New government looks beyond COVID, targets 4.5-5.5% average GDP growth
KUALA LUMPUR : Malaysia aims to average 4.5% to 5.5% annual economic growth through 2025 and become a developed country by that year, five years earlier than a target set by former leader Mahathir Mohamad.
Prime Minister Ismail Sabri Yaakob revealed the goals on Monday as he tabled a sweeping five-year development plan, to be debated and voted on in parliament. The blueprint aims to guide the country beyond the economic ravages of the COVID-19 pandemic, though the fight against the virus is far from over and the premier himself stressed the government’s financial constraints.
“With the implementation of the plan, by 2025, Malaysia would be a high-income and high-tech nation with better quality of life,” Ismail Sabri told lawmakers.
Malaysia first set an ambition to become a high-income nation by 2020, in a national transformation plan proposed in 2009 by then-Prime Minister Najib Razak. After Najib became embroiled in the 1Malaysia Development Berhad embezzlement scandal and lost the 2018 federal election to a Mahathir-led coalition, the new government introduced a “shared prosperity” vision that pushed the high-income target to 2030.
Now Ismail Sabri is arguing the goal is reachable even though the pandemic has changed the economic landscape at home and abroad, with a mix of outlays, economic restructuring and job creation. His government — formed last month after predecessor Muhyiddin Yassin resigned — plans to allocate 400 billion ringgit ($95.5 billion) for development initiatives through 2025.
This is the 12th edition of the Malaysia Plan, presented every five years since the first one in 1956. Under the 11th plan for 2016 to 2020, the government spent 248.5 billion ringgit on development initiatives. But per capita income stagnated last year at $10,100 — about 20% lower than the threshold to climb from middle- to high-income nation status.
The World Bank defines a high-income economy as one with gross national income per capita of $12,696 or more.
This time, the Malaysian government also says it will formulate a national investment aspiration policy, aiming to position the country as a more attractive destination for high-value investments. On the technology front, one priority is to invest around 28 billion ringgit to improve existing 4G mobile communications infrastructure while rolling out 5G by the end of 2021, with an initial investment of 15 billion ringgit from the private sector.
Despite the ambitious agenda, Ismail Sabri’s government faces an uphill battle. Although COVID-19 cases are receding, the seven-day rolling average of daily new infections is still around 14,000. Amid continued restrictions on economic activity, the central bank last month slashed its gross domestic product growth forecast for 2021 to 3.0% to 4.0%, from 6% to 7.5%.
Ismail Sabri also noted the government’s financial limitations, at least in the first year of the plan. “Room to implement development projects is very limited until next year, as the largest financial need is to protect lives in 2020 and 2021,” he said. In 2020, the government’s deficit stood at 6.2% of GDP, while the cabinet recently proposed raising the statutory debt ceiling to 65% of GDP, up from the 60% set last year.
Still, the prime minister said the government’s financials are expected to improve, starting in 2023.
Another part of the plan seeks to draw on lessons from the pandemic.
The premier said the government is committed to strengthening the medical system while developing a national health policy to brace for the next crisis.
“A national vaccine development plan is also being finalized to enable Malaysia to produce vaccines, preparing us to face any pandemic in the future,” he said. In addition, the government has “identified proactive measures to increase hospitals’ readiness, to achieve a ratio of 2.06 beds for every thousand residents by 2025. Some 12 new public hospitals would also be opened in the next four years.”
By : P PREM KUMAR – NIKKEI ASIA REVIEW