AGENDA

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

CONCLUSION

• We must have more clarity on Trump’s policies direction to give a better assessment
• While President-elect Trump’s rhetoric campaign pledges may be watered down when governing, history suggests that presidents tend to carry out their major campaign promises. What is needed is to ensure “checks and balances” in Congress
• The focus will be on who he will appoint to the Trump cabinet and those picked as adviser in his economic think-tank
• Financial markets will keenly watch any leadership change in the Federal Reserve as the terms of Fed chairman Janet Yellen will expire in February 2018. Trump has been critical of her performance
• Pending the extent of policy changes, trade tensions and fiscal stimulus have offsetting impacts on the US economic growth in the medium term
• The impact of shaken trade deals on Malaysia should be manageable as counteracted by domestic growth drivers, including the planned mega public infrastructure spending. Malaysia may consider to establish Free Trade Agreements (FTA) with the US, Canada and Peru

AGENDA

• Economic prospects for 2017
• 2017 Budget
  • Federal revenue - Where does the money come from?
  • Federal spending - Where does the money go to?
• Key measures and implications
• Conclusion

CONCLUSION

• Broadly, the tax incentives, measures and initiatives announced in the 2017 Budget are expected to have a moderate positive impact on the economy and capital market over the medium-term.
• Growth prospects remain positive yet challenging. The Ministry of Finance’s forecast of real GDP growth of 4.0-5.0% for 2017 appears on the high side, 4.0-4.5% is a more realistic target (2016E:4.0-4.5%).
• Risks to outlook could come from lingering external uncertainties (financial market volatility induced by higher US interest rate, unresolved issues related to Brexit, China’s economic rebalancing) as well as the strength of domestic demand.
• Effective implementation of the Budget’s programs and projects are crucial.
• Higher allocation with poor spending efficiency in terms of wastage and leakages, and worse still, mismanagement of public funds and corruption, the intended fiscal multiplier impact will be muted.
• So, it is not about how much money is allocated and spent, but how well the allocated money is spent.
• The biggest winners are bottom 40 households and 1.6m civil servants.
• Sector winners are SME, tourism, agriculture, construction, auto and consumer. The telecommunication sector is the key loser.

2017 BUDGET PROPOSALS - THREE PRIORITIES

Competitiveness

• Design a competitive tax rate to sustain as well as spur more investment
• Malaysia’s regional peers are ahead of the curve

Management of foreign workers, minimum wages

• Predictable and consistent policy
• More engagement with the industry players

Property sector

• Prevent an over-adjustment in the sector
• Review of selective propertycooling measures

GATHERING EXTERNAL HEADWINDS THREATHEN TO DAMPEN MALAYSIA’ ECONOMIC PROSPECTS

• Multiple external and domestic headwinds (global recession risk, slowing China economy, Brexit’s induced uncertainties as well as the ringgit’s volatility ) pose great challenges to Malaysia’s economic prospects.
• Sustaining domestic demand is paramount to counteract domestic economy from reeling external shocks.
• While measures to support consumer spending should continue, strong private investment activity needs to be sustained to create jobs.
• Must calibrate short-to medium-term measures to strengthen our economic and financial resilience.
• Continued fiscal consolidation whilst providing targeted fiscal support.
• With our export engine is under threat, 2017 Budget should focus on the following thrusts:
   
  1. Strengthening the nation’s competitiveness for the next take-off
  2. Sustaining domestic demand
  3. Enhancing exports capacity
  4. Safeguarding domestic price and financial stability

Conclusion

• Brexit raises fears of a global recession and financial contagion
• Brexit uncertainty will escalate the risk of recession in UK. Prolonged negative spillovers will dent the recovery of the EU
• Prompt policies intervention to safeguard financial stability as well as adopting pro-growth measures
• Malaysia will be affected via both trade and financial channels but should remain manageable
• Malaysia’s decent economic growth has been propelled by the strength of domestic demand, albeit slower amid anemic export growth
• Amid the limited fiscal space, selective and targeted fiscal spending programmes are expected to cushion domestic economy
• Bank Negara Malaysia’s policy priority is to safeguard financial stability. A cut in interest rates is warranted if the downside risk to GDP growth rises

