Where to, Malaysia Baharu?
May 9, 2018 was a historic day for Malaysia. Malaysians collectively decided a bold change was needed. And so, after more six decades into its independence from British rule and as a sovereign nation, a new government took seat in office. The change not only signalled a significant shift in political ideology and the transformation of the country’s administration, but also the direction of its economic development.
The Malaysia Plan, strategically crafted and executed since 1966, and now in its 11th edition have guided Malaysia’s development for more than five decades. The country had over the years evolved from a mining and agriculture-based economy to one that is manufacturing and export-oriented, as well as more diversified with a push towards the services and high-income sectors. Its affirmative action bumiputera agenda has also played a vital role in its growth trajectory as the government sought to ensure equitable distribution of wealth for all Malaysians.
Cognisant of the need to radically transform its economic and social fabric, the then government, embarked on a National Transformation Programme in 2009 to focus on delivering socio-economic improvements to put Malaysia firmly on the path out of the middle-income trap and propel it into a high-income nation status.
A decade has since passed.
The transformation programme has yielded some very positive outcomes. A case in point: as at 2017, the country’s gross national income (GNI) per capita had increased to US$9,650 (RM39,565) from US$7,640 (RM31,324) in 2009, just US$2,576 (RM10,562) short of the World Bank’s high-income threshold of US$12,236 (RM50,168). And in doing so, Malaysia has moved out of the middle-income trap.
Is Malaysia economic growth still on track?
Economic analysts at large are awaiting the release of the Malaysian Economic Report by the Economic Planning Unit, which is expected to be available to the public at the end of the first-quarter 2019. This report will essentially provide the complexion of Malaysia’s growth prospects. Economists also maintained that despite expectations that Malaysia may miss its 2020 target for a balanced budget, the country’s economy remains robust and fundamentally sound, with its A-rating for sovereign debt intact and the labour market also envisaged to remain stable. Malaysia also registered a 350% increase, from RM14 billion in 2017 to RM49 billion in 2018 in foreign direct investments (FDI) within the first nine months of 2018 compared with the same period in 2017.
Malaysia marches the Industry4WRD
In spurring future growth, the new administration has also worked to introduce a national policy framework on the fourth Industrial Revolution. This is developed to promote innovation, creativity and competitiveness in embracing the intensification of the digital revolution.
In the mid-term review on the 11th Malaysia Plan, the government aims to intensify the adoption of Industry 4.0 related technologies.
The policy provides the action plan in catalysing the adoption of Industry 4.0 related technologies to increase productivity and competitiveness of the manufacturing sector. Against this backdrop, the country is poised for a continued ascent on the value chain.
Malaysia, according to Datuk Darell Leiking, Minister of International Trade and Industry, will be meeting these challenges head-on with the implementation of the National Policy on Industry 4.0 – Industry4WRD, with the endeavour to incentivise, implement and facilitate digital transformation of the manufacturing sector and its related services.
The recent 2019 Budget had provisioned several incentives to aid the industries along this journey, such as the RM2 billion fund under Services Sector Guarantee Scheme (SSGS) accorded to small and medium-sized enterprises (SMEs) that invest in automation and modernisation. Under this scheme, the government will also provide financing guarantee of up to 70%.
An Industry Digitalisation Transformation Fund, which is a subsidy allocation amounting to RM3 billion has also been approved to promote the adoption of artificial intelligence amongst the industries. The Malaysian Investment Development Authority (MIDA) is also taking an active role through its High Impact Fund by facilitating a matching grant to promote greater research and development (R&D), international certification and standards, as well as modernisation activities amongst the industry.
These measures are expected to significantly boost the government’s efforts to position Malaysia as a strategic partner for smart manufacturing, primary destination for high-technology industries and total solutions provider for manufacturing sector and related services in the region.
As Leiking put it, Industry4WRD will pave the way for enhanced productivity, job creation and the establishment of a high-skilled talent pool for the manufacturing sector, and ultimately contribute to the economic prosperity and societal well-being of the nation. The Ministry of International Trade and Industry has been allocated RM210 million over the course of three years between 2019 to 2021 to take on the Industry 4.0 agenda.
The elephant in the room
Meanwhile, Dato’ Sri Mustapa Mohamed, the former Minister of International Trade and Industry and current Member of Parliament for Jeli in Kelantan, raised three pertinent points for the country to cope with as it enters the era of New Malaysia. The first, as Mustapa put it, is to redefine the bumiputera agenda to make it a more inclusive policy. “We must find a balance between the need to continue promoting the bumiputera agenda while ensuring wealth distribution among other races. There is a need for us, as Malaysians, to sit down and search for a national consensus. There’s the elephant in the room,” he said at the Youth Economic Forum held in Kuala Lumpur last year.
He also noted the need to reduce the brain drain and for more job creation. Apart from stimulating the economy to spur employment, Mustapa also stressed on the need for political stability, key institutional reforms and the eradication of corruption to instil and entrench investor confidence in the country. He also said the government must be conservative in fiscal spending, highlighting the need to adjust to new economic realities. This, as he cautioned, was not only due to the country’s debt position, but also its shortfall in income with the removal of the Goods and Services Tax (GST).
Dr. Azem Fazwan Ahmad Farouk, an associate professor and director at the Centre for Policy Research and International Studies of Universiti Sains Malaysia, observed that we are Malaysians precisely because we can maintain our ethnic, cultural and religious diversity. In conceptualising a Malaysia Baharu, we should begin from the learning, retain the good, innovate the new, apply, and not hastily throw the baby out with the bath water.
Confronted with these realities, Malaysia may find itself at yet another crossroad. However, with acute learnings and lessons from the past 60 years, the new government does have their work cut out for them. The hope is that policies and regulatory controls remain both progressive and inclusive, as the country seeks to fulfil its potential as a globally competitive, sustainable and inclusive economy with opportunities for all.