DEVELOPMENT PLANNING IN MALAYSIA

Socio-Economic Developments . . .
Sustainable growth record with low inflation & unemployment rate while interest rate & exchange rates remained stable Investments in human resource and high quality social services and public institutions Substantial poverty reduction and quality of life improvements

Real GDP Growth, 1970 ~ 2009f

Sustainable growth, except during the crisis periods..
World oil price increase from World oil price increase from US$2 US$15 to US$40/barrel to US$15/barrel
15 10 5 0
71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 '06'0708 09

Decline in world demand for electronics & Sept 11, 2001 incident East Asia Financial Crisis 1997/98 Global Financial Crisis & Recession 2008/09

-5 -10
Advanced Economy Malaysia

Average 1971- 80 Average 1981- 90 Average 1991- 2000 Average 2001- 05

% Growth 7.5 5.8 7.1 4.4

Key Economic Indicators

Since 2000, low unemployment & inflation..

1970 GNP per capita

1980

1990

2000

2007

2008

RM 1,132 3,737 6,299 13,333 23,115 25,796 USD 368 1,717 2,329 3,509 6,724 7,738 Unemployment (%) 7.4 5.6 5.1 3.1 3.2 3.7 Inflation (%) 1.9 6.7 3.1 1.6 2.0 5.4 Fed. Govt. Account -4.0 -13.5 -2.9 -5.8 -3.2 -4.8 Balance (% to GDP) Current a/c of BOP 0.2 -1.2 -2.1 9.4 16.0 18.1 (% to GNP)
4

Structure of the Malaysian Economy

RM billion

550 500 450 400 350 300 250 200 150 100 50 0 1970 1980 1990 2000 2005 2006 2007 2008 Agriculture Mining Construction Services Manufacturing

Real GDP increased by 11 times from RM49 billion in 1970 to RM529 billion in 2008 Economy has transformed from an agro- based economy to manufacturingand services-based

Services represent 55% of GDP; manufacturing 29%, & agriculture 8% (2008)

5

The Agriculture Sector : Policy Evolution

Period 1960-80 Factor/Situation Abundant agriculture labour Abundant agriculture land Shortage of agriculture labour Competition in land use Development Strategies Land extensive approach New land development Establishment of new government agencies Land intensive approach Knowledge-intensive approach Restructuring of agriculture agencies based on commercial and large scale considerations Public sector support & encouragement of private sector participation High technology New Agriculture ~ focus on total value chain development to increase value added & expanding agro-based activities Enhancing private sector participation ICT as enabler & biotechnology for wealth creation Developing agricultural & agro-based entrepreneurs as well as SMEs
6

1981 - 2005

Post 2005

Shortage of agriculture labour Competition in land use

The Manufacturing Sector : Policy Evolution

Phase
1 2

Industrial Strategy
Import substitution Industries (1956-70) Export Oriented Industries (1970-80) Import substitution Industries (1980-85) Export Oriented Industries (19862005)

Industrial Policy
Pioneer Industries Ordinance Invest. Incentives Act, 1960 Ind. Coordination Act, 1975 Heavy industries

Emphasis
Simple consumer goods Domestic Market Orientation Export orientation Free Trade Zones Electronics & textiles exports Consumer durable Intermediate & capital goods Domestic market oriented goods Export penetration Cluster-based industries Strengthening industrial linkages Improve market focus & penetration Regional alliance for competitiveness
Upscale & value add manufacturing &

First IMP (1986-95) Promotion of Investment Act, 1986 Second IMP (1996-2005) Third IMP (2006-2020)

Achieving global competitiveness transformation & innovation of manufacturing & related services

related services through knowledge & innovation-based activities, eg. highend E&E ; petrochemicals; biotech; Shipbuilding Expand complementary business & services industries eg. logistics & engineering services

DIVERSIFICATION OF EXPORTS PRODUCTS (% to Total Exports)

Manufactures
Rubber Tin

Others Palm Oil

Forestry Manufactures Oil & gas Oil & gas Other Others Palm Oil Agriculture

1970 RM 5.2 billion (USD2.1 billion) 8

2008 RM 663.5 billion (USD199.1 billion)

DIVERSIFICATION OF EXPORT MARKETS

2001 ASEAN Singapore United States European Union Japan China 84.0 56.6 67.6 45.4 44.4 14.7 25.1 16.9 20.2 13.6 13.3 4.4 2004 120.6 72.2 90.2 60.4 48.6 32.1 25.1 15.0 18.8 12.6 10.1 6.7 2008 171.2 97.8 82.7 57.3 71.8 63.2 25.8 14.8 12.5 8.6 10.8 9.5 RM bil. % Total RM bil. % Total RM bil. % Total

