DEVELOPMENT PLANNING

IN MALAYSIA

N
o country today allows for complete free rein of the
market. The extent of government intervention,
however, varies from country to country with
greater intervention in developing countries than developed
countries. This is not surprising as developing countries lack
the institutional mechanisms and a mature private sector
necessary for the smooth running of a market economy. And
more importantly, they have a greater task and moral
obligation to address socio-economic issues, including poverty
eradication and equitable income distribution, which would
not be tackled if left completely to the market.

The Malaysian government believes that economic growth is

not an end in itself but a means to bring prosperity and better
quality of life to all segments of society. In this respect, the
2 Development Planning in Malaysia

principle of “growth with equity” has underlined all our

development efforts since the 1970s, which had contributed to
a significant reduction in the incidence of poverty and a more
equitable distribution of income.

PUBLIC-PRIVATE SECTOR PARTNERSHIP

IN DEVELOPMENT

Malaysia’s development efforts are premised on a pro-

business growth strategy. The private sector is the engine of
growth, while the public sector facilitates development and
ensures the achievement of the socio-economic objectives of
the nation. The Government undertakes indicative economic
planning in its various development plans. At the same time,
it adopts market-oriented policies to encourage private sector
investment and activities, both domestic and foreign. The
collaboration of the Government and the private sector is
crucial for the achievement of development goals.

The Malaysia Incorporated concept, introduced in 1983,

provides the framework for closer cooperation between the
public and private sectors. It perceives the nation as a
corporate entity that is jointly owned by the public and private
sectors, where both are partners in development. Accordingly,
the Government machinery is re-oriented to support
businesses. Government officials are required to be more
 Development Planning in Malaysia 3

service-oriented and each organization is required to have a

Clients’ Charter, which publicly sets out the commitment of
the organization to the public, thus increasing accountability.
Unnecessary red tape as well as administrative and regulatory
procedures are removed to increase efficiency.

DEVELOPMENT PLANNING PROCESS

Development planning was accepted as a function of the

Government since the 1950s with preparation of the first five-
year development plan of the nation, the First Malaya Plan,
1956-1960. The formation of the Economic Planning Unit
(EPU) in the Prime Minister's Department in 1961 enabled
development planning to be carried out with authority and
ensured the use of the inter-agency planning and monitoring
mechanisms.

Planning Horizon

Development planning in Malaysia has a three-tiered

cascading planning horizon, covering the long-, medium- and
short-term planning horizons, as shown below. Vision 2020
was launched in 1991 to cover a 30-year period. It spells out
the national development aspirations over the long term and
provides focus for the national development effort.
4 Development Planning in Malaysia

The outline perspective plans (OPPs) was prepared to set the

broad thrusts and strategies in the national development
agenda over a long term. The First Outline Perspective Plan
(OPP1) was a 20-year plan covering the period 1971-1990. The
formulation of development programmes for a 20-year period
with reasonable specificity is fraught with uncertainties,
particularly with the rapidly changing global environment.
Accordingly, the next two OPPs were prepared for a 10 year
time frame. The Second Outline Perspective Plan (OPP2) was
prepared for the period 1991-2000 and the Third Outline
Perspective Plan (OPP3) for 2001-2010.

PLANNING HORIZON

O LONG TERM PLANNING

– Vision 2020, 1991-2020
– First Outline Perspective Plan (OPP1), 1971-1990
– Second Outline Perspective Plan (OPP2), 1991-2000
– Third Outline Perspective Plan (OPP3), 2001-2010
O MEDIUM TERM PLANNING
– Five-year development plans, such as the Eighth
Malaysia Plan (2001-2005)
– Mid-term review (MTR) of the five-year Plans
O SHORT TERM PLANNING
– Annual Budget

The next tier is medium-term planning, where 5-year

development plans are formulated to operationalize the OPPs.
 Development Planning in Malaysia 5

They set out the macroeconomic growth targets as well as the

size and allocation of the public sector development
programme. In addition, they provide the direction with
respect to promoted sectors, thereby giving guidance to the
private sector in determining their own investment policies.
Currently, the Eighth Malaysia Plan, covering the period 2001-
2005, is in operation.

