By Dr Maziah Che Yusoff, Senior Research Fellow, Intan
Each day, the growth of complexity seems to be more elusive and fleeting. The global outlook is so vibrant that having any medium or long term plans such as the 10th Malaysia Plan (2011-2015) and New Economic Model (2011-2020) are deemed to be outmoded and no longer relevant. There is a growing notion that government direct intervention should be kept to the minimum and economy should be freely left to market forces. Many have argued that the success of past experiences should not be the basis for future action and a fresh approach is, therefore, needed for Malaysia to face the challenges and uncertainties of the current global scenarios. There are suggestions that for Malaysia to be globally competitive, the market should be agile enough for the private sectors to respond to the changing environment. And, for that flexible market to exist the government should stay out of the market. Market forces should direct the country’s resources into businesses in which Malaysia has clear comparative advantages.
As Malaysia has yet to gain back its growth momentum since the Asian financial crisis of 1997/1998 and the traditional growth engine has been slowing down, there are fears that Malaysia will have a tough time not only to remain competitive as a high-volume and low-cost producer, but also to move up the value chain for knowledge and innovation based products and services.
Malaysia needs fundamentally new game changers to sustain the current growth and to leap forward to achieve its vision to be a developed and high income nation by 2020. The roadmap to achieve this nation’s aspiration is not as clear as when the idea was mooted in 1990s. Neither is the way to move forward. So, questions were raised on the need for a long term national plan such as the upcoming 11th Malaysian Plan: Is national development planning still relevant today? Even if our planning is on the right track, are we are sure of the right approach to take as what works today might become obsolete tomorrow? It is within this context that the relevancy of the national development plan is debated.
Nation’s Aspiration: Growth with Quality
Is government policy necessary to establish a competitive market?
The popular assumption is that market forces rely on economic agents that are motivated to optimize the satisfaction of their preferences on the basis of rational choice. In reality, this is not so as they are also influenced by sentiment, greed and unrealistic expectations. The rapid recovery of China’s economy provided evidence on the important role of state enterprises in initiating a revival of growth. As for Malaysia, the last four decades of growth was the result of sound economic policies. Those successes would not be realized if Malaysia allowed complete free market. The underlying principle in the national development planning is that economic growth is not an end in itself but a mean to prosperity and a better quality of life. The Malaysian development path is to have growth with quality. Desire for wealth should not override other moral obligations.
Ideally, higher economy growth leads to a better quality of life. But, in reality, higher income does not always improve quality of life. Even though people with more income have higher purchasing power, it does not guarantee them greater well-being and happier life. Happiness and well-being do not just come from wealth creation but also from non-material factors. Thus, in pursuing economic growth, we accord equal prominence to societies’ well-being. This is to ensure that the country’s prosperity is sustainable and translated into an improved quality of life. The nation’s aspiration of quality growth is very well reflected under the principles of 1Malaysia: People First, Performance Now. Strategies and approaches taken to drive Malaysia towards a developed nation will not compromise the criteria that define the people’s well-being. The 2012 budget formulated with the theme ‘National Transformation Policy: Welfare for the People and Well -Being for the Nation’ has reinforced this spirit. The 2015 budget on the ‘People Economy’ further strengthened the government’s commitment to safeguard the well-being of the rakyat.
Quality growth means Malaysians shall not only be able to enjoy higher per capita income but will also have a better quality of life. Thus, Malaysians will have better access to, among others, greener environment; affordable house; safe workplace and communities; quality education and health services; as well as efficient transportation and communication system. New Economic Model, together with Government Transformation Program and Economic Transformation Program, and 10th Malaysian Plan supported by holistic development plans, reflect the nation’s aspiration to become a developed high-income country with better quality of life.
Like most developing countries, national development planning is a dominant policy instrument for Malaysia to accelerate both the economic growth and the social development. In 1960s, the plans focused on the modernization of traditional sectors such as agriculture and mining. In 1970s and 1980s, the priority shifted to poverty eradication and income distribution with emphasis on the development of large scale infrastructure projects like the North South Highway and the Penang Bridge. In 1990s, efforts were concentrated on capacity and capability building of industrial and manufacturing sectors. Since 2000, the focus is on knowledge management, human capital development and ICT. This development model has proven to be successful in charting impressive economic growth and improving public service delivery.
Strategies and approaches taken to drive Malaysia towards a developed nation will not compromise the criteria that define the people’s well-being.
