Published May 12, 2009

Crisis offers opportunity to restructure economy: Najib

Focus will be sectors in which M'sia has edge such as Islamic finance, biofuels

By PAULINE NG
IN KUALA LUMPUR

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MALAYSIAN Prime Minister Najib Razak yesterday said the global financial crisis has provided the country a 'timely opportunity' to proceed with restructuring its economy, and indicated a main focus would be advancing sectors in which it already has a competitive edge.

Islamic finance - a sector that has drawn greater interest following the huge confidence dent inflicted on conventional financing by the global financial crisis - was one such sector, he said, also citing halal foods, medical tourism, palm oil-based biofuels, rubber research and tropical medicines as other areas the country could excel in.

For starters, he suggested Malaysia identify core niches where it has a comparative advantage so it could hone its competitive edge.

'As a small nation, realistically we cannot compete in all areas. We therefore need to define our niche and carve out comprehensive competitive strategies that will make us winners in those chosen niches, where we can excel and compete against the best of the world,' he said.

The identified areas fall in the services category - a sector Malaysia is keen to accelerate development - to increase its contribution to gross domestic product to 60-70 per cent from about 55 per cent now.

This has assumed greater urgency following the slump in manufacturing after consumers put new purchasers on hold when the global recession hit.

'There is a greater need to enhance innovation in Malaysia by leveraging on our core strengths,' said Mr Najib who became prime minister early last month and who has indicated economic restructuring would be a key priority of his administration.

Delivering a keynote address at a banking summit yesterday - his first since announcing a number of measures easing financial sector liberalisation as well as the liberalisation of 27 services sub-sectors - he acknowledged the window of opportunity the global crisis has given his administration to speed up the restructuring of the country's economy which has been stymied by a low productivity, low wage model and a lack of emphasis moving up the value chain in sectors in which it has the expertise, some examples being in rubber and palm oil production.

While the government has urged local companies to move into more value added activities downstream, most have been content with the status quo, in the process depriving the domestic economy of better margins and employment.

Taking the banking sector as an example, Mr Najib said local banks should become more cost competitive and eventually transform into world class ones that operate based on international best practices.

In Islamic finance, new financial products and more sukuk (debt papers) origination ought to be supported, he said, pointing to the over 20 per cent growth enjoyed by the sector in the past eight years. It now has almost 17 per cent market share of the total banking sector.

Mr Najib said the banking sector continues to showcase a high degree of resilience and remains well positioned to weather the financial storm and as such, should continue to fund productive activities rather than be over-cautious.

Earlier in welcoming Mr Najib to the summit organised by the Asian Strategy & Leadership Institute, its chairman Jeffrey Cheah said banks were now more stringent in vetting applications. Mr Cheah, who is also founder of the Sunway Group, observed bank officers were asking 'new and unnecessary questions.'