National development planning in Malaysia: Learning from the past to chart the future

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A woman walks in Putrajaya, the federal administrative center of Malaysia. As the country gears up to work on its 12th Malaysia Plan, its rich experience in national development planning for the past 60 years provides key lessons to consider.

Ascertaining the role of national development planning in supporting Malaysia’s aspiration to become a high income and developed country can be an enormous feat – given the complexities and challenges tied to remaining competitive in the global environment as well as meeting rising citizen expectations.

National Development plans and strategies have been implemented with varying levels of success in countries around the world - with the goal of promoting growth and shared prosperity for its citizens.

For Malaysia, national development planning has been central in guiding economic policymaking for more than 60 years. Malaysia’s development outcomes over the course of six decades have occurred against the backdrop of this five-yearly development blueprints called the Malaysia Plans, currently in its 11th edition, illustrating its importance as a policy instrument to promote growth and shared prosperity.

The poverty rate has declined. Standards of living have improved. Social and economic infrastructure have expanded and grown in sophistication. In 2003, universal access to primary education was also introduced and as such, government expenditure on education - which accounts for almost 5% of the country’s GDP - outperforms its neighbors.

Further, Malaysia’s economy has diversified from an agriculture- and commodity-based economy to one that is now based on manufacturing, services and, more recently, the digital economy. Per capita GDP increased by six times in ringgit terms between 1970 and 2017, and there has been a 6% increase in real income. These strides have propelled Malaysia to become a leading economy in the region.

Much of these dividends have been due to good planning and implementation, with political commitment from the highest levels. The national development planning system has been a beacon, directing key socio-economic reforms in the face of favorable economic climates, and even during economic transitions and global downturns, with some adjustments. Top-down and bottom-up approaches featured in the system balanced technical details, stakeholder buy-in and ownership with deep consultations within and beyond government. This was further backed by budget resources and a strong mandate for the Economic Planning Unit (now the Ministry of Economic Affairs) and as a result, policies were implemented through programs and projects in coordination with line ministries and sub-national governments.

The government has since announced that it will be commencing work on its 12th Malaysia Plan (2021-2025). To this end, we draw from the recently concluded World Bank assessment of Malaysia's experience with national development planning to explore the lessons learnt in the quest to elevate the quality of planning inputs and processes, implementation and corresponding outcomes.

Some of the challenges include:

• Coordination among inter-governmental agencies: The introduction of new reform agendas accompanied by the creation of new institutional structures can affect the effectiveness of inter-agency coordination when done without proper integration.
• Efficacy in measures and implementation gaps: Using the planning system to achieve socio-economic outcomes has several limitations. Ensuring institutional capacity to keep up and coordinate responses against an environment of rapid change and dynamic policy dimensions is key.
• Adequate resources: Plans need to be backed by adequate fiscal resources. This becomes ever more urgent when external factors come into play, for example, the collapse of oil prices during the mid-1980s.

The assessment also suggested a few approaches to meet these challenges:

• Strike a stronger balance between getting the plan right and the quality of implementation by learning the lessons from past implementation and integrating them into future program designs.
• Boost capacity by considering institutional systems and human resource management and development issues.
• Embed an annual review process that will enable quicker revision of targets and key performance indicators based on changes in the global, regional and domestic economic environments.
• Strengthen the Mid-term Review process with more emphasis placed on the feedback cycle through better, more focused, frequent and timely monitoring and evaluation.
• Reduce the distance between planners and beneficiaries through devolution and have development priorities set at the state and sub-state level. The current administration’s promise to share oil revenues, if implemented, could make this a welcome reality for some states.
• Adopt a more nuanced and targeted approach to the challenge of combating poverty and inequality and promoting inclusivity by addressing socio-economic development gaps in lagging regions, states and sub-states.
• Recalibrate the state’s role in industrial policy in economic sectors by prioritizing interventions that create the right environment to achieve socio-economic goals.

Malaysia will most likely retain its approach to national development planning as it remains a central feature of long-term policymaking. But one cannot deny the shifting realities transforming the state of play in the country. A different political and policy environment that places more emphasis on economic governance and citizen-centricity has emerged since the elections of May 2019. This will change the way national development planning is done, with officials potentially more open to reflecting upon the adequacy of institutional and policy frameworks and the planning system. The system will have to face the ultimate test – whether it will remain a relevant and effective policy tool as the nation shifts its sights and standards to be on par with developed and high-income countries.