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DEVELOPMENT PLANNING IN MALAYSIA

OVERVIEW OF MALAYSIA’S HISTORY, POLITICS, ECONOMY AND INNOVATION

3.4 DEVELOPMENT PLANNING IN MALAYSIA

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private universities.

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Table 3.4

An Overview on Malaysian Development Planning Documents

PLAN TITLE DURATION

Draft Development Plan of Malaya 1950-1955

Progress Report on Development Plan 1950-1952

General Plan of development (First Malaya Plan) 1956-1960

Second Five Year Plan 1961-1965

Interim Review of Second Five Year Plan 1961-1965

First Malaysia Plan 1966-1970

Mid Term Review of First Malaysia Plan 1966-1970

Second Malaysia Plan 1971-1975

Mid Term Review of Second Malaysia Plan 1971-1975

Third Malaysia Plan 1976-1980

Mid Term Review of Third Malaysia Plan 1976-1980

Fourth Malaysia Plan 1981-1985

Mid Term Review of Fourth Malaysia Plan 1981-1985

Fifth Malaysia Plan 1986-1990

Mid Term Review of Fifth Malaysia Plan 1986-1990

Outline Perspective Plan 2 1991-2000

Sixth Malaysia Plan 1991-1995

Mid Term Review of Sixth Malaysia Plan 1991-1995

Seventh Malaysia Plan 1996-2000

Mid Term Review of Seventh Malaysia Plan 1996-2000

Outline Perspective Plan 3 2001-2010

Eight Malaysia Plan 2001-2005

Mid Term Review of Eight Malaysia Plan 2001-2005

Ninth Malaysia Plan 2006-2010

Mid Term Review of Ninth Malaysia Plan 2006-2010

Tenth Malaysia Plan 2011-2015

Source: Economic Planning Unit (2011)

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The medium term plan, on the other hand, was designed to facilitate the development and also to strengthen the economy over a five year period. The five year plan period which is formulated within the long term plan framework, is the key working document for the implementation of the government’s development program. It comprises the strategies and programs that are needed in order to achieve the objectives of the long term plan. The plan started in 1966 with the First Malaysia Plan and until today nine plans have been implemented and currently the Tenth Malaysia Plan is still in progress (as in the year of 2011) (Economic Planning Unit, 2011).

The strategy of this five year plan is to focus on the economic investment in several selective sectors and during the plan period, all infrastructure development is directed towards the sectors chosen. These policies have had a significant impact on the country’s development. For instance, during the Eight Malaysia Plan (2001-2005) period, the number of students that enrolled for tertiary education in the year 2000 increased from 130,161 to 252,730 in 2005. This was the result from the decision to establish several new public universities in Malaysia and also to disburse a total of RM7.9 billion to students by the National Higher Education Fund (NHEF) during the plan.

In Malaysia, development planning not only covers the economic sectors but every aspect of development, including education, services, agriculture, science and technology and environment. The policies formulated are very much responsible for shaping and giving direction to the development of the country. One example is the government’s policy on foreign direct investment (FDI). The policy outlined under FDI

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had successfully brought many foreign investors to invest in Malaysia. Through FDI, MNCs in Malaysia grew and increased the volume of production which helped in the process of industrialization in Malaysia.

The introduction of Multimedia Super Corridor (MSC) is another example. As the world’s economy is shifting towards being information based, the establishment of MSC in 1996 provided the foundation of Malaysian investment into Information, Communication and Technology (ICT) development.26 The MSC encourages the development of new employment opportunities and also contributes to the development of technology. After almost ten years of its establishment; the project has created approximately 27,000 jobs and has granted about 1,421 firms with MSC status27

26 “The MSC is a 50 x 50 km2 zone, stretching from the Petronas Twin Tower (world’s tallest towers) in the centre of Kuala Lumpur to the newly built Kuala Lumpur International Airport (KLIA). It comprises several administrative, industrial and technological development clusters. Among the clusters are: (1) Putrajaya – the newly built seat of the federal government, (2) Cyberjaya – an intelligent city which will house multimedia industries as well as research centres and the Multimedia University (MMU), (3) Technology Park Malaysia - a park located in the centre of the MSC providing engineering and IT facilities to entrepreneurs, investors and industries. Previous industrial development project such as the free trade zone in Petaling Jaya, manufacturing hubs in the outskirts of Kuala Lumpur and the city’s financial centres also fall within the MSC. The MSC is a project spanning over 20 years, which envisions Malaysia achieving leadership in the Information Age. The project comprises three phases. Phase I includes attracting world-class companies to set up their operation in the MSC, the launching of seven flagship applications including electronic government and telemedicine, as well as the establishment of the two intelligent cities, Putrajaya and Cyberjaya. Phase II concentrate on creating networks between MSC and other clusters in the country, attracting more companies and implementation of further flagship operations. Phase III will see the culmination of Malaysia as a knowledge society, a home for a large number of multimedia companies, with a host of cities linked to the global information super highway”

(Ramasamy, Chakrabarty & Cheah, 2004, p872).

(Zainal

& Bhattasali, 2008).

27 MSC status companies according to Zainal and Bhattasali (2008), “MSC-status companies are granted a 5-year Tax Allowance (ITA) on new investments made in MSC cybercities. Imports of multimedia equipment are duty free. R&D grants are granted to local small and medium-size enterprises (SMEs).

