ETP TheEdge Pull Out

THE Roadmap foR malaysiaa spEcial REpoRT

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Managing the present by standing in the futureby Chua Sue-Ann

In drawing up the ambitious Economic Transformation Programme (ETP) for Malaysia, the Performance Management and Delivery Unit (Pemandu) has been guided by the mantra of achieving big results fast. Minister in the Prime Ministers Department and Pemandu CEO Datuk Seri Idris Jala says Pemandu has tried to paint a vivid picture of what the Malaysian economy will look like by the year 2020 so that Malaysians know what needs to be done in order to achieve the targets.

If you are very clear about what things will look like in the year 2020, you will know what to do now. I call it managing the present from the future. You stand in the future and manage the present, Idris tells The Edge in a recent interview.

The ETP has identified at least 131 Entry Point Projects (EPPs) and 60 Business Opportunities under 12 National Key Economic Areas (NKEAs) which are expected to be a catalyst for Malaysia to achieve high-income status and bring in a gross national income (GNI) of US$523 billion by 2020.

The NKEAs comprise 11 industry sectors oil, gas and energy; palm oil; financial services; tourism; business services; electrical and electronics; wholesale and retail; education; healthcare; communications content and infrastructure; and agriculture.

The 12th NKEA is the Greater Kuala Lumpur area, which is envisioned as a multiplier for the other 11 NKEAs. The expected GNI contribution from the Greater KL area is calculated separately from the other 11 NKEAs to avoid double counting, given that a portion of the income from the NKEAs will be generated in the Greater KL and Klang Valley areas, says Idris.

In this Q&A, Idris tells The Edge about the main thrusts of the private sector-led ETP and the mechanisms to anticipate global changes that could impact the Malaysian economy.

The Edge: Of the 12 NKEAs, which are the priorities?Jala: First of all, the priority is the 12 NKEAs, and the second priority is the projects within each NKEA that give us the highest GNI and the most jobs. Even within that, there are competing projects. The projects that give us the most GNI and jobs clearly remain our top priority. It is very important.

Based on what you have now, what are your priorities?Clearly, the oil and gas projects are the highest priority if you follow the current list of projects. There will be a lot more to come. There are many, many projects in all the sectors, both big and small projects. What you dont see on the list is how it contributes in terms of spillover effects. For example, the MRT is very, very big and has a tremendous multiplier effect on the economy. We believe that is a very high priority. When you talk to most Malaysians, most of those who live in the city really want better public transport. It is a very big thing, not only from a GNI perspective but also from a rakyat standpoint.

In terms of investment size, the largest chunk of it is oil and gas and financial services?No doubt. If you take a look at our whole economy, the bulk of it is in oil and gas. As it stands today, more than 20% of GNI comes from oil and gas but by 2020, it will be only 14%. Youll see the emergence of financial services, which will contribute about 10% by 2020 from the current 7%. Palm oil and wholesale retail will also contribute about 10% of GNI. The other sectors will begin to rise and grow bigger. There will be a shift in our economy.

We need projects with strong multiplier effects, but the concentration appears to be on oil and gas and financial services, which are said to have fewer multiplier effects but have a much higher value-add to income. How do you explain that? There are two types of benefits projects that will give you direct contribution to GNI and those with indirect contributions, but with high multiplier effects. We will need both types of projects.

And the potential for Greater KL is huge.No question about that. The current thinking is that cities compete more vigorously than nations do. If your city wins, the

nation wins. If your city loses, youve got a problem. So its very important that KL wins. In terms of livability, internationally, KL is ranked No 79. Its not good enough. We need to make KL at least No 20 by 2020. Then well have more investment coming in.

When we look at what the weaknesses are from an investment standpoint, number one is urban public transport. There must be enough greenery and there must be enough entertainment. People must find that they can live here. It is also very important that the city is friendly to investment. Thats why we are creating InvestKL, a team that will be a friendly face to investors. By 2020, 100 more multinational companies will have made KL their hub.

Has Pemandu taken into account that there are some factors beyond its control, such as the recent liquidity crisis and the SARS (severe acute respiratory syndrome) pandemic several years ago which affected the world?We take stock of what is happening in the world and how it affects our economy. We have a monthly steering committee meeting and a weekly economic council meeting. Monitoring is very important. All of the NKEA participants will have to keep an eye on developments and how they are responding to competition. We will revise them and look at them in the context of whats happening. So in the unlikely event that something happens, we will have to go back to the drawing board.

The key point is to recognise early signs that things are happening. Obviously, there may be occasions when the whole world gets caught I believe crisis is good, actually. When a crisis comes, it is those who rise quickly and capitalise on it that become winners. We in Malaysia must be ready when the opportunity comes.

Most of the projects are private sector-mooted, what youve done is packaged the whole thing together?We need people to realise that to flourish in the future and have high income, it has to be driven by the private sector. The governments role is to facilitate, provide the infrastructure and ensure that the human talent is there. Schools must provide quality education and the universities must provide quality talent. Frankly speaking, you will not find the private sector going into public schools. But there is a part the private sector can play to provide even higher quality talent through private schooling. Through the EPPs, we encourage a lot more private sector investment in private colleges and private schools to cause this to happen.

How will Pemandu work with Talent Corp?Talent Corp is very important. It is not trying to do everybodys job, but trying to see where specific areas of intervention are required to make it work. One of Talent Corps deliverables is to cut the red tape for foreign professionals entering the country. We have introduced the multiple-entry visa and the resident pass for foreign professionals. With the resident pass, we grant professionals entry for 10 years and we dont ask where they are working. For example, one company is investing a lot of money in the country and the managing director comes to Malaysia every month, we want to give the guy a resident pass. Another thing is to allow JPA scholars to work with the GLCs if they cannot get a job with the government. When you are so pedantic about the rules, its difficult. So Talent Corp has to break all this.

So for the ETP to work, how much foreign talent is needed?First, we begin by asking Malaysians to fill the jobs. If Malaysians dont want to or if there are not enough Malaysians to do the work, then we encourage the Malaysian diaspora. If we dont have that, well bring in foreigners. We must learn from other countries. Hong Kong and Singapore have brought in a lot of foreigners to help build their economies. The other problem is that Malaysians dont want to do certain jobs, which they perceive

as 3D dirty, dangerous or difficult. If thats the case, we must bring in foreigners. When we move to a higher-income economy, Malaysians will want higher-paying jobs. So in the end, we have to accept that some other people will do these jobs for us. Its okay.

How will the ETP projects cut through the red tape in the system?Actually I am very happy because I realise the civil servants are responding quickly. The speed of response is fantastic! How did we suddenly get them to function and run so fast to deliver this? Its because of the governance structure. The prime minister wants this, the public wants this. We have problem solving meetings every Friday, which I chair. Every lead minister runs through steering committee meetings on each NKRA every month.

The beauty of it is this: if we fail in the ETP, it is because the private sector failed. It is their project. Our role in the government is to encourage them. The people are responding. We have to just do our part. As I have said before, the results are there to speak for themselves and I would be very pleased if by the end of this year, we can talk about the ETP in the same way we can talk about the GTP.

We broke many, many records last year. We were planning to reduce overall crime by 5% and today it has been reduced by 15%. We were planning to reduce street crime by 20% and as of last year, it was reduced by 35%. It is phenomenal considering that crime rises every year. Last year, we had the most pre-school classes in any given year, when 55,056 children were brought into pre-school classes. Last year, we had the most rural roads ever built since independence totalling 775km, primarily in Sarawak and Sabah.

Something is happening out there on the ground that gives us tremendous confidence. I am very pleased. If you had asked me at the beginning of last year whether I expected to get this kind of results, I would have said no. Im pleasantly surprised. The credit goes to the civil servants. They have done a fantastic job. When you think about it, if all Malaysians pull together and really start looking at the positive things, we can get there. Mesti boleh.

The Economic Transformation Programme is Malaysias roadmap to becoming a high-income nation that is both inclusive and sustainable. Private sector-led and government-facilitated, the ETPs starting point is the implementation of concrete changes in specific areas of the economy.

E

Jala: When you think about it, if all Malaysians pull together and really start looking at the positive things, we can get there

THEEDGE m a l aysi a | january 31, 2011

Economic Transformation Programme: A Special Report

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ETP projects to help country generate rM1.7 trillion gross national income by 2020

Escaping the middle-income trap

by Yong Min Wei [email protected]

KUALA LUMPUR: The projects identified in the Economic Transformation Programme (ETP) will transform Malaysia into a high-income economy with a gross national income (GNI) of just over RM1.7 trillion in 2020 compared with RM660 billion last year.

In the executive summary of the Economic Transformation Programme: A Roadmap For Malaysia, GNI per capita would rise from RM23,700 (US$6,700) in 2009 to above RM48,000 (US$15,000) by 2020, in which, such level of GNI per capita would correspond to the World Banks current definition of a high-income economy.

It said the four largest National Key Economic Areas (NKEAs) Oil, Gas & Energy, Financial Services, Palm Oil and Wholesale & Retail, were projected to generate 60% of the incremental GNI growth from the 11 NKEA sectors.

