Business

Tuesday November 10, 2009

PM: Malaysia aiming for average 6% GDP growth to 2020

By JAGDEV SINGH SIDHU


Govt needs to focus on private investment

KUALA LUMPUR: Private investment would have to be the focus of the Government if it intends to get annual growth rates up to an average 6% to 2020.

“It is achievable if we can successfully transform the economy. But how we do that is the question,’’ said Maybank Investment Bank Bhd chief economist Suhaimi Illias.

The Prime Minister yesterday said Malaysia would work towards achieving an annual gross domestic product (GDP) growth of 6% until 2020 to meet its target of becoming a high-income nation.

Datuk Seri Najib Tun Razak said such a rate of growth was needed for Malaysia to raise its per capita income from the current US$7,000 to at least US$17,000 by 2020 to qualify as a high-income nation under World Bank classifications.

The targeted growth rate is a little higher than the average 5.5% the government is looking at under the upcoming 10th Malaysia Plan (10MP).

That growth rate under the 10MP is about double the rate of growth achieved under the 9MP.

To achieve the targeted 6% annual growth, however, would not be easy.

Making the task even more difficult is the structure of the Malaysian economy that is more dependent on external trade than domestic consumption. As an export-oriented economy, Malaysia has been more open to external shocks.

“It’s tough to get to those numbers with an export-driven strategy,’’ said Suhaimi.

The recent global crisis saw manufacturing activity fall dramatically, and that affected both employment and growth rates.

“The alternate strategy has to be the private sector returning as the engine of growth,’’ said Suhaimi.

Private sector investment has accounted for about 11% of GDP and is a pale shadow of the rates prior to the Asian financial crisis more than a decade ago.

Economists said to raise such investment rates, Malaysia needed more market-driven policies and strategies, and do away with the subsidy system.

They said a major policy reform was needed to get private sector investments in, especially today when the number of competing nations for investment money has grown from the days when Malaysia used to be a huge recipient of foreign direct investment.

RAM Holdings Group chief economist Yeah Kim Leng said Malaysia had the capacity to grow at between 5.5% and 5.8% per annum but could bump up that rate if improvements to key economic drivers were made.

Getting growth rates to 6% to 6.5% per annum would be through raising the employment ratio to the rates seen in developed economies, he said.

Other things that needed to be done was to get productivity growth rates to 1% to 1.5% yearly and to maintain investment to GDP rates at 30%.

“That is achievable for a country like Malaysia which has not reached a high base like Japan or South Korea,’’ Yeah said.

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