The 12th Malaysia Plan And The 2025 Target

The 12th Malaysia Plan (12MP), with an allocation of RM400 billion is crafted to eradicate poverty and transform Malaysia into a high income economy by 2025. The 4 areas which I am primarily concern with are:

1. The national GPD growth of between 4.5% to 5.5%.

 2. Reduction in the gap between the annual GDP of the Malayan states and the 2 Borneo states of     Sarawak and Sabah.

 3. Average household income of RM10,000 per month.

4. Source of financing.

 Targeted National GDP growth rate of 4.5% to 5.5%

Malaysia’s average GDP growth rate over a five years period before the pandemic ravaged the global economy, i.e from 2015 to 2019, was 4.8%. The 12MP is a post-pandemic plan, where the Ministry of Health has more or less declared that we have entered into the endemic stage of virus in our communities in Malaysia. While most sectors of our economy will progressively reopen, there will be intermittent stoppages to businesses as and when infection among workers are detected.

Unlike the fully developed economies like those in the EU, in North America, in Japan & Korea and elsewhere where they have fully entered into the IR.4 era, the era of digital technology, robotic technology and artificial intelligence, our economy is still very much a labour intensive one.

To conclude that the new normal will have no or minimal impact of the our economy is to be in a state of denial. Achieving a GDP of 5.5% is a fanciful dream. We would be most fortunate if we can achieve an average of 4%, from 2021 to 2025.

 

 

Reducing The GDP Gap Between Malaya And The 2 Borneo States

Towards achieving the aim of reducing the GPD gap between Malaya and the two Borneo states and indirectly, achieving the targeted GDP growth and the average household income, PM Datuk Seri Ismail Sabri Yaakob (Ismail Sabri) said priority will continue to be given to the socio-economic development of Sarawak and Sabah. He went on to say this is in line with the federal government’s commitment to solving issues related to the promises made to these two states in the Malaysian Agreement 1963.

No absolute figures is stated but Sarawak is slated to receive 15% of the annual total basic development budget.

It must be pointed out here that Sarawak was an ‘equal status’ founding partner in the formation of Malaysia and the original wordings of Article 1 (2) of the federal constitution before the amendment in 1976 testifies to that. In the same breath it can also be said that the socio-economic growth of the Malayan states was fueled by revenue from the oil and gas from territories of Sarawak and Sabah. The logical and equitable share for Sarawak in the development budget therefore should be double the figure that the Ismail Sabri claimed the 12MP will provide Sarawak with. Only then can it be said the allocation is in line with the spirit of the Malaysian Agreement 1963 (MA63).

 Average Household Income Of RM10,000 Per Month

Upper most in the minds of Sarawakians is whether or not the aims of the 12MP have a realistic chance of being achieved in Sarawak. It is not lost on Sarawakians that the 11th Malaysia Plan had failed and at the end of the plan Sarawak was left as among the three states with the highest rate of poverty.

Based on the Bantuan Sara Hidup (BSH) recipients in 2020 Sarawak has some 443,000 households categorised as B40 households. That is roughly equivalent to 63% of the total households in Sarawak based on a population of 2.8 million people.

It was reported on the 16th June 2021 that 600,000 households from the M40 group slipped down to the B40 group as a direct result of the Covid.19 pandemic.

Firstly, it is quite clear that the execution of this plan is already delayed by almost 1 year. This plan should have been presented in parliament sometimes in 2020 by the Tan Sri Muhyiddin Yassin led government. Secondly and equally worrisome is the targeted date set by Datuk Patinggi Abang Johari led GPS state government for Sarawak to achieve developed state status. The date set was 2030, to be achieved through an annual GDP growth of 8%.

The date speaks both of low ambition and of illogical expectations. Sarawakians wonder if this is the reason why Ismail Sabri is allocating only 15% of the basic annual development budget to Sarawak instead of the more equitable 30%. Thirdly, can an 8% annual GDP growth can be achieved with the minuscule 15% allocation by Sabri Ismail?

In 2020, Malaysia’s gross national income (GNI) per capita was US$10,111 (RM42,503) or RM3542 per month. In a household where only 1 parent is working, this income level will put the household into the B40 category. Where both parents are working, their combined income will put them into the middle rank of the M40 group. The average monthly household income was RM7,089 as of August, according to latest figures from the Department of Statistics Malaysia.

To achieve the average RM10,000 household income targeted by the 12MP, the GNI must grow by close to 10% annually. For this reason, an Associate Professor from Putra Business School described the target as ‘quite ambitious’.

Source Of Financing

Questions are also being asked about how Ismail Sabri and his PN Version 2 government are going to finance the RM400 billion needed to fully and successfully implement the 12MP.

Direct federal government debt (excluding other liabilities) reached RM958.39 billion as at end of June 2021. Including all the contingent liabilities, we are looking at at least a RM1 trillion debt load.

It is clear that parliament’s approval will need to be sought to raise the statutory debt ceiling from 60% of GDP and increase the ceiling for the special Covid-19 fund to allow more debt to be taken on to fund operating expenses. And indeed Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz had already proposed to raise the statutory debt limit to 65% of the gross domestic product (GDP).

Uppermost on the peoples’ mind now is who will the government borrow from? In Jan 2021, Moody Investors Service (Moody) assigned a sovereign credit rating of A3 (denoting stable) to Malaysia. In July Fitch Group (Fitch) assigned a rating BBB+ . While this still denotes a stable rating, clearly Malaysia’s ratings had slipped. This may mean the cost of borrowings will be higher than in the past, adding to the interest burden.

I therefore strongly urged the GPS government of Sarawak to reveal to Sarawakians how they planned to ensure that Sarawak can actually get the 15% share of the basic development expenses promised in the 12MP. For without a solid plan of action all those will be just empty promises.

I strongly recommend that the GPS state government moved quickly to unshackle its financial resources by demanding that the federal government immediately takeover the financing of the Batang Lupar bridge and the Sabah Sarawak Link Road (SSLR). Sarawak must also insist that the Territorial Sea Act 2012 be repealed and Sarawak territorial waters be reverted to the original boundaries before 2012. By doing that, rights to all the minerals resources, oil & gas resources and other maritime resources will revert to Sarawak. Over and above what is already mentioned above, the Commercial Settlement Agreement between Sarawak and Petronas be renegotiated in order to obtain more favorable terms.