The incremental GNI growth from the initiatives in Greater Kuala Lumpur/Klang Valley is calculated separately to avoid double-counting, as some of the income from the 11 NKEA sectors will be generated in the Greater Kuala Lumpur/Klang Valley area, the executive summary pointed out.

It said of the GNI growth, up to 31% was expected to be delivered by the entry point projects (EPP) plus a further 10% through multiplier effects. The roadmap added business opportunities could deliver an additional 33% while the remaining 26% of incremental growth was expected to come from other (non-NKEA) sectors.

A list of 131 EPPs has been identified through the initiatives of the ETP Unit, a division of the Performance Management & Delivery Unit (Pemandu).

The roadmap notes that by 2020, Malaysia would not only have the GNI per capita of a high-income economy, but also a number of similar characteristics, as the structure of the Malaysian economy would have changed significantly.

For instance, services would account for a much greater share of the economy, accounting

for 65% of GDP in 2020 as compared to 58% in 2010. In addition, domestic consumption would account for 69% of GDP by 2020 compared with 54% in 2009. This will bring Malaysia in line with developed countries like Taiwan and New Zealand.

Through the ETP, the roadmap said the structure of the economy would become more balanced with less dependence on resource-intensive industries such as oil and gas. It also said the share of population living in urban ares was expected to grow from 64% to 70% with much growth concentrated in the Greater Kuala Lumpur/Klang Valley.

The executive summary stressed that while the Greater Kuala Lumpur/Klang Valley would be a primary engine of economic growth, there would also be growth opportunities elsewhere in the country such as the development of a solar industry in Sarawak, development of a global biodiversity hub to attract tourists to Sabah, commercialisation of padi farming and improvements in palm oil yields.

It said Malaysia would have grown a number of new national and regional champions by 2020, and that these companies would drive long-term growth in areas including financial services, business services and healthcare.

SMEs will play a more significant role across the economy. For instance, in education, agriculture and electronics and electrical, SME participation will be actively encouraged through financial support, better access to research and technologies and improving economies, the roadmap added.

In general, the executive summary said investments in the Malaysian economy up to 2020 would be driven by the private sector, which would account for 92% of the RM1.4 trillion required for the NKEAs from 2010 to 2020 with public funding accounting for only 8%.

This will require an investment from the private sector of around RM120 billion per year, a significant increase from RM72 billion in 2010, it said, adding that the GNI growth of 6% per annum would allow Malaysia to achieve the targets set under Vision 2020.

THEEDGE m a l aysi a | ocTobEr 26, 2010

GreAter KuAlA luMpur/ KlAnG VAlleY

The Greater Kuala Lumpur/Klang Valleys (Greater KL/KV) NKEAs vision can be summarised as 20-20 by 2020, that is to be a city that simultaneously achieves a top 20 ranking in city economic growth and being among the global top 20 most liveable cities by 2020.

Its economic aspiration is to grow GNI contributions from about RM258 billion to RM650 billion per year. This should move GNI share from about 30% of the nations GNI to about 40%.

Additional aspirations include increasing per capita GNI from RM40,000 to RM70,000 per year, achieving a top 20 ranking in the EIU Liveability Index survey and growing the population from six million to 10 million. It will also focus on growing its foreign talent base from 9% to 20% of the population.

Nine EPPs along four dimensions have been identified to deliver the aspirations of Greater KL/KV. Among them, dynamic and regional multinational companies will be encouraged to locate their global or regional headquarters in Greater KL/KV, which will be supported by internal and external immigration programmes with a focus on higher-value jobs.

Regional connectivity will be accelerated by developing a high-speed rail system to connect Greater KL/KV and Singapore, while intra-city connectivity will be improved with a mass rapid transit system.

Greater KL/KV will require a cumulative funding of RM172 billion from 2010 to 2020, of which 34% is expected to come from the public sector.

FinAnCiAl SerViCeS

Malaysia aims to evolve its financial services sector to serve the needs of businesses and consumers in a high-income economy, increase its depth and raise its regional and global market share in select niches.

This NKEA targets to raise total GNI contribution by RM121 billion to reach RM180 billion by 2020. Through this, an additional 275,000 jobs will be created, 56% of which will offer an average income of RM4,000 per month.

To achieve this vision, a portfolio of EPPs have been identified for the financial services sector along four strategic thrusts. Among others, the sector will encourage financial institutions to go on the offensive and tap external markets for their continued growth. This will develop regional champions and make Malaysia an indisputable global hub for Islamic finance.

To grow the financial services sector by three times by 2020 will require cumulative funding of RM211 billion over the next 10 years, for which the public is expected to provide 4%.

Oil, GAS AnD enerGY

By 2020, Malaysia will have a more diversified oil, gas & energy sector that remains vital to our development, and that builds on the nations competitive advantages. A key thrust will be to intensify exploration and enhance production from domestic reserves.

The sector will also develop strong regional oil field services and equipment hubs, as well as have a stronger presence in the regional midstream logistics and downstream markets. Moreover, Malaysia has the potential to grow alternative energy sources such as nuclear, solar and hydro to overcome the decline in domestic natural gas production.

The oil, gas & energy NKEA targets to raise total GNI contribution to RM241 billion by 2020 from RM110 billion in 2009. As the base case projects a natural 2% decline in oil and gas production, this GNI target will require the NKEA to grow at an ambitious rate of 5%.

A total of 12 EPPs have been developed across four themes to raise the sectors output and meet energy demands over the 10-year time frame. Among others, three EPPs will overcome the projected decline of 1%-2% in domestic oil and gas production by capturing value from mature fields through enhanced oil recovery, using innovative solutions to develop small fields and intensifying exploration activities.

A funding of RM218 billion will be required to achieve this NKEA target, of which less than 1% will be from the public sector. Additionally, RM64 billion will be needed to offset the current decline in oil production, while the tax rebates to enhance energy efficiency will likely require RM12 billion.

WhOleSAle AnD retAil

Malaysia aims to increase the importance of retail as a driver of domestic consumption by targeting to more than double its GNI contributions by 2020. The retail NKEA is expected to raise GNI contribution by RM108 billion to reach a total contribution of RM165 billion per annum by 2020.

This NKEA will also create about 370,000 new jobs over 10 years, comprising 7,800 senior management posts, 11,600 managerial, 19,000 professional and technical, 19,000 executive, 37,000 supervisory, 18,000 clerical and the rest being operational posts. In addition, business opportunities will create about 225,000 jobs.

A total of 13 EPPs have been developed across five themes to deliver the GNI growth. Among others, the NKEA will support the expansion of large retail businesses like hypermarkets, malls and big box boulevards and is expected to give special attention to large local retail companies in their efforts to expand domestically and overseas.

The total funding requirement for the retail NKEA will amount to RM255 billion, of which almost 100% will be funded by the private sector.


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AGriCulture

By 2020, agriculture will have been transformed into agribusiness, moving towards a model that is inclusive but simultaneously anchored in market needs, economies of scale and value chain integration.

Malaysia will focus on large global markets with high growth potential, such as aquaculture and premium processed foods, while maintaining a strong presence in strategic sub-sectors such as padi and livestock to ensure food security.

The agriculture NKEA is targeted to raise total GNI contribution by RM34 billion to reach RM49 billion by 2020.

The NKEA will create an additional 75,000 jobs, mostly in rural areas where it is expected to increase income of farmers participating in agriculture initiatives by two to four times.

This NKEA plans to bridge the gap through 15 EPPs that catalyse the establishment of market-driven, industrial-scale and integrated agriculture-related businesses along four themes.

Achieving the agriculture NKEAs aspiration will require cumulative funding of RM22 billion over the next 10 years, with 62% coming from the private sector.

heAlthCAre

The healthcare NKEA aims to grow three sub-sectors within healthcare, namely pharmaceuticals, health travel and medical technology. There is significant opportunity to move from being a net importer to being a significant player in the RM422 billion prescription and pharmaceutical drug industry.

Malaysia will also develop the more profitable medical sub-sectors such as medical devices, diagnostic equipment and healthcare information technology.

Malaysia aspires to generate RM35 billion in incremental GNI contribution to reach RM50 billion by 2020 for the healthcare NKEA. It also plans to welcome one million health travellers, as well as conduct 1,000 clinical trials, all of which is expected to result in about 181,000 new jobs.

The projects represent an aggressive export campaign, an upgraded services platform and a commitment to provide better healthcare for Malaysians with six EPPs categorised into three themes for this purpose.

The healthcare sector will require RM23 billion cumulatively from 2011 to 2020 to fund growth. Of this sum, only 1% will be from public funds while the remaining 99% will be from the private sector.

pAlM Oil

Palm oil will remain a major contributor to the Malaysian economy over the next 10 years, building on a core set of advantages which include rising relative demand globally versus substitutes, continued high oil-yield per hectare, distinctive edge in yield and quality over competitor nations such as Indonesia, and a conducive regulatory environment.

