This article first appeared in Forum, The Edge Malaysia Weekly on July 3, 2023 - July 9, 2023

More than six months after the formation of the unity or Madani government in Malaysia, some commentators and industry players have expressed concern, both publicly and privately, about the lack of a coherent economic narrative by Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim. To be fair to Anwar, others in his position have taken longer to formulate, announce and implement their own economic narrative and plans.

Datuk Seri Najib Razak was sworn in as prime minister in April 2009, and it took more than a year before the Economic Transformation Programme was launched in September 2010. It took US President Joe Biden’s administration more than a year after he took office in January 2021 to come up with a coherent economic and industrial policy, with the landmark Inflation Reduction Act and CHIPS Act being passed only in August 2022.

There will be other economic-related policies that will be launched in the next two months, including the New Industrial Master Plan 2030 (of which I am a member of the review committee) under the Ministry of Investment, Trade and Industry (Miti) and the Mid-Term Review of the 12th Malaysia Plan under the Ministry of Economy.

But what interested stakeholders are particularly focused on is Anwar himself expressing a more comprehensive viewpoint and outlining specific strategies that will provide economic direction for the country over the next few years. Since the prime minister has been collecting inputs from various sources for possible incorporation into his Madani economic vision, I thought that I would do my part by proposing the following eight economic strategies for his consideration.

First, Anwar should announce a comprehensive social protection programme to ease the burdens of the B40 and M40 as general subsidies on petrol, electricity and others are slowly reduced and replaced with targeted subsidies. The markets will appreciate a firm commitment to a subsidy rationalisation programme because it will reduce the fiscal burden on the government. Voters will accept the pain of higher petrol and electricity prices if they know that they will get government assistance in other more targeted ways. For example, the funding for the MySalam programme, which provides automatic insurance coverage for 45 critical illnesses of RM8,000 per individual, is scheduled to run out in 2023. The Perlindungan Tenang health insurance programme applies only to those B40 who have signed up via insurance agents. A more comprehensive and well-structured health insurance programme can be introduced to protect the B40 and M40 communities from financial emergencies in the case of catastrophic health events in the family. In addition, more targeted schemes such as subsidies for accident insurance coverage can be offered to selected groups such as gig delivery riders and drivers.

Second, Anwar should announce the establishment of a progressive wage model for different blue-collar jobs in certain segments such as food services in the F&B sector, factory line workers in the manufacturing sector and fresh fruit bunch (FFB) collectors in the plantation sector. The intention of this model is to introduce high-functioning tripartite partnerships involving the government and sector specific unions and employers, to map out a pathway to invest in the skills of workers, introduce greater automation and slowly but surely, improve the wage structure, sector by sector. This model can enhance the minimum wage discussion which takes place within the context of the National Wages Consultative Council, which is a much more rigid, one-size-fits-all minimum wage approach for the entire country. A more sector-specific approach will also increase the capabilities of individual unions, employers’ groups and even the Ministry of Human Resources because it would require higher capabilities in the analysis of existing sectoral wage structures, for long-term planning of the upskilling of workers by sectors and for putting in place productivity measurements that can be linked to wage growth. At the same time, the long delayed multi-tiered levy for foreign workers by sector should also be introduced to provide the proper incentives for companies to increase their level of automation and plan their hiring quotas accordingly.

Third, Anwar’s government should catalyse a digital revolution in the country in leading by example. He should commit to migrating a certain percentage of government services to the cloud not just to improve service delivery but also to give a much-needed boost to the cloud services industry in the country. He should also empower a member of his cabinet to implement the National Digital Identity Initiative, which would allow Malaysians to access all government services via a single digital ID. Singapore already does this through its Singpass initiative and this has led to a proliferation of activities in the online service space, including via the platform economy, the app economy and in the fintech space. It may even help in the reduction of online scams. The initiative by Economy Minister Rafizi Ramli to increase the accessibility of government data via OpenDOSM should be replicated by other ministries and agencies to further spur this digital revolution. For example, real-time arrival and departure data for trains and buses under Prasarana can be made available via open application programme interfaces or APIs so that those who are interested can develop their own applications using this open data.

Fourth, Anwar should push for an agricultural revolution to bring back some jobs and people to the rural areas and to rejuvenate the rural economy. With the right incentives and policies, similar to the Return-to-Farm programme that was implemented in South Korea in the 2010s, many people — including those from the younger generation — can start their own agro ventures (which can includes agrotourism products) in rural areas near small towns that are facing depopulation. These young people can use the latest technology, including drones for mapping, Internet of Things devices to measure soil fertility and software for better crop management to increase agricultural productivity. New crops should be introduced to diversify away from our dependence on durians — including fast-growing Paulownia trees, high-value grains such as millet, and algae grown in freshwater lakes as a form of biofuel, just to name a few.

