Name: Malaysia's Economic Strategy: A Conversation with Finance Minister Il Datuk Seri Amir Hazmah Azizan
Uploaded: 2025-11-17
Duration: 20 min 15 s
Description: Malaysia is pursuing an ambitious agenda to expand cross-border energy infrastructure, build seamless regional payments systems, and attract high-value electronics manufacturing. Finance Minister II outlines how these priorities fit into a broader plan to strengthen and secure Malaysia’s interests and technology tensions and shifting global economy.

Malaysia is pursuing an ambitious agenda to expand cross-border energy infrastructure, build seamless regional payments systems, and attract high-value electronics manufacturing. Finance Minister II outlines how these priorities fit into a broader plan to strengthen and secure Malaysia’s interests and technology tensions and shifting global economy.

Malaysia's Economic Strategy: A Conversation with Finance Minister Il Datuk Seri Amir Hazmah Azizan

Conferences

We heard earlier in the day that Malaysia is at a turning point, scaling cross-border energy and trade links and expanding its foothold in high-value electronics and manufacturing. Those aren't isolated initiatives. They're pillars of a national strategy to strengthen Malaysia's competitiveness in a world defined by new technologies and shifting global supply chains. We are pleased today to be joined by a leader who has been instrumental in shaping Malaysia's economic strategy. And the decisions guiding the country's next phase of growth. Please join me in welcoming our forum's guests of honor, YB Senator Datuk Seri Amer Hamza Azizan, Malaysia's 2nd Minister of Finance. Thank you. Thank you so much for taking the time to be with us here this afternoon. It is this is a busy man. He has not just the finance portfolio, but he's also the economy minister. We are right in the middle of budget season in the parliament, so that he would carve time out of his schedule to join us is extraordinary, and we thank him. Um, I want to ask you to begin with a little bit about your own background because it's, it's quite remarkable. Um, your journey has come through the private sector to your current, uh, uh, post. You're not a kind of traditional career politician at all. Um, you began at Shell Oil and there for many years, worked at Cazana, uh, the employees, uh, pension benefit fund. Um, patronus, so really extraordinary portfolio of different, uh different roles. How, how do you think your, uh, private sector experience shapes the way you approach your current public job? Oh, thank you. Uh, yeah, I'm always constantly reminded I'm not a politician. I'm very happy to say that I'm not a politician. Yeah, uh, because effectively what I bring to the table, uh, is, uh. An ability for us to actually look at it on raw data, start taking decisions based on what we need to do, and then adjust with what's required from the country point of view. So, um, if you look at the experience I've had, I've been lucky, I've had a tremendous amount of opportunity to try different things. So in trying to cobble together government policy and implementation, the most important thing that I would like to bring on the table is the ability to say, OK, fine and understand the wider things that we need to do, but what does it take on the ground to make it stick? What's the issue that you have that that makes it stick and understanding the business community allows me to also address the needs that required. So we kind of a uh A pragmatism about, OK, we can do that if you want, but these are going to be the consequences. Is that really what you want, which is, which is a really valuable and beneficial approach and you know as I look at at Malaysia and and the policy framework, it's, it's very impressive. I have to say I mean we have been talking all day about turbulence in the global economy, all the challenges. The changes that are going on, we've got superpowers, you know, at loggerheads. We've got crazy tariffs that go up and that go down and disappear and get holes carved out of them. We've got restrictions on exports of technology. And then on top of that, we've got all these technological changes, AI and and maybe even more dramatic changes just over the, the horizon, um. You know, I, I just think back to where we were, you know, quote unquote liberation day and and all of ASEAN sort of had a collective heart attack about that. But you look at where, you know, particularly Malaysia is today, and I wonder if I could ask you a little bit about, you know, your, your kind of sense of where the economy is. Um, it's doing pretty well. It was 5.3, was it in the third quarter, 5.2% in the third quarter. And um I just noticed that I know that your own forecast is more conservative, it's like 4.2 to 4.8 for for 2025, but many of the private banks have started to come around and be much more optimistic. I was just mentioning that Standard Charter just a few hours ago raised its GDP forecast to 5.2, which would be pretty impressive. What's your, what's your thought? Are you more optimistic than you? You know, now that we're into this