Government Influence of Malaysia

 Government Influence of Malaysia

          Although the federal government promotes private enterprises and ownership in the economy, the economic direction of the country was heavily influenced by the government through five years development plans since independence. The economy was also influenced by the government through agencies such as the Economic Planning Unit and government-linked wealth funds such as Khazanah Nasional Berhad, Employees Provident Fund and Pemodalan Nasional Berhad.

            The government's development plans, called the Malaysian Plan, currently the Ninth Malaysia Plan, started in 1950 during the British colonial rule. The plans were largely centred around accelerating the growth of the economy by selectively investing in selective sectors of the economy and building infrastructure to support said the sectors. For example, in the current national plan, three sectors - agriculture, manufacturing and services, will receive special attention to promote the transition of high value-added activities in the respective areas. Other than the generalized plans like the Ninth Malaysia Plan, the government also have a development plan that are targeted to improve the manufacturing sector which is called the Industrial Master Plan. Currently, the plan is called the Third Industrial Master Plan (IMP3) which covers a period from 2006 to 2020. The industrial plans aim to make Malaysia a major trading nation and build up the country's economy and human capital.

            Economic Planning Unit (Malay: Majilis Tindakan Ekonomi Negara), established in 1961 was instrumental in steering Malaysia to recovery from the 1997 Asian Financial Crisis. The unit is an agency under the Prime Minister's Department responsible for steering Malaysia's socioeconomic development towards achieving a developed-nation status by the year 2020 through various measures such as preparing policies and strategies for socio-economic development, prepare medium and long term plans for the government and most importantly, advise the government on economic issues.

           Government-linked investment vehicles such as Khazanah Nasional Berhad, Employees Provident Fund and Pemodalan Nasional Berhad invest and sometimes own major companies in major sectors of the Malaysian economy. For example, Khanazah Nasional is a major shareholder in Proton Holdings, an automaker and CIMB banking group in the financial sector. The government, however, is keen to sell stakes in their companies such as Malaysia Airlines to let the companies remain globally competitive.

Budget Management

            The recently implemented Malaysian reform effort at the central budget process, the Modified Budgeting System, is evaluated. Seventy-one interviews with senior officers in central and spending agencies are used to provide empirical and behavioural descriptions of the reform process. It is argued that many of the new processes are compatible with old budgeting patterns. It is concluded that the presence of similarities between old and new processes greatly enhances the reform process. On the other hand, behavioural changes represent serious obstacles to the implementation of reforms.