Tabling The Eighth Malaysia Plan 2001-2005
Parliament, 23 April 2001 

With great pleasure, I stand before this distinguished House to present the following motion:

"That this House

recognizing the recovery of the economy and the achievement ofour socio-economic objectives during the implementation of the Seventh Malaysia Plan;

endorsing the efforts of the Government in the implementation of the Third Outline Perspective Plan;

approves the Eighth Malaysia Plan, which seeks to implement strategies and programmes and allocate funds designed to achieve the objectives and commitment of the National Vision Policy, as set out in the Command Paper No.12 of 2001;

That in approving the Eighth Malaysia Plan, this distinguished House calls upon all Malaysians to stand united with renewed vigour and commitment in undertaking this noble task of building a progressive and resilient nation."

2. With your permission, Mr. Speaker, Sir, I present the Eighth Malaysia Plan for the period 2001-2005, for the debate of the Honourable Members of this distinguished House.

3. A few weeks ago I stood before this House to present the Third Outline Perspective Plan (OPP3), 2001-2010, which contains the National Vision Policy (NVP), that provides the direction for the development of the nation and the policy agenda for the next ten years. As Honourable Members area ware, this House has approved the OPP3 with wide consensus that the new policy will contribute towards further strengthening national unity among the various races in our beloved country.

4. The Eighth Malaysia Plan, which covers the period 2001-2005, represents the first phase in the implementation of theOPP3. As we enter the Eighth Plan period, we continue to face many challenges. Notwithstanding this, we are confident that we can overcome these challenges with the implementation of the right mix of policies and the commitment of all. This confidence is based upon our ability to implement the Seventh Malaysia Plan despite the attacks by currency speculators that caused the country to experience a slowdown in the economy.

PERFORMANCE DURING THE SEVENTH PLAN PERIOD

Economic Progress

5. The Seventh Malaysia Plan was launched in 1996 following a period of high growth with stability. The Seventh Malaysia Plan, while reemphasizing the concept of balanced development, also introduced the strategy of productivity-driven growth of the economy to enhance the resilience of the nation to face the challenges of the twenty-first century. Even as we prepared ourselves, we were confronted with the financial crisis in the region that also directly affected us and subsequently, the economic slowdown. We were again reminded that the development path is never smooth but has its ups and downs and we cannot afford to be complacent.

6. Overall, the performance of the economy was commend able during the Seventh Malaysia Plan period. The real Gross Domestic Product (GDP) recorded an average growth of 4.7 percent per annum, surpassing the revised target of 3.0 per cent. Recovery measures introduced in 1998 helped to stimulate consumption, while containing inflationary pressures. The unemployment rate remained low at about 3.0 per cent and the Consumer Price Index declined to 1.6 per cent in 2000.

7. The recovery measures also afforded a stable environment for the banking and corporate sectors to implement their restructuring and consolidation programmes. The various agencies created to manage non-performing loans (NPLs), re-capitalize banks and restructure corporate debt, have succeeded in strengthening the sectors and helped them to focus on more productive economic activities. By the end of2000, the amount of non-performing loans was reduced to 6.3per cent of total loans from a peak of 11.4 per cent in August1998. The risk-weighted capital adequacy ratio of the banking system increased to 12.4 per cent from its lowest level of10.1 per cent in August 1998.

8. As the external sector is a catalyst to the nation's economic recovery, exports were increased while imports were reduced. As a result, our merchandise account recorded the largest surplus of RM86.5 billion in 1999.

9. Due to the remarkable trade performance, there were notable improvements in the current account, which compensated for the services deficit as well as the net transfer payments. Consequently, the current account which had been in deficit since 1990, turned positive starting from 1998 to record its highest surplus of RM47.9 billion in 1999 or 17.1 per cent of the Gross National Product (GNP). This strengthened the current account position of the nation. Since August 1998,the nation's external reserves have increased by US$9.7billion to stand at US$29.9 billion by the end of 2000,sufficient to finance 4.5 months of retained imports and is6.4 times the short-term external debt.

10. These achievements were the result of the Government decision not to borrow from the International Monetary Fund (IMF), which would have placed the country at the mercy of this agency. On the other hand, we have created our own approach by preventing the currency speculators from trading the Ringgit and controlling speculative attacks on the Kuala Lumpur Stock Exchange. In this way, we were not burdened with debts from the IMF unlike other countries.

11. Although we managed to recover from the crisis in our own way, the Government had to implement an expansionary fiscal policy to stimulate the recovery in the economy by increasing and accelerating Government expenditure in infrastructure projects and also to grant bonus to Government employees to increase retail trade. These actions succeeded in alleviating the impact of the slowdown on poverty and the restructuring of society.

