12th Malaysia Plan: Addressing mismatch in the job market, reducing reliance on foreign labour, and more

Overall, the 12MP covers nine key areas of focus from 2021-2025, such as boosting economic growth, deeper support for less developed states, and pushing for the average household income to be at about RM10,000/month by 2025.

Malaysian Prime Minister Ismail Sabri Yaakob unveiled on Monday (27 September 2021) the 12^th Malaysia Plan (12MP), one he deemed "a comprehensive development plan that will introduce a number of reforms, to ensure sustainable economic growth with a more equitable distribution of opportunities and outcomes."

The Plan, which covers five years (2021-2025), covers four key goals:

• First: GDP growth is targeted at 4.5% to 5.5% per annum in the period 2021-2025;
• Second: The average household income is estimated at about RM10,000 per month in 2025;
• Third: The GDP per capita gap between the Central Region and Sabah will be reduced to 1:2.5, while for Sarawak it will be reduced to 1:1.2 in 2025; and
• Fourth: Reduction of greenhouse gas emission intensity or Green House Gas (GHG) by 45% of GDP in 2030, based on emission intensity in 2005, in line with the 2015 Paris Agreement.

These will be spread out across nine key focus areas of the Plan, as follows:

#1 Boosting economic growth

This first focus, PM Ismail said, is on restoring the growth momentum of all sectors of the economy, and creating new sources of growth. The growth of several strategic and high-impact industries, namely electrical and electronics, global services, aerospace, halal industries, creative, tourism, biomass, and smart agriculture activities will be accelerated. The transformation of micro, small and medium enterprises (MSMEs/PMKS) will also be strengthened.

• The growth of the services sector will be supported by the sector modernisation strategy, to become a regional services hub. In this regard, clear policies and legislation as well as a conducive business environment will be established to further encourage quality investment. In line with the development of the Fourth Industrial Revolution (4IR), the manufacturing sector is expected to shift to the production of high value-added products and the Malaysian industry is set to become an important player in the global value chain.
  
  
• The agricultural sector will be intensified by using smart technologies to increase productivity and strengthen the country's level of food security.
  
  
• The construction sector will be boosted by the use of advanced technology, including augmented reality and virtual reality in line with the Construction Strategic Plan 4.0, to further increase efficiency and productivity.
  
  
• The mining sector will place emphasis on the production of high value-added processed minerals, sustainable mining activities and the production of new minerals.
  
  
• Productivity growth will be boosted through research and innovation activities, the use of advanced technology, while reducing dependence on less skilled labour. International trade will be strengthened by identifying new markets and products, improving the efficiency of trade facilitation and enhancing the competitiveness of key export industries. In addition, trade cooperation will be encouraged through the ratification of new free trade agreements (FTAs) such as the Regional Comprehensive Economic Partnership (RCEP).

PM Ismail added: "The Government wants to see the private sector play a bigger role in helping the country drive economic growth. In this regard, I assure you that the Government will reduce red tape, provide quality and reliable infrastructure, strengthen the ecosystem to support private investment and develop a skilled workforce."

Apart from the above, the following will apply:

• The National Investment Aspirations Policy will be the main framework for attracting quality investment, and positioning Malaysia as an investment hub in the region. Existing incentives will be reviewed, to focus on investment-based advanced technology and meet the aspects of environmental sustainability. This, the PM shared, will be able to support the country's desire to accelerate the transition to industries based on advanced manufacturing without compromising the environment.
  
  
• At the end of 2020, the number of SMEs is estimated at almost 1.2mn, equivalent to 97.2% of the total number of enterprises. However, the PM said "most PMKS are still less competitive and need to be re-empowered after being affected by the pandemic. Therefore, the Government is committed to continue to assist and support the recovery of PMKS. At the same time, PMKS are encouraged to pursue the digital transformation agenda to drive growth in new post -pandemic norms."

PM Ismail noted: "I am pleased to inform that the Government has agreed to approve several major programmes and projects to be implemented in the 12MP to accelerate the growth of strategic sectors and industries. Among them are investment loan funds for research and development in the fields of aerospace, electrical and electronics; the establishment of the Center of Excellence for Future Industry; intellectual property funds; and a simplified financing scheme for digitisation and adoption of technology to support local companies in transitioning to advanced technology.

