KUALA LUMPUR, Oct 8 — Malaysia has to readjust its spending priorities following the 1Malaysia Development Berhad (1MDB) scandal and the reckless taking on of more debts under the previous administration, Economic Affairs Minister Datuk Seri Mohamed Azmin Ali said today.

Azmin noted that the federal government under Prime Minister Tun Dr Mahathir Mohamad’s leadership has set new directions and new priorities, with the focus now being on sustainable economic growth together with citizen-centric initiatives.

“The damage inflicted by the 1MDB corruption scandal — the worst form of kleptocracy ever — together with the reckless accumulation of debt was far beyond our expectations,” he said in his opening speech at the Khazanah Megatrends Forum 2018.

Earlier in his speech, Azmin said the federal administration has “reprioritised our development projects according to our financial capacity”.

“The ECRL is being closely scrutinised for holistic review while just last month we successfully secured a two-year deferment with the Singapore government on the High-Speed Rail Project,” he said, referring to the two mega railway projects.

But Azmin assured that the government would, at the same time, continue implementing high-impact projects that would directly improve Malaysians’ wellbeing.

Azmin had earlier on in his speech spoke about the “inconvenient truth” of Malaysia’s current economic conditions — including a huge RM1 trillion debt and a youth unemployment rate of 13.2 per cent as of 2017 which outpaces the overall unemployment rate of 3.4 per cent.

“But the basic challenge is that we are in uncharted waters brought by a government that was so profligate in spending on borrowed money that it has taken the nation to the brink of bankruptcy.

“With the revelation of indebtedness approximating RM1 trillion making our debt-to-GDP ratio to about 80 per cent, fiscal discipline is certainly needed,” he said, using the initials for gross domestic product.

As greater control on the government’s spending would have a negative impact on growth, Azmin said counter-measures to balance such effect would be required.

In the same speech, Azmin said Malaysia would need to adopt a different approach to ensure continued economic growth to become a high-income nation, including by shifting to new industries and becoming experts in applying technological breakthroughs to boost productivity.

Malaysia would also have to reverse the decline in the proportion of electrical and electronics exports as compared to commodity exports, he said.

He said Malaysia also has to diversify its economy to produce goods or services that are globally competitive, noting that government support would be necessary to help spur the required technological developments.

“The role of the government is especially important in the area of R&D such as the development of new technology, particularly those with long gestation periods and high initial fixed costs that are typically too risky for pure private sector firms,” he said.

He noted that companies also need to move away from narrowly focusing on chasing short-term profits.

“Short-term thinking necessarily means that companies will hold off on reinvesting for the future, therefore reducing their long-term sustainability and profitability,” he said.

Azmin also said that the prime minister will table the mid-term review of the 11th Malaysia Plan in Parliament next week, which is expected to see development challenges being identified and measures to tackle them proposed.