INVESTMENT IN MALAYSIA - ISSUES, CHALLENGES AND FUTURE STRATEGY

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1 INVESTMENT IN MALAYSIA - ISSUES, CHALLENGES AND FUTURE STRATEGY Stewart Forbes Executive Director Malaysian International Chamber of Commerce & Industry

2 Strategy is a high level plan to achieve one or more goals under conditions of uncertainty. Strategy is important because the resources available to achieve these goals are usually limited. Henry Mintzberg from McGill University defined strategy as "a pattern in a stream of decisions" to contrast with a view of strategy as planning[2] while, Max McKeown (2011) argues that "strategy is about shaping the future" and is the human attempt to get to "desirable ends with available means. - Wikipedia -

3 Investment in Malaysia Where are we today? Where do we want to go? Facilitators Limiters (the drag factors) Optimisation Conclusion

4 Where are we today? Preface by Dato' Sri Mustapa Mohamed, Minister of International Trade and Industry, Malaysia to OECD IPR In pursuit of the transformation agenda, we will focus on: Promoting investments both domestic and foreign in high value added activities and niche areas; Liberalizing the services sector and promoting the development of key sectors in order to enhance its contribution to the economy; Creating an environment for innovation, research and development; Reducing regulatory barriers in order to improve the environment for businesses; Enhancing entrepreneurial skills and promoting the development of SMEs; Attracting skilled talent from abroad to sustain growth of a knowledgebased and innovative economy; and Promoting regional growth and inclusiveness.

5 Where are we today? OECD Executive Summary Malaysia was an early leader in export-led development but has had difficulty sustaining momentum over time. 1.The government is aware of the challenges and has begun to address them reforms in Malaysia have traditionally been gradual and pragmatic. 2.Reducing socio-economic imbalances has been central to Malaysian development strategies for four decades but redistributive policies are evolving. 3.Malaysia still maintains restrictions on foreign investment in many services but progressive liberalisation has begun. 4.Government-linked companies are prominent in many services.

6 Traditional Investment Facilitators Natural Resources Regional Market Size Low Cost Labour (productivity immaterial) Political and Social Stability Educated Workforce Quality of Life Engagement Environment

7 Today s Investment Limiters Natural Resources Regional Market Size Low Cost Labour (productivity immaterial) Political and Social Stability Educated Workforce with acceptable communications skills Quality of Life Engagement Environment Natural Resources - Limited Small Local Market Increasing Cost of Labour (without corresponding productivity) Challenge to Stability Lack of Skilled Workers, poor Communication Skills Security, Crime, Corruption Engagement Deteriorating

8 Optimising Immediate Strategies Remember : Strategy is a high level plan to achieve one or more goals under conditions of uncertainty. Strategy is important because the resources available to achieve these goals are usually limited.

9 What Can We Change? Natural Resources Regional Market Size Low Cost Labour (productivity immaterial) Political and Social Stability Educated Workforce with acceptable communications skills Quality of Life Engagement Environment Natural Resources - Limited Small Local Market Increasing Cost of Labor (without corresponding productivity) Challenge to Stability Lack of Skilled Workers, poor Communication Skills Security, Crime, Corruption Engagement Deteriorating

10 What Can We Change? Increasing Cost of Labour (without corresponding productivity) Key Issue : inability to manage human capital limits business ability to absorb higher costs without losing competitiveness - a better balance needed Key Issue : modernising labour legislation is resisted by government - holistic review required. Key Issue : Narrow government engagement with wide cross section of business on labour issues - engage wider cross section of opinion.

11 What Can We Change? Lack of Skilled Workers, Poor Communication Skills and Poor Attitude Key Issue : graduate communications skills remain below par - emphasise practical communication skills. Key Issue : restore emphasis on high-end trade skills training and review sectoral responsibility for vocational training.

12 What Can We Change? Deteriorating Engagement Key Issue : Historic high quality government engagement with business is deteriorating - formalise a wide spectrum platform for policy debate. Key Issue : Private sector institution fragmentation limits ability to provide clear policy support - strengthen private sector institutions.

13 Conclusion Current efforts to attract investment work, but are insufficient in light of increasing global competition. Limited resources means choosing the optimum areas for action so as not to dilute efforts. 3Es, Education, Employment and Engagement offer areas for concentrated action that can offset inertia and the drag factors and allow accelerated investment growth.

14 Thank You