PM tables RM230bil 10th Malaysia Plan

KUALA LUMPUR: The Government has allocated RM230bil for development expenditure under the 10th Malaysia Plan. The allocation will comprise 55% for the economic sector, 30% for the social sector, 10% for security sector and 5% for general administration.

This was revealed by Prime Minister Datuk Seri Najib Tun Razak in his speech, when tabling the 10MP in Parliament on Thursday.

The key points of the 10th Malaysia Plan are:

- The gross national income per capita is targeted to increase to RM38,850, or US$12,140, in 2015. This requires achieving real GDP growth of 65 per annum. Growth will be led by the services.

- The 10MP is based on 10 ideas:

First: Internally driven, externally aware.

Second: Leveraging on our diversity internationally.

Third: Transforming to a high-income nation through specialisation.

Fourth: Unleashing productivity-led growth and innovation.

Fifth: Nurturing, attracting and retaining top talent.

Sixth: Ensuring equality of opportunities and safeguarding the vulnerable.

Seventh: Concentrated growth, inclusive development.

Eighth: Supporting effective and smart partnerships.

Ninth: Valuing our environmental endowments.

10th: The Government as a competitive corporation.

- To achieve the aspirations of the 10MP, five key strategic thrusts have been identified. They are:

First: Designing Government philosophy and approach to transform Malaysia using NKRA methodology.

Second: Creating a conducive environment for unleashing economic growth.

Third: Moving towards inclusive socio-economic development.

Fourth: Developing and retaining a first-world talent base.

Fifth: Building an environment that enhances quality of life.

- The Government will focus on efforts to develop non-physical infrastructure, including human capital development such as skills development and strong innovation capabilities. The 10MP allocation for non-physical infrastructure will be increased to 40%, compared with 21.8% in the 9MP.

Focus will be given to skills development programmes, R&D activities and venture capital funding geared towards promoting a higher level of innovation in the country.

- The main approach in transforming to a high-income economy will be to adopt strategies based on specialisation, given that strong and sustainable competitiveness is difficult to achieve without specialisation.

This Plan will focus on 12 national key economic areas or NKEAs which have potential to generate high income. Apart from 11 sectors, Greater Kuala Lumpur has also been selected as an NKEA as it has the potential to become a world-class city that can be a driver of economic growth. Details of the NKEA will be finalised in the Economic Transformation Programme, which will be announced in October.

The NKEAs are: (i) Oil and gas; (ii) Palm oil and related products; (iii) Financial services; (iv) Wholesale and retail; (v) Tourism; (vi) Information and communications technology (ICT); (vii) Education services; (viii) Electrical and electronic; (ix) Business services; (x) Private healthcare; (xi) Agriculture (xii) Greater Kuala Lumpur

An Economic Transformation Unit will be established to plan and coordinate the implementation and development of the NKEAs.

- The achievement of the 6% per annum growth target for the 10MP period requires a significant leap in investment activities, led by a more dynamic private sector. To achieve this goal, the Malaysian Investment Development Authority (MIDA) has been corporatised and rebranded.

In addition, business regulations which are outdated will be abolished. Towards this end, the Malaysian Productivity Corporation (MPC) will be restructured to spearhead a comprehensive review of business regulations and improve processes and procedures to increase productivity and competitiveness of major economic sectors.

- Healthy competition is needed to make the economy more efficient and dynamic. For this, the Competition Law will be introduced to provide a regulatory framework against market manipulation and cartel practices that may affect market efficiency. A Competition Commission and Appeal Tribunal will be established to ensure more orderly and effective implementation of the law.

- Smart and effective partnerships between the public and private sectors will be established to drive the economic transformation agenda. This new wave of public-private partnership (PPP) will ensure equitable sharing of risks and returns.

To date, 52 high-impact projects have been identified for implementation. These include:

First: Seven highway projects at an estimated cost of RM15bil. Among the projects are the West Coast Expressway, Guthrie-Damansara Expressway, Sungai Juru Expressway and Paroi-Senawang-KLIA Expressway.

Second: Two coal electricity generation plants at an estimated cost of RM10bil.