Hong Kong
Other Countries Total Exports

15.4
51.7 334.3

4.6
15.5 100.0

28.7
100.1 480.7

6.0
20.8 100.0

28.3
188.9 663.5

4.3
28.5 100.0
9

Major Success to Eradicate Poverty

From almost 50% poverty rate in 1970, now below 4% as of 2008
60 50 40 30 20 10 0

(% total households)

1970 49.3 58.6 24.6

1980 37.4 45.8 17.5

1990 17.1 21.8 7.5 3.9

1999 8.5 14.8 3.3 1.9

2002 5.1 11.4 2.0 1.0

2004 5.7 11.9 2.5 1.2

2007 3.6 7.1 2.0 0.7

2008 3.6 7.4 1.9 0.7

Total Rural Urban Hard-core poor

Note : Poverty Line Income (PLI) for 2007 was RM720 in Peninsular Malaysia (household size 4.2); RM960 in Sabah (household size 5.1); & RM830 in Sarawak (household size 4.6). Hardcore PLI was RM430 in Peninsular Malaysia (household size 7.2); RM540 in Sabah (household size 7.1); & RM520 in Sarawak (household size 7.3).

10

Poverty Eradication Programmes . . .

DISTRIBUTION AGENDA

Focused on human resource development and quality of life improvements Emphasize income-generating projects and not on welfare handouts Major programmes : Rural development New land and in-situ development Drainage and irrigation Agriculture support services Village/small industries Upgrade rural infrastructure - roads, electricity, water Upgrade schools & health facilities Other programmes (hard-core poor) Direct assistance ~ old folks home / the aged, the handicapped food supplements and scholarships interest free loans
11
11

Average Household Income Has Improved

Current overall income level is 14 times more than 1970 income level...

Malaysia (RM) Year 1970a 1980 Overall 264 678 Urban 428 1,045 Rural 200 523

1990
1999 2004 2007b
Note :
a b

1,169
2,472 3,249 3,686

1,606
3,103 3,956 4,356

957
1,718 1,875 2,283

Average household income increased 6.5% per annum from RM678 in 1980 to RM3,686 in 2007 The increase is higher than the inflation rate at 3.1% per annum

Peninsular Malaysia Data Household Income Survey 2007

12

SELECTED INDICATORS OF QUALITY OF LIFE

. . . reaching the level enjoyed in advanced economies
1970 Life expectancy (in years) Male Female Infant mortality rate / 1,000 Population / Doctor ratio Literacy rate (%) Telephones / 1,000 population1 Internet subscribers /1,000 population Utilities Pipe water (% of population) Electricity (% of households) 13
Note:

1990 68.8 73.5 13.1 2,533 85 131 80 80

2007 71.9 76.4 6.3 1,145 93 944 143 962 942

13

61.6 65.6 39.4 4,302 58 17 48 44

1/ Include mobile phones 2/ Universal coverage in urban areas

Development Philosophy

Partners In Development . . .

through a MIXED ECONOMIC SYSTEM of free enterprise but with active government support and direction the GOVERNMENT provides the broad thrusts and sets direction for the whole economy, and ensures the achievements of socio-economic goals the PRIVATE SECTOR is free to operate and given appropriate policy, institutional and infrastructural support
14

Population Size And Structure . . .

MALAYSIA : GEO-POLITICAL STRUCTURE
2009 % to Total

Total Population (000,000 persons) Citizens Bumiputera Chinese Indian Others Non Citizens Age Structure (years) 0 14 15 64 65+

28.10 25.41 16.91 6.31 1.90 0.29 2.66 7.70 19.10 1.27

100.0 66.5 24.8 7.5 1.2

27.4 68.1 4.5

15

PARLIAMENT Cabinet

National Development Planning Committee

Exco of the Economic Council

Economic Planning Unit Mission Cluster Groups / IAPGs Federal Ministries Federal Agencies

Private Sector

State Governments
16
16

Preparation Process Of The Malaysian Development Plan

Stage 1 : Determine macro-framework, review the targets, strategies and policies, and set development budget
National Development Planning Committee (NDPC)
To inform on the planning preparations

Inter-Agency Planning Groups (IAPGs)

Issue call circular

Economic Planning Unit (EPU)

Private Sector
Receive project proposal

Government agencies, Departments and State Governments

17
17

PREPARATION OF DEVELOPMENT PLANS

The Basis Used To Determine Ceiling On The Five-year Development Expenditure . . .

Macroeconomic projections growth prospects in the medium and long term Major priority areas focus on economic and social sectors Previous commitments on-going projects need to be taken into account Role of public sector in the economy to support private sector initiatives Financing capacity financed through domestic savings or external borrowings

20
18

PREPARATION OF DEVELOPMENT PLANS

Human Capital Planning:

Population Growth Labor Force Growth Skill Requirement

Distributional Issues :
Growth & Equity Poverty Regional development Rural Development

19
19

Examples on the Outcomes, 2010 . . .