MSC-status companies exporting multimedia product manufactured in Malaysia using dutiable components are eligible for a refund on the duty paid on the re-exported components…..In return, to enjoy MSC status, companies have to meet criteria: they must be providers or heavy users of multimedia products and services, employ a substantial number of knowledge workers, and they have to specify how they will transfer technology and/or knowledge to Malaysia, or otherwise contribute to the development of the MSC and the Malaysian economy” (p21-22).

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Sources of Policy Initiatives

Who initiated Malaysia’s economic policies? To pinpoint the sources of policies, and of changes to policies, it is necessary to look at the institutional machinery. At the start, it is useful to make a distinction between the federal government, state government, the nonfinancial public enterprises, the government-linked company (GLCs), and the private sector. There are the main sources of policy origination. The federal government has the authority and is, therefore, the source of macroeconomic policies. The three centres for macroeconomic policy initiatives are the Economic Policy Unit (EPU) in the Prime Minister’s Department, the Ministry of Finance (MOF) or the Treasury, and Bank Negara Malaysia, the central bank. EPU is responsible for the formulation of the five-year development plans and the mid-term reviews of the five-year plans. It is also tasked with preparing the long-term development plans, that is, the outline perspective plans that cover a period of 15 to 20 years.

EPU also initiatives specific studies or master plans - the Privatization Master Plan, for example-and it has also just completed a master plan for human resources development.

Monetary policy and exchange rate policy comes under the purview of the Bank Negara Malaysia (BNM). BNM has overall responsibility for the development of commercial banking and the insurance industry in Malaysia. It formulates and monitors the long-term Financial Sector Master Plan. Fiscal policy is under purview of the MOF, and this covers the areas of taxation, operating and development expenditures, and the preparation of the annual budget.

BNM comes under the supervision of MOF. Macroeconomic policy initiatives are usually coordinated by the EPU, BNM, and MOF. The agencies responsible for the development of the various sectors are also involved, but the lead taken by the three key central agencies.

There is an Inter-Agency Planning Group (IAPG) with the three central agencies as members, supplemented by a selected number of ministries and departments. The IAPG is usually activated for the preparation of the five-year plans, and when there are matters that involve policy making in between planning cycles. The EPU serves as the Secretariat to the IAPG.

Technical Working Groups (TWGs) for the five-year plans provide the technical support.

There are other sources of policy initiatives within the federal government. A National Development Planning Committee (NDPC), with the EPU as Secretariat, is responsible for considering the five-year development plans up to the level of senior officials and technocrats.

Papers that seek policy decisions from the NDPC are prepared by the EPU. The NDPC also considers policy matters policy matters or issues that are submitted for its considerations through the EPU. The central agencies of the federal government are members. The Chief Secretary to the Government is the Chairman of the NDPC. The MOF and the BNM have their own committee that consider policy matters under their purview, and they take the lead as Chairman and Secretariat to their respective Committees. The BNM usually submits policy and other matters for discussion to the Minister of Finance. Regular briefings given to the Minister and other senior officials of the MOF provide opportunities for discussing policy matters and developments in the financial sector. The Cabinet is the final arbiter on policy matters. Various ministries and government departments submit policy papers for the consideration of the Cabinet, and these presented by the respective ministers. The Cabinet papers are prepared with the prior consultation of the relevant ministries and departments, and their views are incorporated in the Cabinet papers. Where there are dissenting views on policies that cannot be resolved at the level of the officials, these policy matters it can instruct and direct the relevant minister and the initiating agency to reconsider the matter and resubmit it to the Cabinet when it has completed its task.

Source: Zainal Aznam Yusof & Bhattasali, D 2008, ‘Economic Growth and Development in Malaysia:

Policy Making and Leadership’, Working Paper No.27,Commision of Growth and Development, Washington, pp31-32

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The policy has also been supportive in bringing a more innovative culture into Malaysia.

For example under the five year plan period several science and technology related incentives were introduced including the Intensification of Research in Priority Areas (IRPA)28 program, Industrial Technical Assistance Fund (ITAF), Malaysian Technology Development Corporation (MTDC) and several research support institutions namely Standards and Industrial Research Institute of Malaysia (SIRIM), National Productivity Corporation (NPC) and technology parks.

Whilst generally seen as a success Malaysia’s development plans have not been without their critics. Based on research done by Lim (1983), on Malaysian development plans over the period of 1950 to 1980, it was found that although development planning in Malaysia has largely achieved its targets there were still some weaknesses with processes of implementation, particularly slowness in achieving desired results. These included insufficient planning skills, delay in scheduling programs and too much bureaucratic intervention. During the implementation of the First Malaysia Plan (1956-1960), for instance, there were two objectives, i.e. rehabilitation of the rubber industry and providing better facilities for rural areas. Whilst both objectives were ultimately successfully achieved results took longer than the five year time frame allocated for the program which had a negative effect on national gross domestic product (GDP) (Lim, 1983).

28 The Intensification of Research in Priority Areas (IRPA) program was established in 1988 as an effort of the government in supporting R&D activities in strategic areas. This fund is open to public research institutions and local universities.

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