MALAYSIAN businesses need to be more aggressive in raising their level of productivity, as well as find their niche in global markets, said National Economic Action Committee (NEAC) secretariat head Dr K. Govindan.
This will not only help Malaysian businesses to compete effectively in the global market environment but also allow them to seek better pricing power globally, Govindan said in a presentation at the Malaysia Strategic Outlook 2003 conference organisedby the Asian Strategy & Leadership Institute (ASLI) in Kuala Lumpur yesterday.
He also said Malaysia could look forward to better economic growth this year, but the country needed to identify new sectors of growth as well as install new measures to stimulate innovation and productivity for sustained growth and prosperity over the longer term.
Govindan said that it was time for Malaysia to diversify into sectors that had potential to grow and become movers in the national economy.
Sectors such as private education, private health services and tourism, for example, had a lot of potential and with the right strategies could be major drivers of economic growth, he said.
Govindan also said Malaysian companies could invest more in research and development (R&D) to encourage capital intensive technology in production.
Morgan Stanley Dean Witter Asia vice-president (South-East Asia economics) Daniel Lian said Malaysia needed to correct its excessive dependence on the now-defunct single-track East Asia Economic Model (EAEM).
Malaysias new development path should tilt in favour of a more balanced dual-track strategy, similar to the one advocated and implemented by Thailands Prime Minister Thaksin Shinawatra, he said.
Lian said Morgan Stanley was glad that the 2003 budget unveiled in September last year represented a conscious effort by Malaysian policymakers to redraw the EAEM economic strategy, from one that was extremely outward-oriented to one that improved the balance between domestic and external demand.
However, while the government had moved some resources towards the small- and medium- enterprises (SME) and rural sectors by de-emphasising big infrastructure projects, the local stock market did not appear to be impressed with the moderate dual-track strategy, he noted.
One reason, Lian said, was that there had been no effort to promote a structural consumption boom despite the fact that Malaysia had one of the highest macro savings rates and the smallest domestic demand to GDP share in Asia.
Investors appear to be disappointed by the lack of a pro-consumption policy response, he said.
Lian also said the learning from South Korea slogan launched by Malaysia since the September budget had not captured investors imagination.
Malaysia has not the indigenous industrial capacity and national brand names necessary to duplicate South Koreas industrial success. Unlike South Korea, Malaysias industrial capacity is built on foreign direct investment by multinational corporations (MNCs) that have withdrawn from South-East Asia in favour of China, and this renders the cyclical and structural outlook of Malaysia uncertain, he said.
K&N Kenanga Bhd research head Seow Choong Liang predicted that the Malaysian economy was likely to achieve a moderate growth of about 5% over the next three to five years as the country was now locked in the middle phase of a long-term recovery.
According to Seow, the middle phase economy is characterised by a period of low interest rates, mixed economic data, volatile stock market and disinterested investors.
Seow said that although lower interest rates had stimulated some growth in selected sectors such as automobiles, he did not believe such growth was sustainable.
Nonetheless, Seow is hopeful of stronger economic growth by the 2nd half of this year, adding that Malaysia could still afford moderate pump-priming to manage any downturn.
Credit Suisse First Bostons Singapore-based chief economist for South-East Asia and India, P.K. Basu, had a more optimistic view on Malaysia, expecting GDP growth of 4.8% this year and 5.4% next year.
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