The palm oil NKEA targets to raise total GNI contribution by RM125 billion to reach RM178 billion by 2020. To achieve this, an additional 41,000 jobs will be created, of which 40% will be high-skilled jobs, with an average monthly income of RM6,000.

This NKEA plans to implement eight core EPPs that will span the palm oil value chain. These EPPs will, among others, target capturing the lucrative downstream segment where Malaysia has little presence today by focusing on developing finished segments that generate high value, including oleo-derivatives and selected food and health based segments, and commercialising second generation biofuels.

Achieving the palm oil NKEA aspiration will require funding of RM124 billion over the next 10 years, with 98% of the funding coming from the private sector. The total public funding for capital expenditure is expected to be RM2.9 billion, with an additional RM2.7 billion in the form of tax incentives, soft loans and cash incentives to promote private sector development in the downstream sector.

tOuriSM

Malaysias growth in tourism has mostly relied on growth in arrivals rather than yield, with 75% of the growth from increased arrivals and 25% from increased yield. To attract the higher yield segment, the country will need to both improve and upgrade its offering and services, as well as enhance connectivity to its key priority markets.

The tourism industry is targeted to raise total GNI contribution by RM67 billion to reach RM104 billion by 2020, which will require the sector to triple the RM37 billion in 2009.

A total of 12 EPPs have been developed across six themes to deliver significant results within a 10-year time frame. They include positioning Malaysia as a shopping destination, growing shopping receipts as well as business tourism, which currently represents a small part of the industry.

Achieving the tourism NKEA aspiration will require RM204 billion in funding over the next 10 years of which only 2% is expected to come from the public sector. The NKEA has also identified four sector-wide enablers, namely increasing and focusing marketing in priority markets, reintroducing selective visa on arrival, ensuring adequate supply of qualified human capital and improving tourism environment by improving offerings and accessibility.

eleCtrOniCS AnD eleCtriCAl

Malaysia plans to strengthen the Electronics and Electrical (E&E) capabilities across the value chain, particularly in higher value-added upstream activities. The E&E focus will be to attract more leading multinational companies to operate in Malaysia and to create more Malaysian champions.

It is expected to increase GNI by RM53 billion to reach RM90 billion by 2020 and provide an additional 157,000 jobs, both high-skilled and medium-skilled. The NKEAs will focus on 15 EPPs across four geographical clusters namely Northern Corridor, Greater KL/KV, Johor and Sarawak.

The E&E focus also has five target sub-sectors, namely semiconductors, solar, light-emitting diodes, industrial electronics and electrical home appliances.

As an example for semiconductors, the NKEA will follow a strategy of building on strong foundations in mature technology semiconductor fabrication and expanding into advanced design of integrated circuits as well as supporting the growth of substrate manufacturers.

In enabling growth for E&E, the total cumulative funding requirement from 2010 to 2020 is RM78 billion with 12% coming from the public sector and the remaining 88% from the private sector.

BuSineSS SerViCeS

By 2020, Malaysia would like to have moved closer to the benchmark of developed markets like the UK where the business services sector contributes about 20% of both GDP and employment and 14% of exports.

Malaysia aims to grow GNI contribution of the business services sector by RM59 billion to reach RM79 billion in 2020. This incremental increase will be driven by six EPPs and three business opportunities that will deliver an additional 246,000 jobs by 2020.

A total of six EPPs have been developed across two themes to deliver significant results within a 10-year period. The themes are to accelerate the growth of differentiated sectors and to develop future growth segments.

Achieving Malaysias aspiration in this NKEA will require RM41 billion in funding over the next 10 years, only 9% of which is expected to come from the public sector.

The NKEA has also identified one sector-wide enabler critical to unleash the full potential of the sector increasing the skill of our workforce to meet the needs of our services sector.

It is recommended that a set of actions be initiated to focus on increasing the relevance of skills education and training to industry demands, attracting global talent and increasing the participation of skilled women in the services workforce to 45%.

COMMuniCAtiOnS COntent AnD inFrAStruCture (CCi)

The Communication Content Infrastructure (CCI) NKEA aims at driving continued high growth in communications and enabling the paradigm shift from infrastructure to applications and content. Malaysia expects to raise GNI contribution by RM36 billion in 2009 to reach RM58 billion by 2020.

The incremental increase will be driven by 10 EPPs that will deliver RM16.6 billion in incremental GNI and four business opportunities that will deliver RM11.7 billion in incremental GNI. In achieving this, an additional 43,000 jobs will be created.

The 10 EPPs have been developed across three themes to deliver significant results within a 10-year time frame. Among others, the sector will address the paradigm change of shifting profit pools to content and services by strengthening Malaysias domestic value-add in advanced applications, particularly content creation and platforms, payments and electronic commerce and connectivity applications.

Achieving this NKEA aspiration will require RM51 billion in funding over the next 10 years, of which only 2% is expected to come from the public sector.

eDuCAtiOn

The focus of the education NKEA will be on strengthening the private education services sector by increasing private consumption and investments as well as expanding education exports.

The NKEA envisions a 2020 where education will be a big business that delivers significant, widespread and sustained GNI impact while raising standards and widening access.

The target is to raise total GNI contribution by RM34 billion to reach RM61 billion by 2020. As public sector growth is expected to be limited, the goal will be to require the private education sector to grow six-fold.

A total of 13 EPPs have been developed across three themes to raise overall education standards and deliver significant results within a 10-year time frame.

Achieving this NKEAs aspiration will require RM20 billion in funding over 10 years, of which only 6% constitutes new public funding.

THEEDGE m a l aysi a | ocTobEr 26, 2010


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RM150 million investment in Johor Premium Outlets

Located in Genting Indahpura, Johor, the Premium Outlets will offer a wide selection of designer fashions at substantial savings off regular retail prices and will be the first of its kind in Southeast Asia.

investment:rM300 million

The Economic Transformation Programme

will put Malaysia on the worlds retail tourism map.

Dato Justin Leong, Director,Genting Simon Sdn Bhd

Over 6,200 jobs, RM1.2 billion investment by St. Regis

The six-star St. Regis Kuala Lumpur will be built on a 2.2-acre site, with a total development area of 1.4 million square feet, at KL Sentral. It will feature 208 rooms, 200,000 sq ft of convention facilities, 160 units of hotel-managed residences. It is targeted to be completed by the end of 2014.

investment:rM1.2 billion

potential Jobs:Over 6,200

The St. Regis project is an integral part of the Greater KL Master Plan and will contribute to job creation and multiple economic activities during the construction period between 2010-2014. This project will create a new benchmark in the hospitality industry and service sector, in addition to being a new landmark in Malaysias international tourism promotion.

Tan Sri Chua Ma Yu,Chairman, One IFC Sdn Bhd

Off to a Strong Start!

Economic Transformation Programme Progress Update 1 (25th Oct 2010)

on the 25th of october, in conjunction with the ETP roadmap launch, Prime Minister Dato Seri najib Tun razak announced several early wins, projects that had been confirmed and were in progress. These projects were expected to generate over rM5.3 billion in investment and over 13,000 jobs. The ETP is already delivering results. These early wins show that by focusing on action, results will flow. We will announce more confirmed investments over the next few months, said the Prime Minister.

RM1 billion investment by Mydin Holdings

Mydin Mohamed Holdings Bhd plans to open 14 more branches nationwide within two years in a bid to build a more dynamic retail market.

investment:rM1 billion

I had a dream; my dream is to see Malaysian retailers standing side by side and being able to compete equally with foreign retailers. In business it is not about winning or losing but it is the perseverance of our Malaysian retail entity.

Dato Ameer Ali Mydin,Managing Director, Mydin Holdings

6,500 jobs, RM1.9 billion investment by LFoundry Malaysia

LFoundry Malaysia Sdn Bhd will build a 200-mm wafer fab in the Kulim High-Tech Park (KHTP). The wafer fab should start production of analogue, mixed-signal and high-voltage devices on a 130-nm to 110-nm process technology.

potential Jobs:6,500

investment:rM1.9 billion

Since Malaysia is already on track to elevate the semiconductor industry and take its place as a global player, it makes business sense to establish LFoundry Malaysia Sdn Bhd, a synergy derived from the joint venture of renowned leaders LFoundry GmbH and QT Hightech.

Dr Hans Dudenhausen,CEO, LFoundry Malaysia

RM486 million investment by Malaysia Airports Holdings Berhad (MAHB)

MAHB has invested in a new Low-Cost Carrier Terminal (LCCT) in Sepang which will feature a landside shopping mall. This would be ideal attraction for both travellers and casual retail shoppers.


The KLIA Retail Hub project will transform KLIA into a premier business, retail and entertainment hub which will drive retail activities contributing towards the economic growth of Malaysia

Tan Sri Bashir Ahmad,Managing Director, Malaysia Airports Holdings Berhad

RM124 million investment by Premium Renewable Energy

Premium Renewable Energy (Malaysia) Sdn Bhd will set up a bio-oil plant near Lahad Datu, Sabah, capable of producing 30MW of energy. It is also committed to invest in 29 bio-oil plants by 2020.


In the programmes breadth and depth, the ETP has also not forgotten green technology which is key to a sustainable economy and the future for Malaysia. This just goes to show how inclusive and well thought out the ETP is.

