KUALA LUMPUR: Malaysia today unveiled ambitious plans to jumpstart its economy by mobilising hundreds of billions of dollars of private investment in the next decade.
The plans ranged from a new mass transit system to relieve congestion in Kuala Lumpur to building a huge oil storage facility next to neighbouring Singapore to form a regional oil products trading hub.
A government think-tank said it had identified investments worth US$444 billion (RM1.4 trillion) over 10 years, of which 60% would come from the private sector, 32% from government-linked companies and 8% from the government.
The World Bank described the intent to boost investment and reforms so far as “conceptually right” but said more was needed.
Malaysia is competing for investment with other fast-growing countries in Southeast Asia and neighbouring Indonesia recently unveiled plans to boost infrastructure too.
“For Malaysia to sustain growth beyond a temporary growth acceleration, fundamental policy reforms will be absolutely critical. A second risk concerns the speed and extent of implementation,” said Philip Schellekens, the bank’s senior economist for Malaysia.
In the past 10 years, private companies invested just RM535 billion, according to official data and Malaysia’s private investment rate of around 10% of gross domestic product (GDP) is among the lowest in Asia.
The government, which in 2009 ran its biggest budget deficit in 20 years as a percentage of GDP, contributes around half the investment in Malaysia. It wants to cut that dramatically and defended its new plan as realistic.
“I don’t think the government would publish a document that thick if there is no political will. It’s a risky strategy to expose yourself so publicly when you have no plan to do it,” said Idris Jala, the Minister in the Prime Minister’s Department in charge of drawing up the proposals.
Economists warned, however, that without a new policy framework to encourage investment the plans would be hard to realise.
“It will be difficult to achieve the private investment growth target set by the government if there are no additional tax incentives given to the focus sectors,” said Gundy Cahyadi, regional economist at investment bank OCBC.
Move into services
The plan comes as Malaysia is seeking to boost domestic demand and the service sector. It also outlines the country’s ambition to move into business outsourcing, although tackling Malaysia’s racially divided education system will be a tough challenge.
The government think-tank said that in 2003 Malaysia had just 21,000 finance and accounting professionals that could be employed by multi-national corporations compared with 341,000 in India and 127,000 in the Philippines.
Malaysia has announced ambitious reform plans before but not all have been implemented.
The same government think-tank that formulated the investment plans also came up with ambitious aims to slash Malaysia’s subsidy bill which costs government coffers 2% to 3% of GDP annually.
The cuts were watered down after running into political opposition in the governing coalition and policy analysts are sceptical as to whether Prime Minister Najib Tun Razak can deliver on his reform pledges.