Executive Summary

We live in a Big Data environment today. The term “Big Data” refers to massive amounts of data in multiple formats generated inside and outside organizations on day-to-day basis. The three main characteristics of Big Data are commonly referred to as 3V's: (1) volume, i.e. massive amounts of data; (2) variety, i.e. structured, semi-structured and unstructured data generated from multiple sources; and (3) velocity, i.e. data generated at fast speeds. The explosive growth of semi-structured and unstructured data — just think of social media postings — is a key factor that lies behind the Big Data phenomenon. It is estimated that semi-structured and unstructured data account for 80% to 90% of all data. Traditional data technology cannot handle these data efficiently and effectively, and this implies that organizations were mainly relying on just 10% to 20% of all data to guide their decision making in the past. The emergence of Big Data technologies has enabled organizations to leverage Big Data and discover previously hidden insights.

Big Data can provide richer, more granular and faster insights to power smarter and faster decision making in a wide range of business problems. Procter and Gamble (P&G) searches for new product ideas from customers' comments on social media; Merck, a US-based pharmaceutical firm, leverages Big Data and predictive analytics for deeper root-cause analysis to improve production yield; United Parcel Service (UPS) analyzes real time road traffic data for route optimization; and Celcom delivers targeted promotions to customers based on their actual behaviors. Several reputed research centers found that firms with higher business analytics competency outperform those with less. International Data Corporation (IDC) found that analytically oriented firms are 20% more likely to be among the most competitive within their respective industries. According to Gartner, firms that use predictive analytics may increase profitability by 20% by 2017. A joint research by MIT Center for Digital Business and McKinsey's Business Technology found that data-driven firms perform on average 5% more productive and 6% more profitable than their competitors. These findings show that there is a strong case for Big Data adoption.

Big firms are generally good at leveraging data in their decision making. In contrast, smalland medium-sized enterprises (SMEs) are generally less data-driven and rely more on gut feeling and past experience in their decision making, hindered by smaller data sets and budget for technology investments. Nevertheless, in today's Big Data environment with increasing availability of quick-to-deploy, affordable and flexible technology products, SMEs have better and cheaper access to data, and this represents a big opportunity for them to develop Big Data capabilities to win in the ever more competitive marketplace. SMEs can leverage cloud-based products which require no hardware, no setup time and can be 6 deployed with just a few mouse clicks. These products also have affordable and flexible pricing plans that allow users to make incremental increase as their needs grow. Some cloud-based analytics products also provide access to external data, e.g. Google Analytics provides access to web traffic data and IBM Watson Analytics provides access to Twitter.

Big Data adoption is picking up across the world with more and more firms jumping on the bandwagon. IDC forecasts the global Big Data technology and services market to grow robustly at a compound annual growth rate (CAGR) of 23.1% from 2014 to reach USD48.6 billion in 2019. However, there is a huge Big Data talent shortage. The US alone is expected to face a shortage of 140 000 to 190 000 workers with deep analytical skills as well as 1.5 million managers and analysts with know-how of Big Data analysis to make effective decisions by 2018. As a late comer in the industry, Malaysia too lacks Big Data talent. According to Malaysia's Minister of Higher Education, there were about 4 000 Big Data scientists in 2014 and an additional 12 000 will be needed in the next five years. SMEs are generally seen as less attractive employers compared to big firms. It will therefore be less attractive for SMEs to embark on Big Data projects since it is useless to invest in the necessary infrastructure if no one is there to make sense of data and make insights actionable. SMEs which lack internal Big Data talent can consider engaging external consultants instead of developing an in-house team, or turn to Kaggle for help — an online platform that matches data-related requests with data scientists from around the world at a far more affordable cost.

It is a tough task to deliver value from Big Data, even for big, data-driven firms. Many big firms which are committed in Big Data and advanced analytics failed to achieve the big impact they expected. Nevertheless, there are also plenty of successful examples where firms have been able to improve their top-line and bottom-line performances. To increase chances of success, firms should develop a data-driven culture throughout their organizations; carefully evaluate the business case of their proposed Big Data projects; and clearly define the specific outcomes, i.e. think of what to ask of the data, how the firms will react to the answers, and what are the actionable operational measures.

