Finance

What is the 10th Malaysia Plan?

The 10th Malaysia Plan was the first plan under Malaysia’s New Economic Model, announced in 2010. Intended to accelerate Malaysia’s growth, the plan aimed for Malaysia to become a high-income nation by the year 2020.

When announcing the New Economic Model, Prime Minister Najib Razak stated that it was to be based on three main principles: high income, sustainability and inclusiveness.

These overall principles were echoed in the 10th Malaysia Plan, which covered the projected economy for the years 2011 to 2015. Financially, the emphasis was on creating growth led by the private sector. However, the plan also recognised the need to develop Malaysia’s innovation and talent base and to raise the bottom income percentile of society out of poverty.

This week the Prime Minister will announce the 11th Malaysia Plan. So how much have we achieved of the targets set out in the 10th Malaysia Plan back in 2010?

Towards a high income nation

While a lot of factors may define a “developed nation”, a high income nation is defined specifically by its gross national income per capita. High income nations have a GNI of $12,746 or more.

Malaysia is currently an upper middle income nation, with a GNI in 2013 of $10,430. GNI per capita grew more than 40 percent from 2009 to 2013, starting at $7,059 in 2009. GNI is projected to rise to $12,140 (38,850 ringgit) by 2015.

However, the government’s original target was to reach $15,000 by 2020. In order for this to happen, Malaysia’s economy would need to grow at a real annual rate of 6 percent from 2011 to 2020, according to the Economic Transformation Programme.

Malaysia’s growth has not achieved this annual growth of 6 per cent. After a healthy start at 7.4 percent growth in GDP in 2010, growth fell the following three years – down to a low of 4.7 percent in 2013.

Although 2014 saw growth bouncing back at 6 percent, the World Bank has remained cautious. It lowered Malaysia’s growth projection for 2015 from 4.9 percent to 4.7 percent amid concerns over slower exports, the global decline in oil prices and cutbacks in consumer spending at a time when cost of living is rising.

Infographic courtesy of Bloomberg TV Malaysia.
Infographic courtesy of Bloomberg TV Malaysia.

Boosting the private sector

Under the 10th Malaysia Plan, the government planned to generate 115 billion ringgit of private investment every year. In order to achieve this, the plan provided for improved governance, reformed business regulations, competition laws and enhanced infrastructure and connectivity.

According to the Economic Transformation Programme, private investment has steadily grown since 2010, reaching 64 percent of all investment in 2014 versus public investment at 36 percent. In 2010, private investment was just 52 percent of the pie.

Under the 10th Malaysia Plan, the federal government also planned to enhance public-private partnerships – one example being the Pan-Borneo Highway.

 

Under the 10th Malaysia Plan, the federal government also planned to enhance public-private partnerships – one example being the Pan-Borneo Highway.

 

However, the Pan-Borneo Highway has shown that public-private partnerships face a range of challenges. Although identified under the 10th Malaysia Plan, construction only began earlier this year and is not expected to be completed until 2025.

State ministers in Sarawak have challenged the lack of an open tender on the highway, questioning the cost effectiveness of the chosen contractor, Lebuhraya Borneo Utara Sdn Bhd. The 2,239 kilometer highway is expected to cost 15 billion ringgit.

The Malaysian government has also been under fire for privatising certain federal operations, such as the renewal of foreign workers’ permits – which had previously been done at Immigration counters under the Home Ministry. MyEG, the company awarded this contract, was probed by the Malaysia Competition Commission earlier this year.

Malaysia’s got talent

In order to maintain a healthy GNI, Malaysia must also create and retain talent in its workforce. Under the 10th Malaysia Plan, the government showed that it took this very seriously. 40 percent was put aside for development skills and innovation, in contrast to 22 percent in the 9th Malaysia Plan.

One cornerstone of the 10th Malaysia Plan was the creation of TalentCorp, a government agency tasked with attracting and development talent, including both foreign talent, resident Malaysians and overseas Malaysians.

The World Bank reported that 310,000 skilled Malaysians were living overseas in 2010. Under TalentCorp, highly skilled Malaysians have been targeted with incentives to return to Malaysia under the Returning Expert Programme. Since 2011, over 3000 REP applications have been approved.

 

The World Bank reported that 310,000 skilled Malaysians were living overseas in 2010.

 

Inclusiveness is also part of the drive for more talent in the workforce. The government aimed for 30 percent of women sitting on the boards of public companies by 2016. The current figure shows this target is currently unrealistic, standing at 16 percent as of this year. However, 34 percent of management positions are held by women, which is above average for Asia.

In line with earlier national plans, policies and funding to support bumiputera groups remained under the 10th Malaysia Plan. In particular there have been a raft of initiatives to encourage bumiputera entrepreneurship, evolving beyond the existing policies for corporate equity.

Overall, Malaysia’s employment rates has seen strong growth within the past five years. The unemployment rate has fallen from 3.7 percent in 2009 to 3 percent in 2014 and translated into 1.8 million new jobs since 2010, more than halfway to the target of 3.3 million by 2020.

The take away

The 10th Malaysia Plan was introduced during global recovery from the financial crisis. However, it was also announced amid the excitement of a new vision for Malaysia under the New Economic Model – replacing the New Economic Policy first launched in 1971.

While the 10th Malaysia Plan has hit some targets and missed others, it has been significant in turning more attention – and more public money –
to Malaysia’s skill and innovation landscape.

Official statistics via www.epu.gov.my