KUALA LUMPUR: Despite being in its early stages, the MADANI Economy framework has begun demonstrating its capability in addressing economic challenges and improving the people's standard of living.

With nine years remaining, the framework, announced by Prime Minister Datuk Seri Anwar Ibrahim on July 26 last year, shows promise with initiatives aimed at boosting the Malaysian economy.

Malaysian Economic Association president, Dr Yeah Kim Leng noted that the MADANI Economy framework's principles have been integrated into various national plans, including the New Industrial Master Plan 2030 (NIMP 2030), the National Energy Transition Roadmap, and the 12th Malaysia Plan Midterm Review.

"These initiatives provide the necessary policies and strategies for the private sector to be assured of a clearer direction of the economy and greater policy certainty under the Unity Government.

"Given that the private sector accounts for more than three-quarters of the economy, its confidence is a necessary condition for growth to take off as envisaged in the MADANI Economy framework," he told Bernama. 

MADANI Economy Framework and the NIMP 2030

According to Anwar, who is also the Finance Minister, the "MADANI Economy: Empowering the People" initiative is a comprehensive plan that addresses competitiveness, investment attraction, and current issues affecting people's lives.

He said the MADANI Economy initiative sets seven key performance indicators as medium-term targets to be achieved within 10 years.

The seven key indicators are: Malaysia ranking among the top 30 world economies; top 12 in the Global Competitiveness Index; labour income constituting 45 per cent of total income; 60 per cent female labour force participation; top 25 in the Human Development Index and Corruption Perception Index; and achieving fiscal sustainability with a deficit of 3.0 per cent or lower.

Meanwhile, the NIMP 2030, launched in September last year, is a key component of MADANI Economy as it will support the realisation of economic reforms and aim to revitalise the manufacturing sector.

The NIMP 2030 is designed to drive Malaysia's trajectory as a global leader in industrial development, extend the domestic linkages to create wealth across the nation, as well as strengthen its position in the global value chain.

With a seven-year window, the NIMP 2030 focuses on advancing economic complexity, enhancing technology uptake to become a digitally vibrant nation, pushing for net-zero emissions, and safeguarding economic security and inclusivity.

Anwar said these goals will be supported by four key enablers to overcome systemic and institutional challenges, namely, addressing financing issues, nurturing talent development and acquisition, improving the investor experience, and enhancing governance mechanisms.

Delivering on Promises

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid commended the administration for fulfilling its promises, gaining recognition from the investment community.

He noted that the advance estimate for the country's gross domestic product (GDP) for the second quarter of 2024 (2Q 2024) came in at 5.8 per cent, surpassing consensus estimates of 4.7 per cent.

"The ringgit versus the US dollar has also gained good traction after hitting RM4.7987 on Feb 20 to around RM4.6835 on July 22," he said.

Mohd Afzanizam also highlighted that two credit rating agencies, namely S&P and Fitch Ratings, have maintained their stable outlook on Malaysia's sovereign rating, while JP Morgan recently upgraded its country rating on Malaysia from "underweight" to "neutral.".

The government's fiscal consolidation efforts, including rationalising diesel subsidies and implementing new tax measures, are expected to help achieve a fiscal deficit of 4.3 per cent of GDP in 2024, he said.

He added that engagement sessions with industry players and investors have provided a clear sense of direction on policies, which has translated into more commitment from investors abroad.

"Investor engagement has led to a 13 per cent increase in approved investments to RM83.7 billion in 1Q 2024, with foreign investment commitments rising by 23.8 per cent to RM47 billion," said Mohd Afzanizam.

National Council of Professors fellow Prof Dr. Azmi Hassan opined that initiatives like the NIMP 2030 have successfully boosted both foreign and domestic investments.

"I think there's been an increase of interest from foreign investors because they see that the Prime Minister has prioritised the eradication of corruption and inefficiency in the MADANI Economy framework," he added.

More Efforts Needed, Especially for SMEs

Although the MADANI government is focusing on small and medium enterprises (SMEs) through NIMP 2030, still, more needs to be done to elevate them to regional or international levels, said Small and Medium Enterprises Association of Malaysia (SAMENTA) president Datuk William Ng.

"We find that most SMEs have continued to be strong domestic players but lack the capability to be regional or even international players.

"Of course, the NIMP 2030 is trying to address this by proposing to have more SMEs plugged into the global supply chain and expand our offering so that we can move up the value chain," he said.

However, he also noted that the NIMP 2030 leans more towards the manufacturing sector, while 85 per cent of SMEs are in the services sector, which faces challenges like inflation and rising business costs.

"Utilities, wages, and rental costs have almost doubled in some markets. Despite increasing business, profit margins are compressed.

"As such, measures must be put in place via the MADANI Economy framework to ensure SME survival," he said.