"With the implementation of some of these plans, I believe we will be able to achieve the average growth target of the services sector (5.2%), manufacturing (5.7%), agriculture (3.8%)t, mining and quarrying (2.6%), and construction (4.2%) during the 12^th Plan period."

The tourism sector, most affected by the pandemic, is expected to recover with a growth target of 3.8%. Meanwhile, PMKS are expected to contribute 45% to GDP, and 25% to total exports in 2025.

#2 Strengthening growth catalysts

PM Ismail said: "For Malaysia to be a high-income and high-tech country, we have no choice but to accept the use of new technology and strive to create and develop our own technology. We also need to ensure that infrastructure is strengthened and future talent is developed to catalyse economic growth."

Thus, he shared that measures to accelerate the adoption of technology and innovation will focus on digitisation and advanced technologies, including 4IR technology. Earlier this year, the Government launched the MyDIGITAL agenda and followed up with the National 4IR Policy. Policy planning, implementation and monitoring of 4IR initiatives and national digitisation are coordinated through the National Digital Economy Council and 4IR.

In line with this, the Government is spearheading this agenda through public sector digitisation initiatives and the transformation of PMKS:

• To accelerate the implementation of 5G nationwide, another RM15bn will be invested by the private sector. The National Digital Identity development project is underway to create a secure and reliable identity verification platform as well as electronic certification.
  
  
• The implementation of the National Digital Network Plan (JENDELA) will provide 100% 4G coverage in populated areas, wider 5G coverage, and fixed line broadband to 9mn premises by 2025. As of August 2021, 94% of populated areas have received 4G coverage, the speed of mobile broadband services has reached 29.1 megabits per second and more than 6,000 premises have gained access to fixed line broadband services. The 5G technology network will be launched at the end of 2021. These various digitisation initiatives, the PM said, are expected to support the achievement of the 25.5% target contribution of the digital economy to GDP by 2025.
  
  
• PM Ismail shared: "The Government recognises that the gig economy is an important source of economic growth. It has opened up greater opportunities for citizens to supplement their income, including offering services using digital platforms such as e-hailing and p-hailing. The government will create an ecosystem that supports the development of the gig economy to encourage the people to take full advantage of this opportunity."
  
  
• Efforts will be intensified to accredit local platforms based on international partnership economy industry standards, to enhance global competitiveness. A regulatory framework is being put in place to ensure that platform providers, employees and users are protected. The government will also ensure that unemployment compensation, health protection and savings for retirement are strengthened.
  
  
• The Government will bridge the digital divide, especially between rural and urban areas due to differences in broadband infrastructure, through the provision of digital infrastructure facilities. In this regard, the Internet Centre, Rural Internet Centre and Rural Community Centre will be transformed into the Malaysian Family Digital Centre to provide better and integrated services. Its use will also be expanded to facilitate locals involved in e-commerce, skills training, learning and community activities.
  
  
• In line with technological development and innovation, efforts to produce local technology developers and creators will be intensified to generate wealth and economic growth. To this end, all development and research, commercialisation and innovation (R&D and C&I) activities will be aligned with national priorities. As much as 50% of Government research funds will be provided for experimental research that has the potential to be commercialised.
  • In this regard, the Government has approved the establishment of a one-stop centre for commercialisation and technology transfer as well as the NanoMalaysia Energy Storage Technology Initiative (NESTI) Programme.
  • To coordinate R&D and C&I activities and ensure that they are in line with national priorities, a Research Management Unit (RMU) has been established. The role of the RMU is to reduce duplication of functions, strengthen cooperation between industry, academia and government in various fields, as well as increase efficiency in the use of existing resources.
  • In addition, alternative sources of financing including venture capital, international financing and endowment funds will be enhanced. In 2025, the percentage of gross R&D expenditure to GDP is expected to reach 2.5%, compared to only 1% in 2020. The private sector is targeted to contribute more with a two-fold increase, reaching 70% to total R&D expenditure.

