The ETP has placed Malaysia on a solid economic foundation of sustainable growth, higher incomes and a lower fiscal deficit.
With one unprecedented event after another, 2014 will go down in Malaysian history as one of the toughest years that the nation has had to face.
Airline tragedies, the worst flooding in decades, widespread water rationing and a dengue outbreak of epidemic proportions marred many months of last year. On top of that, the price of crude oil tumbled from US$100 to under US$60 per barrel, severely hitting the nation’s economic bottomline.
These were some of the immense challenges faced by the Malaysian government as it sought to keep the nation going. Fortunately, the reforms that it had undertaken in the last five years helped it to face these tough times with agility.
The government’s initiatives to strengthen the economy and improve the quality of life of Malaysians began more than five years ago with the creation of the Performance Management and Deliver Unit (PEMANDU). This organisation tasked with leading wide-ranging governmental reforms undertook its mandate through two programmes: the Economic Transformation Programme (ETP) and Government Transformation Programme (GTP).
There is no doubt these programmes had helped counter the volatility faced by the nation in 2014.
The ETP, for instance, has placed Malaysia on a solid economic foundation of sustainable growth, higher incomes and a lower fiscal deficit. With the measures formulated under the ETP, Malaysia achieved a Gross Domestic Product (GDP) growth of 6% in 2014, surpassing the World Bank estimate of 5.7%.
Ensuring sustainability in the long term
The recently-launched ETP Annual Report for 2014 stated that the government’s commitment towards sound fiscal changes had helped the country meet the needs of the current climate while ensuring sustainability in the long term.It said some of the significant changes include shifting to a managed float for the retail prices of RON95 petrol and diesel, the implementation of GST in April 2015, and keeping the nation’s fiscal deficit in close check.
It said some of the significant changes include shifting to a managed float for the retail prices of RON95 petrol and diesel, the implementation of GST in April 2015, and keeping the nation’s fiscal deficit in close check.
It also said the progressive elimination of subsidies for fuel (petrol, gas and diesel), electricity, cooking oil and sugar as well as efforts to increase revenue through more stringent tax collection has helped reduce the fiscal deficit to 3.5% in 2014 from 6.7% in 2009.
To benefit the people and improve the quality of life, the ETP took a multipronged approach to raise incomes. This included creating high-value jobs, introducing minimum wage, and raising the retirement age to allow employees to earn higher incomes and remain employed for a longer period.
Progress was also made in increasing the number of women in the workforce, with a target of having women comprise 55% of employees by 2020 from the present 53.4%.
With 2020 approaching along with its target of making Malaysia a high-income nation, PEMANDU will continue to oversee the ETP to ensure the nation meets its goals. The key goals are: maintaining a stable GDP growth of between 4% and 6% per annum, and creating more high-paying jobs among the 3.3 million new jobs by 2020.
To do this, the government will continue to encourage private investments to outpace public investments, with the aim of making the private sector the main driver of the economy.
It also remains committed to reducing the fiscal deficit, having been steadfast in the last four years in meeting its targets. The fiscal deficit has been successfully reduced from 6.7% in 2009 to 3.5% in 2014, with the goal of reaching a balanced budget by 2020.
To achieve this, the ETP will focus on improving tax collection to raise government revenue to ensure its continued ability to spend on the right areas to improve infrastructure and create a better quality of life for all.
To reform the economy, the ETP is focused on reducing the country’s dependence on oil and gas revenue which currently contributes 16.7 % to the GDP. It aims to do this by developing all the top 12 sectors of the economy to spread the growth evenly.
Another key measure is to create a robust capital market. In 2014, over RM22 billion was raised through IPOs as well as secondary offerings.
Private consumption on uptrend
Private consumption, which will continue to be an important driver of the economy, was on the uptrend in 2014 and accounted for about 65 % of the GDP.
The positive and encouraging results of the National Transformation Programme have not gone unnoticed. Both the Harvard and Princeton Universities have written case studies on the NTP’s successes.
In 2014, PEMANDU was named one of the leading Government Innovation Teams in the world by NESTA, UK and Bloomberg Philanthropies.