UPDATED
By Shannon Teoh
PUTRAJAYA, June 11 — Malaysia hopes to build greater confidence in its economic policies as well as improve the services sector in the face of an expected more than half drop in foreign direct investment (FDI) this year.
Prime Minister Datuk Seri Najib Razak said that the new economic model, to be implemented this year, may see further changes to Bumiputera quotas and a focus on medical services while keeping various corridor developments initiated by his predecessor Tun Abdullah Badawi on track.
Najib, who is also finance minister, expressed concern that global FDI was set to drop by 50 to 60 per cent this year and would result in a scramble for “the pool that is left.”
“All nations will be competing and it will be tougher to get a slice of the investment,” he said.
This drop follows a 21 per cent drop last year.
He also told captains of industry and non-governmental organisations at a budget consultation meeting that next year’s budget should focus on ways to stimulate growth.
In his opening speech at the Finance Ministry, he said that policies implemented would have to reflect a “fair and just society” which would build confidence and spur domestic activity.
He said this would require a consistency of policies without “flip-flopping,” a term that has been used to describe Barisan Nasional (BN) policies in the past.
Najib, who recently announced a liberalisation in Bumiputera quotas for several sectors, said the government is looking to assist successful non-Bumiputeras.
He hoped that the continued efforts to help Bumiputeras would not simply be quota-based but in a manner which was sustainable.
“Greater liberalisation means greater competition and efficiency. It will see emergence of strong iconic companies who will be regional and global champions.
“We will have ways and means to help Bumiputra companies, not in a traditional sense but to become more resilient and competitive,” he added in a press conference.
The finance minister also talked about plans to “position Malaysia in terms of providing world-class healthcare” as the thrust of plans to prioritise the services sector in the local economy.
Along with this, the potential of various corridor developments nationwide would be developed. He cited the Iskandar region in Johor which would see cooperation with Singapore.
He said that Singapore’s Minister Mentor Lee Kuan Yew had indicated a continued interest in Malaysia in his ongoing visit here and plans to build a third link, to be financed equally between the two countries, that will spur development in eastern Johor “and up to Kuantan and even Terengganu” on the east coast of the peninsula.
He told reporters that Minister in the Prime Minister’s Department Tan Sri Nor Mohamed Yakcop, who is in charge of the economic planning unit, has been directed to begin discussions with his Singaporean counterpart immediately and obtain a feasibility report as soon as possible.
Najib also said that he expected the two stimulus packages to have a fuller impact in the second half of the year, resulting in 1 to 2 per cent of additional growth.
He recently revised gross domestic product (GDP) projections from a 1 to -1 per cent growth to a contraction of between 4 and 5 per cent.
Malaysia had experienced a 6.2 per cent contraction in the GDP in the first quarter of this year, with a similar figure expected for the second quarter.
Both the central bank and the treasury hope to see only a marginal drop in the third quarter with a return to growth before the end of the year.
When asked if current economic pressures would see a larger deficit for the Treasury than earlier expected, Najib said that he would announce it when presenting the 2010 budget.
“A large deficit is only acceptable to the public and market if it is temporary, for one or two years,” he added.
Show/Hide comments
Show/Hide comment form
