Datuk Seri Mustapa Mohamed, minister in the Prime Minister’s Department (Economy), answers email questions from The Edge on the implications of the European Green Deal for the Malaysian economy
The Edge: What measures are the Malaysian government taking to facilitate the response of Malaysian businesses to the climate goals of its trading partners, including under the European Green Deal?
Datuk Seri Mustapa Mohamed: The conservation and preservation of our nation’s environmental heritage for posterity has always been part and parcel of the federal government’s agenda. The fact that our trading partners have begun to stress the importance of the environment in general, and of mitigating climate change in particular, is of course pertinent.
We have to take serious notice of policies surrounding the green agenda. Besides the policies and schemes that have been in place, such as the Green Technology Financing Scheme, the Green Investment Tax Allowance, and the Green Income Tax Exemption — not to mention the MyHIJAU Mark programme under the Malaysian Green Technology and Climate Change Centre (MGTC) — the government of Malaysia recognises the importance of incorporating environmental, social and governance (ESG) and United Nations’ sustainable development goals (SDG) principles in our sustainable development agenda.
To take one example, developers in the construction sector have been urged to adopt sustainable certification and performance tools, including the Sustainable Infrastructure Rating Tool (Sustainable INFRASTAR), Green Building Index (GBI) and GreenRE in ensuring environmental sustainability features are incorporated from the beginning of the design [and] construction to operation phase.
I am pleased to note that more and more Malaysian companies are embracing ESG principles, and I foresee this momentum to continue building up. For instance, the FTSE4Good Bursa Malaysia Index, which only includes companies that meet a variety of ESG criteria, has been growing steadily since its introduction in 2014.
What is the estimated value of Malaysia’s trade with the European Union market that will need to comply with its ESG measures that have 2030 targets?
At the moment, we do not have any specific numbers. Nevertheless, going forward, compliance with international standards on ESG will continue to be an important consideration in our development planning, and sustainable development agenda. But this must be done incrementally.
In 2020, the EU (excluding the UK), was Malaysia’s third-largest trading partner, representing 8% of Malaysia’s total trade. In fact, Malaysia has consistently been a net exporter to the EU, with total trade growing at 3.7% per annum for the period of 2001 to 2020. Some of our goods and services have already complied with the EU’s ESG standards. That being said, there is much room for improvement.
What targets does the Malaysia Digital Economy Blueprint (MyDIGITAL) set for the greening of the country’s economy, and what is the time frame involved? What are the challenges that must be overcome to achieve these greening goals?
MyDIGITAL and the green agenda go hand in hand. Up-and-coming technology and environmental goals have become increasingly interdependent. This is not the First Industrial Revolution, which took as its goal the domination of nature’s resources by man. The abuse of nature has become increasingly looked upon by civilised nations as a major externality arising from modern life. The Fourth Industrial Revolution implicitly recognises this, hence why green technology is replacing less energy efficient technology.
MyDIGITAL was therefore designed with SDG in mind. Although not mentioned specifically in the Blueprint, digitalisation will naturally provide a positive impact on the environment. A simple example would be that companies adopting digitalisation for human resources processes would inevitably use less paper. Therefore, MyDIGITAL, which sets different goals along different time frames — some objectives being set in two-year time frames, and others in five years, for instance — is a green-friendly blueprint. In fact, we are increasingly looking at accelerating the time frame for digitalisation, as some of our objectives, such as online education, have become urgent matters that need priority attention. Some challenges going forward include a lack of awareness on ESG among businesses and the rakyat, as well as the perception that costs for going green are expensive.
At what stage is the implementation of the national open data digital challenge to innovatively solve social and environmental issues?
In accelerating the digital economy, the government has introduced the national open data digital challenge, establishing platforms for local players to use open data in providing software or hardware solutions for social and environmental issues. This national innovation challenge is led by the Ministry of Science, Technology and Innovation (Mosti). However, this initiative is still at its early stage of implementation.
The government has also implemented a nationwide series of hackathons that are driven by specific themes and matching set of problem statements. In this programme, the innovators, software engineers, subject matter experts and the public will work together to co-create digital solutions to help improve public service delivery as well as enhance the rakyat’s well-being. These hackathons have been mainly led by Mosti and Mampu, the government’s administrative modernisation and management [planning] unit.
Given the European Green Deal’s target to completely phase out the use of coal by 2030, how will the forthcoming National Energy Policy deal with Malaysia’s significant exposure to coal energy?
The National Energy Policy will, Insha Allah, be released in the third quarter of this year. We have been working on the document for the past 18 months, and have been engaging various stakeholders to ensure that it adequately addresses current and future challenges. On coal, discussions are ongoing within the government apparatus viz between ministries and relevant agencies. While the green agenda is indeed very important to Malaysia’s long-term strategic interests, it has to be balanced by the present energy requirements of our economy. This requires a gradual phasing out of coal, rather than a disruptive approach.
Malaysia is a developing economy. We need to ensure that the economy grows while at the same time, safeguarding the environment. This is a difficult issue with competing interests on both sides — one in favour of a more gradual approach, and the other more radical. The government hopes to strike a good balance between the two. This will be reflected in the National Energy Policy.