In the middle of the 5-year planning cycles, a mid-term review

(MTR) of the five-year plan is carried out. The MTR is not only
a stocktaking exercise to determine whether the plan is
implemented in accordance with the stated targets and
development schedule, it also reviews macroeconomic and
sectoral policies and strategies and makes adjustments, if
needed.

The final tier is short-term planning through the annual budget.

It is undertaken by the Ministry of Finance in conjunction with
the preparation of the annual budget. The EPU is also
involved in determining the details of the annual development
budget. This arrangement has been particularly useful in
ensuring the effectiveness of the medium- and long-term
plans. In addition, the Central Bank monitors short-term
development, focusing on the monetary and financial side.
6 Development Planning in Malaysia

Planning Mechanism

In Malaysia, the highest level of decision-making in the

economic and socio-economic matters is the National Planning
Council (NPC), which is the economic arm of the Cabinet, as
shown below.

PLANNING, COORDINATION AND EVALUATION MACHINERY

PARLIAMENT

CABINET

National Planning National Development National Security

Council Council Council

National Development National Development

Planning Committee Committee

Economic Planning Implementation and

Unit Coordination Unit

Planning Implementation

Members of the NPC comprise the ministers of key economic

ministries, such as finance, international trade and industry,
domestic trade, entrepreneur development, commodities and
agriculture. Aside from the NPC, there are two other
ministerial councils, namely, the National Action Council,
which considers matters on the implementation of
development programmes and projects, and the National
 Development Planning in Malaysia 7

Security Council, which deals with security aspects. The Prime

Minister chairs all the three Councils.

At the officials level, detailed deliberations take place in the

National Development Planning Committee (NDPC), which is
the highest policy-making forum for development planning.
The NDPC is a committee of senior government officials,
chaired by the Chief Secretary to the Government. Heads of all
economic development ministries, including the Governor of
the Central Bank, are members of this committee. The NDPC
is responsible for formulating and reviewing all plans for
national development and making recommendations on the
allocation of resources. It also oversees the implementation of
the national development plans.

Development planning at the Federal level is undertaken by

EPU, Ministry of Finance and the Central Bank as well as the
planning cells of the various ministries and agencies. The
functions of EPU are supported by two other central agencies
under the Prime Minister’s Department, namely, the
Implementation and Coordination Unit (ICU) and the
Malaysian Administrative and Modernization Planning Unit
(MAMPU). The placement of the three agencies under the
Prime Minister augments the credibility and authority
available to these institutions to get the job done effectively.
8 Development Planning in Malaysia

The planning process also involves regular and on-going

consultations with both the private sector and civil society.
The institutionalised consultations provide an effective
platform for communication with the Government. Such
consultations, which are frequently held, have not only
resolved problems and bottlenecks but also served to provide
feedbacks on a wide range of issues. They include government
policies, global markets, the health of the domestic economy
and the impact of policies and programmes on the various
segments of society.

In formulating the Outline Perspective Plan, the National

Economic Consultative Council was set up to give policy
inputs. This council drew its members from all sections of
society – government, industrial associations and
representatives, academicians, trade unions, political parties,
religious organizations, youth organizations, professional
bodies, non-governmental organizations as well as other
interest groups and individuals.

A similar planning set-up exists at the state and district levels,

as shown below. At the state level, the State Economic
Planning Units and the State Development Offices are
responsible for formulating state development strategies and
coordinating the preparation of state development
programmes and projects.
 Development Planning in Malaysia 9

STATE GOVERNMENT PLANNING, IMPLEMENTATION AND

SECURITY MACHINERY

Sultan / Raja / Governor

Executive Committee

State Action State Planning State Security

Committee Committee Committee

State Development
Committee
District Planning
Committee
District Action
Committee
District Security
District Development Committee
Committee