COMMITMENT
Health Reducing infant mortality rate to 4.9 per 1,000 live births Reducing incidence of TB to 59 and incidence of malaria to 19 per 100,000 population Improving doctor:population ratio to 1:763

OUTCOME
Improved health status

Housing and Urban Services Constructing 70,000 units of low-cost houses Expanding OSCs and Local Agenda 21 Programme to all 144 local authorities Integrated solid waste management
Roads Construct roads to connect resettlement areas to rural industrial areas and estates particularly in Sabah and Sarawak Expanding rural electricity and water coverage

Adequate, quality and affordable houses Improved urban services

To increase road network coverage in Sabah and Sarawak Electricity 98.4% 82.6% 93.2% 95.5% Water Supply 96.0% 70.0% 95.0% 95.2%
20 20

Peninsular Malaysia Sabah Sarawak Malaysia

OUTCOMES, 2010
COMMITMENT
Family Development Conducting family development programmes for 60,000 participants Implementing Rakan Muda programmes for 1,750,000 youth Conducting National Service Programme for 766,000 youth Sports 2.5 million people participating in mass sport programmes Developing 14,570 athletes through talent identification programme Culture, Arts and Heritage Implementing 150 nationwide courtesy campaign, involving 300,000 participants Implementing 4,500 culture and arts activities Producing 1,500 Akademi Seni Budaya dan Warisan Kebangsaan (ASWARA) graduates

OUTCOME
Improved family well-being Empowered youth with positive attitudes Active and healthy lifestyle Better sporting excellence

Tolerant and harmonious society Enhanced appreciation of culture, arts and heritage

21
21

Implementation Coordination Machinery Of National Policies

National Development Council National Development Working Committee Ministrys Development Committee

FEDERAL

STATE

State Development Council State Development Working Committee

DISTRICT

District Development Working Committee

22 22

Role of the NDPC

To formulate and review all Plans for national development and make recommendations on the allocation of resources To review the causes of delays & difficulties in the implementation of national development plans and propose specific solutions To ascertain such adjustments in national development plans as may be necessary in the light of changes in the economic situation To use its discretion in making decisions itself or to refer to the Cabinet to discharge in the above functions To consider all subjects to be submitted to the Cabinet by Ministries and Departments which have a direct or indirect bearing on development
23

Contents To provide guidelines on the preparation of 9th MP : Policies & Strategies for the new Plan period Macroeconomic Perspectives : macroeconomic thrust under the new plan (the private and the public sectors) i.e. macroeconomic framework, poverty & distribution, human resource development and regional balanced Sectoral Development : thrust for the priority sectors ~ manufacturing, services and agriculture, infrastructure & utilities, social services and privatization policy To receive the status report of the implementation of the 8th MP programmes and projects To obtain proposals on programmes and projects for the 9th MP from the Ministries/Agencies and the State Government continuation programs and projects from previous plan new programs and projects under the new plan Overall development allocations by states Program / project of the NFPEs R&D Projects Enquiries and Final date of submission To obtain inputs for the public sector development planning for the 9th MP period

Development Plan : Call Circular . . .

24

The Inter-Agency Planning Groups (IAPGs) . . .

PREPARATION OF THE NINTH MALAYSIA PLAN (9MP)

Main mechanism to gather information and inputs from public agencies, corporate sector, industry associations, professional bodies and NGOs Ministries/Departments/Public Agencies, State Governments, Private Sector and relevant stakeholders assist EPU to identify main issues, resource constraints as well as provide feedback about implementation at ground level

More than 25 IAPGs and 34 TWGs established

Next . . .
25

The Various Inter-Agency Planning Groups (IAPGs), namely . . .

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. Macroeconomics HRD (Education & Training) Poverty Eradication Income Distribution Restructuring of Society Regional Development Agriculture Manufacturing & related services Tourism ICT Financial Sector Distributive Trade S&T (incl. Biotech) & R&D Privatization 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. Energy Development Transportation Water and Sewerage Housing & Urban Services Health Family & Community Development Women & Development Development of Youths Environment Culture, Arts & Heritage Sports Governance & delivery system International Cooperation
Next . . .
26

PREPARATION OF THE NINTH MALAYSIA PLAN (9MP)

26.

