Abstracted from the National Economic Advisory Council Website)

This report is the first of two documents by the National Economic Advisory Council (NEAC) on the New Economic Model (NEM). This report presents an overall framework of the NEM for transforming Malaysia from a middle income to an advanced nation by 2020. It was developed following a series of meetings of the NEAC beginning in 2009 and consultations with stakeholders in the business sector, government, labour unions, academia and others. It is intended that this report will serve as the basis for formulating the policy measures and the implementation plan in the final document that follows.

The independent work of the NEAC is an important component of the government’s 1Malaysia concept and programme. The NEM will define the Strategic Reform to the goals first set forth in Vision 2020. In the Budget 2010 Speech in October 2009, the Prime Minister and Minister of Finance, YAB Dato’ Sri Mohd. Najib Tun Abdul Razak, emphasised high-skilled human capital, efficient public services, a reinvigorated private sector and equal opportunity for all Malaysians. The NEAC embraces these themes in the NEM.

 The rest of the report is structured as follows.

Chapter 1: Why Do We Need the NEM and What Are Its Goals? briefly presents the goals and characteristics of the NEM. It also touches on the enabling actions and the bold policy measures underlying the Strategic Reform initiatives (SRIs) of the Economic Transformation Programme (ETP) to deliver the goals of the NEM.

Chapter 2: Where Are We? sets forth Malaysia’s cur rent posi t ion and the challenges we face going forward. In the aftermath of the Asian financial crisis the country has posted mediocre and subdued growth recovery, mainly attributed to low and stagnant private investment. While the export sector is an important growth driver, outputs are mainly low value added, reflecting a lack of innovation, a low-skilled labour force, and conditions that constrain business development. Commodities, which have benefited from price increases during the last half-decade, form the bulk of the remaining exports.

Chapter 3: What Is Happening Around Us? focusses on the much more challenging environment within which Malaysia must manage its affairs, in particular its economic management. The global landscape is changing with leading countries exhibiting a new set of distinguishing characteristics; governments responding more rapidly to economic pressures; environmental issues driving policy considerations and competitive advantages; profits and productivity being driven by openness and leveraging networks; and human capital advancing and flowing between global markets more readily.

Chapter 4: Which Advantages Do We Have? highlights some of the strengths that have contributed towards Malaysia’s past successes and new ones that it can leverage to meet its present challenges. The country’s advantages include its diverse population, rich biodiversity and resources, strategic location in a high growth region, a well-established manufacturing base and an attractive standard of living in urban areas.

Chapter 5: Where Do We Want To Be? describes in detail the main objectives of the New Economic Model. Malaysia wants to be a developed and competitive economy whose people enjoy a high quality of life having attained a high level of income which is the result of growth that is both inclusive and sustainable by 2020.

Chapter 6: How Do We Get There? sets for th the t ransformat ion journey for the economy; the policy measures, institutional and regulatory reforms to reshape the incentive structures to deliver the eventual outcomes. This will require political leadership to effect the necessary push anchored by a set of strategic policy initiatives.

Finally, Chapter 7: The Time for Change Is Now – Malaysia Deserves No Less outlines the next steps with regard to the development of specific measures for the ETP.

Visit NEAC Website on the New Economic Model (NEM) 2010 here.

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