Malaysia on Tuesday unveiled ambitious plans to boost its economy by mobilising hundreds of billions of dollars of private investment, although questions remained over whether the money would materialize.
The plans ranged from a new mass transit system to relieve congestion in the capital, Kuala Lumpur, to building a huge oil storage facility next to neighboring Singapore to form a regional oil products trading hub.
A government thinktank said it had identified investments worth $444 billion over 10 years, of which 60 percent would come from the private sector, 32 percent from government-linked companies and 8 percent from government.
The investment aims to double per capita income and push Malaysia into the ranks of “developed” nations by 2020, rebalancing Asia’s third most export-driven economy toward domestic demand and the service sector.
“The plan does not provide a clear sense of where the money is coming from. A lot of these numbers are pie in the sky,” said Bridget Welsh, a Malaysia specialist at Singapore Management University.
Malaysia is competing for investment with other fast-growing countries in Southeast Asia and neighboring Indonesia recently unveiled plans to boost infrastructure too.
In the past 10 years, private companies invested just 535 billion ringgit ($172.4 billion), according to official data and Malaysia’s private investment rate of around 10 percent of gross domestic product (GDP) is among the lowest in Asia and a third the level it was before the 1998 Asian financial crisis.
The government, which in 2009 ran its biggest budget deficit in 20 years as a percentage of GDP, contributes around half the investment in Malaysia and the minister in charge of presenting the investment plans said the new targets were credible.
“I don’t think the government would publish a document that thick if there is no political will. It’s a risky strategy to expose yourself so publicly when you have no plan to do it,” Idris Jala told a public presentation on the plans.
The plan relies heavily on domestic capital as foreign direct investment in this country which in the early 1990s accounted for almost 40 percent of the Southeast Asian total accounted for just 3.8 percent in 2009, according to United Nations data.
Malaysian companies like leading bank CIMB and telco Axiata have started building a regional presence in large, fast growing countries, such as Indonesia.
Economists warned without a new policy framework to encourage investment the Malaysian plans would be hard to realize.
“It will be difficult to achieve the private investment growth target set by the government if there are no additional tax incentives given to the focus sectors,” said Gundy Cahyadi, regional economist at investment bank OCBC.
The plans aim to create another 3.3 million jobs by 2020, many in the high-value service sectors such as Islamic finance. Idris said 46 percent of the new jobs would be “middle-class.”
Despite churning out tens of thousands of graduates, Malaysia’s education system has failed to deliver and is becoming increasingly polarised by arguments over language between the majority Malay population and minorities such as the large ethnic Chinese population.
The government thinktank that designed today’s investment plan said that in 2003 Malaysia had just 21,000 finance and accounting professionals qualified to be employed by multi-national companies compared with 341,000 in India and 127,000 in the Philippines.
“How can you create middle-class jobs when you do not have an education system that works,” said Singapore Management University’s Welsh.
There is also policy risk in Malaysia. Recent plans for a radical overhaul of the country’s costly subsidy regime proposed by the same thinktank that outlined the investment plans were shot down by government politicians who feared unpopularity. -arabnews