Traditionally commodities-dominated and Government-driven, Malaysia’s economy is now in transition. Confronted by the pressures of a contracting global economy and the threat of being caught in the middle-income trap, in 2010 the Malaysian Government unveiled the New Economic Model (NEM) that was needed to transform Malaysia into a high-income nation by 2020.
The search for a new economic model was also in response to the sluggish growth Malaysia had been experiencing since the 1997/98 Asian financial crisis. This was further compounded by growing competition for exports and foreign investment from neighbouring countries.
It was envisaged that the high-income status would be best achieved through a private sector-led growth model, with the Government facilitating an environment that is conducive for stronger socio-economic growth.
As a result in 2010, the National Transformation Programme (NTP) was unveiled to implement the NEM. The NTP comprises two components: the Economic Transformation Programme (ETP) and the Government Transformation Programme (GTP). While distinct, the two programmes work in tandem towards reaching the country’s aspirations for 2020. The implementation and monitoring of the ETP and GTP are overseen by the Performance Management and Delivery Unit (PEMANDU)
, which was established in September 2009 as a unit within the Prime Minister’s Department.
Collectively, initiatives under the ETP are projected to drive the country towards high-income status by 2020, propelling its GNI per capita to US$15,000. This will be achieved by attracting US$444 billion in investments, which will create 3.3 million jobs, many of which are high-income jobs. The ETP’s key thrust, therefore, is to return the private sector to its rightful role as a major engine of economic growth.
The GTP meanwhile, focuses on transforming the Government to improve its delivery system and put the public’s needs first. This will be achieved through the implementation of National Key Result Areas (NKRAs) and Ministerial Key Result Areas (MKRAs). The NKRAs represent areas of national interest which require the most attention, while the MKRAs address developmental goals not covered by the NKRAs. Read more about the GTP here
Malaysia’s transformation agenda is built on a platform of sustainability and inclusiveness. This ensures that all Malaysians benefit from the country’s development and that economic growth is sustained over the long-term. The implementation of the plan and its allocation of resources also take into account social needs, such as quality of life, cost of living, safety and security of the country’s citizens and environmental sustainability.
Although the NTP is just over three years in the making, the country’s transformation has already delivered rapid results that enhanced the lives of Malaysians and instituted important reforms which benefit businesses and the investment community.
These reforms include efforts to eradicate corruption under the GTP’s Anti-Corruption NKRA, which saw Malaysia’s ranking on Transparency International’s annual Corruption Perceptions Index survey rise six spots to 54 in 2012. In 2013, Malaysia moved to the 53rd spot on the index.
In the meantime, the ETP has helped revitalise the Malaysian economy, boosting its productivity and global competitiveness. This has allowed the country to maintain consistent GDP growth upwards of 5% from 2010-2012, despite continued lethargy in the global economy. In 2013, Malaysia’s economy recorded GDP growth of 4.7%.
The ETP’s focus on private sector-led growth has also fuelled private investment in the country, which has more-than-tripled since the start of the programme. This growth trajectory has placed Malaysia firmly on track to achieve its GNI target for 2020. As at the end of 2013, the country’s GNI has already risen 42.5% to US$10,060 from US$7,059 in 2009. Projections also indicate that the country could reach its high-income target of US$15,000 in GNI per capita earlier than 2020.
Source: World Bank Atlas Method
Source: Bank Negara Malaysia
Source: Department of Statistics, Private Investment in Constant 2005 Prices in RM
Malaysia’s transformation has also received international endorsement, reflected in the country’s improvement in key global rankings. These include the World Bank’s Doing Business Report 2014, which raised Malaysia’s global ease of doing business ranking to 6th in 2014 from 8th in 2013 .
The country was also ranked 45th out of 132 countries on Deloitte’s Social Progress Index (SPI) 2014, scoring 70 on the index ahead of emerging economic powers such as Brazil, Russia, India, China and Turkey . The index measures factors such as basic human needs and foundation of well-being to complement traditional economic indicators for a more holistic understanding of the overall performance of countries. Malaysia led its ASEAN peers such as the Philippines, Thailand, Indonesia, Cambodia and Laos.
These global rankings serve as testimony to Malaysia’s continued strides toward achieving a high-income economy. To read more third-party testimonials on the ETP and investing in Malaysia, please read our Global Recognition