Speech - 13TH Annual CGS-CIMB Malaysia Virtual Corporate Day 2021
Minister of Finance Malaysia
YBhg Dato’ Abdul Rahman Ahmad
Group Chief Executive Officer, CIMB Group
Puan Ruzi Rani Ajith,
Ladies and gentlemen and esteemed guests,
1. It gives me great pleasure to be here this morning. Thank you to the organisers, CGS-CIMB, for inviting me to give the opening address at today’s 13th Annual CGS-CIMB Malaysia Virtual Corporate Day 2021.
2. Throughout the years, the annual CGS-CIMB Corporate Day has grown to be the anticipated event for investors and corporates alike, where we discuss and share about opportunities for growth in the increasingly challenging markets.
3. I am sure this latest instalment will serve as a great platform to discuss the way forward for the industry, especially on areas that could redefine the future of Malaysia’s capital markets and business landscape following an eventful 2020, and with the COVID-19 uncertainties still lingering.
4. This includes structural reforms such as how digitalisation will be a long-term trend underscoring growth and economic resilience, as well as how to prioritise sustainability and promote the circular economy. All these are among the major cornerstones of economic growth in this new normal, as we continue to learn and adapt from the COVID-19 pandemic.
RECOVERY PREMISED ON SOLID FUNDAMENTALS
Ladies and gentlemen,,
5. For Malaysia, 2020 carried its own unique significance. Instead of Vision 2020 – the year of transformation – we grappled with the double whammy of a health crisis and an economic contraction.
6. Thankfully, our swift response protected most of our economy from a potentially catastrophic depression. We found firm footing amidst our handling of the outbreak, along with the Government’s strong resolve in implementing four economic stimulus packages worth RM305 billion or approximately 20% of our GDP, namely Prihatin, Prihatin SME plus, Penjana and Kita Prihatin. These contributed an estimated 3.7 to 4.0 percentage points to Malaysia’s 2020 GDP
7. Thankfully, our swift response protected most of our economy from a potentially catastrophic depression. We found firm footing amidst our handling of the outbreak, along with the Government’s strong resolve in implementing four economic stimulus packages worth RM305 billion or approximately 20% of our GDP, namely Prihatin, Prihatin SME plus, Penjana and Kita Prihatin. These contributed an estimated 3.7 to 4.0 percentage points to Malaysia’s 2020 GDP
8. Steps to create and retain jobs under the stimulus packages helped bring unemployment down from its peak of 5.3% to 4.7% in October. Encouragingly, other main economic indicators also point to further recovery in the first quarter of 2021.
9. Our handling of COVID-19 has also received acknowledgement by experts such as the Johns Hopkins University, ranking our case fatality ratio of 0.41% to be within the lowest 10% globally. In fact, Malaysia has fared much better than regional peers like Thailand (at 0.71%), the Philippines (at 1.94%), Vietnam (at 2.32%), and Indonesia (at 2.95%), proving that we are on the right track in terms of containing the pandemic.
10. And now, with positive news that the Government has secured vaccines for close to 83% of our population, we should be able to glimpse a much brighter light at the end of the Covid tunnel.
11. All these efforts have built a strong foundation towards a speedier economic recovery in 2021, supported by a better global economic outlook, particularly in Asia. The Asian Development Bank, for example, anticipates 6.8% growth for developing Asia, and 7.2% for South Asia.
12. The consensus view shows opportunities abound for Malaysia. Our own projection for the GDP to grow between 6.5% to 7.5% this year, is in line with international agencies’ such as the World Bank (at 6.7%) and the IMF (at 7%), to name a few.
13.And the market should not expect any less from us. Moving forward, this Government is committed to ensure we continue on this economic recovery path in a sustainable manner without the slightest compromise to public health.
