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ECONOMIC
CHALLENGES
Mr Speaker Sir,
We have proven our ability to successfully manage our economy under
all circumstances, through boom and bust. Our ability and success
should provide the confidence and should drive us to mobilise efforts
and respond immediately to challenges arising from the instability
in the external environment. In moving forward, we have to intensify
efforts to overcome obstacles that could derail our goal of achieving
developed nation status.
Reducing Dependence on Electronics Exports
Malaysia is the world's 17th largest trading nation. Electronics
is the nation's main export, contributing nearly half the export
earnings of the manufacturing sector and 41 per cent of the nation's
export earnings. However, more than 70 per cent of electronics components
comprise imported intermediate goods. As such, the nation has not
been able to maxi mise benefits from higher value-added activities
of exports. Gross exports is expected to decline by 10.6 per cent,
following the significant contraction in global demand for electronics
products this year. We must, therefore, diversify the sources of
exports as well as explore new markets. We cannot be overly dependent
on a particular export item, especially one with a high import content.
However, we should not reduce the exports of electronics. Instead,
we should endeavour to increase the export of other items in order
to reduce our dependence on exports of electronics.
Realising the Full Potential of the
Services Sector
The services sector is one of the main contributors to growth, accounting
for 55 per cent of GDP in 2001. Nevertheless, there is scope for
further improvement. The nation has modern ports and airports with
the potential for becoming the hubs for cargo movement as well as
attracting domestic and international integrated express operators.
Johor ports must seize the opportunities from their strategic location
and proximity to Singapore to provide world-class port services.
Meanwhile, the Senai airport should become the air cargo hub in
the region. Given the potential of Johor ports and Senai airport,
a more efficient and effective integrated transportation system
must be immediately developed to link air, land and marine transportation
network in the south of the Peninsular.
The performance of the tourism sector has been excellent. Currently,
foreign tourist arrivals have recorded the highest level at more
than 1 million a month. Nevertheless, concerns on the safety of
air travel, particularly in the west in the wake of the September
11 attack, will affect tourist arrivals from these countries. Thus,
efforts must be intensified to attract tourists from Asia, in particular
from countries in the Persian Gulf and West Asia as well as India,
China and ASEAN, in addition to further promoting domestic tourism.
The transport, tourism and hotel industries should collaborate and
participate in the Government's tourism promotional efforts.
Enhancing the Performance of the Agriculture
Sector
The nation is endowed with fertile land which can be utilised for
the cultivation of crops and rearing of livestock. However, the
growth of the agriculture sector has been concentrated only on a
few commodities, such as rubber and oil palm. These commodities
are subject to price fluctuations, thus affecting incomes, in particular,
of the smallholders. We are also overly reliant on food imports,
which exceeded 11 billion ringgit last year. It is, therefore, vital
to diversify the agriculture sector to produce higher value-added
products. Emphasis has not been given to fresh and salt water fish
farming as well as rearing of cattle, goats and other livestock,
such as ostrich, deer and ducks. Mixed farming has as yet not been
promoted. These efforts have not been undertaken on a large scale
although our strength lies in managing large agricultural estates.
Smallholders have not yet merged themselves through cooperatives
or companies for this purpose. Increasing the Dynamism of the Private
Sector
The private sector has been adversely affected by the global economic
slowdown. Its contribution to GDP has declined significantly to
12.8 per cent compared to 32 per cent prior to the financial crisis.
Since 1997, economic growth has been driven mainly by public sector
investment. However, in the long term, economic growth cannot continue
to rely solely on public sector investment through fiscal stimulus.
Neither can we depend on the inflows of foreign direct investment,
due to its volatility and greater competition from other countries,
such as China and Latin America. The private sector has not identified
its comparative advantage in areas where it can increase production.
Improving Competitiveness
In the era of globalisation and liberalisation, the nation faces
greater competition from producers in international markets, particularly
with the emergence of developing countries, such as China. Several
reports have indicated that the nation's competitiveness has declined
in the medium term. In other words, our productivity has not increased
in line with the increase in the cost of production. If this trend
is not checked, Malaysia will lose its share in the international
market. As a result, workers may lose their jobs, wages will not
increase and there will be no additional new job opportunities.
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