Malaysia’s Economic Transformation Programme presented by Idris Jala

Posted on September 23, 2010


About 4,000 people thronged the ETP’s open  at Putra World Trade Centre in Kuala Lumpur on 21Sep.  The government has announced the Economic Transformation Programme (ETP) to realise Malaysia’s ambition to turn the country into a high-income economy by 2020.

Idris Jala, the CEO of the Government’s Performance Management and Delivery Unit (Pemandu),  view  his role as that of facilitator.

“This is a private sector-led initiative…. If we fail, the private sector has failed,’’ he told the packed audience at Putra World Trade Centre. Idris Jala said  the ETP will help Malaysia triple its Gross National Income (GNI) from RM660 billion (2009) to RM1.7 trillion in 2020.

This translates to an increase of GNI per capita income from RM20,770 (US$6,700) to at least RM46,500 (US$15,000), meeting the World Bank’s high-income benchmark. To help achieve this, the government aims to sustain 6% GNI growth between 2011 and 2020.

A total funding of over RM1.4 trillion is required for the duration of this economic push, with 92% of the funding expected to come from domestic investments and public funding expected to take up the remainder.

In his presentation, non government-linked companies (GLCs) are expected to fund 60% or RM824 billion with GLCs funding 32% or RM446 billion. Public spending is estimated to be around RM105 billion.

According to Idris, the targeted 60% private sector funding will be a significant increase from 37% in 2008, and is consistent with the 12.8% per annum private investment growth noted in the 10th Malaysia Plan.

During his hour-long presentation, it was noted that the total private investment from 2005 to 2010 was RM410 billion or an average of RM68 billion per annum.

“Malaysia needs to increase this average annual private investment level in the next 10 years by about 60% more than historical average to around RM120 billion per annum for 2011-2020,” said Idris.

Private investment-led growth will cut government funding, which is constrained by the need to improve the nation’s fiscal position, said Idris.

“As such, government funding will be targeted at initiatives that will maximise GNI impact for every ringgit of public money spent, with heavier emphasis on development expenditure over operational expenditure,” said the former Malaysian Airlines Bhd CEO.

“Malaysia has no time to lose. We need a complete, radical economic transformation. The days of depending on traditional growth engines are over. If we continue on the current model, we risk getting stuck in middle-income trap and lose out on talents necessary to support a high-income economy,” he added.

Full details of the ETP can be download as a PDF file at :

Who are the likely private benefactors of the ETP ??

MalaysiaFinance.blogspot has provided the following :

Sector Initiative Potential beneficiaries
Greater KL KL MRT – received high level of commitment : Gamuda, MMC
Rubber Research Institute project :  MRCB, WCT
High speed train to Singapore : YTL Corp
Klang river project : SP Setia, YTL Power, MRCB
Initiatives to make KL more attractive : SP Setia, Bolton, DNP
Oil, gas & energy LNG regasification plant : KNM, Dialog, Kencana
Financial services Create regional champion : Maybank
Improve capital markets : Bursa Msia
Promote bond market : Maybank
Business Services Increase level of skilled workforce : Jobstreet
Health services Promote generic drug manufacturing and export : Pharmaniaga
Education Push for health services education : Masterskill

ETP: Macro takeaways
NKEA projects will achieve economic growth of 6%
A high income nation with GNI per capita of USD15,000 by 2020
The NKEAs will contribute over 73% of Malaysia’s GNI (USD523 billion in 2020)
92% of funding for the projects will come from private investment and only 8% from public funding
Will generate an additional 3.3 m jobs, over 60% will be in medium-income or high-income salary brackets
NKEA Labs feature 131 EPPs and 60 Business Opportunities

Construction sector

From the EPPs (Entry Point Projects) for Greater KL, there were several projects that will provide opportunities for contractors.

MRT – Gamuda and MMC are potential beneficiaries of the project. Gamuda’s orderbook could double and MMC’s triple, but we believe the sector will benefit given the sheer size of the RM36bn project. Among the key projects, we understand that this project has received high level of commitment – increasing likelihood of the project’s approval.

High Speed Rail (HSR) – This RM8bn project was initially proposed in 2008 but put on hold. The lab recommended a study by Land Public Transport Commission (SPAD) and Economic Planning Unit (EPU) to determine the feasibility of the project with results to be tabled to the Cabinet by
January 2011. Potential beneficiary: YTL Corp (Not rated).

Klang river project – In March 2010, the Selangor government appointed three companies to carry out the project that was expected to attract RM50bn worth of investments. Potential beneficiary: YTL Power (Hold; TP: RM2.50), MRCB.

In addition, the Rubber Research Institute (RRI) project was among projects included in the Greater KL National Key Economic Area (NKEA). Potential beneficiaries: MRCB (High
Conviction Pick; TP: RM2.25), WCT (Buy; TP: RM3.60).

Property sector

The “Greater KL” NKEA aims to improve KL’s ranking to one of the Top 20 most liveable cities and economic cities in the world by 2020 (currently ranked 79/130 in recent quality of life survey). Initiatives proposed include:
a) Foreign magnet: Attracting 100 of the world’s top MNCs & high-skilled immigration;
b) Improved connectivity: High-speed rail to Singapore, MRT (integrated urban rail system);
c) New attractions: Rejuvenation of rivers, greener KL, iconic places; and
d) Enhanced services: Pedestrian network, solid waste management.

PEMANDU expects KL population to balloon to 10m by 2010 from 6.5m currently, creating demand for 1m new homes. Areas identified to benefit the most from transformation of KL:
a) High-impact: RMAF base @ Sungai Besi, Dataran Perdana, MATRADE @ Hartamas, RRIM @ Sungai Buloh, Kampung Baru
b) Ripe for redevelopment: Bukit Bintang, Pusat Bandar Damansara, Dataran Sunway, 1 Utama, Subang Bestari, Balakong, Serdang

Aside from GLC/Bumi developers tipped to benefit from government land redevelopment (eg MRCB, Boustead, Bolton, SP Setia, Mah Sing), owners of large landbank and investment assets in KL should also stand to benefit.

Oil and gas

PEMANDU has identified 12 EPPs and 7 BOs (Business Opportunities) for the oil, gas and energy sector under the NKEA. A 3 pronged area of focus – sustain, grow and diversify. The EPPs and BOs are expected to bring about RM76.8bn in GNI (Gross National Income) and create 52,000 jobs by 2020.

Several of the broader initiatives presented included PETRONAS strategies such as enhancing oil recovery in existing fields, developing smaller fields, and the construction of a LNG regasification terminal to meet the nation’s gas demand. However, what we understand that is making the difference is the role that PEMANDU will be playing to ensure smooth and effective implementation of the said EPPs. This, we believe, would be the critical factor leading to the success of the program.

Based on the roadmap shown by PEMANDU, we understand that the government is looking to receive its first LNG imports into the country by 2013. This would mean that the tender for the LNG regasification plant could be out as early as the beginning of 2011, assuming 2 years of construction.

We see KNM Group (Hold; TP: RM0.55), Kencana Petroleum (Not Rated), and Dialog (Not Rated), as potential beneficiaries to the project. The initiatives highlighted include the 10m cubic metres oil storage terminal in the works spearheaded by Dialog and Vopak in Pengarang, Johor. The development of small fields and enhancement of oil recovery should benefit a handful of local oil & gas players.

Tanjung Offshore (Hold; TP: RM1.60) could stand to gain under its engineering and marine divisions while both Alam Maritim (Buy; TP: RM1.40) and Petra Perdana (Fully Valued; TP: RM1.00) could benefit under their OSV operations.