renewed focus on skills development.
58. In order to attract global trading companies in petroleum and petroleum products, we have introduced the Global Incentives for Trading programme in 2011. Companies registered under the programme enjoy a flat corporate tax rate of 3 per cent of chargeable income. To date, 15 oil trading companies have already registered. Today, I can announce that I have widened the programme, so that it is applicable for trading with both resident and non-resident companies, making it more attractive – and supporting our aim to become a regional energy hub.
59. We have also worked to attract top expatriate talent. In the past, this has been somewhat ad-hoc – in fact, during last year’s Invest Malaysia Q&A session, a long term investor asked for Permanent Residence, and I approved it on the spot!
60. So in December 2012, we began reaching out directly to expatriate corporate leaders by offering 10 year residence passes. Out of 1,600 passes which have been approved so far, 130 resulted from proactive engagement by the government. And in April, the Immigration Department launched an Expatriate Services Division , to provide a focal point for the immigration needs of top global talent.
61. But setting aside long term investors and professional expatriates, we would like to make it easier for investors, and fund managers like yourselves, to visit Malaysia. So today, I would also like to announce the introduction of Multiple Entry Visas for up to 5 years to qualified business investors and fund managers.
Ladies and gentlemen,
62. And we are also working hard to cultivate home grown talent. After all, the most successful economies are those which nurture excellence from an early age; encouraging potential, and giving students the skills and the confidence to forge their own career path. So we are focusing on improving our education system. Last year, we released a National Education Blueprint, to help all children realise their potential, and to equip them to compete at the global level. The active participation of the private sector in public-private collaborations on education will give our children every opportunity to grow and develop, and I am pleased that some Malaysian corporations have contributed to the development and success of rural schools, particularly in Sabah and Sarawak.
63. I also wish to see more gender equality in Malaysian’s businesses, but too many women find it impossible to balance work with family commitments. Over the past few weeks I have been actively calling for higher female participation in the workplace. I urge companies to use the incentives in the federal budget to offer childcare facilities, so that all of Malaysia’s citizens have the same opportunities to progress their careers. And in the interests of transparency, I would encourage all publicly listed and government linked companies to make full voluntary disclosure of female participation rates, from board level down.
64. At the corporate level, Malaysian companies with regional or global aspirations must emulate successful multinational firms, which thrive on the diversity and collective institutional knowledge of their employees.
65. We must also ensure we are providing equitable employment conditions across the workforce. Last year, we introduced a minimum wage. This is critical not just for stimulating domestic consumption, but for fulfilling a pledge to the Malaysian people.
66. Yet I understand that there are still employees being paid below minimum wage, even when their employers are registering huge profits. This is a travesty of both logic and justice. If we wish to become a more developed and a more inclusive society, employee welfare must be prioritised. I ask all employers to commit to paying their workers a living wage.
67. A deep and knowledgeable pool of local talent, complemented with the very best global talent, will deliver a strong and vibrant economy. We must ensure that Malaysians possess the technical knowledge and the soft skills to excel. But we must also equip people with the means to sustain their own wealth.
68. Investor education and outreach programmes have been introduced to raise awareness and participation in capital market products and services. These programmes are designed to provide the general public with the knowledge and understanding to be better investors. With new products entering the market, including Private Retirement Schemes, consumers must arm themselves with the knowledge to understand the basics of a financial product and invest appropriately.
69. By making it easier to attract foreign talent, and developing our domestic human capital, we can ensure Malaysia’s economy, businesses and people are ready to compete in a more closely connected world: ensuring that opportunity is open for all, rather than locked off for a few.
Ladies and Gentlemen,
70. I have taken up rather a lot of your time already, so let me conclude with an observation.
71. Last month, the day after our thirteenth General Election, the KL Composite Index surged more than 100 points, closing out the biggest one-day gain in its history. I wonder if that is any indication that the markets prefer our economic agenda over the opposition’s!
72. It was tempting to see the rally as an endorsement of the path we have chosen for Malaysia. But it was also an expression of relief. After a year of growing uncertainty, political risks had eased.
73. I understand and acknowledge the message from voters: that as we proceed along this path, we must be transparent and accountable, and that the benefits of economic transformation must flow to all Malaysians. I will work to ensure our national success leave no-one behind.
74. As we approach developed nation status, it is time to reflect; to ask ourselves “where next?” The conversation is less about one economic indicator, and more about how we can build sustainable economic growth; about where should position ourselves in Asia and the global economy; and about how we respond to the geopolitical rebalancing that is already under way.
75. Over the next five years, we have the opportunity to set Malaysia’s path for decades to come. As key players in the Malaysian capital markets, I urge you to work closely with us to ensure that our capital market meets the needs and expectations of investors, businesses and the economy as a whole.