Third: Development of the Malaysian Rubber Board's land in Sungai Buloh, Selangor, covering an area of 3,300 acres at an estimated cost of RM10bil.

- An important measure in the 10MP is improving the method of financing for public venture capital companies. Currently, government financing for public venture capital companies, such as the Malaysian Technology Development Corporation and Malaysian Venture Capital, is provided through long-term loans. In this Plan, financing will be in the form of equity to match the risk profile of venture capital investment. For this purpose, the Mudharabah Innovation Fund (MIF), with an allocation of RM500mil, will be introduced to provide risk capital to government venture capital companies. To bridge the financing gap between the early stage of commercialisation and venture capital financing for high tech products, the Government will set up a Business Growth Fund with an initial allocation of RM150mil. The aim of this fund is to support these companies until they can generate sufficient commercial value to attract venture capital financing and other forms of financing.

- To ensure that the SMEs have better access to financing facilities, the Government established the Working Capital Guarantee Scheme totalling RM7bil and the Industry Restructuring Loan Guarantee Scheme totalling RM3bil, announced under the Second Economic Stimulus Package. The entire RM7bil under the Working Capital Guarantee Scheme has been approved. In view of the encouraging response to the Working Capital Guarantee Scheme, the Government will provide an additional RM3bil under 10MP, making it a total of RM10bil.

- The bumiputra development agenda will continue to be addressed in line with the concept of growth with distribution. In view of the increasingly challenging global and domestic economic environment, there is a need to transform the agenda to enhance participation among competitive and resilient bumiputra companies. This new approach will be based on four key principles: market-friendly, needs-based, merit-based and transparency.

- Five strategic initiatives to strengthen the bumiputra development agenda have been identified for implementation:

First: Increasing equity ownership through institutionalisation. In this regard, private equity programmes in government-linked investment companies, such as Permodalan Nasional Berhad (PNB), Lembaga Tabung Angkatan Tentera and Tabung Haji will be renewed, strengthened and expanded to consolidate and pool various funds to broaden ownership and control of Bumiputra equity.

Second: Increasing bumiputra property ownership. In this context, Pelaburan Hartanah Berhad will establish a Real Estate Investment Trusts (REITs) to facilitate Bumiputra investment in commercial and industrial properties and benefit from property appreciation. In addition, Kg Baru, Kuala Lumpur, will be redeveloped to enable landowners to realise and unlock the value of their properties without affecting Malay ownership.

Third: Improving skill and entrepreneurial development programmes and funding through various Bumiputra development agencies. An integrated development package will be provided to the Bumiputra Commercial and Industrial Community (BCIC) to strengthen their competitiveness and resilience.

Fourth: Developing professional bumiputra employment in a more holistic manner.

Fifth: Establishing a high-level council to plan, coordinate and monitor the implementation of the bumiputra development agenda. The Prime Minister will lead this Council, made up of relevant cabinet ministers, senior government officials and the private sector. The Economic Planning Unit in the Prime Minister's Department will be the secretariat to the Council. The Project Management Unit in the Finance Ministry will monitor the implementation of programmes to ensure their efficient and effective implementation.

- Specific focus will be given to disadvantaged groups, especially those living in the interior, in long houses in Sabah and Sarawak, as well as the orang asli and estate workers in Peninsular Malaysia.

- The Government is also considering granting land titles to the orang asli and bumiputras of Sabah and Sarawak.

- Focus will also be given to improving the quality of life of workers in estates and displaced estate workers. Water supply will be provided to 182 estates, up to 1,000 acres in size and located less than 5km from the water mains, costing RM109mil.

- Skills training will be provided, especially to school dropouts from various ethnic groups, to enhance their employability.

- Residents in Chinese new villages will also be given assistance. They will be provided soft loans to assist them pay their land premiums and renewals of leasehold. The loan will be channelled through Bank Simpanan Nasional and an initial fund of RM100mil will be provided.

- In addition, the Cabinet Committees for Indians as well as Sabah and Sarawak Bumiputra affairs will continue to address the issues of the respective communities.

- To improve the quality of students, the proportion of graduate teachers in primary schools will be increased from 28 to 60%.

