Countries of the World/COUNTRYS.BIN/dp/0232/02320.txt

Text File | 1991-06-25 | 36KB | 582 lines

$Unique_ID{COW02320}
$Pretitle{245}
$Title{Malaysia
Chapter 3B.   Government Planning and Policy}
$Subtitle{}
$Author{Donald M. Seekins}
$Affiliation{HQ, Department of the Army}
$Subject{percent
development
government
hectares
malaysia
agricultural
land
1970s
economic
period}
$Date{1984}
$Log{The Bat Cave*0232001.scf
Sailboarding*0232002.scf
}
Country:     Malaysia
Book:        Malaysia, A Country Study
Author:      Donald M. Seekins
Affiliation: HQ, Department of the Army
Date:        1984

Chapter 3B.   Government Planning and Policy

[See The Bat Cave: Courtesy Embassy of Indonesia, Washington DC.]

     The competence and confidence of the Economic Planning Unit (EPU),
attached to the Prime Minister's Department have grown during the preparation
and evaluation of four five-year economic development plans since 1966. Each
subsequent plan, moreover, has included more detailed regional information in
an attempt to plan the spatial development of the country. The Second
Malaysia Plan, 1971-75, enumerated the goals and strategies of the NEP, and
its mid-term review, published in 1973, included the Outline Perspective
Plan, which spanned the entire 1971-90 period. The Third Malaysia Plan,
1976-80, incorporated a major effort to integrate studies conducted by
individual urban and regional planning authorities with national
macreoeconomic projections. The Fourth Malaysia Plan, 1981-85, offered the
most detailed account of regional development priorities by state and filled
in many of the earlier statistical gaps.

     Although the implementation of these development plans has uncovered
inevitable shortcomings in both the planning process and government policies,
the plans formed a strikingly comprehensive, consistent, and level-headed
approach to economic development. The sectoral strategies have concentrated
on increasing the productivity of agriculture, expanding and diversifying
the industrial base, modernizing the financial and service sectors, and
varying the sources of economic growth. Stimulating investment and exports
has been particularly important to the planners, as has been locating
efficient import-substituting industries to form linkages to the rest of the
economy.

     Balanced social and economic development among the states has been
another major priority. In particular, the government has planned to limit
the growth of the Kuala Lumpur-Kelang areas as much as possible, leave Penang
to enjoy its own dynamism, and stimulate investment in Malacca, Johore
Baharu, and especially in regional development centers on the eastern coast
of Peninsular Malaysia. Eight major regional development areas had been
established as of late 1982.

     The sine qua non of Malaysian development planning, however, continued
to be the NEP. Every investment in agriculture, industry, services, or labor
development had to be justified in terms of the twin goals of the eradication
of poverty and advancement for the disadvantaged ethnic groups.

     The EPU was by far the most important planning agency. It served as the
secretariat of both the National Development Planning Committee, composed of
the heads of the economic ministries, and the National Economic Council, a
cabinet committee. The Prime Minister's Department also included specialized
agencies that drafted plans for manpower, social, and public service
development; other ministries also had planning departments. Each state had
planning units as well as development offices for formulating specific
projects. A housing and population census, conducted in 1980, and the
installation of an integrated data system were enhancing the statistical
bases for planning. But the complexities of the rapidly growing economy and
the number of planning agencies at the national and local level presented
coordination problems.

Fiscal Policy and Incentives

     Although private investment has accounted for at least one-half of the
economic development of the country, public sector planning has allocated
increasing expenditures to economic purposes. During the first half of the
1970s, public development expenditure was the equivalent of 11 percent of
GDP-three percentage points higher than in the 1960s. This share rose to
nearly 13 percent in the second half of the decade, and the government
planned to sustain at least this level of expenditure throughout the Fourth
Malaysia Plan, 1981-85. Federal government agencies spent over 82 percent of
the total development funds during the 1970s, state governments about 10
percent, and public authorities the remainder.

     The composition of development expenditures has changed according to
planning priorities, although it has seldom been exactly as targeted. Before
1970, spending on infrastructure facilities such as transportation,
communications, and utilities, accounted for the largest share of
expenditure-about 45 percent Agricultural and rural development programs
received about one-fifth of all development expenditure, while industry and
commerce accounted for only 2 percent. In the 1970s the share devoted to
commerce and industry rose to 13.5 percent, and that for infrastructure
development decreased to about 21 percent (see table 10, Appendix).
Development spending for social service facilities decreased slightly to
about 14 percent of the total. The major changes for the Fourth Malaysia
Plan were the relative expansion of development expenditure for electricity
and water facilities, agriculture and rural development, and defense (see
Defense Spending and Industry, ch. 5). As a counter-recessionary measure, the
government abruptly expanded its investment in housing construction in 1981
and 1982.

     According to government data, about 32 percent of the expenditure
allocated during the Second Malaysia Plan went toward the goals of the NEP.
During the Third Malaysia Plan, this percentage dropped to less than 29
percent. The projected allocation for the Fourth Malaysia Plan was some 36
percent. The vast majority of these expenditures was devoted to reducing
poverty, but during the 1981-85 period the government hoped to raise the
amount expended on increasing the economic power of Malays to one-third of
the total. It should be noted that these percentages were based on
allocations rather than actual expenditures.

     During the 1975-81 period operating expenditures also expanded rapidly in
order to maintain the new facilities constructed by development expenditures.
About one-third of operation expenditures went toward wages. Subsidies for
rice and petroleum products, transfers to state governments, pension
contributions, and payments on the national debt were also important. In 1982
and 1983, in the face of revenue shortfalls and higher borrowing costs, the
government was trying to slow the growth of operating expenditures primarily
by restraining some wages and contributions to statutory funds (see table 11,
Appendix).

     Total revenues of the federal and state governments expanded rapidly
during the 1970s, although not as rapidly as expenditures. In 1981 and 1982,
however, the rate dropped precipitously as income from export duties on
rubber, tin, and palm oil declined. Revenues in 1982 were about 6 percent less
than the amount planned in the budget. As a result, the government had to
curtail development expenditures in fiscal years 1982, 1983, and 1984. The
cutbacks involved postponing some development projects-notably an oil refinery
in Malacca, a military air base, expansion of the Kuala Lumpur-Johore highway,
and retracking of the railroad.

     The public debt of the national government increased by 33 percent per
year from 1980 to 1982, when it reached M $41.5 billion-some 69 percent of GDP,
compared with 45 percent in 1980. Whereas during the 1975-80 period over 71
percent of the additional debt was financed by domestic borrowing-in the form
of government securities and treasury bills-nearly 45 percent of the newly
acquired debt in the early 1980s was financed by foreign borrowing (see
International F