Mukim (division) Development and Security Committee

Kampong (village) Development and Security Committee

Planning Process

Planning in Malaysia is a two-way interactive process between

the EPU, on the one hand, and the line ministries and
agencies, on the other, as shown below. This top-down and
bottom-up processes ensure that national policies and
strategies are realized and development concerns at sub-
regional level are fully integrated into the overall national
development thrusts.
10 Development Planning in Malaysia

DEVELOPMENT PLANNING MACHINERY

PARLIAMENT

Cabinet Ministers

National Planning Council National

National Economic Draft Policy Action
Action Council, Council
National Economic National Development
Consultative Council Planning Committee
Draft
Secretariat Implementation &
Economic Planning Unit Coordination Unit
Proposal General framework
Proposal
Inter-Agency Planning Group (IAPG)
Proposal Consultations
Circulars Circulars
Federal Ministries & Agencies State Governments Private Sector

At the Federal level, the EPU in consultation with other central

agencies, such as the Treasury and the Central Bank, reviews
the past performance of the economy and assesses the
country’s prospects and potential. It also evaluates existing
constraints and bottlenecks. The EPU then prepares the
macroeconomic framework and assesses the implications of
the growth targets on public sector development expenditure.
The final macro planning parameters are determined through
discussions among the inter-agency planning groups (IAPGs)
and their technical working groups.

In preparation of the Eighth Malaysia Plan, 2001-2005, a total

of 25 IAPGs was set up according to topical issues, including
 Development Planning in Malaysia 11

macroeconomics, human resource, poverty eradication,

industrial development, science and technology,
transportation, utilities and social development. The EPU is
secretariat for each of these IAPGs and members are not only
drawn from the relevant ministries and agencies but also
include representatives from the private sector and civil
society, where necessary. During these consultations, factors
such as the international scenario, resource availability and
constraints and implementation capacity are considered.

Planning from the bottom essentially involves the line

ministries, agencies and state governments putting forward
their submissions for specific programmes and projects. The
EPU plays the key role in matching the micro-level projects
with the macro level plans for each of the sectors. In
prioritising the projects, the EPU takes into account several
factors, including consistency with the overall objectives of
national policies, urgency of the projects, financial viability
and implementation capacity.

After agreement by the IAPGs, the development thrusts,

directions and related policies for the planned period as well
as priority orderings for sectors are presented to the National
Development Planning Committee for consideration. Upon its
recommendation, the development proposals are submitted to
the National Planning Council. After which the plan is then
presented to the Cabinet before being tabled in Parliament.
12 Development Planning in Malaysia

Call Circular and Bid for Funds

At the commencement and review of every Plan, Call

Circulars go out to ministries, departments, statutory
authorities, state governments and the non-financial public
enterprises. The purpose of the call circular is basically two-
fold - to inform the government machinery of the preparation
of the five-year development plan including the future
strategic thrusts and to obtain bids for development allocation
for the next five years to implement the identified strategies.

The circular provides general guidelines on the procedures for

plan preparation, the schedule for submission, the timing and
the criteria for proposed programmes and projects. The
various ministries, agencies and state governments are then
requested to review their strategies and development thrusts,
identify programmes and projects for implementation as well
as to bid for the funds required to implement these projects,
which include both continuing and new projects, during the
plan period. Usually, a framework of 6 months is given.

Project Approval Process

Upon receipt of the submissions, the EPU assesses and

prioritizes development projects for the various five-year
development plans based on the project proposals by
ministries and agencies. It consults with the ministries,
Development Planning in Malaysia 13
14 Development Planning in Malaysia

agencies, and state governments to review past performance

and identify issues, problems, or areas of focus. As part of this
effort, the EPU evaluates targets, concepts and programmes
proposed, and determines the overall objectives, scope and
costs of each programme. For example, the scope of a new
university will depend on the size of population (targetted
age-cohort), education and training strategy, type of courses
or activities and the use of accepted standards for construction
and materials.