quarter, and this year has been a very challenging year for everybody, right, uh, but Malaysia's approach has always been an approach that is always measured and actually trying to take and take decisions what is necessary for the long term in doing it. So when Liberation Day hit, we didn't panic, we, we weren't the first going out there and say I'm going to reset my target to be this. We took some time to understand what were the capacity of us to be able to respond, what were the key things that we needed to do, and then execute against that. Hence you saw Benara came up with a revised estimate only in July, you know, this year and we reduced our rate from 4 to 4.8%. Uh, and touch wood, uh, we're still being able to get to a 5.2% in the third quarter, and I think that's the, the, the strength of the Malaysian economy. The Malaysian economy has a very deep diversification at its base. No export market is greater than 13%, yeah, so it's a wide range of markets and the base of the economy is also quite well integrated uh along the way and that's helped us being able to address the challenges that we're seeing today in in the ever-changing world. So the, yeah, the diversity of the economy has really been part of the secret of its of its resilience. Um, the other thing that has struck me as extraordinary is that, um, in the midst of all this upheaval, uh, you've been very disciplined on the fiscal side and, uh, you know, trying to keep the, the budget deficit coming down. Can you talk a little bit about some of the benchmarks there and kind of where we are in the budget and, and, uh, what, what you, I mean, where, where are we now? I think we're 3.8%, is that right of GDP? Yeah, so if you look at the Malaysia, I think like most countries in the world, we all had to respond during the COVID period and most of us use fiscal balances that we had actually to stimulate the economy to make sure the bottom end of society are protected and we had the capacity to continue to move on. But that meant fiscal deficit widened quite dramatically and Malaysia in 2021, we hit the 6.4% fiscal deficit over GDP. And that was not a sustainable number and one of the key things that this government has done is actually to refine forward to say what we need to do is to find balance. The balance that we need is good fiscal discipline, but also the capacity to inject things into the economy that will grow it in the future, but more importantly also rebalance the economy that makes it future-proof. The future in terms of investing in the right segments of the market and making sure that it flows back into society. So we carry the whole society along. That's why under the Economy Madani framework, we talk a lot about lifting the ceiling, lifting the floor, because making sure it translates down to the bottom, makes sure it's sustainable going forward. And in that process, we take decisions. Some of it not easy, reducing fiscal discipline meant we had to retarget back uh subsidies in the country. And looking at it meant that we have to also address the fiscal base that we actually have, which means some tax measures that had to be put in, but always with the mind that whatever measure that we do is got to be balanced so that the impact of society can be contained along the way. And This year we're looking at 3.8% of fiscal deficit over GDP. Next year we're looking at 3.5%. So hopefully by 2028 we'll get to below 3%, which is our target. That's incredible. I mean, you know, America could take a leaf from Malaysia's book on that. Can you say anything about the, the political challenge of that because, you know, um. That's hard for me to imagine in the current kind of gridlock of of American politics, but Malaysia also has a very fractious political system with all these complicated different parties and coalitions. How was everybody able to agree on on those painful kind of uh uh measures of restraint? I guess the most important thing to understand is that we all have to accept the fact that we need to address fiscal deficits, yeah, because there are long term consequences of letting it go uncontrolled. The key then is to understand if you're trying to address what levels do you have to pull and what impact does the level that you pull have on society in totality. So the key measure that we've been doing in Malaysia is making sure that we get better targeting done. Yeah, so we understand that for example, in society, not all the segments of society are equally protected along the way. Some are much more affected than the others. So if you are going to to address subsidies, make sure you have targeting that actually gets it to the to the groups that probably need more support along the way. And start adjusting it to market practices for the groups that can take adjustment. So you've seen that happen when we address electricity in the country. So 85% of domestic consumers in Malaysia did not see an increase in electricity prices. The top 15% did, industrial and commercial did. You saw us also addressed it in. patrol, so we limited it only to uh citizens are allowed to get uh subsidized petrol