NEW ECONOMIC MODEL EXPECTED IN SECOND HALF 2009

Bernama - Friday, May 29

KUALA LUMPUR, May 28 (Bernama) -- The new economic model is expected to be introduced in the second half of this year in order to further stimulate the economy, Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah said today.

"We are still in the discussion stage now. We have set the timeframe yet because we have to look into the overall economy and the positioning of our economy in the context of global economy," Ahmad Husni said when asked to comment on development of the new economic model.

"We have to do all the studies and then we will formulate the new economic model for the country. It will be introduced this year," he said after witnessing the signing of an untied loan agreement worth US$100 million between RHB Bank Bhd and Japan Bank for International Cooperation here.

On May 2, Prime Minister Datuk Seri Najib Tun Razak said the government was making efforts to develop a new economic model for Malaysia which, among others, will emphasise raising the productivity level of workers with the aim of helping them earn higher incomes.

He said the scope of work for this new economic model would be handled by an economic council to be set up, comprising economic experts from Malaysia and abroad.

Yesterday, Najib announced that former minister in the Prime Minister's Department, Tan Sri Amirsham Abdul Aziz, has been appointed as chairman of the Economic Advisory Council, with ministerial status but not a member of the Cabinet, effective this Monday.

The council will report directly to Najib and among its functions will be to advise the government on the establishment of a new economic model for the country which will be centred on innovation, creativity and high value additions.

Asked to comment on the country's gross domestic product (GDP), Ahmad Husni said: "We believe that based on our forecast, by the third and fourth quarters, we will beginning to see a better position and next year we will be hitting positive growth."

He said the Prime Minister has announced that the economy is expected to contract by between -4.0 and -5.0 percent this year.

"Firstly, it is because of the global economic situation. Initially, it was supposed to be a positive growth but in April this year, the International Monetary Fund (IMF) projected a negative 1.3 percent for the global economy, and we are well integrated into the global economy, particularly in terms of our exports and foreign direct investments," Ahmad Husni said.

"Our exports have suffered on average about 20 percent dropped from January to April. So, this has triggered the shrinkage of our economy," he said.

Earlier in his keynote address, Ahmad Husni said contribution from small and medium scale enterprises (SMEs) to the economy is expected to increased to 37 percent in 2010 while its exports will contribute about 22 percent to the total.

He said the government under the second stimulus package has established a working capital stimulus package totalling RM5 billion to provide access to working capital financing and an industry restructuring loan guarantee scheme totalling RM5 billion to increase productivity and high-value activities and promote greater application of green technology.

Both schemes have been fully operational since April 16, Ahmad Husni said, adding that the total approval by the participating institutions for both schemes to date is close to RM1.2 billion.
He said that SMEs constituted 99 percent of the total registered business establishments in Malaysia, contributing 56 percent of the total employment and accounting for 32 percent of the GDP.

According to Ahmad Husni, managing and steering SMEs towards sustainable growth and stability is crucial for Malaysia to cushion domestic economy.

He said that rolling out funds to SMEs has become more urgent to reinvigorate trade finance activities, maintain infrastructure development and create jobs which will help resume country's growth at a more rapid pace. -- BERNAMA