- The performance of students in critical subjects, particularly the National Language, English, Science and Mathematics, will also be improved by increasing the number of quality teachers.

- In order to meet the demand for quality Mandarin language teachers in Chinese National Schools and National Schools, those with Unified Examination Certification and Sijil Pelajaran Malaysia or SPM will be considered for enrolment into the Chinese Language Programme in Institutes of Teacher Education.

- For purposes of renovating and upgrading government-aided schools, a sum of RM280mil will be allocated for 2011 and 2012. Each category of government-aided school, namely Chinese schools, Tamil schools, religious schools and mission schools will receive an allocation of RM70mil for the first two years of the Plan. In addition, assistance will be provided to pay electricity and water bills, up to RM2,000 ringgit per month per government-aided school, benefiting about 1,900 government-aided schools.

- To improve the competence of graduates, their employability will be one of the KPIs of universities. Financial allocation to universities will depend on the achievement of their KPI targets. In addition, the Government will grant gradual autonomy to the universities to improve their performance.

- In order to promote and encourage R&D activities among the higher education institutions, the Government has declared UM, UKM, UPM and USM as research universities. To further enhance R&D activities and programmes under the 10MP, Universiti Teknologi Malaysia (UTM) to be elevated to the status of a research university.

- Currently, the country has approximately 1.9 million foreign workers. However, the continued reliance on unskilled foreign workers will hinder country's aspiration to shift to higher value-added economic activities. Therefore, the foreign worker employment policy will be streamlined by introducing different levy rates according to the ratio of foreign workers to total workers in the company, and vary according to the skill level of the foreign workers. Higher rates will apply for lower-skilled workers. The rates will be increased yearly.

- To attract more skilled workers into the country, the Government will establish a Talent Corporation, which will identify skill shortages in key sectors, and attract and retain necessary skilled human capital.

- The Government aims to provide an attractive and comfortable living environment for city dwellers to live, work and play. Open spaces and green areas will be created and improved. Among the initiatives to be implemented are the transformation of the Lake Gardens in Kuala Lumpur into a botanical garden and the setting up of a Malaysia Truly Asia Tourism Centre in Kuala Lumpur.

- Waterfront areas of cities will be beautified and turned into attractive spaces, similar to the restoration of the Malacca River waterfront.

- Focus will be given to increasing the coverage of basic infrastructure such as roads, electricity and water supply, and communication networks to rural areas. The government will build 6,300km of paved roads in Peninsular Malaysia, 2,500km in Sabah and 2,800km in Sarawak, which is expected to benefit 3.3 million people.

- The Government will also improve rural water supply with a target of 99% in Peninsular Malaysia, 98% in Sabah and 95% in Sarawak. This will involve the extension of water supply to 117,000 homes in Peninsular Malaysia, 112,700 in Sabah and 87,400 in Sarawak.

- In line with the "Greater Kuala Lumpur" NKEA, the Government will further enhance the public transportation network in Kuala Lumpur with the implementation of the high-capacity Mass Rapid Transit system. This is an iconic project in our capital city that will be highly beneficial to commuters and have large spillovers to the economy.

When completed, the system is expected to cover a radius of 20km from the city centre with a total length of about 150km, and when fully operational, will serve up to two million passenger trips per day from 480,000 trips on current urban rail systems.

The construction of bus and rail terminals such as the Gombak Integrated Transport Terminal, will ensure that public transport runs smoothly. These measures are expected to increase the public transport modal share in Greater KL from 12% in 2009 to 30% in 2015.

Efforts to enhance the public land transport system will also be expanded to other cities. For this purpose, a Bus Rapid Transit system will be introduced in Iskandar, Johor, while the number of public buses in Pulau Pinang will be increased by 200 buses to enable the expansion of 26 routes with an added capacity of 75,000 passengers per day.

- Healthcare access, coverage and quality will continue to be improved under 10MP. Among the major initiatives are the construction of eight hospitals, including specialist hospitals, 197 clinics and 50 additional 1Malaysia clinics, which are expected to be ready in the first half of the 10MP.

- Seventy-eight thousand affordable houses will be built during the Plan period. Related laws will also be tightened and enforcement enhanced to ensure the quality of affordable houses built.

