The 12th Malaysia Plan (12MP) has thankfully been torn-up and replaced with a new and more significant pivot in economic reform.
The 12MP was launched on Sept 27, 2021 by then-prime minister Ismail Sabri Yaakob.
The mid-term review (MTR) started less than a year later, suggesting it was wrong from the start. It’s been only two years from launch and we already have a complete revision and a whole new vision.
This really shows the end of the Malaysia Plan system which is a form of central planning that has not stood the test of time.
The approach in the old 12MP, with three key targets, four enablers, 14 “game changers”, eight multidimensional goals and eight macroeconomic strategies, is management consulting, not economic policy. It was repeated in the New Industrial Master Plan (NIMP) which was equally bad.
Malaysia Plans are straight out of the old-style development economics of the 1960s and 1970s. They are interventionist and not uncommon in socialist or communist countries. They have failed.
The new 12MP headed by economy minister Rafizi Ramli and launched by Prime Minister Anwar Ibrahim appears to have a broader and more economically sound approach, which is good.
The three key themes “Malaysia Madani: Sustainable, Prosperous, High-Income”, are headlines but behind them is a more realistic focus on five high-potential sectors: renewable energy, technology and digital, electrical and electronics, agriculture and agro-based as well as rare earth industries.
These are so much more realistic than the NIMP launched only two weeks ago and they focus on existing expertise and real growth opportunities.
The rare earths policy keeps the benefits of the commodity-based growth here in Malaysia and will require foreign investors to set-up here rather than take the resources abroad. It is anticipated to contribute up to RM9.5 billion to GDP and create nearly 7,000 jobs by 2025.
Other existing areas of expertise, including halal and Islamic finance, are also featured. Halal export value of RM63.1 billion is targeted for 2025, not too far behind palm oil export value.
Competitiveness and improvements in business regulations aim to boost domestic direct investment (DDI) and foreign direct investment (FDI).
Government investment of at least RM90 billion annually will increase the total allocation to RM415 billion, with RM270 billion coming in the remaining three years. This is in line with Budget 2023 and should not trouble the debt and deficit levels too much.
Targeted subsidies are again highlighted with a clear aim of replacing general price subsidies with targeted income support, using the Pangkalan Data Utama (PADU) system. This has been a long time coming but eventually the government appears to see what we have been advising.
The eradication of hard-core poverty has already been targeted by the end of 2023 and the People’s Income Initiative (IPR) aims to complement existing poverty eradication programmes and initiatives to help low-income groups diversify income sustainably and avoid falling back into the poverty trap.
One interesting small-scale initiative is the RM60 million in second chance financing for SMEs. This will help them learn from past mistakes and start afresh. It is a wholly different way of thinking.
Some glaring omissions reveal a continuing reluctance to address really urgent issues. Pension reform, higher education finance and healthcare funding are all overlooked. Also the big issue of how to replace Petronas as a national anchor asset if it has only 15 years of reserves left.
Fortunately we will only have to suffer the 12MP for two more years and new policy approaches can fill the gaps in the meantime. For now we should be grateful to see the end of the old 12MP and a clearer sense of where policy will go and how it will get there. - FMT
The views expressed are those of the writer and do not necessarily reflect those of MMKtT.
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