Agenda 

• How resilient is the Malaysian economy?
  • Recent trends
  • Prospect
• Investment prospects and opportunities
• Conclusion

Key Messages

Malaysia remains resilient to external challenges

• Domestic demand remains the dominant driver of growth
• Unrelentingly consumer spending
• Private investment growth supported by public-and private-initiated projects

Macroeconomic fundamentals remain supportive of growth

• Diversified sources of growth
• Diversified export and product markets
• Stable labor market conditions and young demographic dividends
• Conducive investment destination for FDI
• Strong and stable financial system

Strong pipelines of investment opportunities

• Public infrastructure projects
• Manufacturing, services, oil and gas sectors
• Construction and real estate development

KEY MESSAGES

Malaysia remains resilient to external challenges

• Domestic demand remains the dominant driver of growth
• Macroeconomic fundamentals remain supportive of growth
• Malaysia to be more regionally and internationally integrated

East Asia financial market: Where are we?

• Asia’s economic and financial system held up well
• Macroeconomic conditions are supportive of financial market
• Rising incomes, urbanization, demographic dividends will spur demand for goods and financial services

Regional economic and financial integration: Where next?

• Regional economic & financial integration to gather momentum
• Forces shaping the dimension of integration
• Exploring business and market opportunities

Agenda

• The digitalization of everything
• E-commerce: Driver of catalytic change
  • Background
  • The good
  • The challenge and issue
  • What needs to happen
• Conclusion

CONCLUSION

• Global E-commerce sales estimated US$1.9 trillion in 2016. By 2020, sales are projected to double to US$4.1 trillion.
• In Malaysia, E-commerce contributed RM68 billion in 2015 or 5.9% of GDP. The National ECommerce Strategic Roadmap sets a target to double the growth of E-commerce market from 10.8% to 20.8% and reach a GDP contribution of more than RM170 billion by 2020.
• Businesses, large and small must leverage on the powerful tools of technology to integrate into global E-commerce marketplace.
• E-commerce is the gateway to future for expanding sales and gaining wider market access.
• Create a conducive eco-system to accelerate the adoption of E-commerce amongst SME.
• Malaysia has the demographics dividend, ready infrastructure and supportive government interventions to drive the growth ecommerce.
• However, there remain challenges and barriers to hinder e-commerce growth. These are lack of offerings, unclear value proposition, concerns about security payments and privacy of personal data, low buyer adoption and low seller participation.
• In a nut shell, businesses must arm themselves by leveraging on the digital technology, improve themselves with digital tools and keep pace with the trends in order to capture the dividends via E-commerce.

Main features of the EMC

• Employers to assume responsibility for their FW from the point of recruitment to their return upon the expiry of contract
• Payment of the levy to be the responsibility of employers
• Accommodation provided by employers to meet minimum standards set
• Security deposit to be paid by employers hiring migrant workers

OUTSTANDING ISSUES NEED REDRESS

The industry stakeholders have reiterated their request for Government to address the following long-running issues of FW before implementing the EMC:

• Transparency in FW application process
• Process for the application of FW to be made simpler, assured and efficient
• The deferment gives Government’s breathing space to deal with registration of illegal or undocumented workers
• Step up enforcement on illegal workers once the above issues have been fully addressed

Employers have complained about the high cost of FW recruitment.

• Called for the elimination of profit-oriented private agents
• Manageable level re-hiring cost should be reduced to encourage employers to convert their illegal workers
• Cutting the overall cost of recruitment and simplifying the process can help reduce the high incidence of illegals. Also to ensure employers do not revert back to hiring illegals

ENFORCEMENT CARD (E-CARD)

Government to issue E-card to employers applying to re-hire illegal FWs

• Open to illegals workers attached to employers in Peninsular Malaysia; must not blacklisted; passed a health screening; non-UNHCR card holder
• For 15 source countries - Indonesia, Bangladesh, Philippines, India, Kazakhstan, Cambodia, Laos, Myanmar, Nepal, Pakistan, Sri Lanka, Thailand, Turkmenistan, Uzbekistan and Vietnam
• Registration period is from 15 Feb up to 30 June 2017. Registration is free
• E-card act as a validation for workers before they get legal documents from respective countries/embassies to enable employers to apply for rehiring legally
• E-card has security features such as biometrics, name of employer, company registration number, etc
• E-card is only valid for 1 year, up to 15 Feb 2018
• Illegals face repatriation when E-card expires

KEY POINTS

• Big Picture Navigator
• Domestic Economic and Business Environment
• 2017 Sector Outlook

WHAT NEEDS TO BE DONE

• Housing affordability is a large and structural problem
• Causes of affordability problems are complex and diverse
• Addressing affordability problems require a broad variety of strategies to:

1. improve the efficiency of housing markets
2. cut the cost of infrastructure to go with housing
3. release more land and relaxing regulations
4. plan where to put more houses
5. increase supplies of affordable housing
6. respond to housing-related financial pressures on individual households
7. promote innovative housing finance options

Agenda

• What is Trump’s plan?
• How will Trump’s policies impact on Global financial markets, US economy and Malaysia economy
• Conclusion

CONCLUSION

• We must have more clarity on Trump’s policies direction to give a better assessment
• Pending the extent of policy changes, trade tensions and fiscal stimulus have offsetting impacts on the US economic growth in the medium term
• The failure of TPPA means a missed opportunity for Malaysia exporters to sell more in TPPA’s participants countries. The affected sectors are electronics and electrical products, rubber products, palm oil as well as automotive components
• Expanding trade in ASEAN and countries in which Malaysia has Free Trade Agreements (FTA) with as well as the push for RCEP will be positive for boosting Malaysia’s trade prospect
• Malaysia is currently working at having FTAs with four of the 12 countries, namely the United States, Canada, Mexico and Peru, which were participating members of the TPPA
• The impact of shaken trade deals on Malaysia’s economic growth should be manageable as counteracted by domestic growth drivers, including the planned mega public infrastructure spending

Agenda

• Coping with increasingly complex environment
• Malaysia: Be prepared to face looming challenges
• 2017 Business sector outlook

WHAT NEEDS TO BE DONE?

