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All-Round Efforts To Reach 5% Growth Target
Malaysia Perspective | 26 June 2012

By Yang Ming Wan

As widely expected, no thanks to the anaemic external economic situation and the drama of the Eeurozone debt crisis, growth in the Malaysian economy slowed down in the first quarter of this year and fell short of the 5 % percent growth target. Comforting ourselves by the mentality of “less loses is a winlower losses equate to a win”, the growth in the economy ‘just’ slowed to 4.7% percent this quarter, faring better than the 4.3% percent to 4.5% percent that the market was expecting.

This is actually quite close to the 5% percent growth target, and hasbut has nonetheless thus inspired confidence expectations thatin our government to will try pull out all the stops to strive for the 5% percent mark. Signs show that a 4% percent full-year growth should be within reach, and if the gGovernment works harder, and short of a global recession triggered by the collapse of the euro-zone, the 5% percent target may still be a possibility.

Hardware Development Pushes Construction Sector Into Prominence
Among the growth sectors in the first quarter, construction stands stood out with a stellar 15.5% growthstellar growth of 15.5 ,percent; making it the fastest growing sector this quarter and the main engine of growth that is pushing our gross domestic product (GDP) closer to the 5% target.

This figure clearly shows that hardware development is a major strategy in the government’s push to transform Malaysia into a high-income country. In his 12 key areas of economic transformation, Prime Minister Najib Razak especially had also included the “Greater Kuala Lumpur Development Plan”, a massive redevelopment of a number of major government owned assets to transform Kuala Lumpur into a leading global city. The government’s economy transformation plan also contains a number of construction projects, such as the development of urban transport and infrastructure development in rural areas.

However, the high growth achieved by the construction sector in the first quarter of this year is the result of a number of infrastructural projects embarked upon prior to the unveiling of the economy transformation plan. These projects include the sSecond Penang Bridge, the sSecond Kuala Lumpur International Airport, natural gas pipelines from Sabah and Sarawak, re-gasification plant in Malacca and the Ipoh – Padang Besar double-track railway project.

Transformation Projects Yet To Bear Fruit
The foregoing are still ongoing projects. The growth potential of the government’s economic restructuring program is has yet to be realised in the first quarter of this year, and we may only start to catch a glimpse of its effects in the second quarter.

The “Greater Kuala Lumpur Development Plan” is primed to be initiated in the second quarter, while it is reported that preparatory engineering work of the capital’s MRT development project has already been launched. Even so, this is only one mega project among the 110 projects announced under the economic transformation program, and even the preparatory work that is in progress will need a year or so to complete. Of course, this the preparatory project work will also bring economic growth benefits.

Under the premise of the government’s strive drive for the 5% percent economic growth target, we can expect to see more public works projects in the second half of the year, or at least see vanguard projects such as the MRT preparatory works going head into full swing. This means we can expect the construction sector to continue its double-digit growth.

Listing Of Mega Government-Run Companies
The government has spared no time to in launching its infrastructure projects, so that these hardware development could kick start our economic growthwith the view that the hardware development undertaken will help spur our economic growth. Next up Subsequently, it the government intends to willturn turn its attention on to investment activities that will fund these infrastructure developmentthese infrastructure developments indirectly, while drawing in on the might of foreign capital to boost our economy.

The FELDA Global Ventures Capitals Holding, a government-linked companyset up by the government, will be holding its IPO in the second quarter of this year. When completed, This will make the entity the second largest IPO in the world, after that of Facebookthe public offer will be the second largest IPO on record this year, after that of Facebook. In a sequel to the listing of mega government-run companies, news broke that Integrated Healthcare Holdings, a subsidiary of Khazanah Nasional Bhd, will also be listed to raisewith the prospect of raising as much as RM 6 billion.

Apart from raising more funds for these government-linked companies to invest, the listing of such mega government-run companies also allows the gGovernment to sell off some of its equities for cashto cash-in on some of its equity holdings. This is a classic ‘killing two birds with one stone’ tactic. The infrastructure development projects under the government’s economic restructuring program will is targeted to receive a three-pronged co-injection of funding from the public sector, government-run companies and private sector, of which the government’s share will be 8% percent, government-run companies at 32 %percent, and 7060% percent from the private sector. In this light, the motivation for such mega listings becomes obvious.

Freeing Up Funds Wil Energise The Bourse
By allowing mega government-run companies to list, the government will also free up funds in the public sector and government-run companies for the government to push for growth and avoid running up huge debts. At the same time, such mega listings will inject vitality into the stock market, allow more active participation from major players, and promote a healthy economic growth cycle.

Summing up, from all its active all-round efforts, we can see that the government is resolved to fight for a 5% economic growthachieving its target of 5 percent GDP growth.

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