A fund of RM500mil will be established for the repair and maintenance works of public and private low-cost housing. This fund will be allocated on a matching grant basis, where half of the contribution will be borne by the Government and the other half by the management committee or residents' association.

- Steps will be will be taken to increase the participation of women at all levels in both the public and private sectors, including entrepreneurial ventures. Existing laws and related regulations will be reviewed to create a more conducive environment that encourages greater female participation in the workforce. Private sector is urged to increase the participation of women, especially in senior positions, such as chief executive officers and members of Board of Directors.

- By 2020, it is estimated that there will be 3.4 million senior citizens. The Government realises that harnessing this pool of resource is valuable and this group should be given the opportunity to remain healthy, active and productive in their golden years. In line with this, programmes will focus on enhancing elderly-friendly infrastructure, improving access to affordable healthcare, ensuring adequate provision of homes and improving financial security as well as employment opportunities.

- The Government will also promote environmentally-friendly housing by introducing guidelines and a green rating system. Putrajaya and Cyberjaya will serve as flagship green townships. The Government will take the lead in adopting green building standards.

New Government buildings will be designed to meet green standards. Energy efficiency of existing buildings will be enhanced and as a showcase example, the Prime Minister's Office complex will be upgraded to meet the Gold Standard Green rating.

- Beginning with the 10th Plan, the implementation of programmes and projects on a rolling plan basis will be introduced. With this approach, allocation for programmes and projects will be provided on a two-year basis beginning 2011-2012.

This allows commitment to be made based on the financial position of the Government and provides flexibility to respond to new priorities and changes in the global and domestic economic environment.

The detailed list of the programmes and projects for the first rolling plan will be ready by the end of August 2010.

Ringgit's direction to be set by euro

The euro's movement is largely expected to dictate the direction of the ringgit next week, a dealer said.

In the week just ended, most rivals of the greenback gained, after the euro rebounded on Thursday, despite nervousness in the market pertaining to the eurozone debt woes.

The firmer euro was supported by advances in equity markets and a denial by Chinese authorities that they are reviewing their holdings of the eurozone debt.

It was reported that China is reviewing its eurozone bond holdings because of growing concerns over gaping deficits in countries, including Greece and Portugal.

"There has been a lot of concern in recent weeks. However, the Euro-zone debt woes and rising tensions between North and South Korea, appear to cool down on Thursday," he said, adding that, the scenario spurred hope for economy
recovery.

"However, anything happening in the euro-zone and Korea would continue to set the direction of the forex market," he added.

On Thursday, the ringgit was firmer against the dollar, with investors short-covering higher-yielding currencies, ahead of a long market holiday.

The market was closed on Friday for the Wesak celebrations.

The ringgit on Thursday strengthened to 3.2940/29800 against the dollar from last Friday's 3.3180/3230.

It went up against the Singapore dollar to 2.3417/3470 from 2.3534/3603 and against the Japanese yen to 3.6486/6539 from 3.6858/6918 previously.

The local unit was also stronger against the pound sterling to 4.7687/7762 from 4.7802/7881 last week and the euro at 4.0352/0407 from 4.1488/1561 previously.-- Bernama

Subsidy cuts to boost economy

PETALING JAYA: Savings from government subsidies can be used to spur Malaysia’s goal of becoming a high-income nation.

AmResearch senior economist Manokaran Mottain said that by reducing subsidies, the country would also appear more attractive to investors.

“It is the Government’s intention to reduce subsidies so the funds can be allocated to development. We have to move towards being a market-oriented economy. Investors think our economy is distorted,” he told The Star.

Manokaran said the money saved could be diverted to fund development projects, which would have a multiplier effect around the country.

“This will result in stronger growth as the country moves at a faster rate,” he said.

The current subsidy mechanism is no longer sustainable, as Government debt stood at RM362bil last year, or 54% of the GDP.

That is much higher than Indonesia’s 28%, and is approaching the Philippines 62%, he said in reference to Monday’s frontpage report in The Star of the Government’s plan to cut subsidies.

An open day on subsidy rationalisation will be held at the Kuala Lumpur Convention Centre on Thursday to get feedback on the proposal.

