NEM TO DRAW IN MORE FDIs WITH BETTER SKILLS & PRODUCTIVITY

KUALA LUMPUR, March 24 (Bernama) -- Malaysia is poised to attract more
foreign direct investments (FDI) when higher skills and productivity set in
through the New Economic Model (NEM), say two UMNO stalwarts in response to
Prime Minister Mohd Najib Tun Razak's comments in Hong Kong Wednesday.

The United Malays National Organisation, or UMNO is Malaysia's largest
political party; a founding member of the National Front (Barisan Nasional)
coalition, which has played a dominant role in Malaysian politics since
independence.

Najib is scheduled to unveil a number of administrative reforms when he
introduces the NEM next week to emphasise on the execution of the model to
transform Malaysia into a high-income economy and spur greater economic
development.

Dr Norraesah Mohamad, who earned her economics doctorate from
Sorbornne University in Paris and is a member of UMNO's economic bureau, told
Bernama that the country needed the NEM to break out from its "middle income
trap".

"Yes, the Prime Minister is absolutely on the right track. NEM's greater
focus on climbing up the economic value chain, attracting and retaining talent,
as well as emphasis on innovation will definitely drive more investments into
Malaysia.

"This is our wake up call. With stiff competition for FDI from our
neighbours and the world's focus on the larger Asian economies of China, India,
Vietnam and Indonesia (CIVI economies), Malaysia faces challenges in not just
attracting FDIs but also in attracting talent to our shores," she said.

Dr Norraesah also said:"The NEM will address that imbalance. Malaysia is
highly dependent on foreign capital, technology and talent but the race to the
top has become harder due to competitive forces while the slide to the bottom
has gotten more slippery.

"Malaysia is also stuck in a very difficult spot. While our income levels
are not high, they are still higher than the fast growing CIVI economies which
have much larger populations. Hence we are no longer price competitive when it
comes to attracting FDIs."

The government approved 766 manufacturing investments worth RM32.6 billion
(US$1=RM3.3) last year of which foreign investments accounted for 67.8 per cent
or RM22.1 billion.

Meanwhile, Razali Ibrahim, the Deputy Minister for Youth and Sports
who also sits on the UMNO Supreme Council, said FDIs in the past were mainly in
industries such as manufacturing, chemicals and chemical products, non-metallic
mineral products, electronics and electrical products.

"Malaysia can no longer be complacent and expect the economy to grow
organically. If it continues at the same pace based on low income, low value
economy, very soon we will be overtaken by our neighbours and we will no longer
be seen as an important economy in Asia. That would be disastrous for Malaysia,"
he said.


Despite solid Gross Domestic Product (GDP) growth rates recorded by
Malaysia, the income levels of the population are extremely low compared to East
Asian nations.

This means economic growth has not translated into income growth for
Malaysians.

Razali, a lawyer by training, stressed while Malaysia had seen growth
in per capita income (PCI), but when compared with other nations with similar
incomes to Malaysia 30 years ago, like South Korea and Taiwan, "our per capita
income growth has been dismal."

South Korea and Taiwan today have a PCI that is two to three times that of
Malaysia.

Razali remarked: "Malaysia is caught in the middle-income trap. We cannot
offer cheap labour and we are unable to scale up the economic ladder yet. What
are the bold steps we need to undertake to enable us to leap out of this middle
income trap?

"To elevate the country out of this middle-income trap, Malaysia has to
embrace higher economic value and this correlates with more investments from
both local and foreign investors."

South Korea's GDP per capita is US$16,450, Singapore US$34,346 and Hong Kong
US$29,559 while Malaysia is still at US$7,469.

Malaysia was at parity with these countries in the early 1970s.

In five years these countries might be even further ahead if Malaysia does
not take bold steps to change its economic landscape, according to economists
tracking industry trends.

-- BERNAMA



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