Country Economic Work for Malaysia - Islamic Development Bank

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(v) (vi) (vii) (viii) ‣ Weak innovation and business sophistication are due to low budget for research and development (R&D) Binding Constraints Facing the PPPs: They include inadequate availability and accessibility to long-term financing; and land acquisition issues/disputes settlement particularly for road projects. Critical Constraints Facing the SMEs: They include insufficient access to funding sources; weak access to markets; poor ability to absorb and retain good talent in the industry; and insufficient availability of skilled workforce. Binding Constraints for Private Sector Resource Mobilization: They include limited products offered by Islamic banking industry; narrow international base of Islamic capital market; lack of innovation; and shortage of skilled and experienced professionals in Islamic finance industry. Malaysia is not Exploiting its Full Potential of ‘Reverse Linkages’ Opportunities: Diagnostic analysis finds that Malaysia has huge potential of Reverse Linkages (RLs) opportunities through which the country can transfer its knowledge and expertise to other IDB member countries through win-win-win situation. In particular, IDB member countries can benefit from Malaysia’s Islamic financial system strengths; collaborate with Malaysia Science Academy; gain from SMEs development experiences; promote Halal industry; replicate Tabung Haji; acquire benefits from EXIM expertise; and benefit through Malaysian Technical Corporation Programme. Therefore, Reverse Linkages have been chosen as one of the major engagement pillars in the MCPS exercise. The Tenth Malaysia Plan, covering the period 2011-2015, targets an annual economic growth of 6% and to raise GNI per capita from its current level of $9,575 to $12,139 by 2015 and to over $15,000 by 2020 through inclusive and sustainable growth. In order to achieve these objectives, the New Economic Model is being implemented through an Economic Transformation Program, which envisages an investment outlay of MYR1.4 trillion ($523 billion), of which 92% will be sourced from the private sector. The Plan goals can be realized through vigorously pursuing an inclusive and sustainable growth strategy which directly addresses regional disparities and income inequality. In conclusion, the remarkable story of socio-economic transformation of Malaysia resulted from visionary and inclusive development policies of the Government. However, at this stage of economic development, Malaysia appears to be facing the so-called “Middle Income Trap”. In the postwar era, like many countries in similar circumstances, Malaysia had rapidly moved into upper middle-income group by capitalizing on low-cost skilled labor, adoption of appropriate technology, pro-business environment, openness to FDI and trade, and effective privatization policies. In the next phase of its socio-economic development, Malaysia needs to embark on more inclusive development as well as build on new sources of growth, which can propel the economy to reach high income status by 2020. Similarly, the Government also needs to tackle the growing unemployment, particularly among the young graduates, as well as incentives to reverse brain 3
drain. Further, the Government needs to fix the binding constraints, particularly related to private sector development. Both public and private sectors also need to fully exploit Reverse Linkages opportunities by transferring country’s knowledge and expertise to other IDB member countries in a mutually beneficial arrangement to achieve a win-win-win outcome. Further, South-South cooperation concept is considered a viable developmental tool, which can be enhanced through RLs. Within a sector-specific context, there are three critical players in the implementation of RL activities: (i) Provider institutions from Malaysia; (ii) Recipient countries / institutions of IDB member countries; and (iii) as a facilitator, the relevant Entities / Sector Departments in the IDB Group. The key findings of this Country Economic Work help to identify focused programs under two key pillars namely Private Sector Development and Reverse Linkages of the “IDB Group Member Country Partnership Strategy for Malaysia, 2012-2015: Partnering for Achieving the Status of High Income Country”. Further, it also helps to find out niche areas for the MCPS focused-programs to help the Malaysian private sector by fixing some of the binding constraints. The IDB Group MCPS Report was launched by the Prime Minister of Malaysia and the President, IDB Group, during the Malaysia-IDB Investment Forum held on 9-11 May 2012 in Kuala Lumpur, Malaysia. The Country Economic Work and the MCPS Report are placed on the IDB website www.isdb.org. During the Launching Ceremony, Dr. Ahmad Mohamed Ali (first from right) the President, IDB Group, presented a copy of the MCPS Report to Datuk Seri Najib Razak (center), the Prime Minister of Malaysia. On the occasion of the Malaysia-IDB Investment Forum held on 9-11 May 2012 in Kuala Lumpur, H.E. Dato’ Sri Mustapa Mohamed (first from left), Minister of International Trade and Industry of Malaysia, also attended the Launching Ceremony. 4
Page 4: Acknowledgements Appreciation for s
Page 7 and 8: ISRA : International Shari’ah Res
Page 9 and 10: (v) Foreign Direct Investment……
Page 11: (2005)), key insights emerged in tw
Page 15 and 16: macroeconomic indicators are given
Page 17 and 18: SMEs are concentrated in the servic
Page 19 and 20: easy technology adoption, pro-busin
Page 21 and 22: Kelantan with the lowest per capita
Page 23 and 24: Figure 1.12. General Growth Diagnos
Page 25 and 26: that the Government’s Economic Tr
Page 27 and 28: (ii) Low Returns to Investments app
Page 29 and 30: Figure 1.22. Malaysia's Exports by
Page 31 and 32: 43. Malaysia’s private firms are
Page 33 and 34: over the medium-term. Several initi
Page 35 and 36: growth software compared to its maj
Page 37 and 38: esearchers and technicians in R&D p
Page 39 and 40: 59. Malaysia can further enhance it
Page 41 and 42: Annex Table 1.2. Malaysia: MDGs Ach
Page 43 and 44: 64. The Malaysian experience has al
Page 45 and 46: economic growth. The ETP is expecte
Page 47 and 48: 77. According to the Global Competi
Page 49 and 50: development of infrastructure throu
Page 51 and 52: a. Northern Corridor Economic Regio
Page 53 and 54: The challenge is for financial inst
Page 55 and 56: Original Equipment Manufacturing (O
Page 57 and 58: Intensify formalisation to promote
Page 59 and 60: Sukuk market has experienced unprec
Page 61 and 62: For innovation to become an importa
Page 63 and 64:
y the United States (MYR2.3 billion
Page 65 and 66:
(vi) (vii) Sharing Eexperience and
Page 67 and 68:
institutions as well as Islamic pro
Page 69 and 70:
Liberal Foreign Exchange Administra
Page 71 and 72:
Issues/Challenges Facing the Islami
Page 73 and 74:
Funding from Government of Malaysia
Page 75 and 76:
programmes in the country. Initiati
Page 77 and 78:
labeling and branding of Halal prod
Page 79 and 80:
to over 200 industrial estates or p
Page 81 and 82:
member countries can be provided te
Page 83 and 84:
Figure 6.5: MATRADE Business Strate
Page 85 and 86:
offered by the 35 MTCP training ins
Page 87 and 88:
case of the economies in transition
Page 89 and 90:
Key Challenges Facing the MTCP
Page 91:
iii. Conclusion 185. Above diagnost
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Country Economic Work for Malaysia - Islamic Development Bank

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