• An integrated rail and road network linking airports and ports with industrial, urban and rural areas will be enhanced. This involves, among others, the following major projects:

  • The Klang Valley Double Track Phase One connecting Rawang to Salak Selatan is expected to be completed in 2022;
  • The Gemas Electric Double Track to Johor Bahru which is the final line of the electric double track from Padang Besar, Perlis to Johor Bahru, Johor is scheduled for completion in 2023;
  • The implementation of the East Coast Rail Link project continues and is expected to be completed in 2026;
  • The Rapid Transit System project linking Bukit Chagar station, Johor Bahru with Woodlands North station in Singapore will begin construction by the end of 2021;
  • The West Coast Highway involving the states of Selangor and Perak is expected to be completed in 2024;
  • The Central Spine Road project from Bentong, Pahang to Kuala Krai, Kelantan is scheduled for completion in 2025; and
  • The Kota Bharu to Kuala Krai Highway is expected to be completed in 2025.

Further, PM Ismail highlighted that for Malaysia to be a high-income country, talent development is "very important."

"Therefore, the education system needs to produce quality and highly skilled human capital to meet the needs of the industry. The focus is on improving the entire education system of the country, as well as addressing the issue of mismatch in the job market."

To improve the national education system, the main measures that will be implemented are as follows:

• Science, technology, engineering and mathematics (STEM) education will be strengthened to provide students with technological change including 4IR;
• The school environment will be made more conducive through the replacement of 148 poor buildings at a cost of RM1.6bn in 2021 and 2022;
• A total of four school complexes and five new schools will be built at a cost of RM848mn;
• TVET programmes will be strengthened by improving the ecosystem, improving the quality of programmes through accreditation, recognition and certification of international bodies as well as introducing a TVET institutional rating system;
• A centralised platform for TVET supply and demand data will be developed;
• A more flexible higher education system will be established and collaboration with industry enhanced to improve the quality of graduates and meet the needs of the industry;
• Digital education plans at the school and tertiary levels will be introduced to ensure greater access to quality education; and
• Upgrading the facilities of several public universities, including UiTM, UKM, UM, USM and UUM.

The PM added that in this 12MP, the Government will ensure that more highly skilled jobs are created through the implementation of the following initiatives:

• Attracting more new high-tech investments;
• Encouraging the industry to shift to automation and mechanisation;
• Restricting the entry of low-skilled foreign workers; and
• Strengthening collaboration between industry and academia.

"The Graduate Marketability Strategic Plan 2021-2025 was introduced to address the issue of mismatch in the labour market. In addition, the Job Creation Strategic Plan 2021-2023 will be introduced to enable the country to provide the resilient and highly skilled workforce needed by the industry. The implementation of these two plans will ensure that Malaysians benefit from the creation of new employment opportunities.

"The COVID-19 pandemic has affected several sectors of the economy, which have a high dependence on foreign workers, especially the construction and plantation sectors due to the freeze on the recruitment of foreign workers. To address this issue, the industry needs to increase the use of automation and mechanisation in the production process. In the long-run, the number of foreign workers in the workforce will be limited to no more than 15%. Enforcement related to foreign workers will be strengthened to support this policy."

#3 Improving the wellbeing of Malaysian families

In strengthening the healthcare system to ensure a healthy and productive people, the Government will review the effectiveness of the existing health system, and national health policies will be formulated to enhance preparedness to manage communicable diseases and health crises. The National Vaccine Development Roadmap is also being finalised to ensure that Malaysia is able to produce its own vaccines.

In addition, the Malaysian Institute of Infectious Diseases will be built in Bandar Enstek, Negeri Sembilan in 2022. The establishment of this institute aims to prevent diseases, disabilities and deaths caused by infectious diseases. 

PM Ismail added the following points of action:

• The Government has identified proactive measures to increase hospital readiness, to achieve a ratio of 2.06 hospital beds per 1,000 population by 2025.
  
  
• The Government will also develop new health facilities, in addition to the 12 hospitals being built nationwide and expected to be completed in 12MP period.
  
