The Institute for Management Development (IMD), based in Lausanne, Switzerland, issued its World Competitiveness Yearbook 2011 Report (WCY2011) yesterday, reporting that Malaysia’s ranking among 59 economies has declined from 10thposition in 2010 to 16th position this year.

The Malaysian Government has embarked on a number of initiatives to enhance competitiveness. The Government Transformation Programme (GTP) has addressed fundamental nationwide changes through 6 national key result areas (NKRAs) (Reducing Crime, Fighting Corruption, Improving Student Outcomes, Raising Living Standards of Low-Income Households, Improving Rural basic Infrastructure, Improving Urban Public Transport). Subsequent to that in October 2010, the Economic Transformation Programme (ETP) has prioritized 11 sectors of National Key Economic Areas (NKEAs) and the Greater KL Project. The ETP has identified a total of 131 Entry Point Projects (EPP) with a total investment value of RM794.5 billion as part of a major initiative to boost the country’s GNI to RM1.1 trillion and generate 3.3 million jobs. To date, a total of 72 projects have been launched and 41.2% of them are at various stages of implementation. This reflects private sector confidence in the government.

The Competition Law to govern all firms, including GLCs, against anti-competitive practices which will be fully implemented on 1stJanuary 2012 should further enhance Malaysia’s competitiveness. The MPC’s role to undertake a comprehensive review of business regulations to reduce the cost of doing business and increase efficiency should usher a new perspective to transparency and competitiveness to the nation.

In addition, the setting up of Talent Corporation (TalentCorp) to tackle the brain drain commenced operations in January 2011. TalentCorp will facilitate and drive initiatives to attract, nurture and retain the talent needed for the economic transformation. It is starting to deliver some results. For example, the Residence Pass introduced in December 2010 is an enhancement of the Employment Pass providing expatriate with a longer tenure of 10 years as well as greater flexibility. With effect from 1st April 2011, the Ministry of Home Affairs is implementing a number of improvements to the terms of the Employment Pass for foreign workers including allowing a tenure of up to 5+5 years.
In 2010, Malaysia had displayed a strong performance in its economic fundamentals: Total trade rose by 18.3%. Gross Domestic Product (GDP) grew at 7.2% in 2010 (2009: -1.7%), higher Exports of Goods at 83.6% of GDP (2009: 82.1%) as well as a marked increase in international investment. Foreign direct investments had increased since 2009 from US$1.4 billion to US$9 billion in 2010. Malaysia’s unemployment rate at 3.4% is among the lowest in the 59 economies.

The WCY2011 published by IMD had a total number of 59 participating countries. It ranks nations according to the competitiveness index using 331 criteria. The four main factors in the WCY survey are Economic Performance, Government Efficiency, Business Performance and Infrastructure. The report is based on 2/3 quantitative or statistical data and 1/3 qualitative or perception data. This perception data is obtained through feedback from the private sector using the Executive Opinion Survey administered from January and returned to IMD in April 2011.

Malaysia’s competitiveness performance has been affected by more perception-based factors of Business Efficiency and Government Efficiency, where 90 per cent of the perception data declined, affecting the performance of these two factors. Business Efficiency was ranked 14th compared to 4th last year, while Government Efficiency was at 17th position from 9th position. Among the major shifts in perception towards Business Efficiency and Government Efficiency which affected their performance includes criteria such as efficiency of small and medium enterprises, brain drain, cost competitiveness, availability of skilled labour; financial risk factor; access to business credit; implementation of government decisions; protectionism; openness of public sector contracts and immigration laws relating to foreign labour.

It should be highlighted that the ranking for Economic Performance, which gives a macro economic evaluation of the domestic economy and is based on real/hard data, improved to 7th position this year ahead of Taiwan, Sweden, Canada, Australia, UK and Switzerland. Malaysia has come a long way since 2007 where we were ranked 12th position in Economic Performance.

Having said that, I would like to welcome the fact that the IMD survey continues to rank Malaysia as among the top 5 most competitive nations in the Asia Pacific region for the second year running, 6th position in the 20 million population category and 2nd position after Taiwan in the GDP per capita less than US$20,000 category.
The New Economic Model, Government Transformation Programme and Economic Transformation Programme have demonstrated positive results. This is shown by the different indices where the total investment commitment so far stands at RM95billion, which will create almost 225,000 jobs over the next ten years. These positive results have not been fully reflected in the Executive Opinion Survey conducted by IMD.

The government recognizes that more engagement and communication at the local and international levels will need to be undertaken. The Malaysian success story will be continuously communicated to the public and various stakeholders.

Moving forward, I want to stress that the Government is committed to successfully implementing the realization of the NEM, GTP and ETP. The setting up of PEMUDAH, PEMANDU, TalentCorp, the coming into force of the Competition Law, corporatization of MIDA and MPC’s new role to review regulatory reforms, will enhance public sector delivery and create a climate that is conducive to doing business. Enhancing national competitiveness remains a top priority.
Dato’ Sri Mustapa Mohamed

Minister for International Trade and Industry