MADANI Economy framework informs govt policies, programmes to strengthen economy

By Zarul Effendi Razali and Durratul Ain Ahmad Fuad

The MADANI Economy framework is viewed as an integral part of the government's continuing rollout of policies and programmes that help to sustain the growth and resilience of the Malaysian economy.

Malaysian Economic Association president Dr Yeah Kim Leng said the framework, announced by Prime Minister Datuk Seri Anwar Ibrahim in July last year, is seen as the fundamental policy framework that provided the setting to guide the formulation of various plans, roadmaps and blueprints that were subsequently rolled out.

“Efforts under the framework to raise production, boost productivity and move up the value chain in the supply-side or production sector, along with a steady rise in employment, wage and income in the household or consumption sector, will translate into poverty eradication, improved livelihood and well-being, and higher overall gross domestic product (GDP).

“Thus far, the country's median income growth has kept pace with inflation although the B40 (bottom 40%) and the lower half of the M40 (middle 40%) income groups may grapple with the rising cost of living, depending on their geographical location, lifestyle, family size and age group,” he told Bernama. 

2024 the year of implementation

The National Council of Professors fellow Prof Dr Azmi Hassan concurs with Finance Minister II Datuk Seri Amir Hamzah Azizan's statement that 2024 is the starting point for the execution of the MADANI Economy framework.

“I think the (framework) is still in the works in the first six months of the year so there is not enough to gauge the progress.

“But looking at the economic growth via GDP, which grew at a higher rate of 4.2% in the first quarter of 2024 compared with 2.9% in the fourth quarter of 2023, there was a lot of improvement,” he said.

In February this year, Amir Hamzah said 2024 will be about executing the MADANI Economy framework and all the policies that the government put out last year, as the government has established clear guidelines for the economy to move forward.

“We are confident that we will be able to move along the path to execute the MADANI Economy framework this year and all the policies that we put out last year,” Amir Hamzah told Bernama in his maiden interview since his appointment as Finance Minister II last December.

Azmi opined that government will or political will is very important for the implementation of the MADANI Economy framework, adding that the implementation of the Fiscal Responsibility Act (FRA), which was passed in Parliament in October last year, would portray an efficient and responsibility government under Anwar's leadership.  

“The government knew that targeted subsidies for diesel would be a sensitive issue but the subsidy (rationalisation) was implemented for a better future.

“According to the FRA, the government wants to reduce the fiscal deficit to four% this year and three% in the next two years.

“The government is also committed to reducing the national debt to 60% of GDP. I think that's a strong message from the government that it wants to implement the MADANI Economy framework,” he said. 

Enhancing fiscal position, people wellbeing

On the targeted diesel subsidy implementation, Yeah said the move, besides strengthening the government's financial and fiscal positions, also resulted a more efficient allocation of scarce resources due to reduced leakages and more productive spending on development rather than subsidising consumption.

In addition, he said, the economy will also be more resilient in withstanding future oil price shocks.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the government is cognisant about the plight faced by society as prices continue to remain elevated.

This, he said, has led to greater allocation on cash transfer programmes such as the Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (SARA) in order to alleviate the financial burden experienced by the low-income households.

“The Employees Provident Fund Account 3 withdrawal is also being implemented, as the government recognises the need to accord the rakyat with some flexibility to use their retirement savings.

“On that note, the short-term needs have been looked at. Now it's about how to use the savings from the subsidy rationalisation to improve our education, healthcare and infrastructure. Again, it will take some time for us to see the results,” he said.

According to Mohd Afzanizam, cash transfer programmes such as STR and SARA, along with targeted subsidies, have been the main tools for the government to minimise the impact on the rakyat arising from the policy changes on subsidies and taxes.

“Such policy changes are not easy to implement, but it is the right thing to do in order to reduce leakages and ensure only those who are deserving will get the financial aid. 

“The lifting of diesel subsidies was more like the government demonstrating its commitment to fiscal discipline, which should create more space for spending in areas that will bring better productivity gains in the mid to long term. This may include spending on education, healthcare and infrastructure,” he said. 

Medium-term targets and NIMP 2030

Anwar, who is also Finance Minister, said the MADANI Economy: Empowering the People initiative is a comprehensive plan for Malaysia to address various challenges and issues related to its competitiveness and investment attractions, as well as outlining actions to address current issues that affect people's lives.

The initiative sets seven key performance indicators as medium-term targets to be achieved within 10 years.

They include Malaysia being in the top 30 of the world's largest economies, the top 12 in the Global Competitiveness Index, the top 25 in the Human Development Index and the top 25 in the Corruption Perception Index.

Other targets are increasing labour share of income to 45%, raising women labour participation rate to 60%; and achieving fiscal sustainability with a fiscal deficit of three% or lower.

Meanwhile, the New Industrial Master Plan (NIMP) 2030, which was launched by the Prime Minister in September last year, is a key component of the MADANI Economy as it will support the realisation of economic reforms.

According to Anwar, NIMP 2030 will revitalise the manufacturing sector to ensure Malaysia remains resilient amid growing challenges and megatrends.

“NIMP 2030 is designed to drive Malaysia's trajectory as a global leader in industrial development, extend the domestic linkages to create wealth across the nation as well as strengthen its position in the global value chain,” he said.

With a short window of seven years, four missions have been formulated under NIMP 2030 to drive industry transformation at a large scale, namely to advance economic complexity; to tech up for a digitally vibrant nation; to push for net zero and; to safeguard economic security and inclusivity.

Anwar said these missions will be supported by four key enablers to overcome systemic and institutional challenges, including addressing financing challenges, fostering talent development and attraction, improving the investor journey, and enhancing governance mechanisms.