His Excellency, Minister Dato' Sri Mustapa Mohamed; Distinguished Guests:
It is my pleasure to join you for today’s launch of the OECD’s 2021 Economic Survey of Malaysia. Our Survey takes a deep dive into the macroeconomic and social impacts of the COVID-19 pandemic in Malaysia and makes recommendations to support an optimised recovery.
I would like to thank the Malaysian government for its outstanding co-operation in the preparation of this Survey, particularly the Economic Planning Unit in the Prime Minister’s Department and the Malaysia Productivity Corporation.
Prior to the COVID-19 pandemic, the Malaysian economy was performing very well, with average GDP growth of around 5% (2016-19).
Malaysia has benefited from market-based policies, openness to international trade, and strong foreign direct investment, which have facilitated its deep integration into global supply chains, particularly in the consumer electronics and digital services sectors.
These factors, combined with sound macroeconomic policies, put Malaysia well on its way to becoming a high-income country.
But then COVID-19 hit.
Like countries all around the world, Malaysia continues to face serious challenges as a result of the pandemic.
The more contagious Delta variant has made the public health situation even more difficult.
The government has made great progress with its vaccination campaign. We encourage you to continue your efforts to get as many people as possible vaccinated as quickly as possible.
Achieving high vaccination rates will strengthen Malaysia’s resilience, in particular in the event that new waves of contamination with new variants occur across the world.
Vaccinating the population remains economic policy priority one, two and three.
Provided that the vaccination campaign advances as planned, the OECD projects GDP growth to reach 4.3% in 2021 and 6.1% in 2022.
As well as sound public health policies, this strong rebound has been made possible as a result of Malaysia’s decisive economic policy response, which included nine successive fiscal policy support packages, supportive monetary policy, and a resilient financial system.
But large scale macroeconomic policy support cannot last forever.
Structural reforms will be essential to lay the foundations for strong and sustainable growth over the medium and long term.
Please let me focus on three important structural changes advocated in our Survey: competition, digital transformation, and moving towards carbon neutrality.
First, on competition. The OECD’s empirical analysis has clearly established that competition is a key driver of productivity growth, business dynamism and innovation, all of which will be crucial to achieving strong growth after the pandemic.
Our Survey makes use of new Product Market Regulation Indicators, which measure how regulatory policy affects competition in product markets. This analysis shows that barriers to competition remain relatively high in Malaysia, particularly in network industries such as energy, transportation and telecommunications.
Starting a new business remains challenging due to the multiple licenses and permits required by various levels of government.
It’s true that enhancing competition can be uncomfortable, and can lead to social disruption, which must be well-managed. But boosting competition would be a powerful engine for progress in living standards.
Domestic reforms to enhance competition would deepen integration in international trade flows and Malaysia should deepen its international trade relationships. Joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership would be an important step forward.
Second, on digital transformation. The OECD has pointed out for some time that digital transformation is a key engine of productivity growth and economic growth.
Post-pandemic, economic activity will be even more driven by the adoption of online platforms, cloud computing, machine learning, and remote business relationships.
We welcome Malaysia’s new Digital Economy Blueprint, which will facilitate the digital transformation. Our Survey recommends accelerating investments in 5G and fixed broadband, promoting the uptake of digital tools by small- and medium-sized enterprises, and providing more training opportunities to strengthen workers’ digital skills.
Third, on moving towards carbon neutrality. The Survey encourages Malaysia to continue its efforts to combat climate change by adopting a medium-term strategy to cut carbon emissions. We must maintain the momentum globally to reach net zero emissions by 2050 with every jurisdiction making a genuine and proportionate contribution towards the global effort. Making a climate pledge is important, but more important is the concrete plan and actual outcomes achieved.
Our Survey recommends a mix of reforms, including reducing the use of coal in electricity production, increasing renewable energy production, encouraging lower emissions with a price on carbon, improving forest management, and supporting biodiversity. These objectives are all essential for a cleaner post-pandemic recovery.
Competition, digitalisation and climate change mitigation are just some of the key structural reforms recommended in our latest Survey, which also covers other crucial issues such as greater social protection for women and foreign workers.
The world is continuing to grapple with one of the biggest economic, health and social challenges in history. Malaysia’s timely and ambitious policy response, coupled with its demonstrated commitment to reform, is sowing the seeds for a brighter future for all Malaysians.
The OECD is proud to be a friend to Malaysia and we look forward to continuing our deep and fruitful collaboration. Please count on us as Malaysia prepares to implement the 12th Malaysia Plan and its three dimensions of economic empowerment, environmental sustainability and social inclusion.
Thank you (“Terima Kasih”).