Today [June 10] sees a key moment in Malaysian economic policy, as Prime Minister Dato' Sri Mohd Najib bin Tun Abdul Razak presents the 10th Malaysia Plan (10MP) to Parliament. The 10MP is the economic blueprint that will set the tone for the whole country’s development over the next five years.
The Plan is widely expected to contain new policy directions, strategies and programmes all targeted at enabling Malaysia to emerge as a high-income nation. To reach this goal, several key policies unveiled earlier – during the prime minister’s first year in office – will see further expression in the Plan. These include the Government Transformation Programme (GTP), unveiled in late January, and the push to achieve greater efficiencies in government via methods such as Key Performance Indicators (KPIs) and National Key Results Areas (NKRAs). Also receiving further attention will be the far-reaching New Economic Model (NEM), announced in March, which seeks to achieve greater inclusiveness and sustainability through a model of growth based on innovation and creativity.
The 10MP comes at a key time for Malaysia’s economy. Bruised, but not battered, by the global economic crisis, Malaysia is urgently aiming for a new place amongst the world’s economies, as its previous, low-cost economic model based on capital accumulation – a model that has served it well up until today – is no longer suited to the current competitive environment. At the same time, the government must deliver a higher standard of living for its growing population.
It is widely understood that the ‘more of the same’ approach will thus not achieve the stellar growth rates that it has achieved in years past, and indeed, could condemn Malaysia to long-term decline.
"The question is, then" as Tan Sri Nor Mohamed Yakcop, Minister in the Prime Minister’s Department told OBG, "how do we move from being an upper-middle-income country to being a high-income country? That is where the 10MP will be quite different from the others. We have to focus on how to get from upper-middle-income to high income, from low value to high value, from the assembly plant type of industries to knowledge and high technology industries, on how to attract good foreign and local investment in higher-technology industry, and how to improve the education system to create the human capital necessary to move forward."
Behind all this lies Vision 2020, the 30-year plan laid down in 1990 that targeted ‘developed country’ status for Malaysia by the year 2020. To achieve this requires an average GDP growth of 6.5% for the next 10 years. How to achieve this substantial level of sustained growth is the question that has been exercising brains at all levels for some time now, with the prime minister central to this exercise. Indeed, while for the first decade after Vision 2020 began, GDP growth was generally healthily over this level (the exception being the year of the Asian financial crisis), in the last decade only 2004 saw growth exceed 6.5%.
"The ‘how’ part is more challenging," Prime Minister Najib recently told OBG. "It is a work in progress. We are currently identifying the key economic activities that will generate the 6.5% growth required, and these areas will be given priority going forward. Of course, there are challenges. Some are legacy issues relating to how we reacted to the two financial crises – in 1997-98 and the global economic crisis in 2008."
Boosting productivity and finding new sources of growth are two of the key foundations of the 10MP’s answer to the ‘how’ part, and indeed, were key to the NEM, the economic framework that forms the basis of the 10MP.
The actual implementation and success of both the Model and the Plan will hinge on several key factors. Fundamental to the Plan’s success will be the extent to which it is able to enhance the role of the private sector in the economy, whilst at the same time decreasing the government’s direct stake in it. The challenge will be to ensure the more vulnerable groups in society are not left behind. This impacts too on issues such as the increasing need to address Malaysia’s burdensome subsidy bill, which per capita is one of the highest in the world, currently amounting to RM 74bn a year, according to a report initiated by Dato' Sri Idris Jala, CEO of PEMANDU. A narrower definition of subsidies, according to Treasury and Economic Planning Unit, amounts to RM33bn.
Then there is the human capital strategy, which will see a major boost in education and training, both for new students and old ones, again with a boosted role for the private sector. Ties between academia and business are key to the development of a knowledge-based society, with research and development to become more tailored towards commercialisation, thus boosting the capacity of the economy to increase value added – the mainspring for becoming a high-income economy.
"I have said that there are two important preconditions for all this to work," the prime minister told OBG. "First, I must get the market excited about the reforms; and secondly, I must have the buy-in from the people."
The public and business worlds will be closely watching today’s announcement, as the government seeks to move the country forward across the board. The 10th installment of Malaysia’s plan for the future has to show a new approach – and may always be recognised as the programme that set the stage for the country’s final dash towards the 2020 deadline. How successfully Malaysia embarks on this final leg will also likely continue exercising minds and tongues for many years to come.