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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Phases ofPhases of Industrial Policy

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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

Thank

You

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