CATALYSING THE ECONOMY WHILE BALANCING CURRENT AND FUTURE NEEDS
Ladies and gentlemen,
14. Indeed, how successfully Malaysia emerges from this crisis will depend on how we manage this year of transition in 2021. It is a challenge across all economies, to manage national resources prudently, while also balancing current and future needs. As difficult as it may be, any decision must be for the benefit of the Malaysian people and its business community.
15. And this is how the Government is doing this:
a. Firstly, we did not hesitate to expand our fiscal position in the near term to support the counter-cyclical economic recovery packages and the nation’s largest national Budget for 2021 at RM322.5 billion. Yes, this is Malaysia’s biggest ever budget, but this was also thought through with a clear strategy for fiscal consolidation to, among others, achieve a deficit of below 4% under our Medium-Term Fiscal Framework. The Government is also working on the Fiscal Responsibility Act to institutionalise fiscal prudence, governance and transparency based on global best practices.
b. Secondly, the Government is also committed to strengthen its revenue base through a multi-prong strategy, beginning with regulating the shadow economy, which is estimated to be roughly 18% of Malaysia’s GDP or approximately RM300 billion in 2019. Additionally, we are executing our Medium-Term Revenue Strategy, which among others, will reduce our dependency on commodities and further enhance our tax framework to reduce leakages. I assure you, however, that any review will ensure a tax regime that is equitable to all, is appropriately-timed and takes into consideration its impact to the Rakyat and businesses.
c. Thirdly the proper execution of Malaysia’s large-scale projects will drive socio-economic growth in the coming years. These include those under Budget 2021 such as:
i. The RM7.4 billion JENDELA digital network initiative, with the first phase targeting 7.5 million premises with gigabit speed fixed-line broadband, and 96.8% 4G mobile coverage with better mobile broadband speed;
ii. Infrastructure projects including the Pan-Borneo Highway, Gemas-JB Electrified Double Tracking Project, KVDT, the MRT3, and the JB-Singapore RTS. This year alone, the Government has allocated RM15 billion for these projects, expected to provide high multiplier effects from the construction phase all the way beyond the projects’ completion.
iii. Rural infrastructure projects to reduce the urban and rural development gap, for which RM2.7 billion has been earmarked; and not to mention, the five main economic corridors that will also receive a fiscal boost to facilitate investments and growth.
d . The fourth way on how we plan to steer Malaysia out of this crisis is through the 12th Malaysia Plan (12th MP), which has had to be extensively re-written given the surprise that Covid-19 had sprung upon us all. The 12th MP marks the sixth and final step of our 6R Economic Recovery Plan, and will be the starting point of various reforms to support our long-term and more sustainable economic growth. It will cover, among others, new high-impact growth areas supported by the national digitalisation agenda, and greater public-private partnership. The 12th MP will also serve as a roadmap to achieve Malaysia’s Shared Prosperity Vision 2030.
OPPORTUNITIES ABOUND TO INVEST IN MALAYSIA
Ladies and gentlemen,
16. Now I would like to specifically talk about Malaysia’s business environment. The Malaysian Government understands how crucial it is for companies to have a conducive, vibrant business environment in which to thrive, premised on, among others, the rule of law, good infrastructure and policy certainty. On this, two recent independent reports have clearly validated Malaysia’s attractiveness:
a. First, a recent report by EY1 citing Kuala Lumpur as a key location for MNCs and the international business community. This considers factors such as integrated infrastructure facilities, diversity and quality of human resources, as well as our country's readiness to adopt digital technology. I believe this is not an overstatement. We have been consistent in continuing various tax and investment incentives, providing new ones through PENJANA, and further extended or expanded them through Budget 2021. This includes special tax rates for selected manufacturing companies that relocate to Malaysia and make new investments; and preferential tax rate of between 0 – 10% for 10 years for companies with significant economic multiplier effect, or for pharmaceutical companies, particularly those producing vaccines that intend to invest in Malaysia, to name a few.
b. Second is a recent report by Bloomberg2 ranking Malaysia in fifth place among emerging economies as a key destination for investment and businesses, on the back of potential rapid economic recovery, stable fiscal and financial position and the ability to contain and alleviate the COVID-19 pandemic.
