Identifier
Created
Classification
Origin
07KUALALUMPUR1404
2007-09-17 09:06:00
UNCLASSIFIED
Embassy Kuala Lumpur
Cable title:
PM Launches Northern Corridor Economic Region; Malaysia
how-toVZCZCXRO9073 RR RUEHCHI RUEHDT RUEHHM RUEHNH DE RUEHKL #1404/01 2600906 ZNR UUUUU ZZH R 170906Z SEP 07 FM AMEMBASSY KUALA LUMPUR TO RUEHC/SECSTATE WASHDC 9966 INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC RUCPDOC/USDOC WASHDC RUEHGV/USMISSION GENEVA 1505 RUCNASE/ASEAN MEMBER COLLECTIVE
UNCLAS SECTION 01 OF 02 KUALA LUMPUR 001404
SIPDIS
STATE PASS USTR - WEISEL AND JENSEN
STATE PASS FEDERAL RESERVE AND EXIMBANK
STATE PASS FEDERAL RESERVE SAN FRANCISCO TCURRAN
USDOC FOR 4430/MAC/EAP/J.BAKER
TREASURY FOR OASIA AND IRS
GENEVA FOR USTR
SIPDIS
E.O. 12958: N/A
TAGS: ECON EFIN EINV MY
SUBJECT: PM Launches Northern Corridor Economic Region; Malaysia
Promotes Islamic Reinsurance: Economic Update for August 2007
REF: KUALA LUMPUR 1005
UNCLAS SECTION 01 OF 02 KUALA LUMPUR 001404
SIPDIS
STATE PASS USTR - WEISEL AND JENSEN
STATE PASS FEDERAL RESERVE AND EXIMBANK
STATE PASS FEDERAL RESERVE SAN FRANCISCO TCURRAN
USDOC FOR 4430/MAC/EAP/J.BAKER
TREASURY FOR OASIA AND IRS
GENEVA FOR USTR
SIPDIS
E.O. 12958: N/A
TAGS: ECON EFIN EINV MY
SUBJECT: PM Launches Northern Corridor Economic Region; Malaysia
Promotes Islamic Reinsurance: Economic Update for August 2007
REF: KUALA LUMPUR 1005
1. Summary:
- Prime Minister Abdullah launched a new economic development
corridor, the Northern Corridor Economic Region (NCER),which aims
to bolster the economic competitiveness of Perlis, Kedah, Penang,
and Perak states and reduce the imbalance in regional economic
growth rates.
- Malaysia's central bank invited qualified local and foreign
players to make Malaysia the center for their "retakaful"
(reinsurance under Islamic principles) business activities.
- The stock market regained lost ground as turmoil in the global
credit markets eased.
- Inflation rose to 1.6% in July after a low of 1.4% year-on-year
in both May and June, but remains in the central bank's target
range.
End Summary.
Northern Corridor Economic Region
--------------
2. On July 30, Prime Minister Abdullah Ahmad Badawi launched the
Northern Corridor Economic Region (NCER),exactly one year after the
GOM launched its first such economic corridor project, the Iskandar
Development Region, in Johor state on the border with Singapore
(Reftel). The GOM hopes the NCER, which includes the states of
Perlis, Kedah (Abdullah's home town),Penang, and Perak in
northwestern Peninsular Malaysia near Thailand, will accelerate
growth and increase income levels in the region. NCER is one of
four mega economic corridors identified in the Ninth Malaysia Plan
(2006-2010) that the GOM hopes will become key engines of economic
growth for the country. The GOM expects the NCER initiative to
generate RM 177 billion (USD 50.5 billion) in project spending
between 2007 and 2025, with one third of this coming from government
projects and the balance from the private sector.
3. Abdullah hopes to promote balanced economic development across
different regions by encouraging higher value added, knowledge
intensive industries to locate there. Sime Darby Bhd, a government
link company (GLC) conglomerate with core businesses in the
automotive, property and plantation sectors, drew up the master plan
for the project and will serve as the overall coordinator. The GOM
also plans to establish a Northern Corridor Implementation Agency
(NCIA) to help implement the project and serve as a "one stop"
center for investor support. The NCIA will be tabled in Parliament
in the second quarter of next year.
