Malaysia to revisit 12MP in light of COVID-19, weak oil prices – Mustapa
Bernama | April 24, 2020 19:17 MYT
Mustapa said the oil and gas sector had a big impact on the world economy — not only Malaysia but also major oil producing countries. – Filepic/BERNAMA
KUALA LUMPUR: Malaysia will need to realign its economic planning under the 12th Malaysia Plan (12MP) in view of the COVID-19 pandemic and the recent oil price crash.
Minister in the Prime Minister’s Department (Economy) Datuk Seri Mustapa Mohamed said planning for the 12MP was done when the economy was okay in 2019 and therefore there was a need to realign although work on the five-year plan, which covers the period from 2021 to 2025, had almost been completed.
“When I came to the ministry five to six weeks ago, the 12MP was almost in place. But with the current situation (whereby) revenues have been affected and, equally important, this new normal, it is going to take a while before companies are revived and the small and medium enterprises (SMEs) can be back on their normal footings once again. Companies are holding back investment decisions.
“So we have to revisit some of the assumptions made in the last few months when preparing the 12MP, ” he said during a webinar session organised by the Institute for Democracy and Economic Affairs (IDEAS) today.
The session was moderated by IDEAS chief executive officer Ali Salman.
Mustapa said the oil and gas sector had a big impact on the world economy — not only Malaysia but also major oil producing countries.
“When it comes to planning, some of the numbers that we crunched earlier are no longer relevant and now we are going back to the drawing board in terms of forecast of economic growth, in terms of allocations — of course, it would be affected — and other implications on the country’s economy,” he added.
Malaysia has been very dependent on the oil and gas sector, which currently contributes 20 per cent of the government’s revenue, and the downtrend in oil prices will affect the country’s revenue.
Mustapa noted that in the initial stage of COVID-19, governments had not anticipated the magnitude of the health crisis’ impact on the global economy.
However, he said, Malaysia was able to weather the storm as the government had been very much focused in combating the COVID-19 pandemic with the support from the private sector and government-linked companies.
In Malaysia, local businesses, especially in the tourism sector and the SMEs, have been significantly affected by the pandemic.
“When it first started, not many people expected the pandemic to last this long. In the beginning, we did not fully understand the full impact. Take tourism for example; the sector has been worst hit. A few hotels have been closed completely as they had very low occupancy rates of five to 10 per cent.
“This is unprecedented. Various organisations have done surveys and shared the findings with us and all those indicated that micro-enterprises and others have been badly affected. Even retailers have been telling us that their businesses have been badly affected,” he added.
He noted that the authorities would likely consider opening up more sectors as the Movement Control Order entered the fourth phase between April 29 and May 12.
“Going forward in the next few weeks, there will be more people coming back to work, including the SMEs, that would further lighten the burden of Malaysian workers,” said Mustapa, adding that fiscal injections via stimulus packages would stimulate consumption.
“The gradual opening of the economy will continue to drive private consumption. It has got to do with confidence, but at this time, there is a change of consumer buying pattern as people are spending on food and essential products such as medicines.
“Going forward, we have to depend on the private sector as businesses are opened and tourists start coming in by next year to drive a total recovery of private consumption,” he noted.
According to him, COVID-19 also provides an opportunity to reform the Shared Prosperity Vision 2030.
“In a way, it is an opportunity to have a look at the fundamentals, of how we have been doing things in the past. We have to speed up digital government. We have done well in that initiative, but we have to look a lot more into that as well as on digital commerce,” said Mustapa.
Asked whether the government would consider re-introducing the Goods and Services Tax, he said: “The focus now is on the bread-and-butter issue. No one is left behind. The priority now is the current situation. Middle- to longer-term issues will have to come later.”