(Oct 15): Malaysia can achieve its target of becoming a developed nation in six years or earlier as rising private investment offsets any slowdown in government expenditure, economic planning Minister Abdul Wahid Omar said.
The government is formulating a new strategy to decide on programs and projects it will spend on under the 11th Malaysia Plan, a development program for the country for 2016 to 2020, Abdul Wahid said in an interview in Hong Kong yesterday. The new approach will focus on projects with a high impact on the economy that can be rapidly executed, he said.
“For the limited development expenditure budget that we have, you have to spread it across different industries and different states,” Abdul Wahid said. “There is a need to be careful in terms of prioritizing the various development projects to be undertaken.”
Prime Minister Najib Razak is dismantling decades of subsidies and increasing his focus on attracting foreign investment, boosting education standards and adding high-quality jobs to propel the economy into developed status by the end of this decade. Abdul Wahid said the nation’s electronics industry was moving higher up the value chain as sectors such the production of medical devices emerge.
Najib unveiled a plan known as the Economic Transformation Program in 2010 to attract $444 billion of local and foreign private sector-led investment in Malaysia by 2020, ranging from oil storage to a subway in Kuala Lumpur.
Infrastructure Spending
Abdul Wahid said that the government is targeting 90 percent of investment for the projects to come from the private sector. He said that non-state activity accounted for 71 percent of the whole economy in the second quarter from 60 percent a year earlier.
The government approved 498 manufacturing projects with total capital investment of $16.7 billion in the first seven months of 2014, compared with 787 for all of 2013 worth $15.9 billion, according to the Malaysian Investment Development Authority. Those investments through July may add more than 52,600 jobs, the agency said.
Malaysia may have as much as 65 billion ringgit ($20 billion) of approved manufacturing investments this year, according to CIMB Group Holdings Bhd. economist Julia Goh, who raised her forecast from an earlier projection of as much as 52 billion ringgit.
“Factors supporting continued investments include the ongoing Economic Transformation Program projects, improving infrastructure, strong economic growth prospects,” Goh wrote in a report yesterday. There is also a “favorable investment climate, following the positive reform measures in the public service delivery system,” she said.
Highways, Rail
Work on at least 75 billion ringgit of projects such as highways and rail will start next year, Najib said in his annual budget speech on Oct. 10. The finance ministry targets growth of as much as 6 percent this year and next.
The government may miss its development expenditure target of 230 billion ringgit under the 10th Malaysia Plan by about 5 percent amid execution “issues” including land acquisitions, Abdul Wahid said. Such a shortfall would still be considered as achieving targets, he said.
“We spent below average in 2013 and 2014 but it will go up” next year, he said. He estimated there will be about 47 billion ringgit to 48 billion ringgit of development spending in the final year of the plan that spans 2011 to 2015, higher than the annual average of 46 billion ringgit.
Malaysia narrowed its budget shortfall to 3.9 percent of gross domestic product in 2013, and Najib said he is committed to trimming the gap to 3.5 percent this year and 3 percent in 2015, heading toward a balanced budget by 2020.
Gross national income per capita in Southeast Asia’s third- largest economy rose to $10,060 last year, the government said in May. That compares with a previously reported $9,970 in 2012, and the target of $15,000 by 2020. A nation is considered high income when GNI per capita meets or exceeds $12,616, according to the World Bank.