Anand Selvaratnam,Managing Director,Premium Renewable Energy (Malaysia) Sdn Bhd

1Malaysia Development Berhad1Malaysia Development Berhad is the Master

Developer for the Kuala Lumpur International Financial District. 1MDB will collaborate with the private sector to execute its Master Plan for KLIFD.

KLIFD is a critical component in enhancing how the worlds business community will see and value KL. It will provide Malaysia with new sources of growth that can help the country graduate to a high-income economy.

Shahrol Halmi,1MDB Chief Executive Officer

For more info, log on to www.pemandu.gov.my/etp

Visit our blog at www.pemandu.gov.my/etp/blog

Follow us on Twitter @etp_roadmap

RM100 million in GNI from Asia e-University

Asia e-University has been selected by the Ministry of Higher Education as the Gateway University for international education for distance and online learning.

Gni Contribution:rM100 million

We believe it is a tremendous opportunity for local universities to participate in the fastest growing online education space. Lets go global!

Professor Dato Dr Ansary Ahmed,President/CEO, Asia e-University

400 jobs, RM300 million investment by Schlumberger

Schlumberger established a new Global Financial Hub and Shared Services in Bandar Utama as part of the Greater KL EPP that is tasked to attract 100 new MNCs to relocate its operations in Kuala Lumpur by year 2020.

investment:rM300 million potential Jobs:400

The companys decision to open the Finance Centre Hub in Malaysia is primarily driven by the companys long term commitment in Malaysia and the strong belief in the government Economic Transformation Programme.

Ainul Jamal,Chairman, Asia, Schlumberger

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Economic Transformation Programme: A Special Report Greater Kuala Lumpur/Klang ValleyTHEEDGE m a l aysi a | ocTobEr 26, 2010

BY Melody Song [email protected]

KUALA LUMPUR: The governments vision for the Greater Kuala Lumpur and Klang Val-ley area is to deliver RM649.6 billion in gross national income (GNI) via nine entry-point projects (EPPs), three business opportunities, baseline growth and various multiplier effects by 2020.

The vision is to transform the Greater KL/KV area into one of the top 20 cities in the world in terms of GDP growth, while being one of the worlds top 20 most liveable cities according to the EIU Liveability Index Survey by 2020.

The Greater KL/KV area, which spans 10 mu-nicipalities and includes important sites such as the Kuala Lumpur International Airport (KLIA), is one of the 12 National Key Economic Areas (NKEAs) identified to drive Malaysias eco-nomic growth for the next 10 years.

According to the Economic Transforma-tion Programme (ETP), the government hopes that the Greater KL/KVs GNI contribution will grow by 2.5 times to RM650 billion per year from about RM258 billion currently. By then, Greater KL/KVs share of the countrys GNI would have grown from 30% to 40%.

Meanwhile, growth in economic activity in the Greater KL/KV area is expected to raise total employment in the area to 4.2 million by 2020 from 2.5 million in 2010.

Under the governments plan for Greater KL/KV, nine EPPs, which have the potential to add RM193 billion in GNI, along with four dimen-sions requiring public funding of RM4 billion, have been identified.

The four dimensions are attracting multi-national companies (MNCs) to set up offices in the Klang Valley, employing high intra-city con-nectivity, upgrading and enhancing new resi-dential areas, and addressing basic services like walkways.

Some of the challenges the Greater KL/KV lab expects include fierce competition from other cities in the region in terms of attracting foreign companies and its liveability lag, inad-equate public transport and the cleaning up of untapped natural assets, such as the Gombak and Klang rivers.

Meanwhile, the three business opportunities identified in the Greater KL/KV area are the re-invigorating of the administrative capital, Pu-trajaya, where much of the basic infrastructure is already in place but is under-utilised; provid-ing the right mix of housing (moving from 81% of upper middle cost housing in 2009 to 85% by 2020); and to improve basic water and sewer-age services by accelerating the development of water treatment facilities for both phases of Langat 2.

transformation to include boosting connectivity to and within Greater Kl/KV

Attracting MnCs and better talent mixUnder the first aspiration of attracting for-

eign talent to Greater KL/KV, the government intends to attract 100 of the worlds most dy-namic companies within priority sectors in addition to having the right mix of internal and external talent.

The funding requirements for attracting the

GNI contribution to increase by RM650b

Vision is to transform the Greater KL/KV area into one of the top 20 cities in the world

Other key agencies, companies and organisations

100 firms will amount to RM82.2 billion and is expected to create 234,000 jobs by 2020. This is expected to generate additional GNI of RM41.4 billion per year.

Five priority economic sectors have been identified for attracting foreign MNCs

financial services, business services, educa-tion, tourism and retail.

Initiatives that have been identified to at-tract companies include providing attractive incentives, such as proactive marketing to priority MNCs, the strengthening of the local talent base through the Industrial Skills En-hancement Programme and reducing the cost of doing business, for example by introducing a single window licensing process through e-Government portals and by reducing necessary procedures to three steps within three days.

Attracting the higher-quality talent mix is expected to cost RM18 million from 2011 to 2020 to fund the establishment of Malaysian Halls and other one-stop centres in international cit-ies. This is expected to generate RM118.2 billion in additional GNI per year by 2020.

Boosting connectivityMeanwhile, connectivity to and within the

Greater KL/KV will be boosted with a high-speed rail system connecting the area to Singapore, while intra-city connectivity will be amplified via the proposed RM36 billion mass rapid tran-sit (MRT) project.

The high-speed rail system is expected to cost RM16.5 billion and may generate RM6.2 billion in additional GNI, while creating 29,000 jobs.

Preliminary estimates for the MRT project indicate a cost of RM47 billion RM36 billion for infrastructure costs, RM2 billion for land acquisition, and investments of RM9 billion for operating assets such as rolling stock.

The GNI impact from the MRT is estimated to be about RM21.3 billion annually by 2020, with 20,000 new jobs created both directly and indirectly.

revitalising the Klang river,creating new icons

As part of the plan to regenerate and improve high-potential residential and commercial ar-eas, the Klang River will be revitalised into a heritage and commercial centre for Greater KL/KV, meaning that more areas will see more green spaces and new iconic places and attrac-tions will be created, such as the old Pudu Jail gate, Chinatown and the old KTM railway sta-tion.

The redevelopment of the Klang River is slated to be managed by a small but highly pro-fessional statutory authority established under Federal legislation, and will be formally es-tablished by end-2011, subject to the legislative timetable. This is estimated to have a capital expenditure (capex) of RM17.9 billion, of which RM14.3 billion has been identified as the private investment component in real estate develop-ment. The river project is expected to generate RM4.3 billion in GNI annually by 2020, with 17,000 new jobs created.

Meanwhile, the greening of Greater KL/KV to raise the amount of green space to 16 sq m per person according to World Health Organisation (WHO) standards from 12 sq m at present will require a capex of RM149 million over the next

decade, and is expected to generate RM1 billion in GNI annually while creating 3,000 new jobs.

The repositioning of KL as a global city with heritage attractions by establishing a heri-tage triangle walking museum linking Masjid Jamek, Merdeka Square, Dayabumi and Central Market, the transformation of Central Market into a live arts studio complex, as well as the transformation of Pudu Jail into a mixed devel-opment will cost RM240 million, half of which will be sourced from private investors. This will have a potential GNI impact of about RM460 million annually, with some 13,500 new jobs created in the next decade.

45km pedestrian walkway in Kl city, more ef-ficient waste management

Enhancing public amenities is also a prior-ity under the ETP as the population in Greater KL/KV is expected to increase by more than 65% over the next decade.

As part of the move to upgrade services, a comprehensive pedestrian walkway is to be cre-ated, in addition to the development of an effi-cient solid waste management ecosystem.

By end-2011, the Kuala Lumpur Municipal Council (DBKL) will have completed two sets of walkways. The first will link Berjaya Times Square to Pavilion KL, while the second will link Jalan Perak and Pavilion KL with Crowne Plaza and Jalan P Ramlee, and Jalan Sultan Ismail with Jalan Pinang.

A long-term plan by DBKL is in the works to deploy a 45km full pedestrian network across the city, implementation for which will begin in 2012 and completed by 2014.

The plan will be implemented in three phases, with the first being a 3km spine from Merdeka Square to Jalan Tunku Abdul Rahman, which will end in Chow Kit. The second phase will be 14km of primary walkways for high pe-destrian traffic between major areas and tran-sit nodes, and the third phase will be 9km of secondary routes connecting key walkways, as well as a 16km extension of pedestrian coverage throughout the city. This EPP would require a capex of RM105 million from 2011 to 2020, while its potential impact on GNI contribution is esti-mated to be RM6 million annually.

