Do We Really Feel Positive About the Madani Economy?

With the introduction of the Madani Economy Framework in July 2023, the Malaysian government set ambitious goals to transform the country’s economic landscape. The framework aims to create a sustainable, inclusive, and equitable economic model by focusing on key areas such as job creation, enhancing the well-being of citizens, and attracting high-value investments. 

While the economy is forecasted to grow between 4% and 5% in 2024, and inflation is expected to remain manageable at around 2.0% to 3.5%, the lived reality for many Malaysians seems to tell a different story. 

Despite positive economic indicators, including recent appreciation of the Ringgit against US dollar and Singapore dollar and an increase in foreign direct investment, many Malaysians are struggling with the rising cost of living. 

Source: Wikipedia

 The cost of eating out has increased in recent months. Eating at least two meals per day outside (with good nutritional value) can easily set you back RM60 in just two days. Many are feeling the pinch, even as economic metrics suggest improvement. 

Under the Madani framework, the government is also focusing on improving the productivity and competitiveness of local industries by providing incentives for digital adoption and green technology investments. 

One of the key components under this framework is the introduction of a progressive wage model. This model aims to provide a structured wage increase for low- and middle-income earners, tying salary increments to productivity and skills development.

While this initiative is a positive step towards improving income levels, it will take time to realise its full benefits. 

The situation is even more challenging for Small and Medium Enterprises (SMEs), which form the backbone of the Malaysian economy, contributing nearly 40% to the GDP and employing almost two-thirds of the workforce. With new regulations on e-invoicing and Environmental, Social, and Governance (ESG) compliance set to become mandatory, businesses are bracing for increased operational costs. These added expenses could stifle the growth of SMEs, limiting their capacity to thrive and contribute meaningfully to the economy. 

To bridge this gap, the government needs to focus not only on macroeconomic figures like GDP growth and foreign investment but also on how these translate to improved quality of life for average citizens. Purely on metrics, the economy had double-digit growth in August for experts, uptrend in Industrial Production Index (IPI), GDP forecast of 4.8% in 2024, foreign inflows in August of RM11.5 billion and ringgit appreciation (to RM4.15 or better to the USD). 

Nevertheless, it is crucial to implement more inclusive economic reforms that consider the everyday experiences of Malaysians and this includes stabilising food prices, ensuring fair wages, and providing support to SMEs navigating new regulatory landscapes. Structural reforms are vital for sustaining economic growth, but they must be accompanied by policy measures that directly alleviate the financial pressures faced by the public. 

Without addressing the immediate concerns of rising costs and limited wage growth, the true impact of these reforms will remain out of reach for many Malaysians. It’s time for policymakers to not only celebrate improved metrics but also to ensure that these translate into tangible benefits for all Malaysian citizens. 

References:

Do we really feel the positive impacts of Madani Economy? Amanda Yeo, Focus Malaysia, 27 September 2024 

Monthly review; US rate cut sustains foreign inflows, MARC Ratings Berhad, 3 October 2024