Malaysia to Focus on Economic Reforms After State Elections with the New Industrial Master Plan
The Malaysian government is focusing on economic reforms in the upcoming months. This is good news for the people, as the reforms would be raising wages for workers and easing ways to do business. The pressure for Malaysia’s Prime Minister Datuk Seri Anwar Ibrahim to tackle the rising cost of living and low wages for blue-collar and mid-level workers is rising. The opposition, Pakatan Nasional, is getting greater popularity in six states around the country, as can be seen from the current polls.
In 2023, the economy was forecasted to grow anywhere from 4% and 5%. This figure is lower compared to the past; the average growth rate in the past two years was 6%. Factors like inflation, higher interest rates and trade tensions have affected Malaysia. The government is exploring more economic reforms, including subsidies and expediting the approval processes for businesses.
Prime Minister’s Significant Economic Announcements
Datuk Seri Anwar announced there will be some significant updates before the government presents the 2024 Budget in October. He revealed that the New Industrial Master Plan (NIMP) is gearing up to attract a large private sector investment of RM95 billion over seven years (by 2030). This significant funding will primarily come from private equity sources, capital injections, and financial markets.
Doubling as Finance Minister Datuk Seri Anwar said that the government will focus on creating valuable activities and high-skilled job opportunities. One of its key goals is to increase the monthly salary in the manufacturing sector by 9.6% annually. This would make the median salary reach RM4,510 from the current RM1,976. Additionally, Investment, Trade, and Industry Minister Tengku Zafrul Abdul Aziz announced that a portion of the funding for NIMP, approximately RM9.5 billion, will be unveiled when the 2024 Budget is presented this coming October 13th.
Before launching NIMP, economists observed that Prime Minister Anwar had the opportunity to give more attention to economic issues. In the current state polls, his coalition retained control of Malaysia’s two most industrialised states, Selangor and Penang, last August 12. The government also maintained control of Negeri Sembilan in the same elections.
Why Prioritising Reforms is Taking the Front Seat
Amir Fareed Rahim, the Director of Strategy at political consultants KRA Group, stressed the importance of focusing on reforms that minimise political resistance. He mentioned the need for comprehensive improvements in the social safety net to create an efficient welfare system. He also added that addressing reforms in business facilitation is crucial. Amir cautioned against reversing these reforms, stating that any backtrack would be a letdown to Pakatan Harapan’s voter base. Furthermore, he noted that Barisan Nasional (the partner in the unity government) might not gain political advantage from delaying reforms.
In 2022, subsidies reached an unprecedented level of nearly RM80 billion, which marks a historic high in Malaysia; fuel subsidies accounted for over half of this sum. Additionally, the government allocated approximately RM10 billion in subsidies for electricity and dedicated around RM2 billion for poultry and eggs.
What Calls for Immediate Budget Policy Changes
Professor Geoffrey Williams, an economics expert from Malaysia University of Science and Technology, mentioned that there is a straightforward opportunity for government. He suggested that making minor changes in budget policy could enhance worker wages and encourage a workforce with more participation from the female crowd. Labour statistics reveal that 75.7% of 6.45 million formal employees earn less than RM5,000 monthly. What is shocking about these data is about one-third of them make less than RM2,000 a month, falling below the national poverty rate of RM2,589 per month.
While Malaysia has taken steps to improve wages, such as establishing a minimum monthly wage of RM1,500 starting in January 2023, there is still work to be done. Convincing employers to increase wages further may be a challenge, as they are concerned about escalating expenses related to raw materials and higher loan rates for business expansion. Professor Williams added that despite employers voicing concerns about the minimum wage’s impact on costs, there isn’t much evidence to support these claims. The minimum wage implementation has not resulted in higher prices or increased unemployment.
He said that employee compensation constitutes only 35% of Malaysia’s gross operating surplus, while employers retain about 63%. These data suggest that there’s ample room for employers to offer a more equitable share of value-added to their employees for a better balance.
En Route to Making Malaysia More Favourable to Investors
Malaysia is putting effort into becoming more attractive to investors; one way it achieves this is by making it easier for businesses to bring in skilled foreign workers. Back in June, the country’s government made changes to simplify the process for companies of bringing expatriates by expediting the waiting time from three to six months down to just about 20 days. On top of this, the government also increased wages, which involved improving the skills of low-income workers. For example, factory assembly-line workers can receive training to be more well-rounded and switch between different tasks when or if needed.
According to Chief Economist and Head of Social Finance at Bank Muamalat Malaysia, Mohd Afzanizam Abdul Rashid emphasised the ongoing effort to improve the presence of skilled workers. He highlighted the significance of policies promoting key industries like electrical and electronics, chemical, aerospace, and more. These policies are crucial in creating demand for workers with qualifications in science, technology, engineering, and mathematics (STEM).
Malaysia’s Path to Greater Economic Progress
Overall, the Malaysian government is taking solid steps to improve the economy and create better opportunities for its citizens. By persistently focusing on economic progress and development, Malaysia is laying the groundwork for a more prosperous future. Thus, the business community has welcomed the new industrial master plan.
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