17. Ladies and gentlemen,
a. Despite the tumultuous 2020, we have seen continued FDI and DDI with a total of RM109.8 billion approved investments involving close to 3,000 projects in the manufacturing, services and primary sectors for the first nine months of 20203 . Note also that through Penjana Kapital, we recently facilitated the commitment by 8 international venture capital fund managers together with the Government to invest up to RM1.57 billion into Malaysia start-ups in the fields of fintech, edutech, agritech, mobility and AI, which are set to create 1,800 high-skilled jobs in the process.
b. Additionally, despite Fitch’s revision of Malaysia’s sovereign ratings (which incidentally, was one of around 100 countries facing COVID-induced sovereign rating downgrade in 2020), demand for Government bonds remained high with bid-to-cover ratio of 2.6 times for a 10-year government sukuk issued in early December. This was a solid recognition of Malaysia’s crisis response efforts and strong economic fundamentals.
18. However, there is a major caveat to our economic recovery and growth. Rising daily infections could undermine efforts to achieve our forecast and projections in 2021 and beyond. As such, we must all continue to be vigilant. We may have won many battles, but we must win the war against Covid-19. As such, Malaysians – businesses and individuals alike – must not be complacent. Let’s stand united against COVID-19, and we shall prevail.
FOCUSING ON GROWTH SECTORS TO CREATE 500,000 JOBS
Ladies and gentlemen,
19. Next, I would like to talk about how the Government aims to create 500,000 jobs this year, one of the biggest agendas under Budget 2021. For this, apart from RM3.7 billion allocated under the JanaKerja initiative, which includes hiring incentives; reskilling and upskilling and short-term employment in the public sector and among GLCs; it is equally important to note that this is the first time in Malaysia’s history that the Government has set up a National Employment Council, chaired by the Prime Minister himself, and with participation from relevant Ministries such as MOF, Education, Higher Education and Human Resource. This shows seriousness on the part of the government to generate employment
20. But more than that, the Government is also serious about generating the supply of jobs, and this is done not only by matching workforce supply and industry demand, but also by supporting specific sectors, particularly high-growth ones. These include:
a. First, the services sector, which is expected to provide 38.3% of Malaysia’s GDP in 2021, will be firmly supported through Budget 2021. We are doing this through, for example, RM1.5 billion wage subsidy and recovery support for the tourism and retail sectors; and the RM10 billion Special Relief Financing, particularly for those in the wholesale and retail sector including the services sector, which is expected to provide 38.3% of Malaysia’s GDP in 2021, will be firmly supported through Budget 2021. We are doing this through, for example, RM1.5 billion wage subsidy and recovery support for the tourism and retail sectors; and the RM10 billion Special Relief Financing, particularly for those in the wholesale and retail sector including
b. Secondly, the services sector, which is expected to provide 38.3% of Malaysia’s GDP in 2021, will be firmly supported through Budget 2021. We are doing this through, for example, RM1.5 billion wage subsidy and recovery support for the tourism and retail sectors; and the RM10 billion Special Relief Financing, particularly for those in the wholesale and retail sector including
c. Third, , we are also committed to the growth of our micro enterprises and SME sector, which contribute 38.9% to the nation’s GDP, and 48.4% of employment opportunities. Thus far, we have deployed RM24 billion for over 1.4 million SMEs through soft loans, grants, upskilling and reskilling incentives, and efforts to strengthen the domestic value chain.