  
• Medical equipment and supplies, including intensive care unit (ICU) requirements will be added.
  
  
• In an effort to bridge the gap between urban and rural health facilities, the Government will build and upgrade health clinics throughout the country.
  
  
• In line with the National Housing Policy, and ensuring the provision of adequate, quality, and affordable housing for the wellbeing of Malaysian Families, 500,000 units of affordable housing will be built in the 12MP to increase the chances of the B40 and M40 groups being able to own a house. In addition, financing facilities including the Fund for Affordable Housing, Youth Housing Scheme and Rent-to-Own Programme, will be improved to ensure that the B40 and M40 groups are not burdened with installment payments.
  
  
• To provide housing assistance to the poor, the Government will allocate RM2.5bn during the 12th Plan period. The allocation is to build and repair a total of 85,500 units of houses under the Housing Assistance Program, involving 75 thousand units of houses in rural areas, and nearly 10,500 units of houses in urban areas. This does not include housing construction implemented under the state government, the corporate sector and Civil Society Organisations (CSOs).

#4 Strengthening public safety and order

Initiatives in this focus will include measures to improve preparedness, border control and enforcement, enhance public order, strengthen cyber security and defense as well as safeguard the welfare of members.

"I will make sure, more drastic steps will be taken to implement a comprehensive plan, and strengthen Ops Benteng to curb illegal immigrants," PM Ismail stressed.

Among the projects to be implemented, will be the Marine Police Sea Monitoring System in five maritime regions, the construction of the Bintulu Air Force Bare Base, Sarawak, the construction of the Terendak Armed Forces Hospital, Melaka, and the enhancement of maritime asset capacity.

Apart from that, the new military camp in Felda Sahabat, the five Brigade Camps in Kota Belud, and the General Operations Force camp in Beluran, Sabah will be completed during the 12MP period. The National Defense and Security Industry Policy will be introduced, to set the direction of local defense and security-related industries.

To ensure the welfare of military personnel and enforcement personnel, 10,200 units of army family houses and quarters are being built and can be occupied during this period.

#5 Eradicate hard poverty and close the income gap

PM Ismail said: "To address the issue of poverty and income inequality, we need to learn from the successes achieved by several other countries. Thus, hardcore poverty eradication initiatives will ensure the poor, including the urban poor are assisted, through a nationwide approach. Special units at the Federal level and at district offices will be established. This unit will be responsible for coordinating the database in an integrated manner as well as all programmes and initiatives implemented by the government, corporate sector and CSOs. With officers assigned special tasks, to manage poverty at the district level, I am confident that hardcore poverty can be eradicated by 2025."

Further, more concerted efforts will be made to increase income, and address the rising cost of living of B40 households as well as vulnerable groups. Targeted assistance such as cash grants and social protection, will be extended. The Urban Community Economic Empowerment Programme and the Rural People's Wellbeing Development Scheme, at a cost of RM1.5bn, will also be strengthened to enhance the marketability, wellbeing, and purchasing power of B40 families.

The PM added: "The Government cannot be alone in this struggle. I call on the corporate sector and individuals to help Malaysian families out of the cocoon of poverty. No matter how small the assistance given, including through alternative sources of funding such as zakat and waqf, if mobilised will bring great benefits."

To cover other aspects of poverty, the following will apply:

• Education: More students from B40 families will be given priority for admission to high -performing schools and scholarships.
• Health: Access to health care will be expanded.
• Malnutrition: The issue of malnutrition and malnutrition among children from B40 families is on the rise. To that end, this issue will be addressed comprehensively including through nutritious food.

To enhance the capacity, skills and competitiveness of the M40 group, training and re -skills training programmes as well as entrepreneurial activities will be enhanced. They will also be encouraged to subscribe to health and employment insurance at affordable rates. In addition, M40 children will be ensured access to quality education at an affordable cost.

#6 Strengthening the Malaysian Bumiputera and family agenda

On this point, the PM shared: "The Government is aware that a large number of Bumiputeras are still low-income and poorer than other ethnic groups. The middle income gap between Bumiputeras and Chinese is widening, quadrupling in 2019 compared to 1989.