SOCIO-ECONOMIC PROGRESS

Poverty Eradication

12. Despite experiencing some reversals during the economic crisis, there was overall progress achieved in bringing about equitable growth during the Seventh Malaysia Plan period, especially with regard to poverty eradication and income distribution. As Honourable Members may recall, the thrust of the Seventh Malaysia Plan was to reduce the incidence of hardcore poverty to 0.5 per cent and of general poverty to 5.5per cent by 2000. To realize these targets, the Government continued to undertake the leading role in poverty eradication efforts by promoting income-generating projects and providing amenities to improve the living standards of the poor. In addition, specific urban-based programmes, namely squatterre settlement and low-cost housing projects, improved the living conditions of the urban poor. As for the hard core poor, the rapid economic growth prior to mid-1997, and the intensified implementation of the Development Programme for the Hardcore Poor or Program Pembangunan Rakyat Termiskin(PPRT) helped in reducing its incidence.

13. As a result, the incidence of poverty among Malaysians decreased from 8.7 per cent in 1995 to 6.1 per cent in 1997,and the number of poor households declined by 25 per cent, from 365,600 to 274,200. However, our efforts to further reduce poverty were hampered by the economic crisis. We were only able to reduce the incidence of poverty to 7.5 per cent in 1999 and the incidence of hardcore poverty decreased slightly from 2.1 per cent to 1.4 per cent for the same year.

RESTRUCTURING OF SOCIETY

14. Progress was also made in the restructuring of society, particularly in employment restructuring and the creation of the Bumiputera Commercial and Industrial Community (BCIC).However, in terms of corporate equity, the proportion of Bumiputera ownership declined below the 1995 level. Although in absolute terms, Bumiputera ownership of share capital at par value increased by 12.6 per cent per annum from about RM37billion in 1995 to RM59 billion in 1999, in percentage termsit declined from 20.6 per cent to 19.1 per cent. Similarly, the equity ownership among non-Bumiputera also declined during the period from 43.4 per cent to 40.3 per cent. This decline reflects the inability of our rakyat, particularly Bumiputera, to sustain their equity holding structure during the difficult period following the economic crisis. This indicated that economic resilience has to be strengthened.

EMPLOYMENT, EDUCATION AND TRAINING

15. During the Seventh Plan period, employment expanded at an impressive rate leading to a tight labour market situation. To address this situation, various measures were introduced to increase the supply of skilled manpower. These measures included expansion of the education and training capacity, particularly those in the private sector, and incentives to increase the female labour force participation rate. The Government also continued to allow the employment of foreign workers, particularly skilled workers. Efforts were also made to increase the capital-intensity of the production processes through encouraging firms to adopt more labour-saving technologies.

16. Concerted efforts to increase accessibility to education and training resulted in increased enrolment at all levels from pre-school to degree level. Special focus was given to reduce the performance gap between rural and urban schools through the upgrading of teaching and learning facilities and placement of more trained teachers in rural schools.

17. In support of the implementation of a productivity-driven growth, which requires highly skilled, trainable and knowledge manpower, substantial progress was made to provide more opportunities for the rakyat to pursue tertiary education and training. During the Seventh Malaysia Plan period, the Government built three new universities and three new polytechnics to increase tertiary enrolment in public institutions. With the implementation of the Private Higher Educational Institutions Act 1996, the private sector also became an important provider of tertiary education. Six private universities offering degree programmes in key technologies were set up while three foreign universities were allowed to set up branch campuses to offer courses up to the degree level. The expanded education and training infrastructure not only allowed Malaysians to pursue tertiary education locally, thus saving foreign exchange but also attracted foreign students to study in Malaysia. With this development, we have laid the foundation to develop Malaysia into a centre of education excellence.

HOUSING, HEALTH AND OTHER SOCIAL SERVICES

18. The overall achievement of housing programmes was very encouraging with the completion of 859,480 units of houses. This figure represents an achievement of 107 per cent of the Seventh Malaysia Plan target. In this regard, special emphasis was given by the Government for the speedy implementation of the low-cost housing programme. Various measures were implemented including the extension of the Low-cost Housing Revolving Fund and establishment of Syarikat Perumahan Negara Berhad as well as the Integrated Housing Programme or Program Perumahan Rakyat Bersepadu with the objective of resettling squatters in urban areas. The expansion of promotive and preventive health services such as healthy lifestyle campaigns, expanding the coverage of the immunization programme, school health services as well as providing safe water and sanitation in the rural areas, enhanced the quality of life for our rakyat.

