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 Monday, April 03, 2006

Malaysia: Pro-MALAY Policies to Continue in USD $54 Billion 5-Year Development Plan (2006-2010)

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The Malaysian government on Friday laid out a 200 billion-ringgit ($54 billion) five-year development plan (9th Malaysia Plan -2006-2010) aimed at making Malaysia a developed nation by 2020. It aims for an average annual growth of 6.5 percent in the 2011-2020 period.

But its path to become a developed nation in 15 years is being challenged by the rise of China and India.

The 559-page report of the Ninth Malaysia Plan says:

"Malaysia is now an open trading economy participating in an extremely competitive and fast-moving global marketplace.

The opening up of China and India has changed the economic landscape dramatically for developed and developing countries alike."
The government's five-year plan began life in the aftermath of the 1969 racial clashes between the politically dominant-but-poorer ethnic Malays and the minority, though economically powerful, Chinese.

But its continued emphasis on maintaining its pro-Malay policy will NOT go down well with minority groups and investors.

The report says:
"Privatization will continue to be used as a vehicle to meet the objective of increasing bumiputera equity ownership in the corporate sector. The focus of distribution programs will be expanded beyond mere equity ownership of share capital to include other aspects of wealth owners. "

(Note: Bumiputera or "sons of soil" refers to the country's Malays.)

The government maintains the requirement:

  • for companies that bids for government tenders to have 30 percent Malay interest
  • at least 60 percent of contract works will go to the Malays.

  • to raise bumiputera asset ownership in residential and commercial property and in intellectual property and commercial enterprises.

  • continue with its policy of mandating non-Malay and foreign-controlled companies to seek Malay partners and employ Malay executives.
  • Former Deputy Prime Minister Anwar Ibrahim, who was sacked in 1998 after a fallout with then Prime Minister Mahathir Mohamad, has condemned the policy as obsolete and corrupt, saying well-connected Malays benefit from it at the expense of other Malays, Chinese and Indians.

    Anwar said recently:
    "It breeds mediocrity.

    It will weaken the economic base of our fabric."
    But to do away with the policy would be politically suicidal for Abdullah as the Malays form the bedrock of support for the ruling party, the United Malays National Organization (UMNO).

    Of the country's population of 26 million:

  • Malays constitute 65 percent

  • Chinese make up 25 percent,

  • Indians 7.5 percent,

  • and the rest are indigenous groups.

    The affirmative action policy that was launched in 1971 envisaged a 30 percent Malay share of the economy in 20 years.

    But 35 years on, Malay equity ownership in the corporate sector is still lagging behind.

    According to the report, as in 2004, the ethnic Chinese held a 39 percent stake in the corporate sector, the Malays 18.9 percent and the Indians 1.2 percent.

    The government wants to raise the Malay share of corporate equity to between 20 and 25 percent by 2010 and 30 percent by 2020, and the Indian share to 3 percent, while narrowing the income gap so that by 2010, the average Chinese earns only 50 sens more for every ringgit the Malay earns by 2010 and just 35 sens by 2020.

    The poverty rate among Malays still ranks the highest at 8.3 percent in 2004, followed by the Indians at 2.9 percent and the Chinese at 0.6 percent

    For every ringgit that the average Malay earns, the average Chinese gets 64 sens more and the Indian 27 sens more, the report says. One hundred sens equal 1 ringgit.

    The 9th Malaysia Plan

  • The government hopes to achieve average annual growth of 6.0 percent from 2006 to 2010. The economy grew at an average rate of 4.5 percent in the last five years.

  • It also seeks to halve the overall poverty rate to 2.8 percent by 2010.

  • The plan identifies niche areas such as biotechnology and calls for promotion of value-added and technology-driven manufacturing and agriculture industries.

  • Focus is also given to the tourism industry that generated about 31 billion ringgit in revenue last year and is expected to grow at an average annual rate of 13.9 percent to 59.4 billion ringgit in 2010.

  • The manufacturing sector is targeted to expand at a rate of 6.7 percent a year led by the electrical and electronics sector.

  • The target for services sector is set at 6.5 percent per annum.

  • The 3.4 percent targeted growth at the mining sector will come mainly from the oil and gas sector.

  • The construction sector, which has slumped since Abdullah came to power in October 2003 and deferred some mega projects to cut spending, is set to grow at 3.5 percent per annum in the next five years. The sector has expanded at an average rate of only 0.5 percent in the last five years.

  • Delayed projects to be relaunched over the next five years, such as the 14.5 billion ringgit double-tracking railway project and the 1.02 billion ringgit road system in northern Penang state.

  • The government is also initiating 20 billion ringgit worth of privatization projects.

  • Agriculture will expand by 5.0 percent a year as the government wants to promote large-scale commercial farming and to make Malaysia as a regional hub for halal food.

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