NEW ECONOMIC MODEL, A CATALYST TO UNLEASH MALAYSIA`S GROWTH POTENTIAL

KUALA LUMPUR, March 30 (Bernama) -- The New Economic Model (NEM) will be the
catalyst to unleash Malaysia's growth potential in enabling the country to reach
a high income status, the National Economic Advisory Council (NEAC) says.

The NEM to be achieved through an Economic Transformation Programme (ETP)
is one of four key pillars to propel Malaysia towards being an advanced nation,
it said in the New Economic Model For Malaysia Part 1 Report released here
Tuesday.

The other pillars are the 1Malaysia, People First, Performance now concept
and the Government Transformation Programme (GTP), whilst the last is the 10th
Malaysia Plan (2011-2015) to be unveiled later this year.

The report says Vision 2020 would not be possible without economic, social
and government transformation.

"The ETP is meant to transform Malaysia by 2020 into a developed and
competitive economy, whose people enjoy a high quality of life and high level of
income from growth, that is both inclusive and sustainable," it added.

The aftermath of the 1997/1998 Asian financial crisis saw the economy
slowing and the country caught in a middle income trap of between low-wage
producers and highly skilled innovators, without a viable high-growth
strategy.

Hence, the policies and strategies used to achieve the current state of
development is now inadequate for the next stage of development, with economic
growth coming at considerable cost to the environment and which has not
benefitted all segments of the population.

There is serious risk that the economy may regress if fundamental changes
are not made and delayed actions mean, Malaysia will be left behind, the report
notes.

The NEAC said "The Growth Report" cautioned that of the 13 countries which
recorded more than seven per cent growth over the past 25 years, only six
eventually managed to attain high income status.

Therefore, Vision 2020 with a new economic model is not possible without a
transformation of the economy, the supporting policies and effective delivery of
government mandates.

The NEAC also advocates a new, bold approach to obtaining the right
eco-system where efficient markets can operate to produce equitable outcomes.

It said the vicious cycle of vested interests had to be broken to remove
distortions and rent-seeking activities, all of which undermine productivity and
entrepreneurship, so vital in creating a vibrant economy.

"Only through a drastic and comprehensive ETP can we break the barriers and
achieve a new economy as contemplated in Vision 2020," it said, adding that, the
transition period could be painful for households as well as for firms.

In the meantime, the definition of the social safety net will need refining
and the provision of programmes enlarged to include not just the disabled and
elderly but also displaced workers.

Furthermore, some form of industrial transformation funds may also be
necessary to mitigate the impact on displaced firms.

Not only must the cost of doing business be lowered, the cost of failures
too must be reduced to allow for change and encourage risk-taking, the report
states.

Although absolute poverty has largely been eradicated, a hefty 40 per cent
of Malaysian households remain in the low income category, earning less than
RM1,500 (US$1=RM3.2) a month.

The report says this group required specific policy interventions,
especially on capability development, in order to achieve upward mobility.

Income disparities between ethnic groups and regions too must still be
actively addressed, it highlighted.

While economic growth will leverage on economic density and agglomeration,
inclusiveness requires that development be equally spread out and opportunities
equitably accessible, the report highlights.

-- BERNAMA