"I assure you that the Bumiputera agenda will continue to be strengthened and will not be ignored. This is as enshrined in Article 153 of the Federal Constitution which gives the rights and privileges of the Malays and natives, namely the natives of Sabah and Sarawak, and the legitimate interests of other races. The Government's intention is to achieve more just, equitable and inclusive socio -economic development in line with the spirit of the Malaysian Family."

This agenda will be incorporated in the implementation of all policies to ensure that it becomes a priority component of all levels and aspects of development. All parties, including the Government, government-linked companies (GLCs) and government-linked investment companies and the private sector will work together to advance this agenda.

To increase Bumiputera participation in economic activities, access to and educational opportunities as well as human capital development, including huffaz, will be strengthened, among others through the following initiatives:

• Training in technical and professional fields to become experts in various fields; and
• Skills for future careers, such as data analysts and scientists as well as public data specialists.

The resilience and sustainability of Bumiputera businesses will be enhanced to achieve the target of 15% contribution of Bumiputera SMEs to GDP by 2025. This achievement will be supported through the provision of funding and implementation of new programmes, including:

• Bumiputera Prosperity Fund for Bumiputera companies;
• Express Contract Financing Scheme under Majlis Amanah Rakyat (MARA) for Bumiputera contractors; and
• The participation of more Bumiputera entrepreneurs to venture into the digital economy as well as industries with high growth potential.

More on this can be found on Bumiputera assistance can be found here. 

#7 Boosting the development of Sabah, Sarawak, and less developed states

The development of Sabah and Sarawak will continue to be given priority in the 12th Plan, PM said. The provision of basic infrastructure will be expanded by building bridges and upgrading 1,400 km of rural paved roads as well as completing the construction of 1,150 km of the Pan Borneo Highway.

Efforts to reduce the economic development gap between states, between regions and between urban and rural areas will continue to be a focus, and efforts to boost the growth of underdeveloped states, especially Sabah and Sarawak will be intensified. It aims to accelerate the slowdown in GDP growth in the states of Kedah, Kelantan, Perlis, Sabah, Sarawak and Terengganu as well as reduce poverty, especially in Sabah, Kelantan and Sarawak.

For this purpose, at least 50% of the total Federal Basic Development allocation will be distributed to the said states. This allocation is focused on the provision of basic infrastructure, digitisation, education, healthcare services and economic development, he added.

Further plans include:

• Broadband coverage will be enhanced through the construction of digital infrastructure, including the construction of telecommunication towers or transmitters. As of August 2021, a total of 2,645 digital infrastructures have been installed in Sabah and 2,117 in Sarawak. To improve electricity supply, a new power plant will be built and the Sabah East-West Grid transmission line will be upgraded. The Baleh hydroelectric construction project in Sarawak is expected to be completed in 2025.
  
  
• Healthcare services will be enhanced with the completion of the Universiti Malaysia Sabah Teaching Hospital and the Universiti Malaysia Sarawak Teaching Hospital. The construction of 26 new clinics will be able to improve healthcare services in rural clinics in both states.
• In addition, the construction of new homes and poor house repairs under the housing assistance programME will benefit 26,000 poor households in Sabah and Sarawak.
  
  
• To ensure security and enhance economic ties with Kalimantan, Indonesia, new border control posts in Manalunan, Simanggaris and Kalabakan, Sabah, will be built, while the Tebedu and Serikin ICQS Complexes, Sarawak will be upgraded. In addition, the Road Project from Ba'kelalan Border/CIQ Complex to Lawas will begin construction in 2022.

"With the implementation of these strategies and initiatives to accelerate the development of Sabah and Sarawak, the average annual GDP growth of Sabah is expected to increase at 6.5% and Sarawak at 5.3% in the period 2021 to 2025. I am confident that these two states have the capacity and resource strength that can be fully optimised. Thus, actual growth could be higher than these expectations," the PM noted.