Meanwhile, the development of the solid waste management ecosystem is estimated to require total investment of RM3.5 billion, of which a significant portion will be through private sector investment from privatisation initiatives of collection and waste treatment functions. The potential GNI impact from this initiative is estimated to be RM157 million an-nually. E

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Powering the economyby Yong Win Wei

Pengerang, located on the southeastern tip of Johor, is little-known to Malaysians. But that is set to change with a RM5 billion project which will turn the town into a regional oil storage and trading hub by the year 2017.The independent deepwater petroleum terminal

project is a public-private partnership between the Johor state government, Vopak Asia Pte Ltd and local oil and gas player Dialog Group Bhd. Vopak is the worlds largest independent tank terminal operator.

Under the Economic Transformation Programme, the project is one of 12 entry-point projects (EPPs) identified by the Performance Management and Delivery Unit (PEMANDU) for the oil, gas and energy (OGE) sector. The sector, one of 12 National Key Economic Areas (NKEAs) outlined in the 10th Malaysia Plan, is a major contributor to the economy, accounting for 19% percent of GDP in 2009 with export revenue totaling RM56 billion.

The target for the oil, gas and energy NKEA is 5% annual growth from 2010 to 2020, which translates into an increase of RM131.4 billion during the 10-year period. Against the backdrop of a natural 2% decline in oil and gas production, it is, as PEMANDU acknowledges in Economic Transformation Programme: A Roadmap for Malaysia, an ambitious goal.

According to the roadmap, to achieve the target, the government and the industry will focus on four thrusts: sustaining oil and gas production; enhancing downstream growth; making Malaysia the No 1 Asian hub for oil field services; and building a sustainable energy platform for growth.

Enhancing downstream growth The Pengerang terminal is one of two EPPs under enhancing downstream growth thrust. In Southeast Asia, Singapore has traditionally had a strong presence in the oil storage industry, with a total of 10 million barrels of independent storage capacity (capacity owned by third party operators and contracted out to oil companies, refiners and

traders), says the ETP roadmap.But with port locations on major shipping routes

for crude oil and refined products, close proximity to Singapore, land availability, and deepwater marine accessibility, Malaysia is well-placed to complement Singapore in this industry, adds the roadmap. Pengerang is a 45-minute to one-hour boat ride from Changi, and the Johor state government has approved the site 500 acres of reclaimed land for a 60-year lease.

The roadmap envisages that Together, Malaysia and Singapore could operate to form a hub like Amsterdam-Rotterdam-Antwerp which complement each other in areas of refining capacity, independent

storage and blending capacity as well as access to markets.

The Pengerang terminal which requires private investment of RM4.8 billion is expected to generate RM1.6 billion GNI by 2020.

Dialog is investing RM2.3 billion in the project, of which 30% would come from equity and 70% from project financing.

The ETP roadmap estimates that 800 new jobs will be created from the venture, excluding spinoffs from other sectors. Overall, the roadmap envisages an additional 52,300 jobs will be created in the oil, gas and energy NKEA, with a significant proportion being highly-skilled jobs with an estimated 21,000 (40%) for qualified professionals such as engineers and geologists, drawing monthly salaries in the region of RM5,000 to RM10,000.

Hub for oilfield servicesWith its burgeoning domestic oil and gas industry, proximity to oil fields and shipping lanes, a cost-competitive workforce as well as its strategic position in the Asia-Pacific region, Malaysia is well-placed to become an OFSE hub for Asia, the third thrust under the ETP. Three EPPs have been identified under this thrust.

By increasing competitive pressures in the domestic market, there is potential for Malaysian companies to emerge as domestic champions and subsequently, as regional champions as the country captures a larger slice of the regional market, says the roadmap.

Making Malaysia a hub for oilfield services and forging regional champions is something that appeals to oil and gas services players like Dialog and Tanjung Offshore Bhd.

In the second stage of development for the oil, gas and energy sector, the government needs to come up with policies to transform domestic oil and gas servicing companies into giants in an effort to compete for jobs globally and be among the worlds best, said Dialogs executive chairman and group managing director Ngau Boon Keat.

Tanjung Offshore managing director Omar Khalid said the government has done a good job in promoting the oil, gas and energy sector through Petronas. However, oil majors in Malaysia and Malaysian service providers should in the long term be given a chance to take on larger contracts which are more sophisticated and challenging so they could move higher up the value chain, he added.

He noted that collaboration with foreign partners and transfer of competencies and technologies was the first step towards the goal.

Oil majors should also give more opportunities to local providers by ensuring that there is real transfer of technologies and competencies from foreign players or principals. Otherwise, the local players will always be merely acting as agents to the foreign players, he said.

Omar suggested a mechanism to ensure that foreign providers continue to pass on technical competencies to the Malaysian workforce.

Both Omar and Ngau recognise Petronas success and its role going forward. But, as Ngau noted, although the government has created Petronas to be a very successful national oil company, Malaysia still lacks huge oil and gas reserves.

The role of Petronas and the issue of energy security are addressed by the other two thrusts

The Economic Transformation Programme is Malaysias roadmap towards becoming a high-income nation that is both inclusive and sustainable. Private-sector led and government facilitated, the ETPs starting point is the implementation of concrete changes in specific sectors and areas of the economy.

SuStaINING OIl aNd GaS PROductIONEPP 1: Rejuvenating existing fields through enhanced oil recoveryWill add about 166,000 barrels per day of oil production in 2020. Total investment needed is about rM68.6 billion and the contribution to GnI is rM16.6 billion in 2020.

EPP 2: Developing small fields through innovative solutions To adjust the development framework for small fields to increase Malaysias oil production by about 55,000 barrels per day in 2020. Total investment needed is about rM13.3 billion and the contribution to GnI is rM5.5 billion in 2020.

EPP 3: Intensifying exploration activities Will sustain oil and gas production in the long run; hence production from any

new oil and gas discoveries will need to come on-stream in a timely manner. an estimated total of rM18.4 billion investment is required by 2020.

ENHaNcING dOwNStREaM GROwtHEPP 4: Building a regional oil storage and trading hubWill see Pengerang terminal generate rM1.6 billion GnI by 2020 through three streams: charging of storage fees by independent logistic players; additional shipping volumes from availability of storage, and trading of crude oil and petroleum products.

EPP 5: Unlocking premium gas demand in Peninsular MalaysiaWill see an estimated GnI impact of rM10.6 billion of which rM2.4 billion will be in the oGE nKEa. It will also create 27,000 new jobs by 2020 largely in other

sectors beyond oGE.

MakING MalaySIa tHE NuMbER ONE aSIaN Hub fOR OIlfIEld SERvIcESEPP 6: Attracting MNCs to bring a sizeable share of their global operations to Malaysia Will have considerable impact creating over 20,000 jobs and almost rM6.1 billion of incremental GnI by 2020.

EPP 7: Consolidating domestic fabricatorsWill translate to GnI impact of rM4.1 billion and creation of 5,000 jobs. Some rM4 billion of private investment is required for internal efficiency programmes.

EPP 8: Developing capabilities and capacity through strategic partnerships and JVs

Will see 15% gain of the shallow water and 50% of the deepwater market in asia-Pacific (vast majority in Malaysian waters) by 2020. a contribution of rM4 billion in GnI and job creation of some 15,000.

buIldING a SuStaINablE ENERGy PlatfORM fOR GROwtHEPP 9: Improving energy efficiencyWill effectively require estimated rM20.8 billion of funding, the bulk of which will be from public sources used to fund import-tax rebates on energy-efficient vehicles (rM9.8 billion) and rebates for energy-efficient appliances (rM1.3 billion).

EPP 10: Building up solar power capacityoverall GnI contribution from solar power generation in 2020 to grow to rM460 million mainly from creation of 1,900 jobs. GnI impact excludes additional impact

of the rM22 billion catalysing effect the project will have on local manufacturing and influx of FDI.

EPP 11: Deploying nuclear energy for power generationconstruction of nuclear power plants will have a temporary GnI impact in the construction sector, with GnI contribution of rM200 million from the creation of 2,600 jobs. once operational post-2020, the one gigawatt nuclear power plan will generate GnI amounting to rM1.8 billion per year from the electricity generated.

EPP 12: Tapping Malaysias hydroelectricity potentialcreating 590 jobs and an estimated GnI potential of rM5.7 billion in Sarawak by 2020. Most GnI will come from energy-intensive industries operating in Sarawak.

Four thrusts and 12 EPPS

under the oil, gas and energy NKEA. Under sustaining oil and gas production, Petronas

will play a pivotal role in the three EPPs identified. To build a sustainable energy platform for growth, the roadmap has identified four entry point projects aimed at securing energy security and efficiency.

Altogether, the oil, gas and energy NKEA expects to deliver a GNI impact of RM131.4 billion RM47.1 billion from the 12 EPPs and an additional RM61.2 billion from business opportunities and baseline growth.

To deliver GNI growth targets, the total cumulative funds that will need to be invested by the oil, gas and energy NKEA from 2010 to 2020 amounts to RM217.6 billion. About 99% of the investment required for the 12 EPPs will come from the private sector.

Dialogs Ngau said the group is honoured to be involved in this once-in-a-lifetime opportunity to be part of the national transformation process, he said. Through its investment in the Pengerang deepwater oil storage terminal, Dialog hopes to see the formulation of strategies for Malaysia to establish a strong base for oil and gas servicing which includes upstream services, downstream processing, manufacturing and logistics. Such a strategy would create highly-skilled and knowledge-intensive jobs that would outlast the nations oil and gas resources, Ngau added.

