Lecture 02: Economic
planning of Malaysia
WE WILL COVER :-
1) MALAYSIAN ECONOMIC PLANNING FRAMEWORK
2) ECONOMIC DEVELOPMENT PLANNING
• BRITISH COLONIZATION POLICIES, 1800’S – 1957
• THE NEW ECONOMICS POLICY (NEP), 1971 – 1990
• NATIONAL DEVELOPMENT POLICY (NDP), 1991 – 2000
• NATIONAL VISION POLICY (NVP), 2001 – 2010
• NATIONAL TRANSFORMATION POLICY (NTP), 2011 – 2020
• SHARED PROSPERITY VISION (SPV), 2030
MALAYSIAN ECONOMIC PLANNING FRAMEWORK
• Shaping the economic • Used to stimulate the
destiny of Malaysia economy
IMPORTANCES
• Achieving social goals • To provide
like distribution of infrastructures and to
wealth, and the design policy to attract
provision of major FDI or to help SMEs
public utilities
Adopted from : Poon (2015), pg. 26
Economic Planning
Framework
Medium
Short Term Long Term
Term
Planning Planning
Planning
• Time range : 10 Years
• Time range : 1 Year • Time range : 5 Years
• Outline Perspective
• Annual Budget • Malaysia Plan
Plan (OPP)
British
Colonization (1957-1970)
(1970-1990) (1991-2000) (2001-2010) (2011-2020)
Policies NEP NDP NVP NTP
(1800’s – 1957)
Main reason of colonization is Malaya’s resources (tin),
its strategic location, land suitable for rubber plantation.
Focus on their interest:-
• Protect plantation and mining
• Prioritized public expenditure to facilitate export
British imported immigrants from India and China to
Malaya as cheap (Indians in rubber plantation, Chinese
in tin mines and Malays as fisherman and farmers) –
divide and rule strategy
Post (1970-1990) (1991-2000) (2001-2010) (2011-2020)
(1957-1970)
Independence NEP NDP NVP NTP
1st Malaya Plan (1956-1960) - public expenditure
mainly on agriculture, public utilities and transport
(accounted 69%).
2nd Malaya Plan (1961-1965), 1st Malaysia Plan (1966-
1970): increase the expenditure on agriculture.
Government redeveloped abandoned agriculture land
and land development schemes which is carried out by
FELDA in 1956.
• Government policy before the NEP was generally considered to
be basically laissez-faire in approach, and responsive to, as well
as supportive of, both foreign and domestic (predominantly
Chinese) private sector interests.
• The 1970s were characterized by growing state intervention,
primarily in favour of the emerging Malay elite.
• Such intervention caused particular business interests—usually
Chinese or foreign—felt threatened at various times.
• Source: Jomo (2004). The New Economic Policy and
Interethnic Relations in Malaysia
NEW ECONOMIC POLICY NEP (1970-1990)
oImplemented in response to the May 1969 racial riot
oIt sought to ‘eradicate poverty’ and ‘restructure society to
eliminate the identification of race with economic function’ in
order to create the conditions for national unity.
NEP (1970-1990)
Programs to eradicate (reduce) poverty:
• Provision of improved input and facilities in agriculture areas
• Absorption of poor households into modern agriculture and other sectors
• Provision of education, health, housing, water and electricity.
Programs to restructure the society are:
• Modernization of rural life
• Rapid and balanced development of urban activities
• Creation of a Malay commercial and industrial community
NEP (1970-1990)
• Since the implementation of NEP, poverty in Malaysia has gone down
tremendously as in neighbouring Thailand and Indonesia, which did not have
comparable commitments to poverty reduction, but also experienced rapid
economic growth and structural transformation.
• NEP has been principally associated with ‘restructuring’, i.e. efforts to reduce
inter-ethnic economic disparities between Bumiputera indigenes and the non-
Bumiputera, especially between ethnic Malays and Chinese.
• Source: Jomo, K.S. (2005). Malaysia’s New Economic Policy and ‘National
Unity. In: Bangura, Y., Stavenhagen, R. (eds) Racism and Public Policy. Palgrave
Macmillan, London. https://doi.org/10.1057/9780230554986_8
NEP (1970-1990)
• Hence, ‘restructuring’ has come to be associated with ‘positive discrimination’
or ‘affirmative action’ on behalf of the mainly Malay Bumiputeras.
• Such state interventions have resulted in significantly greater Bumiputera wealth
ownership, business participation, education opportunities, public sector
employment and promotion, as well as representation among professionals and
managers/administrators.
• Source: Jomo, K.S. (2005).
NEP (1970-1990)
• However, these measures have also resulted in greater resentment
by those who feel deprived by such policies, resulting at various
times in emigration, capital flight and ethnic mobilization.
Resentment is arguably greatest among the middle classes where
ethnic rivalry is perceived to be greatest.
• While it is doubtful that the NEP has created the conditions for
national unity, it has probably lessened Bumiputera resentment of
non-Bumiputera domination of business and the professions.
• Source: Jomo, K.S. (2005).
NEP (1970-1990)
• However, these measures have also resulted in greater resentment
by those who feel deprived by such policies, resulting at various
times in emigration, capital flight and ethnic mobilization.
Resentment is arguably greatest among the middle classes where
ethnic rivalry is perceived to be greatest.
• While it is doubtful that the NEP has created the conditions for
national unity, it has probably lessened Bumiputera resentment of
non-Bumiputera domination of business and the professions.
• Source: Jomo, K.S. (2005).