• Must take all necessary actions and initiatives to strengthen our economic fundamentals, restore confidence and address the growing public trust deficit
• Policy makers must remain vigilant, holding tight the reins on credible economic and financial management policies to keep the economy going
• Confidence is the key to stemming the ringgit’s slide. While external factors were held responsible for the falling value of RM/US$, a conducive and stable ecosystem is equally vital to encourage domestic investors (residents) and foreign investors to increase as well as retain their investments (money) in the country
• Increased transparency and enhanced communication are essential ingredients of an effective implementation of policies. Good communication can enhance policy effectiveness by influencing expectations and by reducing uncertainty
• Fiscal consolidation path should continue to reduce deficits and debt accumulations. Focus on reforms to achieve spending efficiency and productive outcomes with zero tolerance of wastage and leakage
• Continue to address domestic constraints such as slow productivity, lack of innovation, haphazard regulatory reforms as well as outmoded legislation and the heavy weight of administration–oriented rules to uplift the country’s economic growth and investment potential. The policy makers must catch-up opportunities related to creativity, innovation and digitalization
• Corrective measures to strengthen the shrinking current account surplus via exports enhancing, ports and insurance services expansion, boosting tourism and imports substitution. A critical review and thorough assessment, including the sequencing of both public and private sectors’ projects to ease pressure on imports
• Swiftly advancing structural reforms in the labour market and innovation that can boost productivity and unleash Malaysia’s growth potential

Agenda

• Global economic activity pick pu pace
• Economic outlook for 2017 - where is the economy heading?
• Sources of growth - Moving on twin engines
• Issues and challenges
• Managing risks from household indebtedness
• Conclusion

Conclusion

• The global economy continues to stay on positive track, buoyed by expectations that the Trump administration’s reflationary policies will boost the growth trajectory of the US economy and corporate earnings, helping to lift the global growth prospects.
• But, downside risks to global growth still prevalent. These include the potential implications from the Trump administration’s shaping of trade and economic policies, the impact of higher US interest rates, the rise in protectionism, potential complications associated with the Brexit’s negotiation process as well as the political uncertainties associated with a slate of impending European elections.
• The Malaysian economy will perform better this year. BNM estimates real GDP growth of 4.3-4.8% in 2017 vs. SERC’s 4.3% (4.2% in 2016), supported by continued expansion of domestic demand as well as improved export growth. The growth estimate is premised on the strength of consumer spending, which may face hurdles from higher cost of living, cost-driven inflation pressures and weak sentiments. Exports too could falter if there is trade flow disruption from the trade protectionism mindset as well as financial markets volatility.
• Inflationary pressures are developing in recent months, reflecting the combined impact of fuel prices adjustment, the spillover effect of the ringgit’s depreciation on imported goods and services and other cost-related pressures. The central bank estimates headline inflation to average 3.0-4.0% in 2017, meeting SERC’s estimation.
• We do not expect BNM to ease interest rate further going by continued expansion of economic growth amid the developing of cost-induced inflationary pressures, inflicted by higher fuel prices. We expect BNM to keep the overnight policy rate (OPR) at 3.00% in 2017 for now.
• The ringgit appears stabilizing though the downside pressure remains prevalent. With the Trump’s pro-business and pro-growth policies lifting higher inflation risk, underpinning the Fed’s rate hikes and hence, support the US dollar rally at least in the first half-year of 2017. BNM’s foreign exchange market stabilization measures have seen some improvement in balancing the supply and demand of the ringgit as well as the conversion of export proceeds into ringgit. BNM uses market consensus of RM4.40 per US$ for this year vs. SERC’s RM4.20-4.40 (RM4.4860 at end-2016).

CONCLUSION

• The TPP can bring about a larger market to Malaysian entrepreneurs, especially easier access to the existing 8 trading partners and 4 relatively new markets.
• The ease in access resulting from greater tariff elimination and reducing non-trade barriers could facilitate the whole cross-border trading activities.
• TPPA has also place some emphasis on the new trend of doing business by including commitments on E-commerce.
• The TPPA puts in place sets of rules on e-commerce to ensure that national regulations do not restrict cross-border data flows, or impose localisation requirements as pre-requisites for serving consumers in that market, or impose import duties on electronically transmitted products. Businesses can gain economies of scale by serve multiple TPP markets from one location. SMEs seeking to serve overseas markets would certainly benefit from the savings of establishment costs.
• While TPPA and E-commerce may enhance market access, SMEs particularly smaller local brick and mortar places may face competitive challenges from other foreign players. Although companies may leverage on e-commerce to expand their markets, the gap relative to the savvier e-commerce companies from matured e-commerce TPP countries such as the United States and Japan calls for capacity building. Therefore, to stay ahead, we need to intensify capacity building programmes for the SMEs, while enhancing and widening the e-commerce infrastructure.
• Despite the challenges, there are now more opportunities for ready-SMEs to reach out to a wider market access for goods and cross-border services arising from greater tariff elimination, lowering of non-trade barriers, and lower cost derived from the effectiveness of e-commerce.