21. So, where do we go from here? I would like to highlight several possibilities and opportunities:
a. The need to reset and reform certain institutional arrangements is clear;
b. The role of GLCs and GLICs in nation-building;
c. We have an agricultural prowess that can be upscaled through agritech, crop diversity and downstream development;
d. We must ramp up our expertise in green technology, such as solar panel production and ‘green’ building;
e. We must build on our leadership in the global Islamic finance and the US$1.4 trillion global halal market, and on this note, we should consider using blockchain as tracing technology for halal F&B;
f. We still have not fully explored fintech, and related to this, Bank Negara just issued its policy document on digital banking;
g. There are many other areas that can be developed under this new norm, like edutech, mobility and AI; and lastly
h. Under sustainability and ESG, socially responsible investments and the circular economy are untapped opportunities.
22. This list is not exhaustive but these are among the opportunities that the Government will be looking at in the near future. Government welcomes more fresh ideas from all of you, captains of industry, and we will surely try our best to facilitate your investments in existing and new areas, to further propel your businesses and the economy forward.
RESILIENCE OF OUR CAPITAL & FINANCIAL MARKETS
Ladies and gentlemen,
23. Allow me to also touch briefly on the dynamism and resiliency of our capital markets, which continue to be the main platform in mobilising savings and investments despite the COVID-19 pandemic.
24. As at the end of 2020, our capital market is twice the size of our GDP, valued at approximately RM3.4 trillion. This is represented by RM1.8 trillion in total equity market capitalisation, and RN1.6 trillion in total value of bonds and sukuk outstanding.
25. Despite a volatile and uncertain environment, the FBM KLCI was the best performing market4 in the region in 2020, registering a 2.4% increase compared to a decline of 6% in 2019.
26. Throughout 2020, we saw our equity market becoming more vibrant, dynamic and resilient, with increase in average daily trading value to RM4.2 billion, way above its three-year average of RM2.3 billion. A record daily volume of 27.8 billion shares was achieved in the same month, a level not seen since a decade ago.
27. In terms of the total assets managed by fund managers, we saw growth of 7.9% to RM888 billion as at end-November 2020.
28. Malaysia has also developed a strong banking system, with excess capital buffers of over RM120 billion, more than three times the levels seen during the 2008/09 Global Financial Crisis, which reflects its capability to withstand potential headwinds in credit and market losses.
29. In terms of the strength of our Ringgit, we are one of the top performers in the region5 , with 1.7% increase against the US dollar. This was partially contributed by the recovery in prices of commodities, as well as the positive non-resident inflows of RM33.6 billion it in our bond market from May to November 2020.
30. Against this backdrop, Malaysia is en route to issue its first sustainability bond in 2021. Incentives for future SRI green sukuk is also further encouraged through the continuation of the RM2 billion Green Technology Financing Scheme.
31. Looking at how Malaysia just issued its first ever all-digital sukuk Prihatin in 2020, which was oversubscribed, the latest push towards SDG-related financing presents an exciting new space for Malaysia. This, combined with our leading presence and expertise in global Islamic finance, certainly opens new doors for more of such opportunities in the capital markets.
Ladies and gentlemen,
32. Admittedly, 2020 was a difficult year for many. Recovery will take time, and this year may pose challenges of its own. For the Government and specifically, the Ministry I serve, we are committed to provide a conducive environment for investments and businesses. Together, let’s explore newer and more efficient ways to spur our socio-economic growth, while implementing balanced policies that will help us achieve real shared prosperity in the years to come.
33. Lessons learned from past crisis allow us to reinvent ourselves, and to establish new growth areas that are relevant to the ever-changing global landscape, now accelerated by the COVID-19 pandemic. We must be agile or risk falling behind.
34. There is so much room for us to grow together, and we must take full advantage and position ourselves to benefit from the 2021 global economic rebound, and to build resilience for the future.
35. I hope this will set the tone for the deliberations and conversations throughout this event, especially in terms of leveraging on digitalisation and sustainability to propel Malaysia under the new normal.
36. On that note, I would like to again thank the organisers, CGS-CIMB for their efforts. I wish everyone a productive day ahead and a very successful conference.
37. Thank you.