On July 27 2023, the Malaysian government launched the visionary MADANI economic narrative, a roadmap to pave the way for sustainable growth. The framework will guide Malaysia’s mission of socioeconomic as well as overarching strategic and tactical plans. From the economic perspective, the MADANI framework is timely in view of the upcoming Budget 2024, New Industrial Master Plan, and the expected tabling of the Fiscal Responsibility Act this year. Beyond its economic narrative, the MADANI framework has the potential to drive positive change for Malaysia by embracing a strategic and value-based approach, particularly during a time of domestic and global uncertainties.

In a signal of policy consistency, the theme “Empowering the People” maintains the government’s momentum towards human capital development in Malaysia. Human capital development is specifically embedded within the MADANI narrative’s mission of inclusive growth, equal opportunities and a vibrant labour market. Commendably, measurable goals in this respect include being in the top 25 based on the Human Development Index, increasing the labour share of income to 45% and increasing the participation rate of the female labour force to 60%. The government expects to continue strengthening basic education and promote lifelong learning. Developing human capital will further reinforce the government’s goal to improve the social safety net.

Human capital development and social well-being is essential to raise productivity, maintain sustainable Gross Domestic Product (GDP) growth and raise the potential of GDP growth in Malaysia. Furthermore, these aspects present the next stage of development beyond common models of industrialisation that emphasise physical capital. Increased productivity, functionality of technology and the effectiveness of input conversions to high value-added outputs require skilled human capital. Human capital development is inseparable from Malaysia’s status as an upper-middle income economy as it journeys towards developed, high-income status.

In addition, the government has allocated funds for concrete development measures such as upgrading infrastructure at industrial parks, matching grants to expedite the digitalisation of Micro, Small and Medium Enterprises (MSME), and accelerating local startups as well as research and development initiatives. Over the course of 2023, both multinational corporations and major trade partners at the level of government have expressed investment commitments in various industries.

Concurrent with development goals, Malaysia remains committed towards the global climate change movement as evident in the MADANI framework, through sustainable resource management as one of its pillars, demonstrated by the planned adoption of renewable energy in the National Energy Transition Roadmap alongside pilot projects reportedly worth billions of ringgit in the pipeline. Furthermore, food security is recognised as an important goal, pertinent as climate risks heighten over time. Malaysia’s responsibility towards addressing global challenges is laudable, while simultaneously displaying an objective and honest acknowledgment of local issues. The transparent communication of these challenges, encompassing low domestic wages, rising national debt, a declining investments-to-GDP ratio, reduced global competitiveness, and issues of governance and corruption, forms a robust basis for embarking on the nation’s ambitious socioeconomic transformation endeavours.

The MADANI economic narrative ushers in a promising era for Malaysia, uniting economic goals with social and environmental responsibility. Achieving quality GDP growth supported by the MADANI economic narrative provides Malaysia with an opportunity to raise long-term potential GDP and drive further socioeconomic development. Sustainable GDP growth is envisioned by the government to be compatible with its fiscal deficit-to-GDP target of 3% or better over time. We will continue to monitor policy developments and operational execution of Malaysia’s national plans for incorporation into our long-term GDP forecasts and analysis of Malaysia’s sovereign rating.