INFRASTRUCTURE DEVELOPMENT

19. The provision of a comprehensive range of infrastructure facilities and services is essential to support the growth of the economy. Infrastructure constraints at the beginning of the Seventh Malaysia Plan period have largely been overcome with the accelerated capacity expansion of roads, ports, airports, urban transportation, communications, water supply and electricity as well as sewerage services. Some of the major projects completed were the KL International Airport, Port of Tanjung Pelepas, Light Rail Transit (LRT), Second Link to Singapore, Kelinchi Dam and Malaysia's own satellites, MEASAT 1 and MEASAT 2.

PRIVATIZATION

20. Privatization continued to be an essential part of the Seventh Malaysia Plan strategy of promoting greater private sector participation in economic development. Through the privatization programme, the rakyat was able to enjoy better facilities. This is because, if the projects were to be implemented by the Government, many of the projects would have to be deferred for many years until the Government had sufficient funds. Meanwhile, the rakyat would not be able to enjoy quality facilities and the number of accidents on low quality roads would increase tremendously. On the other hand, through privatization, new facilities were developed much earlier for the benefit of the rakyat, for example, highways with lower toll rates.

21. Privatization has generated a large number of employment opportunities, which require new skills and more sophisticated technology. The privatized entities have embarked on programmes to retrain workers as well as upgrade capabilities and to increase their competitiveness. Better terms of employment not only motivated the employees but also brought about a culture change in the work environment that was more result-oriented. In addition, employees were given the opportunity to participate in the ownership of the entities through the Employees Share Option Scheme. These schemes helped to instil a sense of belonging and dedication, thereby, enhancing productivity.

22. The Government has not relinquished all its responsibilities to the private sector. By transferring Government assets at a reasonable price to the private sector and providing soft loans, the cost of these facilities was reduced. As a result, the payment by the public to the private companies for these services could be reduced. For instance, if the total cost of building a highway is to be fully borne by a company, then the toll rate would likely be as high as 1 Ringgit per kilometre. Due to the Government subsidy, toll rates in Malaysia are the lowest in the world. The same applies for other privatized public facilities.

23. Nevertheless, during the Seventh Malaysia Plan period, through privatization the Government managed to save capital expenditure totaling RM49.2 billion, while the proceeds from the sale of equity and assets amounted to RM4.4 billion. This enabled the Government to allocate more funds for social services such as education and health, which benefited the rakyat, particularly the poor and those in the rural areas.

THE EIGHTH MALAYSIA PLAN, 2001-2005

24. Our primary challenge during the Eighth Malaysia Plan period will be to implement the National Vision Policy to strengthen the nation's capacity, capability and resolve in meeting future challenges. At the same time let us not forget that at the core of our socio-economic development is the overriding goal of national unity. With these perspectives in mind, the theme of the Eighth Malaysia Plan is achieving sustainable growth with resilience. Accordingly, the three key thrusts of the Eighth Malaysia Plan are to shift the growth strategy from input-driven towards knowledge-driven in order to enhance potential output growth, accelerate structural transformation within the agriculture, manufacturing and services sector and strengthen socio-economic stability through equitable distribution of the nation’s income and wealth.

25. Developing the country into a knowledge-based economy will permeate every sector and involve the rakyat at large. All must and can partake in greater utilization of knowledge. The knowledge content of all economic activities, be it in agriculture, manufacturing or Government will have to be increased so as to strengthen value added and generate employment. The Plan emphasizes this aspect in all the 23Chapters presented.

26. All Malaysians will be given equal chances and opportunities to enhance their quality of life and be involved in the knowledge-based economy. Focus will be directed towards providing better opportunities in education especially in rural areas, and increasing accessibility to better health facilities and affordable houses to be owned or rented by the rakyat. Efforts will also be taken to promote healthy lifestyles as well as providing more cultural and recreational amenities to enable our people to enjoy the aesthetic aspects of life. Participation in sports will also be encouraged to strengthen the spirit of solidarity, comradeship and esprit decorps among the rakyat.

27. From past experience we saw that economic development and globalization will have consequences on the nation’s social and cultural institutions and norms. Measures will have to be taken to ensure that society is resilient to withstand the negative influences that may erode moral values as well as affect social harmony and tolerance. Therefore, an important strategy will be strengthening moral and ethical behaviour among Malaysians. Greater emphasis will be given to nurture and inculcate positive values, particularly among our youths, through the implementation of programmes such as Rakan Muda. We also need to instil a sense of national identity and pride among our people from all walks of life.