Example Of The Terms Of Reference Of An InterAgency Planning Group Macroeconomics

Review & analyse macroeconomic performance during the 8MP (2001-2005) & prospects during 9MP (2006-2010) National Accounts ~ supply side (GDP) National Accounts ~ demand side (GNP) Balance of Payments Public Sector Accounts Identify macroeconomic issues and challenges faced during the 9MP Study and identify policies and strategies to accelerate growth at sustainable level under 9MP period, i.e. : New sources of growth in the agriculture, manufacturing and services sectors Accelerate & enhance private investment Increasing TFPs contribution to growth Accelerate transition into a knowledge based-economy Enhancing competitiveness & resilience Fiscal policy towards balanced budget / sustainable deficits Maintaining macro economic stability ~ low inflation & unemployment rate, favorable interest rate & stable exchange rate Next . . .

PREPARATION OF THE NINTH MALAYSIA PLAN (9MP)

27

Members Of An Inter-agency Planning Group examples ~ The Macroeconomics IAPG . . .

1. EPU Chairman & Secretariat 9. Ministry of Plantation Industries & Commodities 10. Ministry of Tourism 11. Ministry of Higher Education 12. Ministry of Health 13. Ministry of Domestic Trade & Consumer Affairs 14. Ministry of Energy, Water & Communications 15. CIDB 16. Sarawak Economic Planning Unit 17. Sabah Economic Planning Unit
28

PREPARATION OF THE NINTH MALAYSIA PLAN (9MP)

2. Ministry of Finance 3. Bank Negara Malaysia (Central Bank) 4. Department of Statistics 5. Ministry of International Trade & Industry 6. Malaysian Industrial Development Authority 7. National Productivity Corporation (NPC) 8. Small & Medium Scale Industry Dev. Corp. 9. Ministry of Agriculture & Agro-based Industry

The IAPG Papers . . .

Macro Perspectives

Population, Employment & Macroeconomic Feamework HRD Policy Objective & Framework Macroeconomic Performance & Regional Development Public Sector Program & Prospects Financing Poverty Eradication & Environment Restructuring of Society

Sectoral Perspectives
Tourism Distributive Trade Health Housing & Social Services Women & Development Youth Development International Cooperation Administrative Improvement
29

Privatization Agriculture Development Industrial Development Infrastructure & Utilities Energy Science & Technology ICT Finance

National Development Policy (NDP), 1991-2000

SECOND OUTLINE PERSPECTIVE PLAN (OPP2), 1991-2000

Emphasise on balanced development, i.e. : Optimum balance between economic growth and equity Greater material welfare imbued with positive social and spiritual values Balanced regional development for national integration Balanced development of major sectors Human resource development Development and protection of environment and ecology
30

Thrust 1

Moving the Economy Up the Value Chain

In achieving Thrust 1, Malaysia needs to: restructure the economy and strengthen production capacity utilise resources efficiently generate new activities that are knowledge intensive and high value added enhance private sector participation Three main pillars to drive Thrust 1: Enhancing productivity and competitiveness Generating new sources of growth Expanding markets for Malaysian products and services

MOVING UP THE VALUE CHAIN

Enhancing Expanding Productivity Generating Markets & New for Competitive Sources of Malaysian -ness Growth Products & Services

Private Sector as the Engine of Growth

31

Thrust 2

Raising the countrys capacity for knowledge and innovation, and nurturing first class mentality
FIRST CLASS MENTALITY
KNOWLEDGE INNOVATION VALUES

Human Capital Development Strategic Thrusts

Improve education quality and accessibility
Making national schools as the school of choice Producing tertiary education of international standing Nurturing quality R&D, scientific & innovation capabilities Fostering a society with exemplary values
32

Thrust 3

Addressing persistent socio-economic inequalities constructively & productively

Main focus . . .
1. Eradicating hardcore poverty & halving overall poverty 2. Reducing disparities in income, employment and wealth ownership 3. Developing competitive Bumiputera entrepreneurs 4. Reducing disparities in development between states, regions as well as between rural & urban areas
33

Thrust 4

Health Care

Clean Environment

Improve the Standard and Sustainability of Quality of Life

Housing, Transport and Social Amenities

Family Development

Public Safety
34
34

The 9th Malaysia Plan, 2006-10

Thrust 5

Strengthening institutional & implementation capacity

Main focus . . .
Promoting good governance

Enhancing the public service delivery system 2

Development through international cooperation

3
35

Malaysian Economy 1970-2009

15.0

Has weathered through three major crises...

1970s 7.5% 5.8% 7.1%

10.0

1980s 1990s

01-05
5.0

4.5%
5.5%

2003

2004
2005
0.0 70 73

7.2%
5.2% 5.9% 6.3% 4.8% -3.0%

97

76

79

82

85

88

91

94

00

03

06

09

0.5

0.5

2006 2007 2009f

-1.1
-5.0
1985/1986 Recession Asian Financial Crisis

-3.0 2008
Global Financial Crisis

-7.4

Note: f Forecast
36
36

-10.0