Malaysia Planning US$69.7 billion in New
Spending
Malaysia unveiled its latest five-year development
blueprint Thursday, saying it is planning RM230 billion
(US$69.7 billion) in new spending and announcing measures to
transform its capital into a leading global city.
Those measures include boosting spending on
infrastructure, liberalising the services sector, and easing
foreign employment regulations, all part of a grander plan for
the country to achieve developed nation status by 2020.
The government also laid out economic targets for the
next five years that include raising gross domestic product
growth, trimming the fiscal deficit and gradually reducing
subsidies.
In his speech on the 10th Malaysia Plan report, Prime
Minister Najib Razak said the country needs to redouble its
efforts to attract investment, and drive productivity and
innovation to make the country more competitive. "We will
remove structural barriers and outdated regulation in order to
create an efficient and flexible business environment for the
private sector," he added.
Economists said the plan is well-crafted and is the
right prescription to make Malaysia more competitive in the
global arena. "Being a small economy, and faced with external
headwinds and internal constraints, the economy continues
to perform below potential and has underperformed compared
to others," said Lee Heng Guie, chief economist at CIMB Bank
in Kuala Lumpur.
Lee said that the government tends to set a high growth
target when drawing up development plans and later trimming
them during the mid-term review. He cited the estimated real
GDP growth of 4.2 per cent a year during the 9th Malaysia Plan
that runs from 2006 to 2010 as an example where growth
was significantly below the target of 6.0 per cent a year.
Lee added that if the reform programmes and
high-impact projects under the 10th Malaysia Plan are properly
executed, it would be positive for both the economy and the
capital market in the short- to medium-term. "But if the
reform moves are stalled and implementation of the planned
projects and programmes is delayed, it could hamper growth and
investment prospects," warned Lee.
To promote economic growth, the government will
implement public-private sector initiatives worth RM62.7
billion that will see money flowing into seven toll highways,
university campuses, an integrated transport terminal and the
privatisation of Penang Port.
Najib said the seven toll highways are estimated to cost
RM19 billion and include the Paroi-Senawang-KLIA
Expressway linking the Kuala Lumpur International Airport to
major residential and industrial areas, and the
Guthrie-Damansara Expressway that serves the populous Klang
Valley area.
To attract fresh investments in the services sector,
which accounts for 58 per cent of GDP, the government will
further liberalise 128 subsectors, including healthcare,
telecommunications and education.
The government projected growth in the sector at 7.2 per
cent a year from 2011 to 2015, which in turn will lead to
annual economic growth of 6.0 per cent in that period.
The blueprint called for a greater role for the private sector
in driving economic expansion. Under the plan, private
investment is projected to grow 12.8 per cent a year and to
contribute 13.9 per cent to GDP in 2015.
Private consumption is expected to register sustained
growth of 7.7 per cent a year, largely on account of higher
income and better employment prospects, contributing to 58 per
cent of GDP in 2015, comparable to developed nations such as
Japan and the US.
International trade, according to the report, will continue to
be a pillar of the economy. Exports are projected to grow 10.6
per cent a year, while imports are forecast to grow 12.5 per
cent a year from 2011 to 2015.
At the same time, the government will also continue with
fiscal reforms and widen its revenue base to trim its deficit
from an estimated 5.3 per cent of GDP in 2010 to 2.8 per cent
in 2015 and Federal government debt from an estimated 52.9 per
cent of GDP in 2010 to 49.9 per cent of GDP in 2015.
The government also projects that by 2020, about 70 per
cent of Malaysia's population will be concentrated in urban
areas, making it all the more necessary to improve the
infrastructure in towns and cities. Toward this end, the
government will undertake major new developments and
investments in public transport in Kuala Lumpur and also
assess what projects are needed in other densely populated
areas.
In addition, the government reiterated that subsidies and
price controls would be gradually rolled back to remove
market distortions. Government subsidies are expected to fall
to RM15.7 billion in 2015 from an estimated RM18.3 billion
this year.
Malaysia's per capita income is also expected to rise
to US$12,139 by 2015, more than 12 times the level in
1970, when the first of such plans was introduced. Per capita
income is projected at US$8,256 for this year.
In a bid to attract skilled foreign talent, incentives and
employment conditions will be improved. The government said
skilled talent earning more than RM8,000 a month would be
allowed greater flexibility and mobility, with no time limits
on their employment visas.