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12th Malaysian Plan sets out ambitious five-year growth targets

12th Malaysian Plan sets out ambitious five-year growth targets

The 12th Malaysia Plan (12MP) has been unveiled, with the government announcing it will allocate RM400 billion ($95 billion) for existing and new infrastructure projects.

The plan sets out economic targets for the duration of the plan, which runs until 2025. They include:

  • GDP growth of between 4.5% and 5.5% a year.
  • Labour productivity growth of 3.6%.
  • The Wellbeing Index to rise by 1.3%.
  • Gross National Income per capita to reach RM57,882 ($13,800).
  • Average monthly household income to be RM10,065 ($2,400).

The plan also includes measures to achieve the goals cutting red tape, putting a greater focus on eight high-impact industries, and transforming micro, small and medium enterprises (MSMEs).

The eight sectors are electrical and electronics (E&E), global services, aerospace, creative, tourism, halal, smart farming and biomass.

Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid told The Star website that the market-oriented initiatives included in the five-year plan would boost business confidence. They would also accelerate the economic recovery process, he said.

“What matters is the pace of its implementation and the impact it may have on the economy. In a nutshell, the 12MP has covered a lot of ground,” he added.

 

Multiplier effect

Mohd Afzanizam said the allocation of RM400bn for development expenditure between 2021 and 2025, if implemented in a timely manner, will have immediate multiplier effect on the economy.

Vincent Lau, head of equity sales at Rakuten Trade, said he thought 12MP is positive for the market, especially for the construction sector. This was because it has earmarked at least 50% of development expenditure to be channelled to the country’s six least-developed states.

This would lead to the construction of schools, hospitals, roads and industrial areas, along with the setting up of poverty eradication programmes.

Lau said: “In addition, with the government giving more attention to the eight high-impact sectors under the 12MP, it is expected to make Malaysia more appealing to foreign investors.”

 

Market forces

However, Carmelo Ferlito, CEO of the Centre for Market Education, is sceptical about the ability to achieve the goals in a ‘top-down’, centrally planned approach.

He said: “If we look at the 12MP, it is difficult to identify points on which not to agree, in theoretical terms. These are all desirable outcomes. The real point is, how do we achieve them?

“Will we unleash market forces in order to determine the outcome that is dictated by the interaction of individual preferences, or will we impose a government strategy which aims to overcome individual preferences?

“The weakest point I see in the plan is the desire to strongly steer the economic system in a direction, which may not be the one created by the market.”

However, he welcomed the government’s plan to reduce red tape, although he said the move needs to be paired with a truly market-oriented approach.