The Launching of Madani Economy

• We witnessed the momentous launch of the Madani Economy on 27th July 2023. This historic event marks the unveiling of the visionary economic direction by Prime Minister Datuk Seri Anwar Ibrahim, encapsulated under the resonant theme “Madani Economy: Empowering the People.”

• At its very core, the Madani Economy embodies a revolutionary paradigm, on the bedrock principles of inclusivity, sustainability, and innovation. It sets forth on a ten-year journey, starting 2023, fueled by determination to scale new pinnacles of economic growth and progress. Within this ambitious timeframe, the nation has set its sights on achieving seven critical benchmarks that will serve as the fulcrum of its transformative journey.

The Vision

• The Madani Economy presents an all-encompassing paradigm, poised to foster a more prosperous Malaysia that caters to the needs of its diverse populace. This framework entails a two-fold approach: firstly, it aims to 'Raise the Ceiling' through a meticulous restructuring of the economy, thereby bolstering the nation's overall wealth and prosperity. Simultaneously, it advocates for the imperative to 'Raise the Floor', whereby the principles of social justice will be ardently championed, ensuring that the augmented wealth is distributed equitably among all segments of the Rakyat, promoting inclusivity and fairness.

• The government has also laid out a comprehensive vision aimed at propelling Malaysia to greater heights, encompassing the following objectives:
  1. Aspiring to position Malaysia among the Top 30 largest economies globally, reflecting a commitment to sustained economic growth. According to the World Bank, Malaysia is currently ranked no. 37th in the world, with nominal GDP of USD406.31bn. Our current GDP per capita is USD11,972, making us an upper middle-income country.
  2. Endeavoring to attain a place in the Top 12 on the Global Competitiveness Index, emphasising efforts to enhance business environment and innovation. Malaysia's competitive edge on the global stage has been waning, evident from its IMD World Competitiveness Ranking of 27th in 2023, in sharp contrast to its more favorable standing of 14th in 1997.
  3. Striving to achieve a spot within the Top 25 on the Human Development Index (HDI), indicating a focus on improving citizens' overall well-being and quality of life. The last record showed Malaysia's HDI value was 0.803 as at 2022 report — which put the country in the Very High human development category — positioning it at 62 out of 191 countries and territories.
  4. Fostering an environment that increases the labour share of income to 40%, emphasising fair remuneration and reduced income disparities. In 2022, only 32.4% of income accrues to workers.
  5. Working towards a higher standing in the Corruption Perception Index, aiming to be among the top 25 countries, as part of the government's commitment to combat corruption and promote transparency. In 2022, Malaysia ranked 61st, compared to 29th back in 1998. 
  6. Targeting a fiscal deficit of 3% or better, showcasing a dedication to sound financial management and fiscal responsibility. According to Ministry of Finance (MoF), the fiscal deficit under the Medium-Term Fiscal Framework (MTFF) 2023-2025 is expected to consolidate at a gradual pace with the overall balance averaging at 4.1% of GDP.
  7. Increasing women's participation in the country's workforce to 60%. The female labor force participation rate remained disappointingly low, stagnating at 55.8% in 2022, whereas the male counterpart exhibited a much higher rate about 82%.

Our Thoughts

• The initial perception is that this endeavor can serve as a catalyst for national progress and advancement. This undertaking entails implementing enhancements and modifications to the existing economic and social frameworks, with the explicit purpose of augmenting efficiency, fostering inclusivity, and propelling sustainable growth. By embracing a restructural policy, a country can surmount its challenges, unlock its untapped potential, and pave the path towards a more promising future for its populace.

• Given the targeted outcome to be within a decade, the targeted fiscal deficit of 3% appears to be promising. This is in tandem with the projections outlined in the Medium-Term Fiscal Framework (MTFF) by the Ministry of Finance of 4.1% between 2023 and 2025.

• While no other specific macroeconomic targets been explicitly mentioned, the Prime Minister did allude to the possibility of achieving a GDP increase of 5.5% (in the base case scenario) and even up to 6.0% (medium term target). The assertion of a robust growth rate appears somewhat slightly optimistic, in our view, but the successful implementation and execution of these policies will play a pivotal role in attaining the desired outcomes. For comparison, the International Monetary Fund's (IMF) long-term projection for Malaysia's GDP stands at a more conservative 3.9% in 2028.
• Realising such ambitions necessitates the development of highly competitive local enterprises capable of thriving within the regional landscape. It is of utmost importance to empower domestic companies, enabling them to expand their presence and operations in ASEAN countries. This strategic move not only fortifies Malaysia's economic position but also contributes to bolstering regional economic growth and overall stability.
• In addition to fostering the growth of domestic enterprises, the government must undertake comprehensive reforms to enhance Malaysia's global competitiveness and facilitate a more businessfriendly environment. By striving to rank among the top 12 economies worldwide in these crucial aspects, Malaysia can attract a greater influx of foreign direct investment, consequently fostering innovation, generating more job opportunities, and propelling sustained economic growth. Such a pro-active approach towards economic development ensures that Malaysia remains an attractive destination for international investments, stimulating progress on multiple fronts and augmenting the nation's prosperity.

• The blueprint unveiled yesterday marks a promising beginning for the new government. We hold the belief that through meticulous implementation, monitoring, and execution, the desired outcomes can be achieved in due course. It is imperative that this blueprint aligns cohesively with the ongoing progress of the government's efforts. Moreover, it should be regarded in conjunction with existing and forthcoming policies, such as the 12th Malaysia Plan (2021-2025), the Mid-term Review of 12MP, the New Industrial Master Plan, which is expected to be announced in the 2H, and the upcoming 2024 Budget.

Source: TA Research - 28 Jul 2023