4. EconOff and EconFSN were briefed by Sime Darby officials on the
NCER blueprint. According to Energy and Utilities Divisional
Director Mohamad Shukri Baharom, there will no duplication of
industries within the NCER so that each state can enjoy its share of
income activities. Shukri said NCER objectives include maximizing
economic potential in the existing industries, closing income gaps,
and moving Malaysia's economy towards higher value added, knowledge
based industries.
5. Shurri added that NCER will focus on transforming and expanding
the agricultural, manufacturing, tourism and logistics sectors in
the region, with the government playing a strong supporting role and
the private sector taking the lead. He said government grants will
be given to companies in industries that require continuous
upgrading in human capital through training and industrial
attachments. Through this, the GOM hopes to develop human capital
while retaining and attracting new investments in accordance with
market needs.
Agriculture
--------------
6. Shukri elaborated that the northern states are known for their
agricultural activities, especially paddy farming, and that the GOM
is planning to transform and expand the region's agricultural sector
into a "food zone" by improving efficiency in food production and
encouraging more downstream food processing. Shuri said Sime Darby
will build a research center to develop seed cultivation and
production in Perlis in collaboration with a Chinese company which
will help reduce Malaysia's dependence on imported seed.
KUALA LUMP 00001404 002 OF 002
Manufacturing
--------------
7. The NCER is also home to much of Malaysia's electrical and
electronics (E&E) sector, which is based mainly in Penang, Kulim,
and Kedah. The E&E sector accounted for 47.7 percent of Malaysia's
manufacturing sector exports in 2006, and the GOM aims to move this
sector towards higher value added products and services through
greater emphasis on design and R&D. The GOM also hopes to transform
Penang into a major logistics and transportation hub which will
serve as the gateway for the NCER.
Tourism
--------------
8. Another key focus area for the NCER is tourism, which is
Malaysia's second largest foreign exchange contributor after
manufacturing contributing 5.5 percent to Malaysia GDP in 2005.
Under the NCER initiative the GOM hopes to encourage more foreigners
to come to Penang for medical tourism (including cosmetic and
elective surgeries) and then recuperate in the high end resorts of
neighboring Langkawi.
Malaysia Promotes Islamic Reinsurance
-------------- ---
9. On August 29 Bank Negara Deputy Governor Zamani Abdul Ghani
invited qualified local and foreign players to apply for licenses to
provide "retakaful" (reinsurance under Islamic principles) services
in Malaysia and to make Malaysia their center for retakaful
activities. New retakaful operators will be given flexibility to
conduct business in the country as a corporation, branch office, or
joint venture with a Malaysian company. Zamani said the move would
complement the country's "takaful" (insurance under Islamic
principles) industry, which has been growing at a rapid pace, and
added the new retakaful licensees would help reduce the Malaysian
takaful industry's dependence on conventional reinsurance products.
In the first half of this year net "contributions" (premiums) to the
takaful industry in Malaysia were RM 1.3 billion (USD 371 million),
up 36% from a year ago.
Stock Market Rebounds
--------------
10. After slipping to a low of 1148 on August 17, the Kuala Lumpur
composite index (KLCI) regained lost ground to close 11.1% higher at
1273.93 on August 30 in line with the improved performances of the
regional and U.S. bourses. Although more than 80% of corporations
here reported improved earnings in the second quarter, the KLCI has
fluctuated wildly along with the ups and downs of the Dow Jones
index on credit concerns in the U.S. Malaysian banks clarified they
have no exposure to the investment products linked to the U.S.
subprime market. Malaysia's lead bank, Maybank Bhd., is the only
Malaysian bank reported to have indirect exposure to the subprime
market in the amount USD 95 million. Maybank reported a 28% higher
profit of RM 1.08 billion (USD 308 million) for the quarter ended
June 2007. Malaysian investment bank CIMB expected the Malaysian
stock market to regain investors' favor once the sunprime dust
settles. As of August 30, the KLCI was up 16.2% for 2007.
