Topic 2

Framework of the Malaysian economy

• The Malaysia’s framework of the economy started

when the First Malaysian Plan 1966-1970 was
introduced.

• The economic framework was continued with the

implementation of the First Outline Perspective Plan
1971-1990(OPP1). The main policy formulated in
OPP1 was the New Economic Policy (NEP)
Framework of the Malaysian economy (cont.)

• Vision 2020 was launched in 1991 as the broad

policy directions of Malaysia. It provides the much
needed guidelines of becoming a fully developed &
industrialized Malaysia by the year 2020.

• In relations to vision 2020, the Second Outline

Perspective Plan 1991-2000(OPP2) was introduced.
The main policy implemented in OPP2 was the
National Development Policy(NDP).
 Cont…

• The economic framework was introduced to

establish a progressive, prosperous, and united
nation of Malaysia.

• The core thrust of all policies implemented in

Malaysia is the “ultimate goal of the national unity”.
Five Years Malaysian Plan

• The Malaysia Plan is a 5-year Malaysian

government national development initiative.

• The 5-year plan is a legacy from British colonial

rule in Malaya after the Second World War.

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Five Years Malaysian Plan (cont.)

• After the formation of Malaysia in 1963, the 5-

year plan has been converted to the Malaysia Plan
(MP) with the First Malaysia Plan which began in
1966 until 1970,

• The difference being that the economic plan now

includes the entire nation – including Sabah and
Sarawak, as opposed just Peninsular Malaysia.

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 Objectives of Five Year Malaysian Plan

I. Identify needs and priorities

The government can focus on economic and socio-
economic issues during the period and come up
with strategies to eradicate them.

II. Update current economy

The government will propose development and
budget allocation for Malaysia depending on the
economic situation

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Objectives of Five Year Malaysian Plan
(cont.)
III. Coordinate the development programs
The government has development proposal and
budget allocation for every period of the plan. For
example, midterm review prepared for every
Malaysia Plan.

IV. Monitor development programs

Each 5-year spending plans are recorded neatly
which allows the government to exercise control
over financial prudence.
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 Five-year Malaysia Plans so far

First Malaya Plan: 1956 – 1960

• Increasing economic development to increase per
capita income and living standards.

• More focus is directed towards those low-income

earners living in rural areas with such projects as
building and improving basic facilities and
diversifying agricultural production.

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Malaysian Plan

• First Malaya Plan: 1956 – 1960

• Second Malaya Plan: 1961 - 1965
• First Malaysia Plan: 1966 – 1970
• Second Malaysia Plan: 1971 – 1975
• Third Malaysia Plan: 1976 – 1980
• Fourth Malaysia Plan: 1981 – 1986

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Malaysian Plan (cont.)

• Fifth Malaysia Plan: 1986 – 1990

• Sixth Malaysia Plan: 1991 – 1995
• Seventh Malaysia Plan: 1996 – 2000
• Eighth Malaysia Plan: 2001 – 2005
• Ninth Malaysia Plan: 2006 – 2010
• Tenth Malaysian Plan: 2011-2015
• Eleventh Malaysia Plan: 2016 – 2020

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13
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 Eleventh Malaysian Plan:
2016-2020
• The Eleventh Malaysia Plan sets another historical
milestone as our nation embarks on an important
mission towards a progressive and high-income
nation, as envisioned in Vision 2020.

• The focus is now on the increase in income and

wellbeing of the society. The targeted per capita
income would be US$15,000.

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Eleventh Malaysian Plan:
2016-2020
 Why we need Malaysian plan?

– Economic growth
– Self-reliance
– Removal of unemployment
– Reduction of income inequalities
– Elimination of poverty
– Modernization of the economy

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Background of the New Economy Policy
(1970-1990)
• Racial riot on May 13, 1969, was mainly due to the
economic imbalances, especially racial imbalances.•
For example: poverty 49% of households, unequal
distribution of wealth, in terms of:

• Race
• Rural/urban
• Agriculture / mining.

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 NEP objective

• The objective: National Unity

• The NEP underscored the importance of achieving
socio-economic goals along side pursuing
economic growth objective as a way of creating
harmony and unity in a nation with many ethnic
and religious groups.
• It is a 20-year plan from 1971 until 1990. (from 2nd
to 5th Malaysian Plan)
• Approaches used were:
a) Growth with equity
b) Active government participation in the economy
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 Peninsular Malaysia: Percentage of poor
household by race,1970.
Race % of household in poverty
 Malay 64.8
 Chinese 26.0
 Indian 39.2
 Others 44.8

 Rural 58.6
 Urban 24.6

Source: Chamhuri Siwar, Surtahman Kastin Hasan (1988)

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The Strategies of NEP

1. Eradicating poverty for all Malaysians,

irrespective of race.

2. Restructuring Malaysian society to correct

economic imbalance, to reduce and eventually
eliminate the identification of race with
economic function
The sub-strategies to eradicate poverty:

I. Poor rural household were absorbed into the

modern sector through non-agricultural
development
II. Increase farmers’ productivity through
development of new land, provision of
irrigation facilities and replanting rubber with
higher yielding varieties.
III. Provide basic services such as healthcare,
education, housing and water and electricity
supply.
The sub-strategies to restructure the
society
I. Raise the people’s ownership in the private
sectors
II. Build a business society among bumiputeras.

III. Develop areas that have remained backward.

IV. Enhance education opportunities within and
outside the country.
Any Question?