The Malaysian Economy

Introduction Malaysia's 1985/86 Nadonal Budget Report was presented to Parliament on 25 October 1985. A significant event in any fiscal year, this particular presentadon took on added significance by virtue of its timing. The absence of tough fiscal measures despite the condnuing recession, for instance, renewed speculadon of an early general election. The year 1986 is, however, more than just a potential election year; it marks the beginning of the final quarter of the New Economic Policy (NEP), and of the Fifth Malaysia Plan. The NEP, formulated in response to the inter-ethnic violence of May 1969, aims to reduce and ultimately eradicate poverty among all Malaysians irrespective of ethnic origin, and concurrendy bring about a social restructuring that would eliminate the identification of ethnicity with economic function. The twenty-year Outline Perspective Plan (OPP) which incorporates the NEP spells out the specific targets to be achieved by 1990: (a) the generation of employment opportunities at a rate sufficient to bring about full employment; and (b) the redistribution of the ownership of economically productive assets in the country such that by 1990, bumiputras (Malays and other indigenous people) will own or operate at least 30 per cent of the total commercial and industrial activities in all categories and scales of operation. The restructuring objective is also extended to employment, with the labour force reflecting the ethnic composition of the population in a full-emplovment situation by 1990 (Economic Report, 1975j76 [Malaysia: The Treasury, 1976], p. 111). For policy-makers, a crucial decision would have to be made, and incorporated into the five-year plan: whether to go for broke to achieve the NEP's restructuring objectives; or accept the difficulty of doing so, and seek to extend the objectives of the NEP beyond 1990. Given the often-repeated insistence of some of the leadership that the restructuring exercise would be completed on schedule, the latter alternative would be a bitter pill to swallow. The Fifth Plan would also reflect official rethinking on strategies for economic growth. The major vehicle for this rethinking is the Industrial Master Plan (IMP), a three-year exercise which was to have been completed in mid-1985 but had yet to be released at the time of the Budget presentation. The present administration under Prime Minister Datuk Sri Dr Mahathir Mohamad appears to have done some rethinking of its own, as it has recendy ploughed considerable resources into heavy industry projects. How this will square with the eventual recommendations of the IMP is an issue of considerable importance. However, given the pre-eminence of the NEP objectives in the planners' considerations, it is reasonable to assume that any rethinking of economic policy would have to be fully consistent with the more fundamental rethinking on the NEP objectives. All these considerations would have come into play in the preparation of the 1985/86 Budget Report. In that light, Finance Minister Daim Zainuddin's Budget speech was a major statement on the government's intended direction for the Malaysian economy

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