As Prime Minister Datuk Seri Najib Tun Razak said in the roadmap, after decades of oil and gas production, Malaysias domestic resources will inevitably start to deplete. To prepare for this, we will strengthen other value creating activities in the oil and gas value chain and ensure that we have a sustainable energy platform for the future, he said.

The roadmap for the oil, gas and energy NKEA lays out just how the government intends to do that, with the involvement of the private sector.

Economic Transformation Programme: A Special Report Oil, Gas & EnergyTHEEDGE m a l aysi a | noVEMbEr 15, 2010

8

Research has shown that dynamic cities compete more fiercely than countries. As our nations capital city, Greater Kuala Lumpur is currently and will always be the heart of our economic strength, but if it does not keep stride with other cities, our entire economy will suffer. The entire Greater Kuala Lumpur/Klang Valley area needs to be made economically stronger and more livable. There is still much to improve if we want Kuala Lumpur to be mentioned in the same breath as Tokyo, London, New York or even Singapore.

And which are the 11 industries?The economic areas that

are key to secure our future, in alphabetical order, are: Agriculture. Business Services. Communications Content and Infrastructure. Education. Electrical and Electronics. Financial Services. Healthcare. Oil, Gas and Energy. Palm Oil. Tourism. Wholesale and Retail.

THE ECONOMIC TRANSFORMATION PROGRAMME is a detailed programme on what we need to do with the Malaysian economy over the next ten years, to achieve high-income nation status. It is anchored on a clear implementation roadmap with strong performance management and transparency.

is there a problem with our economy?Until the late 1990s, Malaysia

was growing between eight to nine per cent every year. However, since the Asian financial crisis in 1997/98, we have only grown between four to five per cent over the last 10 years. This was further aggravated by the dotcom bust in 2000 and the global financial crisis in 2008/2009. While we were one of only 13 countries in the world to have sustained growth of over seven per cent for 25 years or more since 1945, many countries have forged ahead as our economic growth remained sluggish.

is this why we need the economic transformation programme?Yes, because the cost of living

and doing business is increasing much faster than the income and profit we make from current economic activities. This is also known as the middle-income trap. If we fail to do something quickly, we will become even less competitive as we are operating in a globalised economy and our purchasing power will further weaken. All these will lead to a lower quality of life.

What will this programmedo for Malaysia?The Economic Transformation

Programme will basically improve the Malaysian economy, by catalysing change and transforming our economic structure to make it more

competitive and resilient. When successfully executed, it will make us a high-income nation, namely achieving an average per year income per Malaysian of US$15,000. This is the World Banks benchmark for a high-income economy. In addition, the Programme will also create more than 3.3 million jobs by 2020.

What will it do for me?By improving the economy,

you will enjoy a better quality of life that comes with more jobs (with majority being in the middle and higher paying jobs), improved transportation links, enhanced education outcomes and more choices of high quality goods and services. It will also provide a solid foundation for sustained development of the country so that your children will also continue to enjoy a high quality of life. For businesses, there will be stronger opportunities, a conducive business environment and a domestic consumer market with high purchasing power.

So, what is the programme all about?The Programme is simple.

It focuses our finite resources on 12 economic areas where we are the most competitive and best-equipped to excel. This is to ensure we invest in areas that earn us the highest possible

The bookThe Economic Transformation Programme - A Roadmap For Malaysia is now available at leading book stores nationwide.

For listing of stores and to download soft copies of the book please visit www.pemandu.gov.my

Follow us on Twitter/etp_roadmapOr join our forums for discussions on the latest news in our blogs about the Economic Transformation Programme (ETP) with fellow Malaysians at www.pemandu.gov.my/etp-roadmap

income. That said, the other economic areas will stand to enjoy the spillover and multiplier effects from the 12 focused areas. So, everyone wins. Whilst the Economic Transformation Programme was co-created by the private and public sectors, it relies heavily on private-sector led growth, with 92 per cent of the investment coming from the private sector.

Does that mean it will be easy?Simple does not necessarily mean easy. We are talking

about transforming the economy of a country with 28.9 million people now and an estimated 31.6 million people in 2020. It will require tremendous focus, determination and hard work by all Malaysians, as a united nation, to get us there.

So, what are the 12economic areas?The 12 focused areas

are actually called National Key Economic Areas, and each of these has the potential to directly contribute a significant amount of economic growth to the country. They comprise 11 industries and one geographical territory.

One geographical territory?tell me more.That territory is the Greater

Kuala Lumpur/Klang Valley area.

what is it?


1

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10how can we be sure that these 12 economic areas are the right ones? how about

other mainstream industries such as manufacturing and construction?

We gathered more than 1,000 of the nations top-notch leaders from the corporate and government sectors as well as non-government organisations and civil society in a hardworking workshop. Guided by their experience and best macro-economic practices, they arrived at these 12 focused areas based on income and job creation criteria. Other industries such as manufacturing and construction will enjoy the strong flow of activities from the 12 sectors and these too will grow in tandem.

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deepening Malaysias palm oil advantageby Jenny ng

Driving through the Malaysian countryside today, one would notice how oil palms have replaced rubber trees along trunk roads connecting the smaller towns along the west coast of the peninsula. The change is in tandem with the growth of the palm oil industry as oil palm took over rubbers position as the countrys most important commodity crop.

Starting with less than 500,000ha in 1960, oil palm hectarage in Malaysia has grown by leaps and bounds to 4.7 million ha in 2009. The sector is also now the fourth-largest contributor to the countrys gross national income (GNI), at RM52.7 billion.

Under the Economic Transformation Programme (ETP) Roadmap, the Minister of Plantation Industries and Commodities Malaysia, Tan Sri Bernard Dompok, has set an ambitious GNI contribution target of RM178 billion by 2020 for the sector.

Although the palm oil sector has matured over the years Malaysia was the worlds largest producer of palm oil from 1995 until it was dethroned by Indonesia in 2006 there is obviously more growth to be tapped given the ambitious target.

According to the ETP, the palm oil industry is forecast to grow by 7.1% over the next 10 years, driven by gains in the fresh fruit bunch (FFB) yield and oil extraction rate (OER), new plantation expansion abroad and ventures further downstream.

The increase in the palm oil sectors GNI will be achieved through eight entry point projects (EPPs) spanning the palm oil value chain in order to capture the worlds growing demand for the vegetable oil. Global demand for palm oil registered an annual growth rate of 10% between 2000 and 2009.

According to the roadmap, the EPPs are expected to generate RM47.1 billion in GNI in 2020 and the business opportunities created will add another RM74.6 billion (inclusive of a baseline growth of RM17 billion). The incremental GNI also includes RM3.6 billion from the multiplier effect created by EPPs from other sectors.

As the palm oil sector is divided into the upstream and downstream segments, the eight EPPs are identified along two strategic thrusts: upstream productivity and sustainability, and downstream expansion and sustainability.

The key theme of the palm oil National Key Economic Areas [NKEAs] is to increase productivity by raising the national FFB yield per ha across the board. Low yields have been an issue for smallholders (independent and organised) who account for 40% of palm oil production, but not so much for the plantation companies. The major problem for the plantations is labour, says an industry player familiar with the palm oil ETP lab. The palm oil lab was one of 12 labs conducted by Pemandu to come up with the roadmap.

Indeed, independent smallholders account for 12.8% of the Malaysian palm oil plantation area and generate a lower FFB yield of 17 tonnes per ha compared with 21 tonnes per ha and 23 tonnes per ha for organised smallholders and plantations, respectively.

Their [smallholders] limited average plot size of 3.9ha per family and lack of exposure to best practices are the major factors directly impacting

yields, the ETP notes.The second EPP improving FFB yield seeks

to address the issue of poor yields especially among the smallholders.

It entails the implementation of four key activities, namely the recruitment of TUNAS (extension service to smallholders) officers, clustering of independent smallholders around their nearest mill, mandating one of the reference industry best practices for all plantations and implementing a yearly ranking of cooperatives and smallholders to identify and replicate best practices.

On mandating a reference industry best practices for all, the roadmap says that most large plantations are already applying at least

one of the reference good agricultural practices consistently, which has led to yields of an average 25 tonnes per ha for the top 15 plantations. Some smaller plantations have, however, lagged behind.

There is a high variability in FFB yields between estates and different players. A lot can be achieved by implementing better agro practices, says Khor Yu Leng, a palm oil industry researcher who publishes Khor Reports, a report on palm oil and related strategic matters.

As Malaysia has run out of land for development and planters are facing sustainability issues, to expand output, they can only focus on achieving higher yields and investing in worker productivity, Khor adds.

She believes that the focus on yields is the result of a combination of factors, such as the ability to implement good agronomic practices, planters use of high-yield seeds and clones, and some reluctance to replant during periods of high palm-oil prices.

There is also a need for more engagement with the industry on the research side, she adds.

