Malaysian Economy
Bachelor of Business Administration (BBA)
Professor Dr. Ahmad Bin Othman
School of Business and ManagementUniversity College of Technology Sarawak (UCTS)
96000 Sibu, Sarawak
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Today’s Agenda (Week #5)
Industrial policy and Industrialization
Phases of industrial policyFive-year Malaysian Plans (10 plans)
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Introduction
In the colonial period, Malaya was involved in production and
processing of rubber and tin for export in return for imports of
essential food and manufactured goods.
In the year of independence (1957-1960), the economy was still
heavily dependent on rubber and tin exports.
Attempt to industrialize (1960s) was started with the implementation
of import-substitution policy, which was quite unsuccessful.
Framework of the economy
The Malaysia’s framework of the economy started when the First Malaysian Plan 1966-1970 was introduced.
The economic framework was continued with the implementation of the First Outline Perspective Plan 1971-1990(OPP1). The main policy formulated in OPP1 was the New Economic Policy (NEP)
Vision 2020 was launched in 1991 as the broad policy directions of Malaysia. It provides the much needed guidelines of becoming a fully developed & industrialized Malaysia by the year 2020.
In relations to vision 2020, the Second Outline Perspective Plan 1991-2000(OPP2) was introduced. The main policy implemented in OPP2 was the National Development policy(NDP).
In 1991, National Development Policy (NDP) was introduced to replace NEP.
Vision 2020 was also introduced in 1991. it is a long term vision (1991-2020=30 years) containing broad policy directions encompassing various dimensions, i.e.
Economically Politically Psychologically Spiritually culturally.
In summary, Malaysia’s key to economic success of the 1970s through the 1990s were;
Basic policy framework, & Industrialization strategies.
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Planning Horizon . . .
LONG TERM PLANNING
• Vision 2020, 1991-2020
• First Outline Perspective Plan (OPP1), 1971-1990
• Second Outline Perspective Plan (OPP2), 1991-2000
• Third Outline Perspective Plan (OPP3), 2001-2010
MEDIUM TERM PLANNING
• Five-year development plans, such as the Ninth Malaysia Plan (2006-2010)
• Mid-term review (MTR) of the five-year Plans
SHORT TERM PLANNING
• Annual Budget
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RMK10
RMK9
RMK8
RMK7
RMK6
RMK5
RMK4
RMK3
RMK2 OPP3
RMK1 Vision 2020
OPP2
Outline Perspective Plan (OPP1)
66-70 71-76 77-80 81-85 86-90 91-95 96-00 01-05 06-10 11-15
RMK10
RMK9
RMK8
RMK7
RMK6
RMK5
RMK4
RMK3
RMK2
RMK1
OPP2
OPP1
Summary of Malaysian Development Policies
16-20
Establishment of new growth centers
The modernization of rural life
Rapid & balanced development of
urban activities
Provision of a wide range of social
especially designed to raise the living
standards of the low income group
Raising productivity & income of those in low productivity occupation
Expansion of opportunity for inter-sectoral movement from low productivity to higher productivity activity
The creation of a Malay commercial & industrial community in all categories & at all levels of operation
New Economic Policy (NEP) (1971-1990)
Eradicating poverty by raising income levels and increasing employment opportunities for all Malaysians
Accelerating the process of restructuring Malaysia society to correct economic imbalance, to reduce & eventuallyeliminate the identification of race with economic function, and to ensure that Malay & other indigenous people will become full partners in all aspects of the economic life of the nation.
Strategy of New Economic Policy
First
Second
Third Malaysia Plan (1976-
1980)
Second Malaysia Plan (1971-1975)
Fourth Malaysia Plan (1981-1985)
Fifth Malaysia Plan (1986-
1990)
Implementation NEP
New Economic Policy (NEP) (1971-1990)
Evaluation of NEP (achievement)
Increase in GDP Malaysia real GDP growth during 1971-1990; averaged 7.1% annually. In the 60s; averaged 5.2% Grew from RM22.2 billion in 1971 to RM1,109 billion in 1990 per capita
GNP grew by 8 times from RM1,109 to RM8,856 (US$ 860 to US$3406) The annual inflation rate remained low.
Fairer distribution of income
With the regard to the distribution of income, there has been an increasingly fairer distribution of income among the various income group.
