Shared Prosperity Vision 2030 (SPV), launched by the Prime Minister on 5th October, signifies an overarching goal in a new era post Vision 2020, as the country transitions towards the 12th Malaysia Plan (12MP) and eventually 13MP. SPV envisages a sustainable growth model, with lofty goals of fair and equitable distribution across income groups, ethnicities, regions and supply chains. The intended outcome is to ensure decent standard of living for all citizens.

● Clear emphasis on bridging the gap. The SPV highlights income disparity, as being amongst the key issues which the vision aims to tackle. Specifically, it recognises the existence of widening income gap between employees and capital owners, T-20 and B-40, urban and rural as well as across states. In addition, it opines that the economy is expanding at below potential, with still insufficient technology adoption and diversification in sources of growth, whereby exports of petroleum and gas widened its share of overall exports from 6% in 1998 to 15.5% in 2018. Of note, bumiputera concerns also appear as the priority of the vison, covering areas ranging from income, employment and small and medium-sized enterprises (SMEs). We view that the government manages to rightly bring the attention towards the high-stakes issues, similar to those underscoring the World Bank’s Shared Prosperity agenda.

● 3 objectives, 15 guiding principles, 7 thrusts and 8 enablers. The SPV has been framed into four layers, with the first being three objectives, which are development for all, addressing wealth & income disparities and united prosperous & dignified nation, followed by 15 guiding principles. It is then further broken down into seven thrusts, standing out as the most crucial segment of the overall blueprint, providing a comprehensive overview of the areas that the government is trying to improve. The first four thrusts hover around the economic growth side, while the last three thrusts are focused on the issue of inclusivity, with one of them targets to develop new regional economic hotspots outside Klang Valley, similar to those evident in the advanced economies.

● Complementing the thrusts, 15 new sectors or termed as Key Economic Growth Areas (KEGA) and proposed distribution of the sectors by state have been specified. While the approach of tapping into new sources of growth and adopting a niche-based planning for development at the state-level is commendable, we could observe some redundancy in the new sectors listed and we foresee further fine tuning is required for the distribution list. For example, digital economy and industrial revolution 4.0 are those that overlap each other and which may pose hurdles and result in inefficient usage of resources when executing the development plan. As for the proposed distribution of KEGA by state, we reckon that before finalising the list, a thorough consultation with state agencies and local leaders are vital as to enact some sense of ownership to the overall blueprint as well as to ensure smooth implementation of policies.

● The goal of achieving RM3.4t (nominal) economic size in 2030 may be unattainable with SPV’s projection of 4.7% average real GDP growth per annum between 2021 and 2030. Based on our calculation, with a 4.7% average real GDP growth rate, the economy would probably reach RM2.3t (real) GDP in 2030. If converted to a nominal value, according to historical trends, the difference between the nominal and real value should not be far off. Using a 10-year (2009-2019) average deflator of about 1.5%, we estimated that nominal GDP value would only reach up to RM2.9t. Still about RM0.5t short of the RM3.4t target. This assumes that the economy would grow on a relatively smooth growth trajectory, possibly devoid of shocks or random economic events. Hence, to reach the SPV growth target it requires a much faster pace of expansion. Apart from this, we reckon other envisioned goals, given the right planning, monitoring and execution, are realistic and attainable.

● Overall, SPV 2030 propels Malaysia to prepare itself to thrive in the new economic era. The blueprint also helps to shove up sentiments, providing a clear long term direction that the government is heading for. Going forward, focus should be on executing it, ensuring all stakeholders are well-informed of the plan and are able to work cohesively towards the goals.

Source: Kenanga Research - 7 Oct 2019