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 "We will remove structural barriers and outdated regulation in order to create an efficient and flexible business environment for the private sector," he added.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.
they've to spend $$ for subsidy, these and tat so would they ever find $$ to build MRT?