Increase employment opportunities
rapid economic growth; creation of job, from 3.4 million in 1970 to 6.7 million in 1990.
the unemployment rate dropped from 7.7% in 1970 to 5.1% in 1990
Change of economic structure
from agriculture to manufacturing sector.
the transformation had enabled more Bumiputera work in more productive sector of economy (secondary & tertiary sector
Evaluation of NEP (achievement)
National Development Policy (NDP) (1991-2000)
With the aim to fulfill the objectives of Vision 2020, OPP2 was introduced in
1991.
OPP2 (1991-2000) was accomplished through the policies, strategies, and
programs implemented in
-The sixth Malaysia Plan (1991-1995)
-The Seventh Malaysia Plan (1996-2000)
National Development Policy was the main policy during OPP2.
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NATION:
• United Malaysian Nation
• Common and Shared Destiny
•Territorially Integrated
•Ethnically Integrated
•Living in Harmony
• Full Partnership
• Fair Partnership
• One ‘Bangsa Malaysia’
• Political Loyalty
• Desicated to Nation
ECONOMY
• Competitive
• Dynamic
• Robust
• Resilient
POLITICS
• Matured Democratic
• Society
• Consensual
• Community Oriented
MORAL AND ETHICS
• Fully Moral and Ethical Society
• Strong in Religion
• Highest Ethical Standard
WELFARE
• Fully Caring Society and Culture
•Society Comes Before Self
• Walfare – Family Responsibility
THE SOCIETY
RESOURCE DISTRIBUTION
• Just
• Fair and Equitable Distribution of Wealth
• Full Partnership in Progress
ORIENTATION TOWARDS SCIENCE AND TECHNOLOGY
• Scientific and Progressive Society
• Innovative
• Forward Looking
• Contribute to Scientific and Technological Society
MENTAL FRAMEWORK
•Psychological Liberated
•Psychological Secure
•Self Confident
•Justifiably Proud
•Robust in Facing Adversity
•Pursuit of Excellence
• Aware of its potentials
VISION 2020
Vision 2020
Introduced in February 1991
Aims to achieve the status of a developed country that is distinctive and molded according to its own features without following:
Developed not only in the economic sense but it must be fully developed along all dimension:
-Economically -Spiritually-Politically-Technologically-Socially-Culturally
United Malaysia objectives
Just and caring society
Mature democratic society
Sustainable development
Fully competitive, dynamic, and resilient
economy
Entrepreneurial
Vision 2020
Vision 2020
Vision 2020
challenges:
1)To establish a united Malaysian nation with a sense of common and shared destiny2)To create psychologically liberated, secure and developed Malaysian Society3)To foster and develop a mature democratic society4)To establish a fully moral and ethical society5)To establish a matured, liberal and tolerant society6)To establish a scientific and progressive society 7)To establish a fully caring society and caring culture8) to ensure an economically just society9)To establish a prosperous society, with an economy that is fully competitive, dynamic, robust and resilient.
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Real GDP Growth . .
Average 1971- 80
Average 1981- 90
Average 1991- 2000
Average 2001- 05
2000
2001
2002
2003
2004
2005
2006e
ECONOMIC PERFORMANCE
7.5 %
5.8 %
7.1 %
4.5 %
8.5 %
0.3 %
4.4 %
5.4 %
7.1 %
5.3 %
6.0 %
DEVELOPMENT PLANNING MACHINERY
Cabinet Ministers
National Planning Council
National DevelopmentPlanning Committee
Inter-Agency Planning Group (IAPG)
Federal Ministries & AgenciesState Governments Private Sector
National Economic Action Council
(NEAC), National Economic
Consultative Council (NECC)
Economic Planning Unit
PARLIAMENT
Draft
Policy
Draft
Proposal
Proposal
ProposalCirculars Circulars
General framework
Consultations
Secretariat
National Action Council
Implementation & Coordination UnitPrivate
Sector Dialogue
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Five Key Thrusts
To achieve the goals & objectives of Vision 2020
1. Moving the economy up the
value chain
2. Raising the capacity for
knowledge and innovation, and nurturing “first class mentality”
3. Addressing persistent socio-
economic inequalities
constructively and productively
4. Improving the standard and
sustainability of the quality of life
5. Strengthening the country’s
institutional & implementation
capacity ~ establish a more effective implementing &
monitoring mechanism
Ninth Malaysia Plan, 2006 – 2010The National Mission, 2006 – 2020