MALAYSIA'S NEAR TERM OUTLOOK

From : The World Bank

PRESS RELEASE

Malaysia’s Near-Term Outlook still Favorable; Smart Natural Resource Management Ensures Smooth Path to High Income Economy

June 24, 2013

KUALA LUMPUR, JUNE 24, 2013--- Resilient domestic demand will allow the Malaysian economy to recover from a slow first quarter in 2013, says a new World Bank report. GDP is expected to grow by 5.1% for both 2013 and 2014, driven by higher consumer and business spending. As the global recovery gathers speed in 2014, the Bank report states, Malaysia's external sector will increase its contribution to growth, offsetting the impact of tighter fiscal policies on the domestic economy.

Released today, the World Bank’s Malaysia Economic Monitor: Harnessing Natural Resources, notes that Malaysia’s trade has become more dominated by commodities such as crude oil, natural gas, rubber and palm oil. With prospects for demand in commodities dampened by weak growth in key export markets such as China and Europe, and an abundance of supply globally, Malaysia needs to accelerate structural reforms to ensure that its economy remains diversified and dynamic.

"Malaysia has done remarkably well over the last two decades," says Kaushik Basu, Chief Economist at the World Bank. "However, the coming onstream of new sources of global energy is likely to put downward pressure on several commodity prices. This will no doubt put restraints on growth on a commodity-exporting country like Malaysia. I hope Malaysia will show the nimbleness it has shown in the past."

Malaysia is one of a few developing countries that has successfully converted an abundance of natural resources into long-term sustainable growth. As noted in the report, sound policy choices ensured revenues from resource extraction were reinvested in the economy in the form of machines, buildings and education. This supported high rates of growth that was shared among the population, raising the average incomes of the bottom 40 percent of rural households by 7.1 percent a year over three decades, while poverty rates

plummeted.

"Malaysia is a good example of a country that has successfully used natural resources to invest in other areas of the economy,” says Annette Dixon, World Bank Country Director for Malaysia. “This has allowed the country to promote diversification, create jobs and improve living standards for its people."

While Malaysia can be seen in many ways as a blueprint for other resource-rich, developing economies to follow, important challenges have emerged as a consequence of the global boom in commodity prices in the 2000s. In recent years, the economy has become less diversified, with high-tech manufacturing declining and commodities increasing as a share of exports. As highlighted in this report, reversing this trend, as well as saving a higher share of revenues from oil and gas, will enhance the resilience of

Malaysia’s economy.

"To reach its goal of becoming a high-income nation, Malaysia will need to continue managing natural resources sustainably," says Frederico Gil Sander, World Bank Senior Economist for Malaysia. He added, "Some adjustments are needed to spend less of the resource revenues on consumption and more on building skills and institutions that will support further diversification."

The report suggests that policy makers in Malaysia consider measures to enhance structural reform and management of natural resource revenues going forward, including:

* Improving sustainable consumption of natural resources by increasing the role of Malaysia's formal oil wealth fund, reforming fuel subsidies and reviewing gas pricing.

* Diversifying the economy towards higher productive investments in non-commodity sectors through improvements in human capital and better public investment management systems.

* Adapting agricultural commodity production to the effects of climate change.

The Malaysia Economic Monitor series provides an analytical perspective on the policy challenges facing Malaysia as it grows into a high-income economy. The series also represents an effort to reach out to a broad audience, including policymakers, private sector leaders, market participants, civil society and academia.

HOW LONG OR HOW TO MAINTAIN THE 'RECOVERY' - Nik Zafri (2009)

Hello again...today I'm 'blogging' not 'lecturing'...( :-) )

So, the Malaysian Economy has shown signs of survival at last...but the golden question now is for how long? Some say :

“Wait till September, before something will go wrong”

Thinking of September always give me the shudders – not only because it's my birthday month (unfortunately) but many things happen 'coincidentally' during September. So, can we or can we not change our 'destiny'?

Here goes nothing :

We need some good support or some sort of infrastructure – call it politics if you want.

1.We need to lower down the poverty level regardless of background, status, race, religion and political tendency. Yes, this reminds me of the Ninth Malaysian Plan (2006-2010).

But of course, rough ideas can always be 'liberated' further for e.g.

a) What Senator Datuk Seri Sharizat Jalil recommended today that the Welfare Department should also consider assisting those 'owning cars, motorbikes, televisions and refrigerator' – which are now considered no longer 'things that only wealthy people can own'.

b) The 'Lembaga Zakat' wider functions should also be taken into account.

Assisting Poor Kids to School

Besides assisting potential entrepreneurs and donation to the needies, the banking and financial institutions should also come out with some ideas on how they can chip in into this – at least sponsor the poor kids to school (I know some have done this but more programs like these would go far in order to really achieve the status of 'responsible corporate citizen'...hmm that's a good idea...why not we have certs or some sort of certifications' entitled the 'Responsible Corporate Citizen's Award'...perhaps YAB Prime Minister Datuk Seri Najib can do the awarding ceremony – perhaps the award or cert entitle the corporate entities with some 'waivings' apart from tax)

Eat good and healthy food – now this one is really very serious! Diabetes, Hypertension, Heart Attack, Mamak Stall, Nasi Lemak, Smoking/drinkng (whoops) God knows how many more! What kind of food are we Malaysians taking?!!

