12th Malaysia Plan: Economists say it's all about the execution, not just making a wish list

A general view of the Perdana Putra building in Putrajaya. ― Picture by Yusof Mat Isa
A general view of the Perdana Putra building in Putrajaya. ― Picture by Yusof Mat Isa

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KUALA LUMPUR, Sept 29 — Various economists have described the 12th Malaysia Plan as “comprehensive” or “not far reaching enough” but all agree that its success will, of course, depend on its execution.  

Lee Heng Guie, executive director of think tank Socio-Economic Research Centre, said the five-year plan (2021-2025) was well-drafted, but that the challenge lies in actually executing the initiatives and ensuring there are sufficient funds to do so.

“I think the plan is more comprehensive, cutting across all sectors, and you must understand, this plan was crafted when the economy is still under the impact of Covid-19.

“So there’s a lot of high hopes on the plan supporting the short-term and medium-term growth trajectory, and the complexity and challenges tied to remaining competitive in the global economy in meeting rising rakyat expectations. So a lot of effort was put into the crafting of this plan, because this is the first five years to achieve the Shared Prosperity Vision 2030,” he said.

Good co-ordination and sufficient funding

“I think the most important challenge is to get good co-ordination between ministries, and agencies... to have a good plan, to execute it well,” he said, noting there were “implementation gaps” in the past.

“The other challenge is we must have adequate fiscal resources to support the implementation. If you look at the plan, they plan to allocate close to RM400 billion development expenditure, it really needs big adequate resources, which means on the fiscal side, it may take some time to reduce the fiscal deficit.

“But maybe the government will have to look into how to strengthen fiscal collection so you will have enough funding to finance your development expenditure,” he added.

Referencing the “whole-nation” approach as mentioned in the 12MP, Lee said what was required is high political commitment by the administration to execute the plan.

This would not mean a compromise of the Opposition’s role in Parliament to provide checks and balance to the government, while the government could at the same time consider and adopt constructive views given by the Opposition during Parliament debates, he said.

As it is now almost nearing the end of the first year, Lee said there are only four years left to work on the targets in the 12MP, but noted: “It’s ok, these targets are not cast in stone, you have a mid-term review, maybe some of the targets you can have yearly reviews and do some changes.”

Malaysia typically carries out mid-term reviews for its five-year plans, but does not have annual reviews.

Instead of waiting for mid-term reviews of the five-year plans, the government would be able to deal with such shocks head-on and provide some intermediate response or remedies through yearly reviews, and have some flexibility to adjust targets, he said.

While the 12MP targets a GDP growth of 4.5 to 5.5 per cent per annum, Lee said a range of 4.5 per cent to 5 per cent would be more realistic given the impact of Covid-19 on potential growth.

To drive the economy higher, Lee said the country needs to improve productivity, efficiency of capital utilisation and labour and also increase adoption of technology.

Less is more; show the ‘hows’

Firdaos Rosli, chief economist of Malaysian Rating Corporation Berhad (MARC), said the 12MP has too many targets that sought to cater to all target groups.

“I think it is a commendable attempt at reaching as many constituents as possible. Therefore, I think 12MP is more of a government’s wish list rather than an action plan,” he told Malay Mail.

“Because at the end of the day, we have finite resources. When we have a lot of constituents to target, then the overall impact of these targets may not be as we intended,” he said.

“Let's just take one example, the government plans to increase average monthly household income to RM10,000 which is actually a big jump from where we are today, about RM7,000. There will be a significant impact on inflation, so there is a need to look into Malaysia’s value-added manufacturing capabilities and overall tariff structure.

“There are many targets on the document, but I don't think it is possible to achieve everything unless the government assumes everything is going to be like a straight line. Because there are other conditions to look into, like neighbouring economies and the global economy.”

While acknowledging that the 12MP is a document that will be read by investors and credit rating agencies in assessing the country’s macroeconomic priorities, Firdaos suggested it would not be feasible to be impactful with such a broad policy.

“For a five-year plan, I would want to see the government be very specific as to what the real growth drivers are, I don’t think that one pops up. Like in the past, it was all about megaprojects that provided the required multiplier effect to other industries,” he said, stressing that the 12MP should have elaborated more on how the intended goals such as higher productivity would be achieved.

“I wished I could see more ‘hows’ than ‘whats’ in the policy document,” he said.

“It is always better to have fewer but detailed strategies rather than more strategies that are scant on details,” he later added.

Commenting on the goal for Malaysia to be a high-income nation, for example, he noted that high-income nations require high-quality infrastructure, but again noted the lack of sufficient details.

“In the 12MP document, it does specify that they want to improve access of infrastructure in rural areas, which is good, which is the right thing to do. But they did not specify what the infrastructures were, where and how much. Maybe spend more in one state but less so in another state, and in which locality.”

Actual performance, not mere promises

Tan Sri Ramon Navaratnam, chairman of think tank Asli-Centre for Public Policy Studies (Asli-CPPS), said the 12MP was “elegantly presented” but described it as a mere “tinkering with the system” instead of introducing transformations.

“Frankly I did not find anything very transformative, I thought it would be a grand opportunity for the government to introduce some major policy changes, but it’s like the same old record but with higher expenditure,” he told Malay Mail.

When asked about the 12MP’s plans to introduce more high-skilled jobs and to reduce foreign labour in the workforce to a maximum 15 per cent in the future, for example, Navaratnam said: “This is typical, they talk of high aspirations but don’t show what they plan to do to achieve it. So in the end, people are saying this is rhetoric, and the same record is being played.”

Noting that the aim of reducing the foreign labour in the country is an “old story”, he said that it would be just “a lot of talk, no action” without action plans being laid out, while suggesting the entire 12MP’s implementation be monitored closely by parliamentary committees, non-governmental organisations and the public.

“People are fed up with promises, they want performance and for that reason, there must be good monitoring mechanisms and government ministers must lead by example.

“Their achievements must be monitored publicly and they should be pulled up periodically for non-achievement of targets. Then there is hope, otherwise people are sceptical because of the record so far,” he said.

Stressing that the 12MP targets should come with proposed actions, the former senior Treasury official also said the key is to monitor the progress made in achieving the targets.

“Targets are the easiest things to set, so how do you achieve it? A target doesn’t mean it is achieved, that’s why you need a good monitoring system,” he said.

He said a new hack would, for example, be modifying the New Economic Policy — which had been replaced by the New Economic Model — to shift from race-based to needs-based, by making affirmative action apply to all non-Malays who are poor as well, adding that this alone would have made a big difference if it was announced under the 12MP.

The full 12th Malaysia Plan which is 532 pages long can be found here: https://rmke12.epu.gov.my/en

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