Amidst the “old wine in a new bottle”,
Malaysia faces structural issues not addressed in the Plan. Malaysia’s GDP was
RM 1.8 trillion in 2023, Sarawak’s GDP was RM 142.35 billion, and Sabah’s GDP
was RM 111.9 billion.
A major part of Malaysia’s formal economy
is controlled by the government through government linked companies or GLCs.
These GLCs control around 55 percent of the market economy. GLCs are primarily rent-seeking and profit
orientated organizations. GLC operations are aided by regulated monopolies,
oligopolies, or restricted markets based upon legislated barriers of entry to
other competitors. The primary objective of GLCs is to provide the maximum
dividends as possible to the government to assist in financing the annual
budget.
Although a major part of the private sector
is over-run by GLCs, banking, finance, and communications, much of the private
sector is based upon long established firms that have grown up over the last 70
years. Most of these firms are in service industries, although there is some
manufacturing, construction and agriculture enterprises. Many firms that
participate in construction and utilities are politically connected.
Foreign investment is primarily focused
upon labour-intensive industries, although Penang has successfully developed a
chip manufacturing cluster. Overall, very few firms are innovative. Issues of
equity/ownership also surface. NEP is still an on-going exercise, which
provides the brakes for any growth initiative.
Economists insufficiently pay attention to
Malaysia’s informal sector. Most of the workforce are either self-employed sole
proprietorships or work in MSMEs employing between 2-5 people in agriculture,
small manufacturing, or retail activities. These ventures are not sufficiently
capitalized, run on ‘hand to mouth’ finance. These firms are based upon low
technology, low levels of innovation and think only in the short term.
Malaysia’s formal workforce is made up of
approximately 15 million people. According to statistics in 2019, 15.5 percent
or 1.7 million worked in government. GLCs employed around 1.3 million people.
Wage improvements are pegged to government announcements for the public sector,
rather than competitive pressures.
As a result of the clearly divided economic
sectors in Malaysia, there is a three-tier labour market. Dirty and dangerous
low paying jobs done by foreign guest workers, which Malaysians will not work
in. The second sector of the labour market is where Malaysians primarily
occupy. This runs from semi-skilled right up to corporate managerial positions.
The second professional tier is now coming
under threat from computerisation, automations, and now artificial intelligence
(AI), which is rapidly taking away jobs. This can be seen within the banking
sector, and even fast-food outlets where ordering and e-payment systems allows
for the reduction of staff at outlet level.
The third sector is within the informal
sector, where there are no minimum wages and conditions. Those under-employed
or not working are not counted in official figures.
Education in general is hindered by the
focus upon religious studies, where recent surveys have shown that students
spend up to 67 percent of their school time on religious studies. Students in
Malaysia are falling behind other countries in the region which focus firmly on
STEM subjects.
Bank lending practices prevent many MSMEs
from obtaining loans to commence or expand their businesses. Lack of collateral
is a major issue. Sourcing raw materials for many types of manufacturing,
especially where firms develop their own unique products (innovation) is often
very difficult where it is required to import large quantities of materials
firms can’t finance. This is a major hinderance to the ability of firms to
innovate, due to lack of resources.
Malaysia’s Cabotage Policy restricts
foreign vessels participating in domestic shipping activities in Malaysia,
means that firms in Sabah and Sarawak must first send their goods to a port in
peninsula Malaysia before shipments can be exported. This makes the cost of
potential products cultivated or manufactured in Borneo prohibitive
internationally, and vice versa. This prevents Sabah and Sarawak exporting
competitively to South-East Asia, especially the coast of China, Hong Kong and
Taiwan. This prohibits the growth of export based agricultural industries.
GLCs have a management problem. There is a
public service culture within many GLCs, where there is little passion for the
business by employees. Great enterprises are built on passion, which is sorely
absent in some GLCs. This prevents innovation and improvements in productivity.
The level of corruption within the
Malaysian economy is still high, due to the large number of government-driven
business. Connections and favoured clients/suppliers/contractors prevent open
and competitive market practices. This also increases the cost of products and
services.
Wages are in real decline leading to a
greater divide between the rich and poor. This is putting pressure on the
middle class that grew from the 1990s onwards. The growth of the middle class
is slowing due to real wage stagnation.
So, there are structural issues
like equity holdings, productivity, innovation, pre-ponderance of GLCs and
endemic corruption which are not fully addressed. And finally, implementation
or execution of plans. It is easier to set targets than to implement them.
There is need for an annual review rather than mid-term (review) as practised
currently. Course correction is necessary
with growing uncertainties in the marketplace globally. But of course, it is
better to plan than not to plan at all!
References:
Structural Issues Within the Malaysian
Economy: Vital Issues For The 13th Malaysian Plan – Analysis,
Murray Hunter, Eurasia Review, 5 July 2025
Malaysia aims
for 4.5%-5.5% GDP growth under 13th Malaysia Plan 2026-2030; allocates RM430b
for development projects, Luqman Amin, theedgemalaysia.com, 31 July 2025
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