Perhaps Datuk Seri Liow Tiong Lai should look into this matter as well....just make the food pyramid bigger so that everyone can see it!! Remember, good food gives you good brains and good brains will help you out solve matters.

One more thing....food in school canteen and cafeterias must adhere to strict food regulations – regular checks by authorities etc. No more food poisoning cases please... (remember also to provide or sponsor free healthy food for ALL children and students in school – once a week? - any takers? Nestle?)

For the banking and financial institutions, venture capitalist and grant providers

Only one thing...Show us the MONEY!! How about releasing the ones that are still in your safekeeping now??

Now is the right time...you have good benchmarks, great KPIs, good collaterals, guarantors even, not to mention viability and feasibility...so what are you waiting for? Afterlife? Bailouts?

For the politicians (regardless who you're with)

Stop the nonsense and craps....go help the Prime Minister 1 Malaysia! Go do your jobs in your constituencies...not just gatherings in community halls - go to mamak stalls if you have to (don't worry, if common people swarm you with proposals or asking you money or projects..just give a lending ear and say "I'll see what I can do" but 'must do according to procedures')

Work harder.....

Then if you wish to fight in the course of implementation or for the sake of people's progress, then fight 'lah'....make sure jobs are done!!

For the government

I found out that energy savings attitude should be inculcated further, from the government offices to corporate sectors and finally the 'rakyat' (or the other way round) There are still wastages of electricity, water supply etc...this must stop...

On the other had, those places that still do not have anything at all...be it electricity or water supply, must be assisted NOW!

ICT – another never-ending issue, I think I've said once (which paper was it?), don't focus too much on 'classy places' but the out of town as well...don't depend so much on small time providers such as cybercafes – give a first class infrastructure (plus educate them) just like what you've given to the 'urbanians' (if there's such word)


For the property market

(to be continued) - I think there are articles in here that you guys can make use.

The Star Global Malaysians Forum - Posted: 24 August 2006 at 11:46pm

Nik Zafri Posted :

Someone has asked me to define what is PFI in the construction industry. I know that this question is very much related to the previous 9MP. So here's what wikipedia says:

The Private Finance Initiative specifies a method, developed initially by the United Kingdom government, to provides financial support for "Public Private Partnerships" (PPPs) between the public and private sectors. This has now been adopted by parts of Canada, France, the Netherlands, Portugal, Ireland, Norway, Finland, Australia, Japan and Singapore amongst others) as part of a wider reform program for the delivery of public services. en.wikipedia.org/wiki/PFI

Besides than PFI, I'm sure you all have heard of these :

a) Design and Build, b) Turnkey, c) EPCC, d) Conventional,

Thus, PFI is an additional to these..
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anonymous wrote:
hi, i juz read your post on PFI. Is there any pros and cons in PFI? From wut i've read, PFI don't really works in UK. the article is as follows:

The Confederation of British Industry (CBI) reported that the PFI procurement

process wastes an average of £2.45m per hospital scheme worth £60m or more since 1994. This represents 1.05% of a project's capital value. Ifthe trend continues, the CBI believes the waste could end up reaching at least £122m on upcoming hospitals. The procurement process was found to typically take 39 months when 18 months is recommended . (Source: Building, 21 April 2006)

What about Malaysia?

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Posted: 24 August 2006 at 11:46pm

Nik Zafri's Response

Good observations. One tiny thing…the PFI definition is not mine..it’s wikipedia’s (of course I reserve my comments..for now) Pros and cons…what doesn’t? If I read the statement you’ve inserted here carefully, there’s something along the line saying about ‘process wastes.’ Now if I’m not far too mistaken, in the thread – construction quality management, I did talk about ‘cost of quality’. And if I read it right again, the statement sounds like it’s taken from some audit report (intergrated financial and process audit – the accenture way)…yeah…they cover ‘cost of quality’ too – defects, system NCRs, logistics, and so on (even has years of projections on 'waste' alone) Well buddy, not only PFI, ‘waste’ issue is happening everywhere – even in Turnkey/Design & Build /EPCC /conventional…But again, this does not mean in any way that I’m with or not with PFI. Let's wait and see first. It's not really fair to pass a judgement in such a short time.
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Posted: 15 November 2006 at 2:14pm

Azlin_Rahim wrote:

hello there.. hurm..finally i can write something here.. im so busy with my examination..heheheyup..still with the PFI.. as far as i concern PFI is one of the extension of privatison..however i am really confused with the PFI accordance with 9MP..its kinda looks like PFI have the similarities with the BOT, i guess..correct me if im wrong..thank you...


azlin_rahim wrote:
Hello back. In theory, I would agree with you that PFI could be the 'upgrade version' of privatisation and even not too wrong to say that PFI has the elements of 'Turnkey' & D & B as well, but according to this link,* there is a difference.


* Excerpt :

Those who say that PFI is privatisation have got it wrong because, while the private sector is rightly helping in public service delivery, the public interest is paramount.

