Malaysia unveils ambitious $185b five-year plan to reshape country amid global economic headwinds
- Prime Minister Anwar Ibrahim on July 31 unveiled a RM611 billion (S$185 billion) five-year blueprint for the country, the biggest ever, with an ambitious aim to boost digitalisation, artificial intelligence development and further developing high-growth, high-value industries.
Under the 13th Malaysia Plan (2026-2030), the economy is projected to grow by 4.5 to 5.5 per cent a year, he announced in Parliament. This is slightly higher than the 3.7 per cent year-on-year expansion in 2023, and 5.1 per cent in 2024. Gross domestic product is expected to grow by 4 per cent to 4.8 per cent this year.
The previous five-year blueprint, covering 2021 to 2025, had total investment allocation of RM400 billion, meaning the new Plan promises to channel 53 per cent more funds, as Malaysia faces global economic headwinds including from looming tariffs on domestic exports to be imposed by the United States.
'This plan is not merely rhetoric,' Datuk Seri Anwar said in his speech. 'Rather, the government has set measurable targets for success in terms of economic figures to guide and monitor the work that will be carried out.'
The speech was punctuated by cries of 'Kekal Anwar' (Retain Anwar) by several government backbenchers, in an obvious counter-punch to last weekend's Turun Anwar (Anwar Resign) street rally organised by the opposition parties that attracted some 20,000 people.
Malaysia aspires to be a high-income nation by 2030, and stand among the world's top 30 economies, said the blueprint, themed Reshaping Development. Malaysia's GDP size placed it at number 37 among the world's biggest economies in 2024, according to a World Bank listing.
Among strategies to boost the economy in the digital and future technology sectors are by focusing on research, development, commercialisation and innovation, or what the government calls RDCI – in order to create more products and services based on the 'Made by Malaysia' concept.
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To boost high-growth, high-value strategic sectors, Mr Anwar said he is looking at increasing Malaysia's electronic and electrical product exports to RM1 trillion in 2030, from RM600 billion in 2024. This would be done through the High Value-High Technology Semiconductor Industry Flagship project.
Geopolitical analyst Mr Adib Zalkapli told The Straits Times that the 13th Malaysia Plan is critical to get the country back on track after years of setbacks caused by the prolonged political crisis following the 2018 general election and the subsequent Covid-19 pandemic.
'The success of the plan will largely depend on maintaining the political stability over the next five years and the absence of major external disruptions such as another global health crisis,' said the managing director for Viewfinder Global Affairs.
Malaysia's political temperature, which had been steady in the past two years, has heated up in the last few weeks as public unhappiness arose due to the expansion of the sales and service tax, reduction in fuel subsidies, a hike in industrial electricity rate.
Hundreds of lawyers marched in Putrajaya on July 14 to demand judicial independence amid suspicions that the government wanted to interfere in the appointment of a new chief judge and other senior court officials.
Mr Anwar in his speech responded to concerns raised by economists about the government's ballooning debt and spending. He said the fiscal deficit is expected to gradually decrease to below 3.0 per cent of GDP, while government debt won't exceed 60 per cent of GDP during the five-year plan.
Deputy Finance Minister Lim Hui Ying had told Parliament on July 29 that federal debt stood at RM1.3 trillion at the end of June. The deficit stood at 4.1 per cent of GDP last year, but is projected to fall to a more manageable level of 3.8 per cent in 2025, she added.
The World Bank has estimated that Malaysia's federal debt to GDP stood at a high 64.6 per cent in 2024, just a touch lower than the government's self-imposed debt ceiling of 65 per cent.
Pushing for Malaysia to become a regional hub for digital technology innovation, Mr Anwar told MPs: 'Today, the 'generational opportunity' presented by AI is right before us, and must not be missed.
'Malaysia has outlined a clear direction to lead Southeast Asia's economy in AI, digital technology and the renewable energy industry, with aspirations to emerge as a key global player.'
He is also looking at increasing the country's capacity in renewable energy to 35 per cent from 29 per cent by 2030. Mr Anwar on July 12 launched a floating solar project in Lake Kenyir and a Green Hydrogen Hub scheme in Terengganu with the aim of attracting foreign investors.
Analyst Dr Oh Ei Sun said the focus on high-growth, high-value industries is realistic and can be more successful. 'Malaysia has traditionally received these investments from Western countries and the base is already there,' said Dr Oh, senior fellow at Singapore Institute of International Affairs.
But analysts find it curious that Mr Anwar is targeting the development of shipbuilding and ship repair industry in the new blueprint, with the aim of expanding shipping capacity and upgrading bunkering infrastructure at ports in Perak, Kelantan, Terengganu, Sabah and Sarawak.
'This initiative will contribute to Malaysia's target to become a competitive and sustainable regional maritime hub,' said Mr Anwar.
Dr Oh said Malaysia had tried its hand in the shipping industry in the 1980s and the 1990s, but that the plan did not amount to much.
Professor Yeah Kim Leng, a director at the Jeffrey Cheah Institute on Southeast Asia Economic Studies said Malaysia is on track to achieve its GDP-growth goal, as well as its high-income nation status by 2030, aligning with World Bank projections.
'We need to prepare and ensure policies align to sustain our income growth, and converge at a faster rate with other high-income countries and close the gap. This will require crowding in private sector participation and investment in the high-growth sector that includes semiconductors.'
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