Topic 2: ECONOMIC PLANS AND POLICIES INTRODUCTION

At the end of this topic, students should be able to: PART A: Understand the background of Five Years Malaysian Plan Explain the objectives of Five Years Malaysian Plan List down the Five Years Malaysian Plan PART B: Explain the background of NEP Understand the NEP objectives List down the NEP strategies to eradicate poverty List down the NEP strategies to restructure the society PART C: Explain the needs of the implementation of IMP Understand the objectives and strategies of IMP I Understand the objectives and strategies of IMP II Understand the objectives and strategies of IMPIII

1. Five Years Malaysian Plan The Malaysia Plan is a 5-year Malaysian government national development initiative. The 5-year plan is a legacy from British colonial rule in Malaya after the Second World War. 4

1. Five Years Malaysian Plan After the formation of Malaysia in 1963, the 5-year plan has been converted to the Malaysia Plan (MP) with the First Malaysia Plan which began in 1966 until 1970, The difference being that the economic plan now includes the entire nation – including Sabah and Sarawak, as opposed just Peninsular Malaysia. 5

2. Objectives of Five Year Malaysian Plan Identify needs and priorities The government can focus on economic and socio-economic issues during the period and come up with strategies to eradicate them. ii. Update current economy The government will propose development and budget allocation for Malaysia depending on the economic situation.  

2. Objectives of Five Year Malaysian Plan III. Coordinate the development programs The government has development proposal and budget allocation for every period of the plan. For example, midterm review prepared for every Malaysia Plan.     IV. Monitor development programs Each 5-year spending plans are recorded neatly which allows the government to exercise control over financial prudence.

3. Five-year Malaysia Plans so far Increasing economic development to increase per capita income and living standards. More focus is directed towards those low-income earners living in rural areas with such projects as building and improving basic facilities and diversifying agricultural production. First Malaya Plan: 1956 – 1960

Malaysian Plan Second Malaya Plan: 1961 – 1965 First Malaysia Plan: 1966 – 1970 Second Malaysia Plan: 1971 – 1975 Third Malaysia Plan: 1976 – 1980 Fourth Malaysia Plan: 1981 – 1986

Malaysian Plan Fifth Malaysia Plan: 1986 – 1990 Sixth Malaysia Plan: 1991 – 1995 Seventh Malaysia Plan: 1996 – 2000 Eighth Malaysia Plan: 2001 – 2005 Ninth Malaysia Plan: 2006 – 2010 Tenth Malaysian Plan: 2011-2015 Eleventh Malaysia Plan: 2016 – 2010 6

Eleventh Malaysian Plan: 2016-2020 The Eleventh Malaysia Plan sets another historical milestone as our nation embarks on an important mission towards a progressive and high-income nation, as envisioned in Vision 2020. The focus is now on the increase in income and wellbeing of the society. The targeted per capita income would be US$15,000. 7

Eleventh Malaysian Plan: 2016-2020

Why we need Malaysian plan? Economic growth Self-reliance Removal of unemployment Reduction of income inequalities Elimination of poverty Modernization of the economy

4. Background of the New Economy Policy (1970-1990) Racial riot on May 13, 1969, was mainly due to the economic imbalances, especially racial imbalances.• For example: poverty 49% of households, unequal distribution of wealth, in terms of: Race Rural/urban Agriculture / mining.

5. NEP objective The objective: National Unity The NEP underscored the importance of achieving socio-economic goals along side pursuing economic growth objective as a way of creating harmony and unity in a nation with many ethnic and religious groups. It is a 20-year plan from 1971 until 1990. (from 2nd to 5th Malaysian Plan) Approaches used were: Growth with equity Active government participation in the economy 5

Peninsular Malaysia: Percentage of poor household by race,1970. Race % of household in poverty Malay 64.8 Chinese 26.0 Indian 39.2 Others 44.8 Rural 58.6 Urban 24.6 Sumber: Chamhuri Siwar, Surtahman Kastin Hasan (1988)

The Strategies of NEP 1. Eradicating poverty for all Malaysians, irrespective of race. 2. Restructuring Malaysian society to correct economic imbalance, to reduce and eventually eliminate the identification of race with economic function

6. The sub-strategies to eradicate poverty: Poor rural household were absorbed into the modern sector through non-agricultural development Increase farmers’ productivity through development of new land, provision of irrigation facilities and replanting rubber with higher yielding varieties. Provide basic services such as healthcare, education, housing and water and electricity supply.

7. The sub-strategies to restructure the society Raise the people’s ownership in the private sectors Build a business society among bumiputeras. Develop areas that have remained backward. Enhance education opportunities within and outside the country.

The Industrial Master Plan (IMP) IMP include: IMP I (1986-1995) IMP II (1996-2005) IMP III (2006-2020)

8. The needs of the implementation of Industrial Master Plan Increase national income The first benefit to the country’s industrial sector is to increase the national income. Various types of industrial goods available locally will enable the country to export local products abroad.   ii Open job opportunities The industry also provides jobs for people. With the many manufacturing plants, the employment opportunities for the people of Malaysia are increasing. iii. Stimulating the national agricultural sector The industrial sector will stimulate the agriculture sectors. The agriculture sector will be developed with the use of modern machinery and high quality seeds.

8. The needs of the implementation of Industrial Master Plan iv. Enhancing national image Development of the industrial sector will also enable our country to be considered as a developed country. v. Increase government revenue The industrial sector will also increase the government revenue through a variety of tax collection.

9. Objectives of IMP I (1986-1995) To enhance the economic development and rapid growth through manufacturing sector. To meet the objective of New Economy Policy (NEP), To encourage the use of country natural resources by optimal and efficient through manufacturing activity and To provide the development base as local technology

The strategies are: Diversifying exports and promote import replacement sector. Encouraging research and development by publics and private party. Promoting heavy industry to become an industrial development mover. Promoting the growth of small enterprises.

10. Objectives of IMP II (1996-2005) To boost technology in increase productivity, To promote manufacturing sector with high technology, To focus at industrial development that would enhance and expand industrial network base upon action network comprehensive and integrated and lastly To use approach based upon cluster also gave development to other sector.

11. Objectives of IMP III (2006-2020) The IMP III is a 15-year blueprint for industrial development in Malaysia riding on the theme: “Malaysia-Towards Global Competitiveness”. It is expected to drive industrialization to a higher level of global competitiveness, towards attaining developed nation status under Vision 2020.

11. Objectives of IMP III The objective of the IMP III is to achieve global competitiveness through innovation and transformation of the manufacturing and services sectors. Contribute to other development thrust of the Ninth Malaysia Plan (9th MP), 2005-2010.