Prioritising Projects

The number and size of proposals always exceed available

resources. Thus, the EPU will have to match and prioritise the
requirements with respect to sound public finance practice
and development goals. The Government has to consider
other objectives including appropriate sectoral distribution as
well as state and regional distribution before recommending a
final list of programmes and projects. The development
budget (with programmes and projects) is integrated with the
policies and strategies contained in the five-year plans. The
ministries and agencies will monitor and review the
implementation of programmes and projects.

Some of the broad criteria applied when prioritising the

projects are growth promotion, project viability, social
obligation and needs, poverty eradication, and promotion of
 Development Planning in Malaysia 15

regional balance. In the case of infrastructure projects, the

development of infrastructure in Malaysia is largely guided by
master plans, which help to determine project priority. In
addition, projects in urban areas that have potential for
privatization are given less priority than the projects with little
scope for privatization. Projects in the less developed states
and regions are given more weightage than those in the more
developed states and regions. Continuation projects are given
priority over new projects.

To help determine regional priority, the projects that are

proposed by the state branches of Federal Ministries must first
be discussed with the State Economic Planning Units (SEPUs)
in order to determine the development project needs and
requirements before submission to the Federal headquarters.
All projects under the state governments or state agencies are
to be channelled to the SEPUs, which are given the task of
evaluating, examining and making recommendations with
regards to the projects. The SEPUs are required to coordinate
and consolidate all project requests by state agencies before
submitting these requests to the Economic Planning Unit.

At the Sectoral Division in the EPU, desk officers are given an

initial budget ceiling for the sectors under their charge. They
examine the projects and rank them according to priority.
These projects are then discussed at the Development Projects
Examination Committees (DPEC), which are chaired by the
16 Development Planning in Malaysia

EPU and comprise members from the ministries and agencies

submitting the projects, the Ministry of Finance, and other
relevant agencies. The DPEC goes through the project list, and
ministries and agencies concerned would have to provide
justification for each of the projects. The project list for the
sector is drawn up, based on the selected projects that fall
within the budget ceiling for that sector.

The project lists from all submissions are then consolidated

and examined at the Sectoral Division. At this stage, there
would be some reallocation of the development budget among
sectors based on the priority and the quality of submitted
projects. Although resources are allocated along sectoral lines,
the project list also provides the listing of projects based on
allocations by state. This helps in the monitoring of resource
allocation to ensure that the project selection gives due
attention to the less developed states and regions so as to meet
the objective of promoting balanced regional growth. The
consolidated project list is submitted to the Cabinet together
with the draft chapters of the Malaysia Plan for its
consideration and approval.

PROJECT IMPLEMENTATION AND MONITORING

The co-ordination of the implementation of development

plans at the inter-state and inter-departmental levels is
 Development Planning in Malaysia 17

handled by the Implementation and Coordination Unit (ICU).

The monitoring of project implementation carried out by the
ICU has been useful in providing information on the
implementation capability of the government machinery as
well as the economy’s absorptive capacity. Impact studies
help the Government to gauge the efficiency of the strategies
and programmes implemented, particularly in the effort to
address socio-economic objectives and thus allowing for the
formulation of more effective approaches in subsequent plans.
The feedback from the implementing ministries and
departments are used by EPU in the subsequent round of
planning as the basis for improving the planning approaches
and strategies.

As part of the seven flagships under the Multimedia Super

Corridor endeavour, the Electronic Government (e-
Government) project is set to improve the provision of public
services through the use of information technology. A
pioneering application under the e-Government project is the
Project Monitoring System II (PMSII), which is a state-of-the-
art system to monitor the implementation of development
projects under the five-year development plans. PMSII has on-
line links to all ministries as well as government department
and agencies, and up-to-date information on projects are
accessible to all linked to the system. PMSII was launched by
the Prime Minister in 2001 and is currently being used by
ministries and agencies.
18 Development Planning in Malaysia

ROLLING PLAN

Although the planning machinery and processes seem to

suggest rigidity in the system, in reality the actual process is
more flexible and pragmatic. This is because planning is done
at all planning horizons, namely, long, medium and short-
term, and they present opportunities for revisions and
incorporation of new information as well as to respond to new
problems and opportunities as they arise. This has enabled
development planning to respond to new challenges
expeditiously.

