Malaysia unveils new growth plan

Malaysia unveils new growth plan

KUALA LUMPUR (AFP): Malaysian Prime Minister Mahathir Mohamad
unveiled yesterday a five-year multi-billion-dollar plan to
achieve steady economic growth and eradicate the country's
current account deficit.

The so-called Seventh Malaysia Plan increases development
spending 38 percent from the previous five-year program to 162.5
billion ringgit (US$65 billion) for the five years to the end of
2000.

Much of that spending would be ploughed into infrastructure.

The plan "is designed to bring Malaysia to the threshold of
the 21st century, not only stronger economically but also more
united as a nation," Mahathir said in the plan tabled to
parliament.

The blueprint for economic growth outlined a huge
privatization program, bigger education spending, higher
productivity, and a shift from labor-intensive industry to high-
technology.

It called for more spending on infrastructure to avoid
hampering economic growth and for aggressive action on trade to
help turn the current account deficit into a surplus by 2000.

The government would aim to rein in Malaysia's economic
expansion to eight percent a year, down from the rapid annual 8.7
percent growth recorded on average under the previous plan, the
plan said.

Officials from the country's Economic Planning Unit that
compiled the plan said the lower growth rate was aimed at
ensuring long-term stability and a better quality of life.

Rapid growth had contributed to a widening current account
deficit, inflationary pressures, infrastructure constraints and
an acute labor-crunch, they said.

The plan aimed to turn around the current account balance,
which deteriorated into 17.8 billion ringgit ($7.1 billion)
deficit in 1995 from a deficit of 2.48 billion ringgit in 1990.

The development plan set a target of producing a current
account surplus of 1.836 billion ringgit by 2000, the economic
officials said.

We have formulated strategies to boost the services sector
and turn around the deficit in five years," the economic unit's
director-general, Ali Abul Hassan Sulaiman, told reporters at a
briefing on the plan.

The privatization program included the national postal service
Pos Malaysia Bhd., the Bakun hydroelectric dam in eastern Sarawak
state and Bank Bumiputra Malaysia Bhd, the country's second
largest commercial bank.

No figure was given for how much the privatization program
would raise.

The economic plan said the government would more aggressively
promote tourism and higher education, local port, shipping and
reinsurance services to stem large outflows.

Malaysian exports would be more aggressively marketed overseas
to enhance the merchandise trade balance.

The five-year plan aimed for lower inflation but no figure was
given. The central bank in March said the government aimed to
curb inflation to below four percent a year. Inflation in 1995
was put at 3.4 percent.

In tackling inadequate labor resources, the plan called for a
shift from an investment-led economy reliant on labor-intensive
production into a productivity-driven nation propelled by
capital-intensive industries.

Investment in the manufacturing sector, expected to contribute
37.5 percent to growth, is projected to total 110 billion
ringgit, largely to support the shift to capital- and technology-
intensive industries.

To upgrade skills and strengthen the technology base, research
and development and training would be emphasized, with enrollment
of science and engineering students rising from 76,300 in 1995 to
132,050 by 2000.

The blueprint aimed to raise the contribution from higher
productivity to output growth to 41.3 percent, compared with 28.7
percent in the previous plan.

The economy's future would depend on productivity gains if
private investment were to fall, Ali warned.

The five-year plan expects private investment to increase 86
percent to 385 billion ringgit from 207 billion ringgit in the
previous plan.

Of the plan's 162.5-billion-ringgit public sector investment,
the federal government would contribute 41.5 percent, or 67.5
billion ringgit, with the rest provided by state governments and
state enterprises.

Half of the federal government's contribution would be
invested in economic sectors to sustain growth.

Among the key economic sectors, transport and communication
would take 14.8 billion ringgit, or 23.4 percent of the federal
government's contribution, to prevent infrastructure bottlenecks.