MACROECONOMIC TARGETS AND PROSPECTS

28. The strengthening of macroeconomic fundamentals and the financial sector together with the strong performance of the economy in 2000 will provide the base to sustain the high growth during the Eighth Malaysia Plan period. The GDP is projected to grow at an average rate of 7.5 per cent per annum with low inflation. I remain confident that the medium-term prospect for the economy is still good despite the possible adverse effect of the slowdown in the US economy this year, on our exports and growth performance. Looking at the scenario for the five years of the Eighth Plan, private consumption in real terms is projected to increase at 7.4 per cent per annum in line with the expected rise in per capita income fromRM13,360 in 2000 to RM17,780 in 2005. Private consumption percapita is expected to increase from RM6,200 in 2000 to RM9,070in 2005, in view of the growth in disposable income.

29. Private investment will continue to provide the stimulus for the economy with its growth averaging 19 per cent perannum. Its share to total investment is expected to be 68.7per cent in 2005. Private investment in nominal terms, however, will have to increase by more than double from RM42.9billion in 2000 to RM105.5 billion in 2005. The capital market, particularly the private debt securities market as well as the pension and provident funds, will provide important sources of financing to meet the investment needs of the productive sectors of the economy during the Plan period. Foreign investment will continue to be important, although its share to total investment is expected to decline as a result of the anticipated higher growth in domestic investment and increased global competition for foreign direct investment(FDI).

30. As the economy matures, there will be less reliance on labour and capital input, while the contribution of Total Factor Productivity (TFP) as a source for growth will be further enhanced during the Plan period. TFP is expected to contribute 37.2 per cent of the 7.5 per cent per annum growth target, while the contribution of labour and capital will be21.5 per cent and 41.3 per cent, respectively.

31. The task before us is formidable as the increase in TFP contribution to growth will require wide-ranging structural transformation to upgrade economic efficiency. This will include improving skills and management capabilities, increasing research and development (R&D) spending, and greater use of technology and information and communications technology (ICT) in all economic sectors, in line with efforts to develop the knowledge-based economy. In addition, public investment will be increased to improve the education and training delivery system. At the same time, the private sector will be encouraged to assume a bigger role, particularly in terms of R&D and product innovation.

32. Malaysia's export performance in the next five years is expected to be favourable with gross exports forecast to grow at an average rate of 7.9 per cent per annum. With the scheduled liberalization of trade in goods and services under the World Trade Organization (WTO) as well as the commitments to tariff reductions under bilateral and regional trade arrangements, Malaysian exports are anticipated to penetrate a wider range of markets. Towards this end, Malaysia will need to enhance the competitiveness of its products through productivity increases and quality improvements. This includes the establishment of trading houses that will provide the support services to promote Malaysian exports overseas.

33. During the Plan period, gross imports will grow at a rate of 10.2 per cent per annum, comprising mainly of capital and intermediate goods. Efforts will be taken to increase the production of locally manufactured capital and intermediate goods, including parts and components, to reduce import intensity. However, local inputs will have to be produced more efficiently in order to compete with cheaper imports. Imports of consumption goods are expected to grow moderately in line with efforts to contain imported inflation, including the Buy Malaysian campaign.

34. The current account of the balance of payments is expected to remain in surplus for the whole Plan period, although on a declining trend, while the merchandise account of the balance of payments is expected to register a surplus of 17.4 per cent of GNP. However, the services account will continue to be in deficit at 11.4 per cent.

35. The Government will continue to implement measures aimed at reducing the large deficit in the services account. Increased foreign exchange earnings are to be expected from tourism, education, shipping and insurance, finance and consultancy services. These measures include among others, increasing the efficiency of the transportation services in view of the large deficit in freight and insurance. To enhance the efficiency of port services, efforts will be undertaken to streamline administrative procedures through the implementation of the electronic data interchange, expansion in the number of haulage companies, expansion of the domestic shipping fleet and stricter enforcement of cabotage rules.

36. Efforts will continue to be undertaken to maintain a low rate of inflation during the Plan period. Towards this end, measures to enhance local food production will continue to be implemented, particularly through the provision of land and the promotion of joint public and private sector initiatives to increase the supply of food, thereby reducing food imports. In addition, the Government will ensure that the growth of money supply is consistent with price stability, and adopt a prudent fiscal policy.

37. The anti-inflation strategy will also include various administrative measures, such as the enforcement of price-tagging and averting irresponsible price increases, prevention of restrictive sales practices and monitoring of the prices of basic necessities for the lower-income group. Measures to encourage automation and labour-saving techniques as well as increased participation of females and pensioners in the labour market will continue to be undertaken in order to moderate labour demand pressures and ensure that wage increases are in line with productivity growth. In addition, the price index is expected to be maintained at a low level with the availability of cheaper imports in the domestic market.