and for diesel, we targeted also in the same similar manner where groups that were necessary to get support, we give support, the groups that had inflationary effects, we protected it, but the rest had to pay market price. By doing that, we address the arbitrages that exist in either commercial to residential and vice versa. We address the potential leakages in smuggling that actually occurred and because of that, we've got the ability to save. And if you do it well, you refine your process as well, you use data as the base of how you look at it, you can contain the effects in a better form and bank your savings. So in Malaysia, Uh, we've achieved about 15.5 billion ringgit of savings per year coming in from the measures that we've done. At the same time, we kept inflation at a low level. Today we are seeing about 1.5% inflation. The remarkable and, and what are the employment numbers looking like right now? Employment levels are pretty strong. We had about 3% unemployment rate, which pretty much full employment. Remarkable. Um, let's talk about what comes next and, and some of the challenges. I mean we've heard in numerous number of sessions here today about how Malaysia aims to kind of leapfrog to the frontier of the digital revolution that it's, it's investing incredible amounts in data centers in in light manufacturing, trying to figure out ways to kind of move up the. The the value chain, um, one of the obstacles to that of course is going to be figuring out how to provide enough power to keep all those data centers and manufacturing facilities running. I was just looking at some of the numbers here. They're kind of hard to get your head around, but I've seen analysts estimating data center uh electricity use rising from 8 to 9 terawatts today to about 68 terawatts by by 2030. And load ships going, you know, up by like 8 times. Can Malaysia supply that step change, that kind of step change reliably? I think you, you've got to understand where we began, right? When we began this journey in say 2020, 2021 when the early stages were starting up, we had very, very large reserve margin. Our reserve margin had gone crept up to about 55% of total capacity that exists. So there was an opportunity because the capacity was just sitting over there. But we had some structural things that we had to fix, so among the structural things that we had to fix was address the subsidies to make sure that it doesn't leak the way it's not supposed to leak. Second is to make sure that it induces the right behavior from industry. So if you notice the change in the power tariffs this year, we are now adjusting power tariffs every month. So when you do that, you allow the prices to catch up faster or decline much faster along the way, provides better certainty for for industries along the way. Uh, the third is actually to look at, uh, in terms of forward planning, what do we want. So the first rounds of data centers that came in helped build a critical base for Malaysia. The next round of data centers we said we wanted it with a bit more capability for Malaysia. We wanted it with AI, we wanted with a lot more regional providing services. So it helps build a sustainable business for Malaysia in the long term. And the third round of data centers that we want that. Plus we want you to also have things that reduces the consumption of power, better smarter usage of water along the way. So you build on your basis so that you can over time address the requirement. And going forward under our national energy transition roadmap, we have quite a clear direction forward how we are actually going to transition the economy into greener power. Part of it is actually renewables in the country, solar, hydro. Uh, part of it is also bringing in through the Asian power grid into supplying into Malaysia and then connecting it onto the wider grid of ASEAN. This is important because it grinds the grid, but more importantly, over time also it reduces the total capacity that needs to be injected in uh the whole ASEAN region. Net net, everybody gains. Right, you can do load sharing and uh uh that's that's very interesting. So, um. The renewables goals are quite ambitious for Malaysia. Can you say a little bit about what the what the what the current renewable capacity is, you know, what percentage of of energy demand is renewable in Malaysia right now and what's the, what's the goal by? I think the target is 2030, is that right? The, the, the country has adopted the net zero by 2050. We will get to net zero by 2050. In order to do that, the energy mix is likely to be about 70% of our energy mix must be renewable in order for us to get to that state. So what does it requires a lot. That's a lot, I agree. Uh, so one of the key things that we have to do is to transition it in a proper manner. Part of the transition means utilization of gas for the short term, have to step up and we remove coal as the base load fuel in Malaysia, and that's ongoing at this point in time. Every time a coal plant expires its contract, it doesn't get renewed. Yeah, going forward also as other coal plants and we also will