’11th Malaysia Plan’ fails to convince investors

’11th Malaysia Plan’ fails to convince investors

Malaysia needs to alleviate the concerns of young talents and investors in order to attract both the brain and the fund that are needed to take country into a high-income nation.  

On May 21st, Prime Minister Najib Razak introduced the last phase (2016-2020) of a state plan to transform Malaysia to a developed nation by 2020.

The so-called Eleventh Malaysian Plan (11MP) focuses on education reform, increasing labour productivity, and investment in green technology and public infrastructure. The plan hopes to spur annual growth between 5.0 – 6.0 percent.

Against the backdrop of rising social tension and political instability in Malaysia, the 11MP has neither impressed the domestic nor convinced outsiders.

Economists have at best remained cautious, and see the plan being too ambitious. The growth target of the last five year plan, apart from 2014, has failed to achieve 6.0 per cent. 2015 GDP is also predicted to miss the target, with Focus Economics predicting growth of 4.9 percent.

The plan is criticised by Malaysian academics, like senior lecturer Dr Lee Hwok Aun from Universiti Malaya, who says the plan rests on “flawed foundations”. He argues the GNI per capita used in the plan was based on nominal terms, as opposed to following the conventional logic of forecasting growth in real terms.

If the real term was used in the plan, he said, the GNI would have to be US$17,725 as supposed to the quoted figure of US$15,000, and Malaysia would have to grow at a rate of 7.7 percent.

The plan has since been indicted by domestic commentators, who called it a stunt to boost the PM’s low public approval as opposed to being a frank assessment of the economy.

Furthermore, the plan misses fundamental human rights reforms that are crucial for a high-income country. Executive Director of Institut Rakyat Yin Shao Loong highlighted that the 11MP is silent on improving labours’ right by 2020. He criticises the government’s decision to deliberately put business before labour, which partially contributes to suppressed Malaysian wages.

There is concern within Malaysia that the 11MP would not foster an affluent Malaysian society that resembles current developed countries, which respect labour rights and human rights.  Including a series of recent arrests of opposition politicians and journalists, the government’s aggressive use of the Sedition Act against activists, academics, and journalists is hardly conducive to the formulation of a liberal and democratic developed nation.

The ambitious plan relies on improving human capital and investment. However, Malaysia continues to suffer from brain drain and socio-political factors have made investors cautious.

Internal division within the ruling government is heating up. The prime minister has been repeatedly asked to resign over the alleged mismanagement of the state investment fund 1Malaysian Development BHD (1MDB) from the opposition as well as from his cabinet ministers.

Facing criticism from his party, Prime Minister Najib has asked his ministers to resign if they do not support him. Rumours that went viral online in May about a potential cabinet reshuffle in August this year add another layer of uncertainty to the United Malays National Organisation’s internal stability.

The transition from a middle-income country to a developed country relies on the improvement of labour productivity with a high-skilled sector; however, socio-political struggles have pushed young talents to seek work abroad.

TalentCorp CEO Johan Mahmood Merican said “a major concern of students and Malaysians living abroad was the state of the country’s politics, which many believed indicated a lack of viable job prospects for local talents”. He further points the salary issues, which is “a real problem especially with countries like Singapore being able to offer sometimes more than double what our graduates here can get”.

Despite the government’s awareness of the brain drain issue as a major challenge for Malaysia to become “knowledge-intensive-and high-value added activities” by 2020, more efforts in salary reform and political freedom are needed to convince workers to return.

Investors will remain cautious with the rising level of authoritarianism that restricts freedom of information and drives uncertainty in the change of leadership. The UNMO’s internal division undermines the source of stability that is needed for major investment, which is crucial to Malaysia’s 11MP.

The 11MP aims to improve labour productivity and infrastructure, which would greatly benefit from overseas returnees and foreign capital. With the current political and economic climate, though, it is hard to see how these crucial elements would be attracted to Malaysia.

About Author

Qingzhen Chen

Qingzhen is a GRI Senior Analyst and a research analyst for an international information company. Her research focuses on China and the Asia Pacific. Previously she was a market researcher for PwC. She has gained regional knowledge from internships with the UNDP, China Policy, and the Royal United Services Institute. She holds a BA in Politics and East European Studies and an MSc in Security Studies from University College London.