The Madani Economy: A Potential Solution?

The Prime Minister has laid out his economic vision with the launch of "Ekonomi Madani" and the salient points expressed were as follows:

1. To be amongst the top 30 biggest economies in the world, in terms of nominal gross domestic product (Malaysia currently ranks 35).

2. In the top 12 in IMD World Competitive Index. The current rank is 27.

3. Have income from labour at 45 percent of total income. The present 12th Malaysia Plan goal is 40 percent by 2025.

4. A 60 percent female participation in the workforce, up from 55.1 percent in 2021.

5. Top 25 in the UN Human Development Index. Current rank is 62.

6. Top 25 in the TI Corruption Perception Index. Current rank is 61.

7. Keeping the fiscal deficit within three percent of GDP. The deficit for 2023 is projected to be five percent.

Source: Malaysiakini

A key component of Madani Economy is upgrading Malaysia's industrial sector, which now stands at 25 percent of GDP, to turn it into the country's main engine for growth.

Among the strategies are diplomacy, reviewing incentives and improving infrastructure.

As a start, RM100 million will be allocated to improve infrastructure in industrial zones, especially for facilities which have a "green" concept. Providing a conducive start-up ecosystem is also a key priority.

More details are expected when the government launches the National Industrial Master Plan 2030 in August.

I like many of the goals, but the PM’s economic vision has not “fleshed-out” how he is going to get there! In addition, he has not set or said anything on inequality. Will we reduce our Gini-coefficient to 0.35 (from 0.4) and then introduce the GST? And how do we improve inequality – taxes on the T20? Transfers to the B40?

Honestly, a disciple of economics may say there are only two real objectives (for a nation):

(i) to set a growth rate of say, 6-8% to be the top 30 economies of the world; and

(ii) to distribute income/output in a fair manner, so that happiness is achieved.

With (i) you will address all the issues faced with less constraints and bottlenecks. And in (ii), through taxation and distribution you may display a compassionate, caring nation. Isn’t that what we all want?

Reference:

Madani Economy: The salient points, Malaysiakini, 27 July 2023