This article, which reviews the Mid-Term Review of the 12th Malaysia Plan (12MP MTR), first appeared in the StarBiz7 feature on the 12MP MTR on Saturday, 16 September 2023.
THE Madani economy framework and the 12th Malaysia Plan mid-term review (MTR) do not seem to have a significant difference on the surface, but the latter contains some initiatives which will be game-changers if implemented well. These include the move towards a progressive wage policy and also initiatives in the healthcare sector, including setting up a new mental health institution, a national ageing action plan and a geriatric centre.
More than that, under the MTR, the government plans to optimise the use of data for public policy. An Omnibus Act will govern data-sharing and cloud storage, while an impact study on the Public Sector Data Sharing Policy and National Data Sharing Policy will be done to encourage data-sharing. A new integrated household database (PADU) – a socioeconomic data repository on households – will also be set up.
Appointing a chief digital officer to spearhead digital technology, data governance and digital literacy will be something that all industries, especially those reliant on research and data, will look forward to. A National Digital Identity pilot project will be rolled out in 2025, while the government will transition
to the digitalisation of services under a new government technology programme.
Second, the MTR is forthright about implementing public sector reforms. For instance, it plans to introduce a Public Sector Governance Act and integrity plan as a guide on “corruption-
free governance for all entities, both public and private”, in its goal to aim for the top 25 positions in the
global Corruption Perception Index (CPI) within 10 years.
On this note, it is also positive that beneficial ownership declarations will be reviewed to strengthen transparency of share ownership, specifically within the Companies Act 2016 and Limited Liability Partnerships Act 2012.
A governance and institutional framework and legislation “related to corruption” were also announced, as
well as a special task force on agency reform (STAR). The structure and functions of ministries and agencies are to be reviewed and streamlined. Public sector efficiency is certainly welcome, since civil service performance is essential for the effective delivery of public goods and services.
A third observation is regarding the government’s plans to balance growth with fiscal management. The
12MP is allocating an additional RM15bil, increasing spending to RM415bil. According to the government, increased spending is possible due to savings from subsidy re-targeting various
national expenses as well as reallocating unused GLC and statutory body funds, all of which will be transferred to development expenditure.
While this may be positive at the outset, the additional RM15bil is of some concern. Historically, the government has not had the capacity to fully use the allocated expenditure. Budget documents suggest that the government only managed to spend around 91% of the estimated development expenditure from 2011-2021, except in 2018 where the expenditure was more than the estimate.
Given these aims, the government will have no choice but to engage in long-awaited fiscal consolidation. It has already announced targeted subsidies will be rolled out as soon as early next year for electricity, diesel, petrol as well as other social assistance. PADU will reportedly provide “near real-time micro data on individualssuch as demography, income and social assistance”. This is a bold move, since removing subsidies will result in higher costs of living for some income groups. Some PH MPs have called to
assess these plans as it would have economic impact on small-scale industry players and the M40 community.
But subsidy rationalisation, which has been discussed over the last decade with minimal progress, is key to
ensuring that over the long term, the government can achieve its 3.5% deficit target. This is especially the case given substantial public spending over the last few years during and after the Covid-19 pandemic.
The government’s priority on fiscal responsibility raises the possibility of restoring Goods and Services Tax (GST) as well as implementing Capital Gains Tax (CGT) that was previously announced, both of which would provide more secure buffers for the government’s public spending on a more sustainable, long-term basis.
The Fiscal Responsibility Act and Government Procurement Act (GPA) are two legislative reforms that this government should also enact immediately, to complement efforts on responsible public financial management. The government’s announcement that the GPA has been approved is therefore welcome, but clear timelines on its enactment must now be presented to the public. On this note, plans to enhance the Public Expenditure Review and reactive the Debt Management Committee are also positive.
Finally, a bumiputra economic congress is to be held in January 2024 with the objective of setting a new
direction and approach that is “more fair, equitable and inclusive”. Building bumiputra businesses to increase income levels is positive, but caution might be exercised when aiming to improve effectiveness of aid and support to bumiputra involvement in economic activities.
Encouraging enterprise development is best done by removing barriers to business, most often regulatory
or legal in nature. In the rollout of future economic plans, it is hoped that greater focus on promoting healthy, robust competition among enterprises can be achieved.
An example is updating the Competition Act 2010 to enhance competition in all sectors as well as
conducting a thorough review of the large number of state-owned enterprises and government-linked companies in Malaysia – especially those that are not financially viable. A more competitive environment
that is not encumbered with excessive regulation is what will ensure private sector growth, increased foreign investment and participation towards a thriving economy.
