Malaysian Prime Minister Ismail Sabri Yaakob on Monday unwrapped a new five-year economic blueprint that set ambitious targets to raise household income, rein in carbon pollution, and develop high-tech industries in the country’s latest bid to become a developed nation by 2025.
The 12th Malaysia Plan, the first major policy introduced by Ismail’s administration, projected an average 4.5 to 5.5 percent annual rise in gross domestic product (GDP) over the next five years, which experts describe as “sensible” after the country posted an average yearly growth of 2.7 percent from 2016 to 2020 – about half its initial target of 5-6 percent under the previous plan.
Malaysia’s economy has yet to fully recover after it shrank by 5.6 percent last year, its worst performance since the Asian financial crisis in 1998, dragged down by the COVID-19 outbreak.
Although GDP expanded faster in the second quarter this year at 16.1 percent, the central bank cut its 2021 growth forecast to between 3 and 4 percent from 6 to 7.5 percent previously as new lockdown measures and a rise in Coronavirus infections in August weighed on the outlook.
The central bank, however, is positive that the country’s vaccination drive will allow for a gradual reopening of the economy and a rebound in the second half of this year. As of September 29, a total of 71 percent of the total population has received at least a single COVID-19 vaccine dose. The government’s financials are expected to improve in 2023, Ismail said.
The five-year plan also aims to raise the average household income to 10,065 Malaysian ringgit ($2,406) per month from the current estimate of about 7,089 ringgit. Analysts are particularly skeptical of that target, calling it “ambitious” as the increase between 2016 and 2020 was less than 2,000 ringgit.
Malaysia also fell short of its target to hit the World Bank’s high-income threshold of $12,696 by 2020. The country’s gross national income per capita stood at $10,111, 20.3 percent lower than the level required to become a high-income economy.
Ismail is now saying that the target can be reached by 2025. The government has pledged to create half a million jobs this year and limit the hiring of foreign labor to increase employment opportunities for locals affected by the pandemic. By 2025, the unemployment rate is expected to fall to 4 percent, with an additional 1.1 million jobs created.
Ismail’s administration will also look into creating more high-skilled jobs, in line with its National Investment Aspirations policy introduced in April 2021, in order to attract high value-added investments. It has been estimated that 80 percent of job creations since 2010 were low- to mid-skilled jobs, as the economy is not growing as fast as it did in the early 1980s and mid-1990s.
Malaysia’s high-income ambition was first mooted by former premier Najib Razak in 2009, with the country aiming to attain the coveted high-income status by 2020. Following the historic 2018 federal polls that ended Barisan Nasional (BN)’s six-decade rule, the new government, led by Dr. Mahathir Mohamad, announced a shared prosperity vision that extended the target to 2030.
Ismail’s appointment as the country’s third prime minister in three years marks the return of the United Malaysia National Organization, the dominant party in the BN coalition, and the return of the high-income quest. The five-year road map set aside 400 billion ringgit to achieve high-income status by 2025.
The allocation for the 12th Malaysia Plan makes it the biggest economic development package yet, 54 percent higher than the 260 billion ringgit allocated under the 11th plan. The government spent 248.5 billion ringgit on development initiatives in total from 2016 to 2020, Ismail said.
Malaysia also aims to become a carbon-neutral country by 2050, with economic instruments such as a carbon tax and an emission trading scheme being considered for implementation.
Ismail said the government has vowed to stop building coal-fired power stations, as it continues its efforts to reduce greenhouse gas emissions intensity — emissions per unit of GDP — by 45 percent in 2030. The country recorded a 29.4 percent reduction in emissions-to-GDP in 2016.
The government’s pledge to halt the construction of new coal power plants signals a greater commitment and focus in addressing environmental issues more effectively.
Institute of Strategic and International Studies (ISIS) Malaysia director of research Alizan Mahadi said this is in contrast to previous five-year plans that set out to reduce emissions whilst promoting conflicting policies such as increasing coal-fired plants and car ownership.
“We see this year that there is a focus on green mobility, green industry, eco-industrial parks, and sustainability in the tourism sector, among others. The game-changer here is we can see the concept of green growth becoming mainstream across different sectors and throughout the 12th Malaysia Plan and that is certainly something new,” he said in an interview with local news channel Astro Awani’s Consider This.
However, much of the language used in the five-year plan is aspirational and it is unclear if these goals will translate into action.
Institute for Democracy and Economic Affairs (IDEAS) Malaysia CEO Tricia Yeoh described the 12th Malaysia Plan as attempting to use the “right terms and phrases” but not addressing issues that are fundamental, citing plans to appoint qualified corporate and industry players to the board of directors and top management of state-owned enterprises as a way to improve governance in these agencies.
“One can’t help feeling like you’re reading something that sounds good on paper, but whether or not it’s actually going to be executed (remains to be seen),” she said. “Is that really going to happen looking at the slate of political appointments today?”
IDEAS recently launched an online platform called Pantau Kuasa, which tracks political appointments in statutory bodies during the last three administrations from Najib to Muhyiddin.
The charts showed that while there were efforts to cut back on political appointments under Mahathir’s Pakatan Harapan tenure, they more than doubled in size under Muhyiddin’s term.
Overall, the five-year plan is a mixed bag of progress and missed opportunities. With Ismail’s administration expected to last two years at most until the next scheduled general election in 2023, Malaysia’s long dream of achieving high-income status may be out of reach once again.