OPERATIONALIZATION OF THE FIVE-YEAR

DEVELOPMENT PLAN

Macro-frame and Budgetary Ceiling

Five-year Development Plan

Annual Budget
Mid-Term
Review Year 1 Year 2 Year 3 Year 4 Year 5
Rolling Plan of Projects
Bring
forward
to next
NFPEs Plan
New Projects Privatization
Re-prioritize

The EPU continuously monitors the economic situation in

collaboration with the Treasury, the Central Bank and other
 Development Planning in Malaysia 19

economic-based ministries as well as interacts with

multilateral institutions. Shortfalls between planned targets
and actual results as well as potential problems that arise from
control variables, such as the current account deficit, public
sector financial deficit or inflation, are noted by EPU.
Opportunities for policy response are taken during the yearly
budget, during the mid-term reviews or when a new plan is
being prepared, as shown below. Should the situation warrant
an immediate response, policy papers for the NDPC and/or
Cabinet are prepared for quick action.

PLANNING DURING A CRISIS

In undertaking development planning, planners need to be

pragmatic, flexible, pro-active and responsive. They must be
prepared to adjust to changing requirements and
circumstances. This can really be put to a test during an
economic crisis, such as during the 1997-1998 Asian financial
crisis.

The Asian financial crisis had wide-ranging effects on all

sectors of the society. It resulted in the loss of consumer and
investor confidence, causing a collapse in private investment
and drastic reduction in private consumption. This, in turn,
caused the gross domestic product to contract by 7.4 per cent
in 1998. The crisis had, to some extent, hampered efforts
20 Development Planning in Malaysia

directed to improving the socio-economic well-being of the

people, resulting in a slight increase in the poverty rate.

When hit by the crisis in 1997, the Government realised that it

had to respond fast to prevent the economy from slipping into
a deeper recession. The National Economic Action Council
(NEAC), chaired by the Prime Minister, was established as a
consultative body to deal with the economic crisis. Under the
NEAC, the National Economic Recovery Plan was prepared as
the blueprint for economic recovery. The Recovery Plan
contained over 580 recommendations to stabilise the currency,
restore market confidence, maintain financial market stability
as well as address medium-term issues such as improving
economic fundamentals as well as addressing the equity and
socio-economic agenda.

Some of the lessons that can be drawn from the crisis are as
follows:

• There is no standard solution to crisis management and

resolution. Each country is different in its social, economic
and financial structures and stage of development and,
thus, must adapt its policy responses based on the
specific circumstances. Crisis-hit countries which fared
well were those with public policy that were flexible and
pragmatic, adapting to the changing environment;
 Development Planning in Malaysia 21

• Correct diagnosis is critical to ensure that policy mistakes can

be avoided at all cost. The policy response to a currency
crisis impacts not only the domestic economy but can
also affect the region. Thus, the policy response need not
only be appropriate and comprehensive, but also
adopted in the correct doses that the markets could
absorb.

• Policies should aim at preserving economic strength. There is

the need to ensure that adjustment measures do not lead
to an excessive contraction of the economy. Planners do
not have to subscribe to theoretical arguments that
declines in output are the inevitable cost of much needed
structural changes. If the diagnose is correct, structural
adjustment can be achieved without severe economic
loss.

• Policy prescriptions should not be rigid but practical and

flexible, depending on the prevailing situation. While policy
objectives can remain the same, the measures to achieve
the objectives should be adjusted to best suit the
changing circumstances. In this regard, new policy
choices should not be dismissed. In Malaysia’s case, a
careful combination of macroeconomic policies and
selected exchange controls was successful in creating the
right conditions to effectively stimulate economic
recovery. However, an important consideration when
22 Development Planning in Malaysia

using the more unconventional policy approaches is to

ensure that the required initial conditions for successful
implementation are met.

• Intervention by the government is crucial. The private sector

may not have the capacity to drive such structural
changes. The government will need to provide the
leadership and funding, while the restructuring exercise
itself should be executed on market principles and at
market-based prices.