11. Second Finance Minister Nor Mohamed Yakcop said Malaysia's
economic policies should have enough "in-built" flexibility to
overcome the concerns over the U.S. subprime problems. He said
Malaysia has always been flexible and creative in the management of
the economy. He commented that the current downturn in Wall Street
was likely a correction in a bull market and not the emergence of a
bear market.
Inflation Rises in July
--------------
12. Malaysia's consumer price index (CPI),a measure of the
country's inflation rate, rose 1.6% to 105.7 in July year-on-year
after a low of 1.4% year-on-year in both May and June. For the
period January to July, the CPI increased 2% from the same period in
2006. Analysts had projected a lower inflation of 1.4% for July.
They attributed the marginally higher inflation to the filtering
effect of government employees' salary hike and the increase in
excise duty of cigarettes starting July. Bank Negara expects
overall inflation for all of 2007 to register between 2% and 2.5%.
SHEAR
SIPDIS
STATE PASS USTR - WEISEL AND JENSEN
STATE PASS FEDERAL RESERVE AND EXIMBANK
STATE PASS FEDERAL RESERVE SAN FRANCISCO TCURRAN
USDOC FOR 4430/MAC/EAP/J.BAKER
TREASURY FOR OASIA AND IRS
GENEVA FOR USTR
SIPDIS
E.O. 12958: N/A
TAGS: ECON EFIN EINV MY
SUBJECT: PM Launches Northern Corridor Economic Region; Malaysia
Promotes Islamic Reinsurance: Economic Update for August 2007
REF: KUALA LUMPUR 1005
1. Summary:
- Prime Minister Abdullah launched a new economic development
corridor, the Northern Corridor Economic Region (NCER),which aims
to bolster the economic competitiveness of Perlis, Kedah, Penang,
and Perak states and reduce the imbalance in regional economic
growth rates.
- Malaysia's central bank invited qualified local and foreign
players to make Malaysia the center for their "retakaful"
(reinsurance under Islamic principles) business activities.
- The stock market regained lost ground as turmoil in the global
credit markets eased.
- Inflation rose to 1.6% in July after a low of 1.4% year-on-year
in both May and June, but remains in the central bank's target
range.
End Summary.
Northern Corridor Economic Region
--------------
2. On July 30, Prime Minister Abdullah Ahmad Badawi launched the
Northern Corridor Economic Region (NCER),exactly one year after the
GOM launched its first such economic corridor project, the Iskandar
Development Region, in Johor state on the border with Singapore
(Reftel). The GOM hopes the NCER, which includes the states of
Perlis, Kedah (Abdullah's home town),Penang, and Perak in
northwestern Peninsular Malaysia near Thailand, will accelerate
growth and increase income levels in the region. NCER is one of
four mega economic corridors identified in the Ninth Malaysia Plan
(2006-2010) that the GOM hopes will become key engines of economic
growth for the country. The GOM expects the NCER initiative to
generate RM 177 billion (USD 50.5 billion) in project spending
between 2007 and 2025, with one third of this coming from government
projects and the balance from the private sector.
3. Abdullah hopes to promote balanced economic development across
different regions by encouraging higher value added, knowledge
intensive industries to locate there. Sime Darby Bhd, a government
link company (GLC) conglomerate with core businesses in the
automotive, property and plantation sectors, drew up the master plan
for the project and will serve as the overall coordinator. The GOM
also plans to establish a Northern Corridor Implementation Agency
(NCIA) to help implement the project and serve as a "one stop"
center for investor support. The NCIA will be tabled in Parliament
in the second quarter of next year.
4. EconOff and EconFSN were briefed by Sime Darby officials on the
NCER blueprint. According to Energy and Utilities Divisional
Director Mohamad Shukri Baharom, there will no duplication of
industries within the NCER so that each state can enjoy its share of
income activities. Shukri said NCER objectives include maximizing
economic potential in the existing industries, closing income gaps,
and moving Malaysia's economy towards higher value added, knowledge
based industries.
5. Shurri added that NCER will focus on transforming and expanding
the agricultural, manufacturing, tourism and logistics sectors in
the region, with the government playing a strong supporting role and
the private sector taking the lead. He said government grants will
be given to companies in industries that require continuous
upgrading in human capital through training and industrial
attachments. Through this, the GOM hopes to develop human capital
while retaining and attracting new investments in accordance with
market needs.