PFI is thus quite distinct from privatisation – where for example in privatised health or education it would be the market and the price mechanism, not the public (sector), that defined and provided the service directly to those customers that can afford it and thus where the public sector can end up sacrificing both fairness and efficiency in the delivery of these core services.

So there should be no principled objection against PFI expanding into new areas where the public sector can procure a defined product adequately and at no risk to its integrity. The private sector may have a core skill the public sector can benefit and learn from, such as in the provision of employment and training services, the renovation of schools and colleges, major projects of urban regeneration and social housing, and the management of prisons. In each of these areas we can show that the use of private contractors is not at the expense of the public interest or need be at the expense of terms and conditions of employees. If we can secure greater efficiency in the provision of the service, it is one means by which the public interest is advanced.
-------------------------
BOT is the mechanism of PFI and they are not independent but rather complementary in a sense that PFI uses BOT method to move. Here's another good link:*

* Excerpt :

The Private Finance Initiative, or PFI hereafter, is a new initiative to construct and operate public facilities by the private sector. It is designed to make high quality and cost effective projects possible through utilizing the strength of the private sector and through business competition. It can use the private sector’s various financing method, good services, technologies, know-how, and marketing capability. In PFI, most popular schemes are BOT and BOO.

In the BOT scheme, a government grants the private sector to finance, build and operate a public facility. The private sector builds and operates the facility mainly at their own risk for certain period (say 10 to 50 years). After a certain concession period, the facility is transferred to the government.

In the BOO scheme, the difference from BOT is that the ownership of the project remains in the private sector.

PFI are used in a rather large projects, such as railways, highways, ports, airports, water supply, waste water treatment, telecommunication, power plants and pipeline gas distribution.

The roles of the governments in a host country and the private sector are as the follow:

-Grant of concession
-Tax incentives
-Appropriate land and space
-Subsidies or any assistance if necessary
-Minimum operating income guarantees
-Support loan and standby financing, and
- Risks which private sector can not bear, such as political
risk, environmental risk and so forth.

The role of the private sector is to do the following:

- High quality and cost effective public service
- Low cost finance arrangements
- Technology and skill transfer
- Contractual schedule control
- Management of four risks, namely
--Facility completion risk
--Operating risk
--Proceeds collecting risk, and
--Investor’s risk
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Again, I'm neither saying nor commenting on PFI or RMK 9 in Malaysia due to (again) 'it's too early to tell' and unfair to theorize before seeing end-results...

Good luck in your studies.
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Posted: 18 December 2006 at 10:07am

Response by Su_Za

I did my PhD reseach on PFI in the UK. So, just to share with everyone some info on PFI.
...............................................
Types of PFI Projects

Basically, there are three types of projects that the government encourages within the PFI; services sold to the public sector, financially free-standing projects and joint ventures (Treasury Taskforce, 1997a: para. 1.05-1.06; Akintoye et. al, 1998; and Allen, 2003). At present, the major focus of PFI activity has been on the first of these, i.e. services sold to the public sector (Treasury Taskforce, 1997a: para. 1.05)

a. Services sold to the public sector

The provision of public services using assets that are financed, designed, built and operated by a private sector consortium and are paid for by a public body through service charges (Armstrong, 1996 and The Scottish Parliament, 1999). These are normally referred to as Design, Build, Finance and Operate (DBFO) schemes. Under the scheme, the public sector purchaser needs to be assured that services provided will give greater value for money (VFM) than the conventional procurement. Examples of the DBFO projects are:

· the provision of prison places by the private sector through designing, building, financing and operating new prisons

· hospitals where the private sector will meet the costs of the building and take on the responsibility for the provision and management of ancillary services such as cleaning, catering and maintenance (Illidge and Cicmil, 2000)

In other words, at the heart of the DBFO approach the focus is changed away from the procurement of assets to the purchase of services associated with those assets (Dick and Akintoye, 1996).

b. Financially free-standing project

This is where the project is entirely financed and managed by the private sector. The revenues for the services supplied are mainly from payment by the end users. This type of project does not require a VFM test but does require government approval (Owen and Merna, 1997). In other words, public sector involvement is limited to enabling the project to go ahead through assistance with planning, licensing and other statutory procedures. The Second Severn Bridge and the Dartford River Crossing are the examples of projects under this category (Treasury Taskforce, 1997a: para. 1.06).

c. Joint ventures

For this type of project, the public and private sector work as a partnership but the private sector retains control. The public sector investment could be in the form of grant, guarantee or subordinated debt. In return, the public sector will receive a proportional share of any profit (Illidge and Cicmil, 2000). This type of project requires a VFM test and needs to conform to these criteria:

· Private sector partners in a joint venture should be chosen through competition
· Joint venture control held by private sector
· A clear definition of the government’s contribution and its limitations
· Clear agreement of risk and reward allocation, defined and agreed in advance, ensuring that the private sector is genuinely assuming some of the risk.

The Channel Tunnel rail link, Croydon Tramlink, Manchester’s Metrolink and urban regeneration schemes are examples of joint venture projects.