Data is the new oil. Firms that are not data-driven risk of being outcompeted by those that are. The complexity of today's business environment warrants them not to only rely on gut feeling and past experience but to adopt a more data-driven approach in their decision making. Big Data can be the new strategy to help firms stay competitive and so they should invest in Big Data technology, talent and culture to prepare themselves for the Big Data era.

Conclusion

Apart from the infrastructure development projects, there are still many potential benefits and opportunities spill-over from the B&R initiative. Hence, businesses should strategize their business planning accordingly, and take on the first mover benefits. While the market is getting bigger now, businesses may have to forge alliances or look at collaboration between companies as ways to fill the gaps in their capabilities.

Nevertheless, businesses shall study the market by approaching the local business community, so that they are not targeting on the wrong market. It is undoubtedly that B&R initiative has created a lot of the business opportunities; however, over-confidence and over-optimistic may lead to a failure if the risks and challenges are not assessed in a holistic manner.

Government and Trade Associations

Governments and the trade associations have respective roles to assist the businesses in exploring the new markets by conducting more exhibitions in different countries, and facilitate the trading network and information dissemination, particularly for the SMEs which have the limited resource and knowledge to go global. For example, MATRADE which is under the Ministry of International Trade and Industry (MITI) should reinforce their role in assisting the Malaysian businesses to tap with the B&R initiative. In relation to this, trade associations like ACCCIM with its vast business network can play a supplementary role as additional reference point. The banking institutions also need to be prepared in providing financing on the anticipated numerous projects under the B&R initiative.

Small and Medium Enterprises (SMEs)

SME competency such as level of innovation and technology shall be raised in order to prepare themselves to expand their business overseas, or to strengthen their competitiveness. SMEs should capitalize government initiative such as the trading grant and acquire talent in expanding their businesses. Last but not least, SMEs should build the global mindset, explore the business opportunity and improve their product standard for a wider market outreach through B&R initiative.

Rules of Origin as Trade Measure

Rules of Origin (RoO) is not a trade instrument, but can be used as a measure to address national and international policies, i.e.

• to give preference to products from developing countries or from beneficiary countries;
• to protect local industry and to administer “buy national” policies;
• to control access to the domestic market by foreign exporters; and
• As safeguard to health, environment, food safety and national security.

Definition of Originating Goods

Under the TPP agreement, there are three (3) basic criteria to determine a TPP good, or as being “made in the TP”.

1. Wholly obtained or produced entirely in one or more Parties.
2. Produced entirely in the territory of one or more Parties, exclusively from originating materials.
3. Produced entirely in the territory of one or more of the Parties, using non-originating materials provided the good satisfies all applicable requirements of Product-Specific Rules of Origin (PSR).

Wholly Obtained

Wholly obtained goods include natural products comprising of natural resources and minerals; plants grown and harvested in a country; and live animals bred, fished or captured.

Wholly Produced

The definition of wholly produced also covers goods produced from originating materials; or from scrap and waste derived from production operations or from used goods of exporting country.

Substantial Transformation

Goods produced using nonoriginating materials will have to undergo substantial transformation in a country before being qualified as originating. Product-Specific Rules of Origin (PSR) is used to determine the change.

Negotiated Outcome

1. Commitments to protect and promote internationally recognized labour principles and rights, which includes the International Labour Organization’s (ILO’s) 1998 Declaration on Fundamental Principles and Rights at Work.
2. Commitments to ensure that national laws and policies provide protection of the fundamental principles and rights at work, which includes:
   • the right to freedom of association and collective bargaining; and
   • the elimination of child labour, forced labour or compulsory labour, and of discrimination in respect of employment and occupation.
3. Ensures that national laws provide acceptable conditions of work with respect to minimum wages, hours of work, and occupational health and safety.
4. Include a non-derogation clause that prevent TPP parties from relaxing their rule or law or deviate from domestic labour laws in order to encourage trade and investment.
5. Enforceable dispute settlement procedures, in case of non-compliance, to help ensure all labour obligations are respected.

Summary for Labour Obligations

• This is the first FTA with labour obligations for Malaysia. The obligations of TPPA reiterate and adopt the principles of the 1998 International Labour Organization (ILO) Declaration into the member’s national laws.
• Malaysia shall enact the legal and institutional reforms as required in the Labour Consistency Plan prior to the date of entry into force of the TPP Agreement.
• The reform exercise is expected to see at least nine current legislations related to labour and employment being amended.