38. With the economic recovery, the public sector will resume its role as the facilitator of private sector participation in the economy. The operating expenditure during the Plan period will be moderated through prudent fiscal management and efficient use of resources. Meanwhile, the public sector development expenditure is estimated to increase from RM222.9billion during the Seventh Malaysia Plan to RM253.4 billion during the Eighth Malaysia Plan. Of this total, RM110 billion or 43.4 per cent will constitute the development expenditure of the Federal Government and RM109.4 billion or 43.2 per cent will be the development expenditure of the non-financial public enterprises (NFPEs). Although in current terms, the absolute level of the public sector development expenditure is larger, in real terms, it will be lower than that in the Seventh Malaysia Plan, in line with the policy to reduce the public sector's role in economic activities.

GROWTH AND DISTRIBUTION

39. The thrust of the poverty eradication strategy is to reduce the incidence of poverty to 0.5 per cent by 2005.Poverty eradication programmes will be more target-specific by addressing pockets of poverty, particularly in remote areas. In addition, the respective programmes will also address the issue of poverty among the Orang Asli and other Bumiputera minorities in Sabah and Sarawak. The strong economic growth that is anticipated during the Plan period is expected to generate more opportunities for the poor to increase their income and move out of poverty. The Government will intensify efforts to ensure that the poor and low-income groups also benefit from various measures implemented in education, health services, housing and the provision of quality amenities.

40. To address pockets of poverty among households in urban centres and its periphery, the Government will implement programmes such as the provision of housing and amenities as well as opportunities to generate income. At the same time, the respective states and local authorities will carry out the resettlement of squatter areas throughout the country. In addition, the existing integrated approach taken by local authorities, private sector and non-governmental organizations(NGOs) will be continued through programmes such as the Integrated Development for Urban Communities, Pusat RAHMAT, Projek HARAPAN and Skim Khas Ibu Tunggal.

41. The cooperation and willingness of this target group to accept these projects to increase their income is important if these projects are to be effective and successful.

INCOME DISTRIBUTION

42. The Government will continue to address the issue of income imbalance, particularly between and within ethnic groups, income groups, economic sectors, regions and states. With the expected high economic growth during the Plan period, the middle-income group is expected to increase in size and share of income. As part of a major long-term income distribution objective, the nation will create a bigger and more prosperous middle-income group in addition to increasing income of the lower income group. The cooperation of this target group, is once again important, for them to succeed.

43. Various measures will be implemented to reduce income imbalances between the rural and urban areas as well as between the less developed and the more developed states. Inrural development, the Government will continue to modernize and commercialize agricultural activities through various programmes. In addition, measures will be taken to encourage smallholders and farmers, particularly those with small and uneconomical land size, to diversify into activities such as aquaculture and livestock farming as well as in non-agricultural income-generating activities. At the same time, the Government will establish an income augmentation mechanism to protect smallholders during periods when the prices of primary commodities fall to drastically low levels in the world market. This will require discipline in the selection of the types of crops.

OWNERSHIP AND CONTROL OF THE CORPORATE SECTOR

44. As for the restructuring of ownership in the corporate sector, efforts will continue to be taken to improve effective Bumiputera participation as well as increase the share of capital ownership and control of companies to at least 30 percent by 2010. To accelerate the restructuring process, programmes that provide opportunities for potential young entrepreneurs and corporate leaders, particularly in the modern and strategic sectors, will be strengthened. As Bumiputera companies have, relatively speaking, made inroads into the construction, transportation and agricultural sectors, they will be encouraged to diversify into other higher value-added activities during the Plan period. Besides setting the quantitative target, an important agenda is to improve the resilience of the Bumiputera to enable them to sustain their corporate equity holdings and not succumb to divestment for short-term profits or when the country is faced with an economic crisis.

45. The role of Bumiputera institutions and trust agencies will be enhanced, especially in mobilizing Bumiputera resources and in creating new wealth. In this regard, Bumiputera trust agencies and institutions, such as the State Economic Development Corporations (SEDCs), will undertake measures to reposition review and consolidate their position to enable them to face future challenges. These institutions and trust agencies will also be provided with greater opportunities to increase their stake and effective ownership of companies for the benefit of the wider Bumiputera community.

EMPLOYMENT RESTRUCTURING

46. During the Eighth Malaysia Plan, the implementation of strategies and programmes to restructure employment in the various sectors and occupations will continue to be undertaken. Measures will be taken to improve the balance of Bumiputera and non-Bumiputera employment in both the public and private sectors. This will require concerted efforts of both the Government and the private sector. The concentration of non-Bumiputera in the private sector and the Bumiputa