advanced economies is an example of why this is so important. effective coordination of monetary and fiscal policy is important to contain demand pressures and manage market confidence. ladies and gentlemen, 13. it will be remiss on my part not to speak about the ringgit. since january this year, we have seen the ringgit depreciating by more than 9 % against the us dollar. but on this, we need to be clear that the strength of the dollar is a global phenomenon – not just a malaysian one. in fact, the us dollar is now at a two decade high [ 1 ] due to aggressive tightening of monetary policy by the federal reserve which increased its policy rate by 300 bps this year. risk - off sentiments arising from geopolitical conflict and a moderating global growth outlook have further increased demand for dollar assets. 14. like most countries in the world and around this region, the ringgit has not been spared. the currencies of other major economies have also depreciated against the us dollar. if we also look at how the ringgit has fared against the currencies of our trading partners, it has appreciated against some and depreciated against others. in fact, the performance of the ringgit, if weighed against the currencies of malaysia ’ s trading partners have been relatively stable. this underlines the point that we are in an environment of us dollar strength. 15. it is also important to emphasise that the ringgit ’ s performance against the us dollar alone is not a reflection of the state of the economy. the exchange rate is only one indicator among many. like i said at the start, it is important to consider the strength and positive performance of the malaysian economy. growth is robust, the labour market is healthy and the financial system is resilient and continues to perform its role effectively. further, malaysia has a strong external position with more foreign currency assets than foreign currency liabilities. foreign currency borrowings only account for less than 3 % of total federal government debt. 16. i also need to stress that a flexible exchange rate continues to be relevant as it allows the country to absorb external shocks. it also allows the mpc to set the policy rate based on malaysia ’ s domestic growth and inflation outlook, rather than be constrained in having to follow the monetary policy of other advanced economies. 17. now, we know that exchange rate movements create winners and losers. no doubt, the dollar strength will raise the

##ility of the malaysian economy. where we are today is not by luck or an accident. 25. and so, as we look towards the challenges ahead, we must continue to build on and fortify the strong foundation of the economy and once again, transform our economy as we did in the past. this time, from an economic model based on cost minimisation ( i. e. a low cost model ) to premium maximisation. we need to aspire to become an innovation - based economy. what do i mean by being an innovation - based economy? a. first, the most critical raw materials of the economy are ideas instead of natural resources or capital. b. second, products are of mass customisation and high complexity, instead of mass production. c. third, organisations are characterised by entrepreneurs, start - ups and collaborative networks. d. fourth, business competitiveness is not dependent on incentives, subsidies or cheap labour, but defined by world class talent, strong institutions and good governance. e. finally, market forces work through creative destruction to respond efficiently to the changing needs of the economy and society. we cannot protect every job, business, and industry. but social safety nets can protect the most vulnerable and help all segments transition to new opportunities. 26. to some extent, the work has already started. the government has already laid down the key strategies within our national policy documents such as the twelfth malaysia plan ( rmk - 12 ) and the national policy on industry 4. 0. however, the success of these plans and aspirations requires strong policy coordination to secure success. this is especially important given our need to invest to strengthen economic complexity and leverage on our strength as a resource rich country. 27. now, the challenge is to turn these plans and blueprints into action and results. for us to elevate our fundamentals as an innovation economy, we need to press on with reforms to strengthen the foundations of ideas, quality investments, talent, and market dynamism to ensure efficient allocation of resources. 28. as we face new and emerging challenges, we must embrace new opportunities that are available. one such opportunity is the move to a low carbon and greener economy. besides producing green products such as solar panels, our own rich biodiversity plays a critical role in the global shift towards sustainability. the key however is not to monetise our natural assets quickly, either as commodities or as green - assets or credits to other countries. instead, we must look to develop