Our Prime Minister Datuk Seri Anwar Ibrahim recently unveiled the Madani Economy initiatives. Then the next day, I joined the delegation of the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) led by its president Tan Sri Low Kian Chuan to attend the 2023 China Greater Bay Area (GBA)-ASEAN Economic Cooperation (Qianhai) Forum in Shenzhen. Themed ‘Science, Technology and Industry Cooperation under China-ASEAN Comprehensive Strategic Partnership’, the forum focused on the role and path of the Greater Bay Area in China-ASEAN technological innovation and digital economic cooperation.
During the two-day forum, we heard from ministers of commerce and technology from China and the 10 ASEAN countries, the ASEAN ambassadors and consuls general to China, leaders from Guangdong province and Shenzhen city, as well as representatives of major business associations from China and ASEAN. The organisers also arranged company visits to places like Shenzhen Qianhai Cooperation Zone, Huawei, Tencent, BYD and Singapore’s Hong Leong Technology Park Shenzhen.
Reflecting on the insights gained from this trip and comparing them to Malaysia's newly announced Madani Economy initiatives, we are exploring the parallels between the two. As the fourth-largest bay area after New York, San Francisco and Tokyo, let’s look at the development policies of the Qianhai area in Shenzhen, especially in innovative collaboration and digital economy, to identify similarities and learn from their strategies.
The Madani Economy initiative sets seven ambitious targets to achieve within a decade. These aspirations include becoming one of the world's top 30 economies, attaining the top 12 in global competitiveness, ranking in the top 25 for the Human Development Index, elevating the labour income share to 45%, achieving the top 25 in the Corruption Perception Index, reducing the financial deficit to 3% or lower, and raising female employment rates to 60%.
Achieving these ambitious goals requires Malaysia to engage in extensive economic restructuring and establish greater economic integration with neighbouring countries and regional partners. It is particularly crucial as the world grapples with supply chain disruptions. This necessitates robust political will, reforms in governance and services, and the restoration of international competitiveness.
One notable announcement in the Madani Economy plan involves granting a preferential 15% income tax rate for knowledge workers of eligible companies within Iskandar Malaysia in Johor, aiming to attract international investors and knowledge workers to settle in Malaysia. PM Anwar said this was part of the government's effort within Iskandar Malaysia to establish a financial hub. Also, the government is poised to introduce expedited customs channels, streamlining the entry process for skilled foreign workers.
This initiative shares similarities with Shenzhen's Qianhai Cooperation Zone but with an added feature of lower corporate tax at 15% of which Madani Economy should emulate this measure. Established in 2010, Qianhai serves as a modern service industry platform within the Guangdong Free Trade Zone, focusing on various sectors, including finance, new international trade, digital & fashion, professional services, integrated development of advanced manufacturing and modern services, technology services, convention & exhibition, commerce, trade and logistics, and the modern maritime. Both locations offer favourable tax rates and incentives to attract foreign talent.
It is worth noting that Qianhai’s eight focal points of the development plan are the same industries Malaysia has been promoting in recent years, with similar emphasis mentioned in the Madani Economy. In fact, this aligns with the global economic trend. To drive these industries forward, innovation, creativity, and research and development (R&D) are paramount.
Take Shenzhen, for example; in 2021, its strategic emerging industries contributed $1.33 trillion renminbi (about RM85bil), accounting for 41.1% of its GDP. The investment in R&D accounted for 5.49% of the city's GDP. During a visit to Huawei with our Science, Technology and Innovation Minister YB Chang Lih Kang, I was particularly impressed by Huawei's efforts in developing new technologies. Around 10 years ago, I visited Huawei's headquarters in Shenzhen, where its focus was mainly on smartphone development and other products. Now, Huawei is far beyond rapid growth; its current R&D efforts are more geared towards the future of technology.
From improving users’ experiences of existing products to pioneering transformative technologies, Huawei’s investment of 25% of its annual profits (nearly half of Malaysia's annual tax revenue) into R&D is a practise that both the Malaysian government and businesses must learn from. After all, leading technological change is the only way to stay at the forefront of innovation; otherwise, one will always be trailing behind.
Back home in Malaysia, we observe that the government's annual R&D investment has averaged around 1% of GDP since 2020, significantly lower than in other countries. The emphasis on nurturing local talent and education spending, averaging around 20%, raises questions about whether the skills developed align with contemporary demands, and whether these talents contribute to Malaysia's economic growth.
When compared with the Greater Bay Area and neighbouring nations, Malaysia must showcase unique advantages to attract high-tech, high-value investments. The Madani Economy plan charts Malaysia's course for the next 10 years, but success hinges on effective execution. Policymaking should not occur in isolation, and constant follow-up, adjustments and benchmarking against successful international policies are key to success.
In recent years, Malaysia has unveiled various blueprints, such as the Malaysia Digital Economy Blueprint, National Trade Blueprint, National Energy Transition Roadmap and others. With the New Industrial Master Plan (NIMP) 2030 underway and the Malaysia Plan that is unveiled every five years, we are never short of visionary plans. However, the pivotal aspect lies in the seamless integration and coordination of these initiatives across different sectors. Aligning government efforts and private sector engagement will enhance Malaysia's regional competitiveness and address underlying issues hindering economic progress, ultimately fostering growth and improving citizens' well-being.
Malaysia's recent political transitions and cautious policies have affected investor confidence. With the culmination of the state elections, it is imperative for political parties to shift focus from contentious debates to prioritising economic development and welfare. A stable political landscape and a conducive business environment can help rebuild investor confidence, leading to better livelihoods and increased support.
With regional trade agreements like the Regional Comprehensive Economic Partnership (RCEP), the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP) and the Belt and Road Initiative (BRI), Malaysian businesses should enhance their value proposition. This includes both competitive prowess and the ability to collaborate with countries in the region. By leveraging each other's strengths and compensating for weaknesses, businesses can amplify their impact on the global stage, achieving a synergistic effect greater than the sum of their individual efforts.
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~ this article is published on Star Biz "Insights" on 23rd Aug 2023