THE mid-term review (MTR) of the 11th Malaysia Plan (2016-2020) is to prevent further damage and focus on maintaining growth amid huge national debt and global economic uncertainties, economists said.

The MTR, to be tabled today by Prime Minister Dr Mahathir Mohamad in the Dewan Rakyat at 4pm, is unlikely to feature new distributive and income disparity policies or actions, said former World Bank economist Dr Lim Teck Ghee.

Rather, the remaining years should focus on growth as Malaysia faces considerable uncertainty because of local and international factors, such as the US-China trade war and predictions of slower global growth, he said.

These would impact on Malaysia, which has seen an outflow of foreign funds from the capital market – a trend which may not have peaked yet, he said.

Credit ratings agency RAM Ratings said on Tuesday that foreign capital outflow from the Malaysian bond market increased by 25% to RM3 billion in September compared with the previous month, mainly due to external factors.

Fiscal discipline and restraint

Calling for fiscal discipline and restraints for the next year or two, Lim said Putrajaya must also make the economy more competitive and plug leakages and wastage.

Putrajaya must also repair the damage caused by “a free spending, wasteful and corrupt Barisan Nasional government that had mismanaged and squandered relatively scarce human and financial resources”, he added.

“How to repair this damage, especially in government operating expenditure, is the big challenge that needs to be addressed sooner rather than later. 

“This is also one of the most contentious of the reforms that need to be undertaken.”

The significantly higher oil prices are for now the silver lining for Malaysia, although the gains may be temporary.

“(Spending) needs to be carefully targeted at financing a small menu of key socio-economic priorities and reforms that can raise productivity and bring about broad-based national gains.”

The 11MP – themed “Anchoring growth on the people” – was tabled in 2015 by the previous BN government. Its aims were to lay the foundation for growth beyond 2020.

The plan reaffirms the government’s commitment to the people, placing their wellbeing, as well as inclusive and sustainable growth, as the necessary hallmarks of an advanced nation.

The plan talks of providing jobs, education, security, public transport and rural infrastructure; addressing the cost of living issue; increasing private investment and consumption; generating new growth through productivity and knowledge; and prudent spending through outcome-based budgeting and further rationalising subsidies.

It also targets a gross development product (GDP) growth of 5% to 6% per annum until 2020; RM54,100 per capita income and an average monthly household income of RM10,540 in 2020.

Core goals to stay

Meanwhile, economist Dr Lee Hwok Aun said he expects the core objectives of 11MP – promoting investment, raising productivity, cultivating skills and innovation, fostering fair distribution, focusing on low-income households, and narrowing spatial and regional disparities – to remain unchanged.

An overhaul of the existing plan would not be appropriate, he said, adding that the PH government has only been in power for five months and is constrained by the debt situation and global economic uncertainties. 

“Of course, PH will want to make a statement, reset some priorities, introduce new programmes and tweak existing ones, and perhaps do some rhetorical rebranding. 

“Some new areas of emphasis could be in taxation and redistribution, digital economy, and new growth engines and investment stimuli,” said the senior fellow at the ISEAS-Yusof Ishak Institute in Singapore.

Last week, Dr Mahathir said the government might have to introduce new taxes to pay off the country’s RM1 trillion debt.

Putrajaya also recently said there was only RM450 million left in the government’s consolidated revenue account as at April 30 before the 14th general election, which saw a change of government.

The state of Malaysia’s finances led the new government to cancel and shelve a number of infrastructure projects, like the East Coast Rail Link and high-speed rail linking Kuala Lumpur and Singapore.

Lee said it is hoped that the MTR will also clarify the state of Malaysia’s public finances and provide explanations for project continuities and cancellations. 

“We should also note that development projects in recent years have increasingly called on the private sector, with GLCs (government-linked companies) playing important roles. With leadership reshuffling in these bodies, we can also expect some changes in projects they undertake.”

Equitable society

On 11MP’s aim to create a more equitable society, Lee said Putrajaya needed to be realistic about measuring and dealing with poverty.

Malaysia should adopt the relative-poverty approach, to be referenced in tandem with absolute poverty that measures the lack of access to basic needs. 

“The poverty line income (PLI), which is set at an unrealistically low level also warrants a revision. 

“The PLI stands at about RM1,050 for a household of four in the peninsula, meaning that a family of four with RM1,200 income or a three-person family with RM900 a month are considered not poor and able to meet their basic needs.”

Putrajaya must also not rely on short-term remedies to boost the B40 and M40 groups but go in for the long haul by providing quality public education, good jobs, accessible social services, and a balance of fair opportunity and diversity, among other elements of a more equitable society, Lee added.

Ultimately, the task of creating an equitable society is “a complex and challenging quest extending far beyond 2020”. – October 18, 2018.