Agriculture
--------------
6. Shukri elaborated that the northern states are known for their
agricultural activities, especially paddy farming, and that the GOM
is planning to transform and expand the region's agricultural sector
into a "food zone" by improving efficiency in food production and
encouraging more downstream food processing. Shuri said Sime Darby
will build a research center to develop seed cultivation and
production in Perlis in collaboration with a Chinese company which
will help reduce Malaysia's dependence on imported seed.
KUALA LUMP 00001404 002 OF 002
Manufacturing
--------------
7. The NCER is also home to much of Malaysia's electrical and
electronics (E&E) sector, which is based mainly in Penang, Kulim,
and Kedah. The E&E sector accounted for 47.7 percent of Malaysia's
manufacturing sector exports in 2006, and the GOM aims to move this
sector towards higher value added products and services through
greater emphasis on design and R&D. The GOM also hopes to transform
Penang into a major logistics and transportation hub which will
serve as the gateway for the NCER.
Tourism
--------------
8. Another key focus area for the NCER is tourism, which is
Malaysia's second largest foreign exchange contributor after
manufacturing contributing 5.5 percent to Malaysia GDP in 2005.
Under the NCER initiative the GOM hopes to encourage more foreigners
to come to Penang for medical tourism (including cosmetic and
elective surgeries) and then recuperate in the high end resorts of
neighboring Langkawi.
Malaysia Promotes Islamic Reinsurance
-------------- ---
9. On August 29 Bank Negara Deputy Governor Zamani Abdul Ghani
invited qualified local and foreign players to apply for licenses to
provide "retakaful" (reinsurance under Islamic principles) services
in Malaysia and to make Malaysia their center for retakaful
activities. New retakaful operators will be given flexibility to
conduct business in the country as a corporation, branch office, or
joint venture with a Malaysian company. Zamani said the move would
complement the country's "takaful" (insurance under Islamic
principles) industry, which has been growing at a rapid pace, and
added the new retakaful licensees would help reduce the Malaysian
takaful industry's dependence on conventional reinsurance products.
In the first half of this year net "contributions" (premiums) to the
takaful industry in Malaysia were RM 1.3 billion (USD 371 million),
up 36% from a year ago.
Stock Market Rebounds
--------------
10. After slipping to a low of 1148 on August 17, the Kuala Lumpur
composite index (KLCI) regained lost ground to close 11.1% higher at
1273.93 on August 30 in line with the improved performances of the
regional and U.S. bourses. Although more than 80% of corporations
here reported improved earnings in the second quarter, the KLCI has
fluctuated wildly along with the ups and downs of the Dow Jones
index on credit concerns in the U.S. Malaysian banks clarified they
have no exposure to the investment products linked to the U.S.
subprime market. Malaysia's lead bank, Maybank Bhd., is the only
Malaysian bank reported to have indirect exposure to the subprime
market in the amount USD 95 million. Maybank reported a 28% higher
profit of RM 1.08 billion (USD 308 million) for the quarter ended
June 2007. Malaysian investment bank CIMB expected the Malaysian
stock market to regain investors' favor once the sunprime dust
settles. As of August 30, the KLCI was up 16.2% for 2007.
11. Second Finance Minister Nor Mohamed Yakcop said Malaysia's
economic policies should have enough "in-built" flexibility to
overcome the concerns over the U.S. subprime problems. He said
Malaysia has always been flexible and creative in the management of
the economy. He commented that the current downturn in Wall Street
was likely a correction in a bull market and not the emergence of a
bear market.
Inflation Rises in July
--------------
12. Malaysia's consumer price index (CPI),a measure of the
country's inflation rate, rose 1.6% to 105.7 in July year-on-year
after a low of 1.4% year-on-year in both May and June. For the
period January to July, the CPI increased 2% from the same period in
2006. Analysts had projected a lower inflation of 1.4% for July.
They attributed the marginally higher inflation to the filtering
effect of government employees' salary hike and the increase in
excise duty of cigarettes starting July. Bank Negara expects
overall inflation for all of 2007 to register between 2% and 2.5%.
SHEAR