Published in the South China Morning Post August 2006
When Malaysia unpegged its ringgit to the U.S. dollar last July, opting instead for a managed float, analysts hailed the event as one coming from a position of economic strength.
Malaysia, they said, was ready for the verdict of the global market.
With Gross Domestic Product targeted to grow at 6 per cent per annum under the five-year, RM$200 billion 9th Malaysia Plan ending 2010, and a more open political climate under prime minister Datuk Seri Abdullah Ahmad Badawi, direct foreign investment is again finding its way back to the country.
Companies like Dell, Intel and Singapore contract manufacturer Flextronics have given Malaysia the thumbs-up with new or additional investments in manufacturing facilities there.
With progressive liberalisation of trade under the World Trade Organisation (WTO) and the Asean Free Trade Area (Afta), and the planned implementation of the Asean Economic Community, Malaysia’s total trade is expected to breach the RM1 trillion (US$275 billion) figure for the first time during the 9MP period.
The next 15 years will be crucial ones for the country as it races towards its goal of becoming a developed nation by the year 2020 under its Vision 2020 plan, first articulated in 1991 by former prime minister Tun Dr Mahathir.
“It is a time of transition, a time to attain the next phase of growth,” stated Abdullah Badawi in his speech at the launch of the Third Industrial Master Plan (2006-2020) in Kuala Lumpur earlier this month.
This transformation will rest partly on Malaysia developing its human capital to keep up with intensifying global competition. Increasing the country’s capacity for knowledge, creativity and innovation and nurturing a first-class mentality is one of the five major thrusts of the 9MP.
In fact, getting rid of the “First-World infrastructure, Third-World mentality” malaise common among Malaysians has been one of Abdullah’s battle cries in his three years as prime minister.
The 9MP also seeks to transition to the next phase of growth by leveraging off the strengths inherent in the country.
Boost for Agriculture
While acknowledging the continuing importance of manufacturing and services to the economy, the Abdullah Badawi administration also appreciates the need to revitalise and modernise Malaysia’s agricultural sector.
Calling agriculture a “long under-appreciated sector”, Abdullah said that it would be given a new lease of life in order for it to become the third engine of economic growth, after manufacturing and services.
Manufacturing now contributes 31 per cent to total GDP while services contributes 51 per cent.
Emphasis will also be given to the use of technology in agriculture and resource-based manufacturing, especially in the high value-added areas like oleochemicals, biofuels, food products and advanced wood products.
“We have a great but underdeveloped competitive advantage in these areas,” explained Abdullah.
Under the 9MP, the agricultural sector will receive a significant boost with an allocation of RM11.4 billion, a 70 per cent increase from the allocation during the previous 8th Malaysia Plan.
With the incidence of poverty at its highest among the bumiputra community in the rural areas, agricultural development is also meant to help narrow national socio-economic differences. Hardcore poverty should be eliminated by 2010, according to the five-year plan.
Critics of the 9MP question the efficacy of its implementation and express doubts that the benefits will trickle down to the masses for whom they are meant. “I am critical of it because it benefits only a few, and not those in whose name it was announced,” lambasted the late M.G.G. Pillai, formerly a veteran journalist known for his outspoken views.
While Abdullah’s government has been receiving praises in several foreign press reports for the way it is managing the economy, locals are feeling the pinch in their daily lives as consumer inflation reached a six-year high of 3 per cent in 2005, after hovering around 1.5 per cent for five years.
The government has been gradually reducing fuel subsidies, with the result that petrol and diesel prices in Malaysia have increased five times since 2004.
A litre of petrol is now RM1.92 and, although still one of the cheapest in the world, has set off a chain of price hikes down the line for Malaysians. Increasing prices of public transportation, hawker food and highway tolls are among the gripes voiced by many private citizens.
These continuous hikes in fuel prices prompted an open memo to Abdullah from the Malaysian National Trade Union Congress urging him “not to balance the budget on the backs of the working class.”