Khor supports the move to rate, rank and benchmark cooperatives and smallholders. If measured properly, it would be very helpful to the industry, she says.

On the issue of labour productivity, the Malaysian palm oil sector is facing a shortage of skilled and unskilled labour in plantations owing to the demanding nature of the work and growing number of alternative job opportunities. The shortage is estimated at 20% of the total industry workforce.

The lack of mechanisation options has led to an over-reliance on manual labour, where 80% of the total industry workforce are foreign workers. Foreign workers remit an average of 60% of their incomes to their home countries, causing a direct negative impact on the industrys GNI.

The third EPP tackles the issue of worker productivity and worker shortage. One of the core activities identified to improve worker productivity is the use of Cantas, a motorised harvesting pole.

Cantas can reduce FFB-cutting time and prunes trees below 15ft, which account for 30% of oil palm trees. This is expected to increase worker productivity

by 85%.However, critics say the equipment is costly

one using a China-made engine costs RM2,500 while a more expensive one costs RM4,500.

According to the person familiar with the palm oil ETP lab, efforts are being made to bring down the price of Cantas to RM2,000 to RM2,500 each. The Malaysian Palm Oil Board, which receives royalties on Cantas, is expected to offer incentives for its use, he adds.

In addressing the issue of labour shortage, successful implementation of the third EPP is expected to reduce the use of 110,000 foreign workers by 2020. For the immediate term, however, it is understood that the ministry is looking into the problem of labour shortage while plantations seek alternative sources of foreign labour.

The use of palm by-products is also covered by the fifth EPP, which aims to develop biogas at palm oil mills from palm-oil-mill effluent (POME) waste. The treatment of POME is accompanied by the production of biogas containing methane. The objective of this EPP is to ensure that mills capture the methane gas to generate electricity to be supplied to the national grid, or for their own use.

The roadmap encourages mills to start developing biogas plants immediately to capture additional income from incentives offered by the Clean Development Mechanism (CDM) programme before it expires in 2012. However, given the lengthy process of the CDM certification, industry players say it needs to be streamlined.

This EPP has an ambitious target of developing biogas plants at the 500 mills in the country over the next 10 years. Of these, half have the potential to supply electricity to the national grid by 2020.

Mill owners stand to increase their income

The Economic Transformation Programme is Malaysias roadmap towards becoming a high-income nation that is both inclusive and sustainable. Private-sector led and government facilitated, the ETPs starting point is the implementation of concrete changes in specific sectors and areas of the economy.

uPStREaM PROductIvIty aNd SuStaINabIlItyEPP 1: Accelerating the replanting of oil palmWill generate an additional GnI contribution of rM4.6 billion in 2020.

EPP 2: Improving fresh fruit bunch yieldWill generate rM10.2 billion of incremental GnI, create an additional 1,600 jobs and improve the annual income of 161,000 independent smallholders by 47%.

EPP 3: Improving worker productivityWill generate an estimated rM1.7 billion in GnI by 2020, and create 28,000 local jobs (in addition to reducing 110,000 foreign workers).

EPP 4: Increasing the oil extraction rateWill generate an additional rM13.7 billion in GnI and create 10,000 local jobs mostly due to the opening of 84 new mills to meet increased supply of FFb in 2020.

EPP 5: Developing biogas at palm oil millWill generate an estimated rM2.9 billion in GnI in 2020 while creating 2,000 jobs and not requiring any incremental government funding.

dOwNStREaM ExPaNSION aNd SuStaINabIlItyEPP 6: Developing oleo derivativesWill generate an additional rM5.8 billion in GnI and create 5,900 local jobs.

EPP 7: Commercialising second-generation biofuelsWill generate rM3.3 billion in additional GnI and create 1,000 local jobs.

EPP 8: Expediting growth in food- and health-based downstream segmentsWill generate rM4.9 billion in additional GnI and create 74,900 local high-skilled jobs.

Eight EPPs to grow incremental GNi of Rm47.1 billion

source: eTP: A roADmAP For mAlAysiA

as the electricity tariff for the Renewable Energy Power Purchasing Agreement must be increased from the current 21 sen per kWh to 35 sen, according to the ETP roadmap.

Downstream, the sixth EPP aims to shift the focus on the production of basic oleochemical products such as fatty acids, fatty alcohols, methyl esters and glycerine to higher-value oleo derivatives with higher profit margins. Currently, higher-value oleo derivatives constitute only 1% of the palm oil non-food downstream production; the ETP is aiming for 40% by 2020.

Production of second-generation biofuels using oil palm biomass, such as empty fruit bunch, takes centre stage with the seventh EPP, whose objective is to fast-track its commercialisation.

The production of bio oil using biomass-to-liquid technology is one of the best possible high-value utilisations of biomass generated at mills, according to the ETP roadmap. Bio oil is used for generating electricity and can be converted into green transportation fuel.

Malaysia is set to have its first bio oil plant in Lahad Datu, Sabah, by 2012. A memorandum of understanding to build the plant was signed in July between Felda Group, one of Malaysias largest palm oil producers, and Premium Renewable Energy Sdn Bhd, one of the lead initiative owners for this EPP.

Aside from creating high-skilled jobs, successful implementation of the EPPs will raise the average salary of the 161,000 low-income independent smallholders by a significant 47% in 2020, in line with the vision of transforming Malaysia into a high-income economy. With the private sectors leading role in the palm oil NKEA and government support, the sector looks set to continue its dominance in the Malaysian economy.

Economic Transformation Programme: A Special Report Palm OilTHEEDGE m a l aysi a | noVEMbEr 22, 2010

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Restoring E&Es sparkby nadia S hassan

Malaysias electronics and electrical sector, once the driving force of the economy, has in recent times found it hard to move up the value chain. Chinas emergence as a low-cost base powerhouse has led to the countrys previously vibrant E&E sector losing some of its lustre.

While local E&E companies have achieved success, the sector is facing a number of critical challenges. E&Es contribution to Malaysias exports and the economy has been declining, from 59% in 2000 to 41% in 2009. In addition, the concentration of activity in Malaysia is mostly in assembly, which is of lower value-add, says the ETP: A roadmap for Malaysia.

However, that is set to change under the ETP, which sees not only a move upstream but also the refining of existing operations and the tapping of new growth sectors. The aim is for the E&E sector to contribute some RM90 billion to gross national income by 2020 and create 157,000 jobs.

The focus will be on four geographic clusters the Northern Corridor, the Klang Valley, Johors Iskandar Malaysia and Sabah and Sarawak and four subsectors semiconductors, home appliances, industrial electronics and new technologies like solar and light-emitting diodes or LEDs. Penang and the Northern Corridor, already the hub for semiconductor players, are seeing a growing cluster of solar and LED manufacturers.

While the ETP is looking to grow the Klang Valley as a think tank, Johors strength lies in its strong intermodal logistics infrastructure and connectivity, which allows it to build upon its proximity to Singapore.

Sarawak will leverage its abundant natural resources and renewable energy to create value in the upstream silicon supply chain while Sabahs strong agriculture and eco-tourism base provides platforms for specialised applications like precision agriculture via wireless sensor network technologies.

attracting more MNcsThe roadmap outlines 15 entry point projects (EPPs), with the Malaysian Investment Development Authority (Mida) in the driving seat for 11 of them. In broad strokes, Mida has been tasked with attracting more MNCs and their technology to serve as a jumping-off point.

For the semiconductor sector in particular, Mida, working with a consortium, targets to build a number of semiconductor fabrication plants. The total funding needed for this EPP is RM10.2 billion in private investment and RM100 million in public investment over the next 10 years.

Instead of pursuing a leading-edge strategy for wafer fabs, we will pursue a smart-follower strategy in which we target the establishment of fabs that use mature technology focused on niche applications, says the roadmap.

This move into fabs is seen as positive by semiconductor player Unisem (M) Bhds managing director John Chia.

Many of our fabless customers, such as the integrated design houses, would be able to source their requirement for wafers here instead of being totally dependent on the likes of TSMC and UMC of Taiwan.

The major foundries typically look after the bigger customers and if there are local foundries here, the medium and small players will find them an attractive source. It would be convenient,

having sourced their wafers locally, to do their back-end assembly and test with houses like Unisem, he says.

Dufu Technology Corp Bhds financial controller John Loh says bringing in more MNCs will boost second-tier E&E companies.

If more MNCs are brought in, they would look to companies such as Dufu to help frame their operations and add value. That will prove a good growth catalyst, he says.

One of the biggest problems facing the sector now is a lack of engineers, which is an issue that needs to be addressed, say both Chia and Loh.

The positive thing is that the proliferation of wafer foundries will attract greater engineering talent, which Malaysia has lost in recent years to other countries, says Chia.

However, Loh says more needs to be done to revitalise the sector. Chia concurs, saying that it is insufficient to only offer pioneer status and tax breaks to attract new investments as other countries are doing the same. Still, Loh acknowledges that it is early days yet.

Solar and lEdsGiven Malaysias experience in semiconductors, it is no surprise that solar and LEDs are tipped to be the new growth areas for E&E. The roadmap notes that the solar value chain has stages that are similar to those of the semiconductor value chain.