• Greater efforts at regional cooperation is important to

undertake coordinated policy measures that would
contribute to mutual benefit of countries in the region
and protect the region’s interest.

POLICY EVOLUTION

Development policies in Malaysia since independence evolved

over time to suit the requirements and circumstances of the
nation. Since achieving independence in 1957 but prior to
1970, the development policy was primarily aimed at
promoting growth with a strong emphasis on the export
market, as shown below. The focus was on laissez-faire policy
as well as economic and rural development. Although the
economy grew very rapidly during this period at an annual
average of 6.0 per cent, distributional aspects were not given
 Development Planning in Malaysia 23

emphasis, resulting in socio-economic imbalances among the

ethnic groups with negative social consequences in the form of
a racial riot in 1969.

MAJOR ECONOMIC POLICIES

National Vision Building a Resilient

Policy (NVP) and Competitive
Nation, 2001-10

Balanced
National Development
Development,
Policy (NDP)
1991-2000

Vision 2020 Total Development, 1991-2020

New Economic
Policy (NEP) Growth with Equity, 1971-90

Post- • Laissez-faire / export-oriented

independence • Economic and rural development
1957-70

The launching of the New Economic Policy (NEP) in 1971 was

the most significant policy change in the Malaysian history.
The NEP emphasized the importance of achieving socio-
economic goals alongside pursuing economic growth
objectives as a way of creating harmony and unity in a nation
with many ethnic and religious groups. The overriding goal
was national unity. To achieve this goal, two major strategies
were adopted:
24 Development Planning in Malaysia

• To reduce absolute poverty irrespective of race through

raising income levels and increasing employment
opportunities for all Malaysians; and
• To restructure society to correct economic imbalances so
as to reduce and eventually eliminate the identification of
race with economic function.

An equally critical aspect of the NEP was that it was

predicated upon a rapidly growing economy. This was
deemed necessary so as to provide increased economic
opportunities for the poor and other disadvantaged groups to
enable them to move out of poverty and to participate in the
mainstream economic activities. In addition, it ensured that
distribution did not take place from the reallocation of existing
wealth but from expanding and new sources of wealth.

In 1970, more than two thirds of corporate equity in Malaysia

was owned by foreigners, while the Bumiputeras, the
indigenous people who made up two thirds of the people,
owned slightly over 2.0 per cent as shown below. The NEP set
a restructuring target of 30 : 40 : 30, where by 1990, the
holdings of the Bumiputeras should reach 30 per cent, other
Malaysians 40 per cent and the foreigners 30 per cent, in the
context of an expanding economy. By 2002, because the total
value of corporate equity expanded by 75 times, the holdings
of all groups increased in value in absolute terms. Although
the share of foreign ownership fell to almost a third, its value
 Development Planning in Malaysia 25

increased by over 30 times compared with the position in

1970.

CONCEPT OF EQUITY RESTRUCTURING

27.2% 1.1%
6.0% 1970
2.4% RM5.2
bn Bumiputera (RM0.1 bn)

63.3% Chinese (RM1.4 bn)

Indians (RM0.06 bn)
Others* (RM0.3 bn)
TARGET : REDISTRIBUTE AN
EXPANDING ECONOMIC Foreigners (RM3.3 bn)
CAKE BY 30 : 40 : 30
RATIO
2002
18.7% Bumiputera (RM73.2 bn)
43.2%
RM391 Chinese (RM159.8 bn)
bn
Indians (RM6.0 bn)
1.5%
28.9% 10.0% Others* (RM39.2 bn)
Foreigners (RM112.7.3 bn)
* Include nominee companies

Guided by its success in implementing the New Economic

Policy and the subsequent five-year development plans,
Malaysia moved on to a new and more challenging phase in
nation building. Vision 2020, which was launched in 1991,
articulates the vision of what Malaysia should be like within
30 years. It has become the basis of planning for Malaysia’s
future since the 1990s. Vision 2020 gives an emphatic focus to
the achievement of a suitable balance among competing
concerns in development. It reaffirms our strong commitment
to human development and to raise the quality of life of the
people to the level enjoyed by the developed nations.
26 Development Planning in Malaysia

The National Development Policy (NDP), introduced in 1991,

was not only the successor to the NEP as Malaysia’s
development policy but also set the stage for the first decade
under the Vision 2020. The NDP reaffirmed the relevance of
the NEP by retaining the latter’s main elements and at the
same time, in view of the emergence of fresh challenges,
introduced several new thrusts for balanced development.

