RM400 BLN ALLOCATION, 14 INNOVATIVE ACTIONS TO RESET ECONOMY, BUILD RESILIENCE IN 12MP

KUALA LUMPUR, Sept 27  – With a development expenditure allocation of RM400 billion, four catalytic policy enablers and several bold innovative actions, the 12th Malaysia Plan (12MP) 2021-2025 is crafted to restore economic growth, address socioeconomic challenges and enhance national competitiveness to be a more resilient and sustainable player in the world stage.

In the next five years, the country’s economy is expected to rebound and achieve stronger and more sustainable growth of between 4.5 per cent and 5.5 per cent per annum after having experienced a hiccup towards the end of the 11th Malaysia Plan (11MP) due to the health pandemic triggered by COVID-19.

Development expenditure in 11MP was RM260 billion.

“The 12MP, a medium-term plan with the objective of a prosperous, inclusive, sustainable Malaysia, is the start of a new phase in Malaysia’s development journey – the Shared Prosperity Vision 2030 (WKB 2030),” Minister in the Prime Minister’s Department (Economy), Datuk Seri Mustapa Mohamed said in the 12MP document themed: “Resetting the economy; Strengthening security, wellbeing and inclusivity; and advancing sustainability,” released here today.

Some of the 14 game changers are imperative for reforms and transformation, catalysing strategic and high impact industries to boost economic growth, enhancing national security and unity for nation building, transforming the approach in eradicating hardcore poverty, embracing circular economy as well as transforming the public service through the whole of government approach.

Although the development expenditure allocation in 12MP is more than that of 11MP, allocation for basic development expenditure in 2021 and 2022 are expected to be challenging in the aftermath of a health crisis.

The federal government revenue would be enhanced by exploring new sources, expanding the revenue base, reviewing tax incentives, strengthening overall tax administration and adopting a medium-term revenue strategy.

However, for now the fiscal policy will remain expansionary in the short term to revitalise the economy battered by the virus and the fiscal balance is targeted to be between -3.5 per cent and -3 per cent of GDP in 2025.

“Fiscal consolidation will resume once the economy is on better footing to ensure long-term fiscal sustainability,” it said.

The document said efforts will focus on rejuvenating the economy to ensure the momentum of growth is restored, and this will be achieved by boosting productivity growth, expanding export markets, strengthening the effectiveness of financial intermediation ecosystem, enhancing the role of industrial estates and food production areas as well as improving governance and policy.

The private sector will play a greater role in restoring the growth momentum in meeting future challenges and competing in the global market, said the document released by the Economic Planning Unit.

Promoting Quality Investment to Strengthen Economic Growth 

The private sector will continue to be the key driver of growth with private consumption expected to increase at an average annual rate of 5.8 per cent, supported by higher household income arising from expected stable labour market conditions in tandem with the post-COVID-19 economic recovery, higher minimum wage and cash assistance to the targeted groups.

According to the document, private investment will rebound and is expected to grow at 3.8 per cent per annum of an average of RM258 billion at current prices compared with RM233 billion during the 11MP.

Existing investment will also be reviewed to attract more investment, especially in strategic and high-impact industries and in efforts to attract foreign direct investment, focus will be given to companies that will facilitate market access as well as technology and knowledge transfer for domestic firms.

“Through these efforts, private investment is expected to increase to more than 75 per cent of total investment during the 12MP period, attaining the average level prior to the 1997/1998 Asian Financial Crisis.

“Meanwhile public investment is expected to grow at 2.6 per cent per annum driven by the government development expenditure and capital spending of non-financial public corporations.

“The investment will be largely in infrastructure, transport, utilities as well as the oil and gas industry. Major public sector projects that will be undertaken include the East Coast Rail Link (ECRL) project, Johor Bahru-Singapore Rapid Transit System and Pan Borneo Highway,” the document said.

The public consumption is expected to expand by 3.7 per cent per annum, in line with the measures taken to reduce the impact of the COVID-19 pandemic and stimulate the economy.

Domestic Economy 

During the 12MP, potential output is expected to expand between 4 and 5 per cent with the private sector activity to rebound and remain the anchor of growth supported by accommodative monetary and fiscal policies.

Labour market conditions are expected to improve with full employment under the five-year plan with the unemployment rate to be at four per cent in 2025 while inflation is projected to be stable with the average annual inflation rate (2021-2025) to be at 2.7 per cent. 

The 4.5-5.5 per cent GDP growth per annum would  be led by higher labour productivity growth, resulting in a 6.4 per cent per annum rise in gross national income per capita to RM57,882 in 2025 from RM42,503 in 2020.

Salaries and wages are also expected to rise, resulting in a more equitable distribution of income between capital owners and employees as well as contributing to higher household income.

The overall wellbeing of the people is expected to improve supported by both economic and social progress as well as balanced and inclusive regional development.

The services and manufacturing sectors will continue to be the main drivers of the economy while the agriculture sector will be reinvigorated to support the downstream activities and to enhance food security.

The growth in these sectors will be supported by strong demand, enhanced productivity as well as higher value-added and knowledge-intensive activities. The implementation of the National Fourth Industrial Revolution Policy will be pivotal to boost growth across all sectors.

“The services sector is expected to record a steady growth of 5.2 per cent per annum (2020-2025) and constitute 58.3 per cent of GDP in 2025. Emphasis will be placed on accelerating the development of high potential growth industries, including the halal, creative and tourism.

“The manufacturing sector will continue to focus on shifting into higher value-added, diverse and complex products. It is expected to expand by 5.7 per cent per annum, led by the export-oriented subsector,” it said.

As for the agriculture sector, adoption of smart farming through modern and new technologies is vital in reinvigorating growth in the sector. Besides, the utilisation of biomass and biogas will also be optimised and the sector is projected to grow by 3.8 per annum during the 12MP, contributing seven per cent to GDP in 2025.

The construction sector is expected to expand by 4.2 per cent per annum, driven by the civil engineering and residential buildings subsectors while the mining sector is expected to increase by 2.6 per cent per annum during the plan, mainly driven by the increase in natural gas production.

Leveraging Participation in Global Value Chain

The country’s trade performance is expected to improve in tandem with the expected recovery in global trade and the strengthening of major commodity prices.

The document said that gross exports are projected to increase at an average annual rate of 5 per cent supported by higher value-added products and diversification of markets.

“The implementation of the ASEAN Economic Community (AEC) Blueprint 2025 and new free trade agreements (FTAs) are expected to provide further impetus to external trade growth and these new trade agreements include the Regional Comprehensive Economic Partnership , the world’s largest FTA covering about 30 per cent of global GDP and 2.2 billion people.

“Exports of manufactured goods are expected to record an average growth of 4.9 per cent per annum, particularly driven by electrical and electronics (E&E) and resource-based exports. Growth in E&E exports at 5.1 per annum will be led by, among others, integrated circuits, diodes and photosensitive semiconductors.

The agriculture exports are expected to increase by 4.8 per cent per annum, thanks to palm oil-based products and natural rubber. Growth of mining exports will rebound by 7.3 per cent per annum supported by higher demand for crude petroleum and LNG exports.

Gross imports are estimated to expand at an average annual rate of 5.9 per cent in line with strong exports performance and higher domestic investment activities.

Imports of consumption goods are projected to strengthen as purchasing power of Malaysians are anticipated to increase during the 12MP. The trade surplus is expected to remain substantial at RM191 billion in 2025.

The current account of the balance of payment is projected to remain in surplus at RM44 billion or 2.2 per cent of GNI in 2025, supported by higher surplus in the goods account despite the continued deficit in the services account.

-- BERNAMA