The savings would also reduce the national debt, he said, as the Government would not have to borrow as much for operational and development projects.

“If there are no reforms, we cannot move up the competitiveness rankings,” said Manokaran.

He said for people to accept the reduction, the Government would have to find a way to relieve their burden, such as reducing corporate or individual income tax.

The fuel subsidy takes up a huge chunk of government subsidies. “The subsidy is now 20 to 30 sen a litre, and I think it will be reduced gradually, not at one go,” he said.

According to a high-ranking source, one of the proposals from the Performance Management and Delivery Unit (Pemandu) subsidy rationalisation lab is to reduce the subsidy bill over five years by 30%.

A fixed date would be set for subsidy cuts to take place each year, which may mitigate panic buying and sudden price hikes.

According to a forecast on fuel prices by the Finance Ministry, the market price of fuel is around RM2.20 now and is expected to hit RM2.60 by 2016.

According to a GTZ International (Deutsche Gesellschaft für Technische Zusammenarbeit) fuel report last year, even the Somalians were paying more for fuel.

The average price of fuel in Somalia was US$0. 91 (RM3) per litre.

Idris Jala: M’sia must cut subsidies, debt by 2019 or risk bankruptcy

KUALA LUMPUR: Malaysia will be bankrupt by 2019 if it does not cut subsidies and rein in borrowings, said Minister in the Prime Minister’s Department Datuk Seri Idris Jala on Thursday.

He said that Malaysia's debt would rise to 100 percent of GDP by 2019 from the current 54% if it did not cut subsidies.

“We do not want to be another Greece,” he said when officiating the Subsidy Lab Open Day here to receive feedback from the public on subsidies.

Some of the recommendations of the subsidy rationalisation lab:

- Reduction of gas subsidy, resulting in an increase in electricity tariffs. However, most households will not be affected as the move will only affect those consuming more than 200kWh.

- Toll rates to increase in mid-2010 as per concession agreement except for highways without alternative toll-free routes.

-Outpatient treatment at public hospitals to be increased from RM1 to RM3. In-patient treatment will also increase, depending on the wards (Class One, Two or Three), from between RM3 and RM80, to between RM6 to RM160.

-Text book loan scheme and tuition subsidy aid to be abolished. Students will also have to pay for public examination fees.

-Foreign students will pay full fees at public universities.

-Local undergraduates and postgraduates to pay more in student fees, ranging from RM300 to RM800.

Meanwhile, Bernama reported Idris as saying that Malaysia was likely to become an oil importer as early as next year at the current rate it was consuming petroleum,

Malaysians continue to be among the highest fuel consumers per capita in the world fuel consumption habits pattern which generally has remained relatively unchanged despite increased oil prices in 2008.

He also said that approximately 70% of the government's liquid petroleum gas (LPG) subsidy went to commercial concerns and not the intended households.

About 30% of the cooking oil subsidy was also abused, he said.

He said the government is proposing to phase out the petrol subsidy gradually in line with its move to strategically position Malaysia's economy on a stronger footing to realise the aspirations of Vision 2020, which is to achieve a developed, high-income nation status.

"Subsidies are an inaccurate representation of trade," Idris said when officiating the Subsidy Lab Open Day here to receive feedback from the public on subsidies.

"In addition, they pose a fiscal burden that emerging economies such as Malaysia should move away from. As such, we desperately need an exit strategy for subsidies, as they are unsustainable," he said.

"In order to save the country, we need to increase our GDP, Malaysians need to be aware we are giving the highest subsidies - 4.6 per cent of GDP even higher than Indonesia (2.7 per cent) & Philippines (0.2 per cent)," said Idris, who is also the Chief Executive Officer of the Performance Management and Delivery Unit (PEMANDU).

Malaysia is one of the most subsidised nations in the world. Its total subsidy of RM74 billion in 2009 is equivalent to RM12,900 per household.

This covers the areas of Social (RM42.8bil), Fuel (RM23.5bil), Infrastructure (RM4.6bil) and Food amounting to RM3.1bil.

"All savings to reduce these savings are intended to reduce our deficit and debt of RM103bil in five years," he said.