not renew it but replace it with temporarily gas and over time put in renewable replacement. That includes hydro, which we have still some resources in uh Sean, Malaysia and a lot inrawa. And second, bringing renewables from Asia grid, yeah, and that's why we have now a memorandum of cooperation that connects Vietnam, Malaysia, and Singapore to bring 2 gigs of power along that line and we will use uh wind power from that site to incorporate in the country, push a lot more in terms of solar, bringing batteries at the same time to stabilize the grid and look at inducing better efficiency so that we can also reduce demand. Uh, based on growth that's coming in. I ask you about the push into uh higher value added in in uh in manufacturing. I mean, Malaysia is already a global powerhouse in assembly testing and packaging for semiconductors, and it's a top tier electronics exporter. Um, what has to happen to kind of step up to the next level in the value chain? What are the kind of critical factors that you see? Well, Malaysia didn't fall and got lucky in doing this. We built the, the ENE and semiconductor sector since the 1970s, early 1971 was when Intel first came into Malaysia, and over the years what we've been trying to do is strengthen the ecosystem that exists. So the more places that you have in, the more work that is built around supplying to the ecosystem, you build capability within the system. So now what Malaysia's next push is actually we want to go up the value chain a bit more. That includes advanced packaging, that includes also cheap design. So as this is going down that path, what we will have to do is to also prepare our workforce to be able to go up that path. We will also have to provide capital to allow venture capital to come in and PE to come in to support mid-tier companies to grow to be able to do it. But make sure as we grow it, the ecosystem gets bigger and more diverse and stronger along the way, and the government plays a role in that. It provides capital, it provides support in terms of training along the way. It goes out and looks at where can it strengthen infrastructure in the country so that the infrastructure can support the plants that actually come in whether you open new industrial land, you provide more power mechanism or water mechanism, it provides infrastructure that will support businesses. And hence a better planning and execution on that helps build the story move on. We've got just a couple of minutes. I want to get back to this idea of resilience. Uh, I wonder if I could ask you just for your quick take on, on, on these tariffs, you know, the tariffs that were announced in April have been rolled back to 19%. Uh, they're comparable to tariffs for Thailand, Indonesia, and, and, uh, you know, Vietnam is a 20% or something like that, I, I think, but sort of roughly the same. Uh, on the other hand, Singapore's tariffs are lower, and China's tariffs are probably higher, although that's kind of a Swiss cheese. It's very hard to calculate. Um, there's a carve out for Malaysia as well though, for, for chips, for pharmaceuticals. I gather palm oil is still kind of under discussion somehow that could really help a lot. How much headway do you feel that these tariffs are to Malaysia achieving its? Its its economic goals over the next kind of 2 or 3 years. I think there are a couple of things that we need to understand when we look at the supply chain for the ENE semiconductor space. The supply chain is a very globally connected supply chain. Disruptions to it causes quite a big backflow elsewhere. And if you look at the base that Malaysia has built, it is a base that has been built by Western and Chinese entities in the country. And the key was being able to balance both sides to be able to play an active role in supporting the mechanism. So our proposition to both is actually to say we are key to your long-term supply chain, we provide the intermediate goods that you need in the long term to support your growth. And we want to continue to be because we are a reliable partner to it. So the differentiation that Malaysia brings is its reliability, ecosystem, it's a supply chain mechanism that is very different than than most other players. We are not at the top end of the supply chain, which requires deeper capital base, deeper knowledge base, and so on. So we are not a threat to to uh aspirations of the US who wants to bring a lot of things back home, yeah. Neither are we at the bottom end of the chain, uh, which is not good enough margin for us. So what we are doing is stay in the middle but grow a little bit more of the margin take inside it and increase the complexity of the economy. And as we do more of that, we strengthen the value chain, the economy is able to sustain going forward. Well, I think we have gained a little bit of insight as to why Malaysia has managed to navigate all this turbulence so well. It has someone so knowledgeable and pragmatic helping to frame those policies. So I really want to hope you'll join me in thanking the minister and taking time to share his thoughts with us. Thank you very much so much.