These new thrusts, together with the existing ones, served to

emphasize the growing concern of Malaysians that increasing
consideration need to given to non-materialistic matters in
national development which encompass, among others, the
strengthening of social and spiritual values as well as the
protection of the environment and ecology.

The new thrusts entailed shifting the focus of the anti-poverty

strategy towards the eradication of hardcore poverty while
reducing relative poverty; emphasizing employment creation;
the rapid development of an active Bumiputera Commercial
and Industrial Community as a more effective strategy to
increase the meaningful participation of the Bumiputeras in the
modern sectors of the economy; greater reliance on the
involvement of the private sector in the restructuring objective
by creating greater opportunities for its growth; and focussing
on human resource development as a fundamental
requirement for achieving the objectives of growth and
distribution.
 Development Planning in Malaysia 27

In 2001, the Third Outline Perspective Plan (OPP3) was

launched with its focus on building a resilient and competitive
nation and embodying the National Vision Policy (NVP).
While the NVP incorporates the key strategies of the NEP,
namely, eradicating poverty irrespective of race and
restructuring society, and the NDP’s “balanced development”,
it also introduces new policy thrusts.

These new policy thrusts entail developing Malaysia into a

knowledge-based society; generating endogenously-driven
growth through strengthening domestic investment and
developing indigenous capacity, while continuing to attract
foreign direct investment in strategic areas; increasing the
dynamism of the agriculture, manufacturing and services
sectors through greater infusion of knowledge; addressing
pockets of poverty in remote areas and among Bumiputera
minorities in Sabah and Sarawak as well as increasing the
income and quality of life of those in the lowest 30 per cent
income category; achieving more effective Bumiputera
participation in the economy; and re-orientating human
resource development to support a knowledge-based society.

CONCLUSION

Malaysia’s success in achieving high sustained growth and

rapid development can be summed up as “getting the basics
28 Development Planning in Malaysia

right”. This, among others, meant instituting sound

development policies, good economic management,
promoting private investment, developing human resource as
well as providing good physical and institutional
infrastructure. The success is not the result of any single policy
but different policies applied at different times. The
government distinctly played the leading role in structural
adjustment, particularly in influencing savings, investment
and financial policies. The effective role of development
planners was key to Malaysia’s success. The consultative
nature of Malaysia’s development planning process meant
that development plans take into account the interest of all
stakeholders, thus leading to a sense of ownership by all
involved. This is crucial in determining the success in
implementing the development plans.

In conclusion, below are some of the important lessons

derived from the Malaysian experience:

• The government has a definite role in charting the future

directions of the nation but it should not be involved in
activities that crowd out the private sector. Rather, the
government should focus on establishing the framework
of broad macroeconomic policies and fostering high
savings and investments that are channelled into high
value-added activities, the provision of adequate and
efficient physical and social infrastructure, the
 Development Planning in Malaysia 29

development of excellent international marketing

linkages for continued export growth, and the provision
of a social welfare programme for the disadvantaged
groups;

• Growth must be accompanied by equity for development

to be meaningful. More importantly, this is the
prerequisite for political and social stability;

• Eradicate poverty by providing access to income earning

opportunities and not hand-outs as well as engaging the
private sector in the process;

• Prudent, flexible and pragmatic role of the government is

crucial. Policy adjustments must be quickly made once
market forces have demonstrated that certain strategies
and policies no longer apply in the light of changed
circumstances; and

• Provide a pro-business environment for private

investment, entrepreneurship and innovation to flourish
and prosper.