NATIONAL DEVELOPMENT PLAN NDP
(1991-2000)
o Objectives - same as NEP
o Vission 2020 (fully industrialized nation) was outlined
o NDP giving special emphasis to the following aspects :-
Eradication of hardcore poverty and reducing relatively poverty
Development of Bumiputera Commercial and Industrial Community (BCIC)
to establish Malay in the modern economic sectors
Greater reliance on the private sector to generate economic growth
NATIONAL DEVELOPMENT PLAN NDP (1991-2000)
Development Under NDP
NATIONAL VISION PLAN NVP (2001-2010)
Objectives
Objectives:of the NVP:
•• building
building aa resilient
resilient nation
nation by
by fostering
fostering unity
unity
•• promoting
promoting an an equitable
equitable society
society byby eradicating
eradicating poverty
poverty and
and
reducing
reducing imbalances
imbalances among
among ethnic
ethnic groups
groups as
as well
well as
as regions
regions
•• sustaining
sustaining high
high economic
economic growth
growth
• developing a knowledge-based economy
• strengthening human resource development
• pursuing environmentally sustainable development
NATIONAL TRANSFORMATION PLAN NTP (2011-2020)
o NTP was formulated with the aim to transform Malaysia into a high-income
advanced economy.
o All Malaysian to enjoy the prosperity and success of the country.
o 6 programmed were introduced :-
Government Transformation Programme,
Economic Transformation Programme,
Political Transformation Programme,
Community Transformation Programme,
Social Transformation Programme ,
Fiscal Transformation Programme.
SHARED PROPERITY VISION (SPV), 2030
Launched in 5th October 2019 as the Vision 2020 has failed
Shared Prosperity Vision 2030 is a commitment to make Malaysia a
nation that achieves sustainable growth along with fair and
equitable distribution.
The commitment is aimed at strengthening political stability,
enhancing the nation’s prosperity and ensuring that Malaysians are
united.
MALAYSIAN ECONOMIC PLANNING FRAMEWORK
(CONT.)
3. Long Term Planning
Vision 2020
National
3rd Outline Perspective Transformation
Plan (OPP3) Policy
National Vision Policy Total
2nd Outline Perspective
Plan (OPP2) Competitive Development
National Development Nation
Policy
1st Outline Perspective Plan
(OPP1) Balance Development
New Economic Policy
Reasons:-
Growth and Equity • 20 years period is too long
• Too much uncertainties, changing global
environment
1971 – 1990 1991 – 2000 2001 – 2010 2011 – 2020
MEDIUM TERM PLANNING
1st Malaya Plan (1956-1960)
2nd Malaya Plan (1961-1965) Roles of 5 years planning
1st Malaysia Plan (1966-1970) (i) Set out the macroeconomic growth
2nd Malaysia Plan (1971-1975) targets
3rd Malaysia Plan (1976-1980) (ii) Set out the size and allocation of the
4th Malaysia Plan (1981-1985)
public sector development program
5th Malaysia Plan (1986-1990)
6th Malaysia Plan (1991-1995)
(iii) Provide the direction to promoted
7th Malaysia Plan (1996-2000) sectors, thereby giving guidance to the
8th Malaysia Plan (2000-2005) private sector in determining their own
9th Malaysia Plan (2006-2010) investment policies.
10th Malaysia Plan (2011-2015)
11th Malaysia Plan (2016-2020)
12th Malaysia Plan (2021-2025)
Function of Mid-term Review (MTR)
• Check whether the plan on track
• Make adjustment on sectoral policies if needed
Notes: You may refer to Lonik (2015), pg. 20 for the detailed discussion on the 5 years development
plan of Malaysia.
Medium Term Planning
12th Malaysia Plan (12MP) (2021-2025)
• Govt spent RM248.5b for development under 11MP; allocates
RM400b for projects under 12MP
• GDP growth expected to average 4.5% to 5.5% between 2021 and
2025
• Average household income targeted to reach RM10,000 by 2025
• Economic growth gap to be reduced between central region and
Sabah and Sarawak
• Greenhouse gas emissions to be reduced to 45% of GDP by 2030.
• Malaysia’s statutory debt recorded at 57.9% of GDP
• Govt vows to reduce bureaucracy and build reliable infrastructure
and ecosystem to attract quality foreign investments
https://www.theedgemarkets.com/microsite/12-malaysia-plan
Medium Term Planning
12th Malaysia Plan (12MP) (2021-2025)
• Govt to develop ecosystem to support gig economy
• Growth of several strategic and high-impact industries, namely
E&E, global aerospace services, halal, creative, tourism, biomass
and smart agriculture, will be boosted
• R&D expenditure to account for 5.2% of GDP by 2025, versus
1% in 2020, with private sector to account for 70% of expenditure
• RM15b more will be invested by private sector to speed up
nationwide 5G roll-out
https://www.theedgemarkets.com/microsite/12-malaysia-plan
SHORT TERM PLANNING
The annual budget is prepared by Ministry of Finance (MOF)
EPU will provide the details of the annual development budget (Presented by Prime
Minister)
Central Bank monitors short-term development, focusing on the monetary and
financial side
REFERENCES
Department of Prime Minister . Source: https://www.pmo.gov.my/
2019/10/shared-prosperity-vision-2030-2/
Lehar, H., Anas, Y., & Choo, T. H. (2014). Malaysian Economy (1st ed.).
Oxford University Press.
Lonik, K. A. T., (2015). Malaysian Economy, Growth and Transformation.
Penerbit UTHM, Universiti Tun Hussein Onn Malaysia.
Poon W. C. (2015). Malaysian Economy (3rd ed.). Kuala Lumpur: SJ
Learning.
Rasiah, R. (2011). Malaysian economy: Unfolding growth and social change.
Kuala Lumpur: Oxford University Press.