US-based Sunpower Corp is among a handful of solar companies with facilities in Malaysia.

The roadmap intends to help boost the solar value chain by increasing the number of silicon and solar module producers, and growing wafer and cell producers.

In terms of silicon producers, Mida has already identified several names that it would like to bring into Malaysia. As for increasing the number of solar module producers, the government will work to improve Johors attractiveness as a manufacturing base in general.

We will also assess the potential for partnerships with Singapore to attract solar investments spanning both countries. Singapore is attempting to build up solar cell production capabilities, which would complement module production capabilities in Johor, says Pemandu.

As for the LED segment, Pemandu is looking to fill the gap in the supply chain to strengthen its hold on the solid state lighting (SSL) market. In addition to creating a thriving ecosystem of SSL companies, the roadmap plans the expansion of LED packaging and equipment.

The final piece of the strategy is to grow downstream activities. Pemandu aims to turn Malaysia into a test and measurement hub. In this, it has US-based Agilent as the anchor to bring in more sophisticated products and share its technology to help grow the local vendor ecosystem. Agilent will also be a beacon for other companies going forward.

The ETP also seeks to groom local brands in the area of electrical home appliance manufacturing and help them grow an international distribution network.

The Economic Transformation Programme is Malaysias roadmap to becoming a high-income nation that is both inclusive and sustainable. Private sector-led and government-facilitated, the ETPs starting point is the implementation of concrete changes in specific areas of the economy.

SEMIcONductORSEPP 1: Executing a smart follower of strategy for mature technology fabricationThe focus will be on semiconductor fabrication plants (fab). a consortium has been formed to acquire fab assets in high-cost countries and relocate the fab equipment to Malaysia. The first fab will start operations in 2011, and four more fabs will be built by 2020. EPP 2: Developing assembly and test using advanced packaging technologyDiscussions are ongoing with a company to bring an advanced packaging service to Malaysia. If successful, it would help attract more companies. The success of the fab strategy would drive existing demand for advanced packaging services. EPP 3: Developing integrated circuit design firmsThere are ongoing discussions with several Ic (integrated chip) design companies to set up in Malaysia, with a target of 50 companies by 2020. EPP 4: Supporting the growth of substrate manufacturers and related industriesSarawak will be the focus for this industry, with a target of one substrate plant in the state by 2012 and another by 2014. at least another two more wafer substrate manufacturers will be brought in. SOlaREPP 5: Increasing the number of silicon producersThe goal is to attract one or two selected major companies each year to increase the amount of silicon produced from six kilo tonnes currently to around 170 kilo tonnes in 2020. In addition, Malaysia will develop two domestic silicon companies. EPP 6: Growing wafer and cell producersThe goal is to increase current production capacity by 10 times to 23 gigawatts in 2020 to become the second largest producer of solar cells globally. EPP 7: Increasing solar module producersjohor will be promoted as a hub for module production. The ETP will assess the potential for partnerships with Singapore to attract solar investments spanning both the island and johor. lIGHt-EMIttING dIOdESEPP 8: Developing LED front-end operationsMida will aggressively target front-end materials and substrate suppliers and epitaxy manufacturers to bring one of each to Malaysia by 2014. In addition, it will attract at least one new global company to set up wafer fabrication operations here by 2015.

Four subsectors and 15 EPPs

EPP 9: Expanding LED packaging and equipmentMida will facilitate the provision of low-cost land, infrastructure and financial incentives for lighting Mncs already in Malaysia to expand capacity and also attract new ones to set up operations here. EPP 10: Creating local solid state lighting championsa LED certification centre will be established by 2012 to verify the compliance of Malaysian products to global standards and increase global awareness. SME corp will grant working capital loans to SSL companies to help them expand. INduStRIal ElEctRONIcSEPP 11: Building a test and measurement hubMida, with a major T&M player, will work to build a complete test and measurement hub in the northern corridor, with the latter helping to bring the manufacturing of advanced and sophisticated measurement products to Malaysia, among others. EPP 12: Expanding wireless communication and radio frequency identification (RFID)The aim will be to grow the ecosystem of local outsourcing service providers in two-way radios. The ecosystem will initially serve a leading global wireless company in Penang, but eventually will make the northern corridor a more attractive site for other wireless communication Mncs. EPP 13: Growing automation equipment manufacturingMalaysia will be promoted as a manufacturing, rather than just an assembly, site to leading automation equipment manufacturers such as abb and Siemens. The target is for two more automation equipment Mncs to manufacture here by 2015.

EPP 14: Building transmission and distribution companiesThe aim is to build a cluster of transmission and distribution manufacturers, attracting multinationals such as Siemens and abb, as well as growing local companies such as Tenaga Switchgear. one of the key enablers will be the establishment of a high voltage testing lab. EPP 15: Building a home appliance manufacturing hub and international distribution networkThis will be led by a top Malaysian-owned electrical home appliance company, together with other investors. The first part is to build a strong international market by targeting fast-growing asean and Middle East markets on a multi-brand marketing platform. To support sales growth in local and new international markets, the second part will focus on building a manufacturing hub to host the entire supply chain.

Economic Transformation Programme: A Special Report Electronics & ElectricalTHEEDGE m a l aysi a | noVEMbEr 29, 2010

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Surging ahead

Economic Transformation Programme Progress Update 2 (30th Nov 2010)

Cisco will transfer its manufacturing process and skills for a wide range of routing and switching products. With funds granted by the Malaysia Investment Development Authority, Cisco will equip 1,000 Malaysians with the necessary knowledge, skills and awareness of Cisco technologies and applications to support the transfer.

The support and training will encourage the development of highly-skilled employees and knowledge-based workers critical to support the nations growth and technology progression. The ability to manufacture high-end technology products will strengthen Malaysias position as the preferred manufacturing hub in the region.

Ms Anne Abraham,Managing Director, Cisco Malaysia

Technology Park Malaysia (TPM), along with Universiti Tenaga (UNITEN) and Malaysia Multimedia University (MMU) aim to drive innovation and serve as an enabler for collaborations within the private sector. This will be done by focusing on research to transform advanced engineering and IT education sectors.

total investment: rM374 million

TPMs mandate is to nucleate, nurture and provide the appropriate platform for technology-based start-up companies to test ideas, prove scientific and technological concepts that have the potential to become international brands, thereby contributing to national GDP.

Dato Haji Mohd Azman Haji Shahidin, President/CEO, TPM

UCSI will construct a Faculty of Hospitality and Management, and create a purpose-built five star hotel in Sarawak, an international convention centre and a resort hotel in the Greater Kuala Lumpur/Klang Valley. This is to increase both quality and quantity of hospitality and tourism graduates to support the industrys ambitious growth and profit goals.

total investment: rM650 million

UCSI University is committed to strengthen Malaysias position as an international centre for Hospitality and Tourism Education as well as a prominent tourist destination. This EPP gives

close on the heels of the nine Entry Point Projects (EPPs) announced under the Economic Transformation Programme (ETP) on 25 october 2010, nine more projects were announced on 30 november 2010 by yab Dato Seri najib Tun razak, Prime Minister of Malaysia. Some of the national Key Economic areas (nKEas) outlined in the ETP will see tremendous growth as a result of these projects, which in turn will encourage overall growth in Gross national Income (GnI) and more potential jobs to drive Malaysia towards achieving a high income nation status in 2020.

us the opportunity to champion and work with other industry leaders to improve the quality of education, service professionals and increase the countrys tourist appeal.

Dato Peter Ng, Chairman,UCSI Group

The Ministry of Education, in collaboration with SEGI College, DiKA College, Taj International College, Institut Teknologi Info-Sains Mahir, MCS College, Institut Perkembangan Awal Kanak-Kanak, Kolej Uniti, Thames Technology, Iras Mewah and Institut Megatech will be conducting pre-school teacher training in 10 states. This is all part of the up-scaling of pre-school teachers in Malaysia to meet the increasing enrolment of children in pre-schools as well as the need to upgrade quality of pre-school teachers. This is the first time the government has outsourced teacher education to the private sector. The selection of these Private Tertiary Institutions (IPTS) and training centres, in line with the criteria set out by the Ministry of Education was made via competitive bidding and was open to all training centres and IPTS. total investment: rM11.4 million

We feel proud to be a part of the national agenda in shaping the future of pre-school teachers and also the future of the children whom in years to come will be our future leaders.

Dr Hajjah Roswati Binti Rahmat, Director, Regulatory Affairs, SEGI College

Tenaga Nasional will invest in several large scale projects including a large coal power plant in Perak under the Manjung Extension Development, as well as new hydroelectric power plants in Ulu Jelai, Perak and Hulu Terengganu. One of the projects also seeks to ensure power supply reliability throughout Malaysia by reinforcing power transmission infrastructure in locations such as Salak South-Mahkota Cheras, South Pantai and Puchong Perdana-Olak Lampit.

total investment: rM4 billion

These projects are vital to support our economy as it continues to grow. Increased capacity is needed to provide energy to businesses and also the grow

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