Dissecting the 12th Malaysia Plan

Manokaran Mottain: “We need to move the economy away from low-cost manufacturing to produce higher value-added products which would reduce the dependency on foreign workers.”

THE unveiling of the ambitious 12th Malaysia plan (12MP) filled the week with some optimism over the economic development of the country after the global economy faced a recession last year due to the Covid-19 pandemic.

Many economists and industry players in the country welcomed the long-waited five-year plan, which has allocated an historic RM400bil for government spending over the next four years.

But doubt has creeped in the mind of some Malaysians whether the aspirational targets can be achieved.

This is because some targets under the 11th Malaysia plan were not realised.

This includes the country’s gross domestic product (GDP) growth per annum, gross national income (GNI) per capita, share of compensation of employees, average monthly household income and Malaysia well-being index, according to the 12MP report.

Certainly, it was difficult to achieve the set target of average 4.5% to 5.5% GDP growth per year due to the pandemic that battered the global economic growth.

However, according to UOB senior economist Julia Goh, other targets of 11MP could not be achieved because of social-economic challenges and structural issues in the country.

According to UOB senior economist Julia Goh, other targets of 11MP could not be achieved because of social-economic challenges and structural issues in the country.According to UOB senior economist Julia Goh, other targets of 11MP could not be achieved because of social-economic challenges and structural issues in the country.

“These issues include income and growth disparities, youth unemployment and industries stuck at the lower-end of the value chain that led to underachievement of these targets,” she says.

Nonetheless, the initial targets that were not accomplished have now become a tall order to fulfil in the next four years.

For instance, the target set for average monthly household income of RM8,960 in 2020, has now increased to RM10,065 by 2025.

It is worthy to note that the average monthly household income stood at RM7,160 last year.

Besides that, the government has set a high target for GNI per capita which measures the annual national income per person, to RM57,882 by 2025 from the initial target of RM47,720 in 2020. However, last year, GNI per capita stood lower at RM42,503.

Meanwhile, it is worth noting that the government has usually underspend on development expenditure in the previous plans, which means larger share of the its expenditure was allocated for operating expenditure, adds Goh.

For instance, in the 11MP, the original allocation for development expenditure was RM260bil, which was then revised down to RM220bil in the mid-term review.

“Hence, out of the RM400bil development expenditure allocated in the 12MP, there is uncertainty if this can be achieved.” notes Goh.

As such, will the 12MP follow suit a similar pattern?

In order to achieve the high targets of the 12MP by end of 2025, it is crucial to resolve the underlying issues including the transformation of the education sector and lower adoption of technology among some sectors of the economy that have created roadblocks and in turn, delaying the country in achieving its goals, according to tax and business advisory expert Dr Veerinderjit Singh.

Dr Veerinderjit SinghDr Veerinderjit Singh

Although Prime Minister Datuk Seri Ismail Sabri Yaakob stressed on the importance of producing high quality labour in the 12MP, Veerinderjit, formerly a tax partner in a big four accounting firm and now chairman of Tricor Malaysia, says there was no structural change in the 12MP on improving the education sector.

“The things mentioned in the 12MP on the education sector was just more of what has been happening in the past few years.

“Why is critical thinking and creativity not a standard feature in teaching the young rather than the rote learning that has been the prime emphasis all these years.

“Why is there no enhancement on the teaching of English.

“The training of teachers is also in need of improvement. Many lack knowledge of the cultural diversity in Malaysian itself, many have no global perspectives, so how can such teachers expand the minds of the young,” he explains.

Settling these issues would result in the education institutions to produce the right labour market skills in a field that is in demand as the country has long-struggled to match education outcomes with skills.

Veerinderjit notes that the shortage of skillsets may delay foreign investors to undertake investments in the country.

Certainly, the mismatch of talent and the shortage of the right talent could put a lid on investment demand for foreign multinational companies operating in the country.

Another key concern is to ensure some sectors are adopting higher technology as the country is still heavily involved in the labour-intensive industries.

“Focus has to be given to these sectors. If the government doesn’t solve these issues, goals of the aspirational plans will be delayed.

“The 12MP is nicely written but the underlying problems would deter the country to achieve the plans.

“In the private sector, you will solve underlying issues first, before you spend money on a project, so why can’t the government function the same way,” he opines.

Meanwhile, Alliance Bank chief economist Manokaran Mottain echoes similar views on the stricter implementation of the fourth industrial revolution which would accelerate smart manufacturing and create high-income jobs.

“We need to move the economy away from low-cost manufacturing to produce higher value-added products which would reduce the dependency on foreign workers,” he adds.

It is evident that the government has put a cap on the foreign workers in the total workforce to be not more 15% in the 12MP.

As such, former civil servant Tan Sri Ramon Navaratnam, who helped to draft the New Economic Policy in the late 1960s, says that a strong leadership by the Prime Minister with public backing is crucial to execute the 12MP effectively.

“Strong leadership with the right values is essential as the public will then support you. As a civil servant, I could not have functioned effectively with a weak leader.

“At the same time, we should not mix politics with economics as that will deter us from achieving our goals in the 12MP.

“For the plan to be successful, there must be transformation, less leakages, revamping of the education system and most importantly brain drain should be discouraged.

On a positive note, AmBank Group chief economist Dr Anthony Dass says the 12MP has shown a clear and inclusive economic vision for Malaysia in the new decade.

While Malaysia remains a business-friendly country, Dass notes that there is an urgent need to reinvigorate business dynamism through regulatory approaches to achieve a robust post-Covid-19 recovery.

Meanwhile, Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid says the market-oriented initiatives under the 12MP would boost business confidence.

Among such initiatives are the allocation of RM400bil to support ongoing and new projects, the pledge to cut red-tape, a greater focus on eight high-impact industries and transforming micro, small and medium enterprises.

The initiatives would also accelerate the economic recovery process, he adds.

“What matters is the pace of its implementation and the impact it may to have to the economy,” says Afzanizam.

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