Many would point to Sekinchan in Selangor as a successful story of a small town that has grown prosperous from agropreneur and agrotourism activities. I believe that other small towns in Kedah, Perak, Johor and on the east coast of Peninsular Malaysia can replicate the Sekinchan model, with closer cooperation between the federal and state governments. More tweaking needs to be done for small towns in Sabah and Sarawak because of the longer distance from major cities but with the right vision, leadership and implementation, I believe that such models can be replicated in East Malaysia. Foreign investment in the agro-industry sector should also be encouraged such as the joint venture with FGV Holdings Bhd that was announced by the Baladna group from Qatar in 2022 to produce milk and dairy products in Perlis.

Fifth, the role of ESG as a key economic driver must be given prominence. Investment, Trade and Industry Minister Tengku Zafrul will launch the National Environmental, Social and Governance Industry framework (i-ESG) for the manufacturing sector in September. National Resources, Energy and Climate Change Minister Nik Nazmi has already announced a spate of measures to further grow the renewable energy sector, including lifting the ban on exporting RE overseas and increasing the Net Energy Metering quota for self-consumption from 75% to 85%. Each ministry must be empowered to design and drive their own ESG-related economic programmes. For example, national and state guidelines for the construction of housing for foreign workers on industrial and agricultural land according to internationally accepted standards must be adopted to have better housing standards for foreign workers and to provide a boost to the construction sector. Companies and the government can work together to create Verified Carbon Standards (VCS) programmes that can qualify for carbon credits at the international level as part of a larger plan to enhance the green economy and the green financing ecosystem in Malaysia.

Sixth, a new strategy of smart reindustrialisation needs to be pursued, with the proper incentives and financing from the government as well as the private sector. The details of this strategy will be found in the New Industrial Master Plan 2030, which will be launched by the investment, trade and industry minister in August. The Biden administration has already provided the example of an aggressive reindustrialisation policy for the world to examine. While Malaysia does not have resources on a similar scale as the US, we do have a good base of existing manufacturing excellence on the part of local as well as foreign companies to build on. The key challenge here is the role of facilitator played by the government to enable local and foreign companies to capture new opportunities in the manufacturing and manufacturing services space such as electric vehicles and related components & software and finding strategic niches in the global supply chain ecosystem.

Seventh, Anwar should introduce a spate of policies to attract high-skilled and high-income workers and their families to work and live in Malaysia. One low hanging fruit would be to reintroduce the pre-2021 conditions for the Malaysia My Second Home (MM2H) programme. This would give confidence to the expatriate community that Malaysia is once again a welcoming place for them. Although retired expatriates under the MM2H programme may not be high-income earners, they can be influential promoters of Malaysia to their friends. Plus, they spend a significant amount of their savings on healthcare services, rent and F&B during their time spent in Malaysia. Special visas should also be given to high-income workers who are employed by companies outside Malaysia, provided they can show proof of a monthly salary that exceeds a certain amount. These visas would attract many expatriates who are increasingly priced out of the property market in Singapore and wouldn’ t mind living in Kuala Lumpur or Johor Baru and commuting to Singapore a few days a week for work. Finally, foreign students who are studying in Malaysian universities should be given a pathway to remain in the country to look for work, especially those with in-demand language, programming and data analytics skills. Right now, these students, who are already familiar with the country, have no choice but to leave Malaysia to work even though some of them have skills they can offer to local companies. This will not only increase the availability of skilled workers to Malaysian companies and foreign investors, but also give the higher education sector in the country a boost.

Eighth, there should be a comprehensive update on the structure of investment incentives and rationalisation of Investment Promotion Agencies (IPAs) in the country. According to my sources, many of the incentives provided by the Malaysian Investment Development Authority (Mida) have expired, including incentives for the less developed areas and for principal hubs and they have not been replaced with new policies. At the same time, Malaysia is expected to implement the global minimum tax regime soon, and this will most certainly affect current and future foreign investors. This is a good opportunity for the Ministry of Finance and Miti to align on strategic incentive structures for future foreign direct investments (FDIs) and to communicate this clearly to the foreign investor community inside and outside the country. At the same time, the government should consider rationalising the number of federal IPAs, which number more than 20, many of which require high monthly operational expenses to run. This would not only result in much needed savings for the government, but it would also make life easier for foreign investors so that they will not have to approach a multitude of IPAs to have their case heard.

I hope these humble suggestions can reach the desk of the prime minister or perhaps the smartphones of some of his closest economic advisers.

Professor Dr Ong Kian Ming is director of the philosophy politics and economics (PPE) programme at Taylor’s University. He is also senior adviser to Global Counsel, an international strategic advisory firm. He can be reached at [email protected].

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