Meanwhile, studies by Bank Negara have shown that inflation will rise to four per cent (2011-2012) and three per cent post 2013.

Subsidies only result in market distortion and they drain the government of much needed funds that could be better used for more strategic and pressing development projects for the rakyat, Idris said.

"The time for subsidy rationalisation is now," he said.

"We are reviewing the possibility of introducing a floating price mechanism, mitigation measures and assistance needed to put in place."

"We do not want to end up like Greece with a total debt of EUR300 billion. Our deficit rose to record high of RM47 billion last year."

"If the government continues at the rate of 12 per cent per annum, Malaysia could go bankrupt in 2019 with total debts amounting to RM1,158 billion," he cautioned.

Malaysians consume more fuel

PETALING JAYA: Malaysians are one of the highest fuel consumers in the region where even price increases have not deterred motorists.

Since 2004, they have consumed more than 400 litres per capita annually, which is much more than Singapore, Thailand, Indonesia, China and India. Singapore, which was ranked second among the list of six countries, only consumed 250 litres per capita in 2007.

India and China consumed under 50 litres per capita in 2007, according to data collated from the Finance Ministry, Domestic Trade, Cooperatives and Consumerism Ministry, International Energy Agency and Global Insight.

Even with fuel prices at its highest in mid-2008, when petrol was at RM2.70 and diesel at RM2.58 per litre, consumption still grew by 8% annually and almost 20 billion litres are expected to be consumed by the end of 2010.

As Malaysia practises a blanket subsidy on fuel, data made available to the Performance Management and Delivery Unit (Pemandu) subsidy rationalisation lab showed that 71% of fuel subsidy was enjoyed by the middle to high-income level groups.

Some 28% of those enjoying fuel subsidy earn more than RM5,000 per month, while 43% earned between RM2,500 and RM5,000.

Abuse of liquid petroleum gas (LPG), or cooking gas, has also contributed to an inflated subsidy bill. Some RM1.71bil was spent on subsidising LPG, to which only RM397mil or 30% are used by households.

It is believed that the rest of the LPG had been misused for commercial purposes or smuggled abroad.

The same issue affects cooking oil, where 70,000 tonnes are subsidised monthly but only about 70% are consumed by households.

Najib: It shows our fundamentals are strong

KUALA LUMPUR: Most Malay-sians welcome a strong currency as it reflects the country's strong economic fundamentals and a robust recovery, Prime Minister Datuk Seri Najib Tun Razak told international financiers here yesterday.

“It is a movement in a positive sense. Generally, it is good for us,” Najib said during a question-and-answer session with delegates of the Official Monetary and Financial Institutions Forum (OMFIF) inaugural meeting in Asia.

At the meeting themed “Asia's Role in the World Economy - the New Global Financial and Economic Order,” he was asked to comment on the ringgit's strong performance especially against the US dollar, pound and euro.

Najib, who is also Finance Minister, said a strong currency also reflected the fact that Malaysian exports had been doing very well.

The economy recorded 10.1% growth in the first quarter of this year, which was the highest quarterly growth in a decade.

The ringgit is Asia's best-performing currency this year, as foreign money has poured into domestic capital markets due to a combination of strong economic growth and rising interest rates.

Year-to-date, the ringgit has appreciated by about 6% against the US dollar, 19% against the euro and 16% compared with the pound.

In his address earlier, Najib also said the challenges that arose from the international financial crisis presented an opportunity for Asia and the West to work together to find solutions that benefited all.

“Malaysia's unfolding economic story is a part of what is taking place in Asia. While Asia is indeed diverse, we are bound together by the common desire to transform and uplift our economies individually, which in turn will reinforce the region's economic and financial integration in the New World Order,” he added.

“We are looking beyond Asean. We are also looking at how to get the United States and Russia on board. We want a stronger bridge in Europe and believe in open integration,” he added.

Najib, who briefed the delegates on the 1Malaysia concept, New Economic Model and Government Transformation Programme, said people were seeking effective governance where economic growth was inclusive and beneficial for all.

On how to survive the economic crisis, Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz said Asia's resilience, including Malaysia's, was a result of a decade of reform.