In an effort to transform rural areas, high value-added economic activities will be boosted through e-commerce platforms, smart agriculture and rural industries. Rural infrastructure will be enhanced by building and upgrading 2,800 km of paved roads, including:

• Jalan Nanga Tulie to Rumah Bujah, Nanga Pelagus in Kapit, Sarawak at a cost of 280 million ringgit;
• Jalan Dudar to Taburan to Mendawang in Kota Belud, Sabah at a cost of 101 million ringgit;
• Rural Road from Simpang FELCRA Ulu Kerut to Kg Orang Asli Bot-Bot to FELDA Jengka 7 to Jalan Kilang Sawit Jengka 18 in Maran District, Pahang at a cost of 135.3 million ringgit; and
• Jalan Baharu from Kampung Gagu to Ulu Beranang in Negeri Sembilan with a project cost of 179.2 million ringgit.

In addition, efforts will also be stepped up to ensure access to clean water supply reaches 98% and electricity supply 99%. To intensify local socio-economic activities, small rural projects will continue to be implemented such as the Social Amenity Program with an allocation of RM310mn and the construction of Rural Roads at a cost of RM1.6bn. These efforts are expected to help bridge the income gap between rural and urban areas.

#8 Accelerating green growth

On this point, PM Ismail shared: "Economic development should not affect the environment, while the coverage of green areas should be maintained. Efforts to accelerate green growth, enhance energy sustainability and transform the water sector, must remain at the core of the country's socio-economic development.

"Accordingly, the Government will take into account environmental, social and governance (ESG) principles in the decision -making process. Although Malaysia only contributes 0.7% to greenhouse gas emissions, the Government will continue to meet its commitment to reduce GHG emission intensity by up to 45% to GDP by 2030, based on emission intensity in 2005, in line with its aspiration to be a low carbon nation."

He welcomed the private sector initiatives that have taken a step forward through their commitment to achieve net zero carbon emissions. This includes the commitment of GLCs and GLICs such as PETRONAS, Tenaga Nasional Berhad, Employees Provident Fund and Sarawak Energy Berhad to achieve this goal by 2050.

"I urge other companies to emulate this initiative by expressing the same commitment. This step becomes increasingly important as trading partners, capital markets and financial institutions place conditions of compliance with ESG principles in their investment decisions and product production."

The PM added: "The Government will work with the private sector to achieve this goal. Today I give a commitment that Malaysia will be a carbon neutral country as early as 2050. To support this effort, economic instruments such as carbon pricing and carbon tax will be introduced. Details of other measures for carbon reduction will be announced after the review of long-term low-carbon development strategies will be finalised by the end of 2022. To this end, the Government has committed to no longer build new coal-fired power plants."

More on this can be found here. 

#9 Improving the efficiency of public service delivery, and ensuring effective policy implementation

PM Ismail said: "I would like to commit that the civil service, which is the heart of the country's administration, will continue to be strengthened to increase transparency and efficiency. To this end, the civil service will be transformed through a whole-of-government approach taking into account that the successful implementation of initiatives requires the involvement of all levels of government. The implementation of effective service delivery is very important to ensure that Malaysian families really feel the development that is implemented."

In line with this, the structure and functions of ministries and agencies will be restructured to create a more horizontal organisation and reduce red tape. Mechanisms for the selection and recruitment of management and professional officers in various schemes will also be strengthened to acquire the best talent. Proposals to introduce a civil service act will be studied to enable the implementation of a clear separation of powers and responsibilities between Members of the Administration and civil servants.

Further, the digitisation of public services will continue to be enhanced. The newly launched Public Sector Digitization Strategic Plan (PSPSA) 2021-2025 outlines the strategic direction for the implementation of public sector digitisation to drive a sustainable Digital Government agenda towards shaping a digital society.

The government is targeting early-to-end or end-to-end online services to increase to 80% by 2025. A national data governance policy framework will be developed to encourage wider data sharing between the public and private sectors.

Apart from that, the PM shared: "I am aware that young people today always want to voice their desires and views to jointly develop the country through the practice of democracy. To realise this aspiration, the Government will ensure that the constitutional amendment that allows 18-year-old citizens to vote (Vote18) is implemented in the near future." 

Image / PM Ismail's Facebook