Alignment and Consistency: uphold the common highest priority
In meeting the nation’s inspiration, it is imperative that the civil servants of more than 200 different schemes of services, working in various ministries and agencies, uphold the common policy framework or the principle of consensus. The many ministries and agencies in the public sector need to be aligned on the common highest priority. The development plan seeks to achieve alignment and consistency among different socioeconomic objectives. Some desirable economic goals are likely to conflict with others. Different ministries have different core functions with different KPIs (key performance indicators) to deliver. In doing so, they require the same or different things which sometimes might be contradictory to one another. It may be possible to attract more foreign investors by providing more incentives. But in doing so, the measures applied may also cause negative impact on other economic sectors. Restoring market prices for goods and services will improve economic efficiency but, in doing so, it may initially raise consumer prices and costs of doing business. Undertake subsidy rationalization and introduce Goods and Services Tax (GST) will enhance economic sustainability but the restructuring process can be painful. Addressing the problem of urban poverty and improving infrastructure require lots of public funds but could not be negated as measures are needed to maintain a balance with achieving high investments in urban areas. The falling crude oil prices since November 2014 would allow the government to save on subsidies but, at the same time, it would also affect the government’s revenue. Thus, having a national development plan provides greater focus on the whole of government’s approach. Each ministry needs to see its contribution as part of the bigger picture. The national plans are the reference documents for the civil servants not to lose sight of the forest for the trees.
One of the critical challenges in connecting the dots in the public service is how to break down the silo mentality among the different ministries. In striving to do so, the challenge is not only about how to get the message across but also on how to strike the balance among the different priorities. There should be prudent spending as not to put more pressure on the current account deficit but, at the same time, should not be too prudent that it could jeopardize the potential growth of the country. There is only one vision for the nation and there are so many ways on how to achieve that vision. Each ministry is set up for a specific purpose but all of them have the same ultimate destination – that is to achieve the nation’s aspiration. Ministries can take different routes towards the same destination. The ability to see the big picture and the significant of connecting the dots among ministries to the common highest priority are no doubt the key success factors for a diverse organization such as the Malaysian public sector.
Clear Visions of the Future
By exercising the whole of government approach, the development plan provides clear visions of the future and identifies long and medium term strategies to achieve multiple outcomes. Organizing and analyzing diverse mixture of data in the planning process helps bring clarity to possible future events. The point is of course not to predict the future, but to be better prepared for potential developments and to deal with new type of challenges. Economic planning assesses the current state of the economy; designs various types of initiatives to break barriers or bottlenecks in important economic sectors; and provides improvement on the coordination between different parts of the economy. The planning process tests the ability to acknowledge the prospect and work through possible consequences. Without it, there would be a lack of shock absorbers when we hit bumps on the road. Henry Kissinger once said: “if you don’t know where you are going, every road will get you nowhere”.
In meeting the nation’s inspiration, it is imperative that the civil servants of more than 200 different schemes of services, working in various ministries and agencies, uphold the common policy framework or the principle of consensus.
Clear Direction for Strategic Collaboration
We practice a mixed system approach in our development plans: the government sets directions and private enterprises are free to operate. This mixed system is an intermediate system between two extremes – centralized planning and laissez faire. The centralized planning exists in socialist countries such as Cuba and North Korea. At the other extreme, the laissez faire or the free enterprise advocates the non-involvement of the state in business and the economy. Between these two extremes, the mixed system calls for the state to have a role in setting the economic direction and providing facilitation, through loose regulation, for the private operators to drive the economic growth of the country. This approach adopts market oriented policies to encourage private sector investment. Hence, the plan provides clear direction with flexible strategies as well as forming the basis for strategic collaboration between the government and private sector. The development efforts are premised on a pro-business strategy. The national plan redefines the role of government to facilitate the private sector to be the engine of growth. This collaboration of government and private sector is crucial for the nation’s progress.
Concluding Remarks: Sense the pulse of the people
It is undeniable that some serious revamps are necessary. However, there is no need to start from scratch as the foundations are all there. The development plans have served as strong foundations to shift the growth trajectory from a low income to an upper middle income nation for the past four decades. What we need is a new game changer to forge the way to the future of Malaysia as a developed nation. Malaysia needs to foster innovation and upgrading in products and processes. Thus, the answer on how Malaysia can regain its growth momentum is not on the relevancy of the national development plan. It is about the right priorities of the right sectors at the right time. Identifying the right investment, the right catalyst and the right innovation is crucial to complete an equation to accelerate growth.
The market economy, left unattended, can be vicious. Having long term plans give us the opportunity to leverage on diversity, to integrate with the global world and to build bridges and effective partnerships. This adopted mixed system in the Malaysian development planning process helps align and connect the dots in the public service; provides clear direction and forms the basis for strategic collaboration between government and private sector. These are the unique features of the Malaysian development plans that have served well in the past and should continue to be the thrust for the future. The debate on the relevancy of the national development plan could be envisaged in terms of more-or-less rather than either-or. It might be useful to keep in mind that planning is an iterative process involving a series of small step forward.
The nation’s aspiration to have quality growth provides clear signal to both the civil servants to be receptive and proactive, and to the public sector to be a pleasant place. In striving to provide effective and efficient service to realize the vision to be a high income country (growth), civil servants should not lose the ability to sense the pulse of the rakyat (quality of life). The plans do not focus solely on economic data analysis, but to equally address the people’s well-being. Hence, development planning is unavoidable. With a plan in hand, we can always see how much we have progressed in meeting our goal and how far we are from our destination. Knowing where we are is essential for making good decisions on where to go or what to do next.