PETALING JAYA: The five-year economic plans that have been implemented since the 1960s have served Malaysia well, bringing economic development and prosperity, particularly in the earlier decades of the country’s growth.
Now approaching its sixth decade and into its 12th iteration – the 12th Malaysia Plan (12MP) – some economists are arguing that the central economic planning model that is the foundation of the Malaysia Plans is no longer relevant in the 21st century.
They say the time is ripe to move away from the old-style development economics of the 1960s and 1970s.
Center for Market Education CEO Carmelo Ferlito suggests a rethinking of the role of Malaysia’s multi-year economic plans given that it has too much of a “Soviet flavour”.
“Multi-year plans are a legacy of the heavy involvement of the government in shaping economic growth, but this is unsustainable. It creates distortions, so we should develop a plan for ‘unplanning’ it, a strategy to unleash market forces and to reduce the heavyweight of the government.
“The new strategic vision should be oriented towards thinking how to reduce the government’s role in the economy, and to unleash private entrepreneurial spirit,” he told FMT Business.
The First Malaysia Plan was launched in 1966 with the objectives of promoting the welfare of all citizens, and improving the living conditions in rural areas, particularly among low-income groups. It sought to increase the level of income, generate employment opportunities, promote new economic activities, and expand electric power development.
Less government spending, not more
On the government’s move to increase the 12MP’s expenditure ceiling by RM15 billion, bringing the total allocation to RM415 billion, Ferlito said: “I don’t think we need more money to stimulate the economy, and indeed the spirit of Madani Economy is to make the economy competitive.
“For it to be more competitive, it requires less government spending, so the direction should be to reduce money spent, rather than increase.
“There is a need to imagine a gradual withdrawal of the government’s role in the economy as sound and sustainable economic development comes from private initiatives, not from government intervention.”
Tabling the 12MP mid-term review (MTR) in the Dewan Rakyat yesterday, Prime Minister Anwar Ibrahim said the increase was necessary to enhance management quality and reallocate subsidies to cover basic needs.
The 12MP, a blueprint prepared by the economic planning unit of the prime minister’s department and finance ministry, was tabled by then prime minister Ismail Sabri Yaakob in Parliament on Sept 27, 2021.
Civil society participation
Monash University Malaysia economics professor Niaz Asadullah said the 12MP’s bold measures and a bigger budget demand better and smarter implementation of the economic plan.
He said what is equally important is citizen oversight. “It’s encouraging to note that part of the increased allocation will go towards enhancing management quality, but effective management is not just about money,” he told FMT Business.
“Provisions for active civil society participation should be implemented to include academics, non-governmental organisations (NGOs) and private sector leaders for the effective delivery of the 17 big measures and the related 71 main initiatives under the MTR.”
These “big, bold measures” include the development of high growth, high value (HGHV) industries, enhancing fiscal sustainability, retargeting of subsidies, accelerating energy transition, and empowering micro, small and medium enterprises (MSMEs).
Anwar, who is also the finance minister, noted that in the first two years of the 12MP, the country recorded an average gross domestic product (GDP) of 5.9% between 2021 and 2022.
“Out of the 175 set targets, 31% have been achieved, and 59% are on schedule,” he added.