Introduction

2.01. The First Outline Perspective Plan (OPP1), 1971-90, set the broad socio-economic framework within which the objectives of the New Economic Policy (NEP) were to be achieved. Apart from setting the major targets with respects to growth and distribution, the Plan also outlined the policies, strategies and programmes towards attaining these objectives.

2.02. The OPP1 period saw the completion of four five-year development plan. While the development path has been marked by significant economic and social progress, the economy also underwent several trying years resulting from domestic constraints and weaknesses as well as external uncertainties and instability. In spite of all these, the nation has emerged much stronger and stands poised to approach the decade of the nineties with greater strength and resilience.

Objectives And Target Of Opp1

New Economic Policy                         

2.03. The NEP was formulated with the overriding objective of attaining national unity and fostering nation-building through the two-pronged strategy of eradicating poverty and restructuring society. The first prong of the NEP strategy was to eradicate poverty, irrespective of race. In undertaking this commitment, the Government recognized the magnitude of the efforts required as, at the onset of the OPPI, about half of the nation's total households were in poverty. The incidence of poverty in Peninsular Malaysia in 1970 stood at 49.3 per cent of total households. The target was to reduce this to 16.7 per cent by 1990. The largest number of poor households was in the rural areas with an incidence of poverty of 58.7 per cent compared with 21.3 per cent in the urban areas. The incidence of poverty in the rural and urban areas was targeted to be reduced to 23 per cent and 9.1 per cent, respectively, by 1990. In terms of ethnic groups, the Bumiputera formed the majority of the poor, accounting for 74 per cent of all poor households in Peninsular Malaysia in 1970. The incidence of poverty among the Bumiputera was also the highest at 65 per cent compared with 26 per cent for the Chinese and 39 per cent for the Indians.

2.04. In terms of income levels, the mean household income in 1970 was only $264 per month, with 27 per cent of households earning below $100 per month and a further 31 per cent earning between $100 to $200 per month.

2.05. The second prong of the NEP strategy sought to restructure society by eliminating the identification of race with economic function. This objective was to be achieved through the restructuring of employment pattern, ownership of share capital in the corporate sector and the creation of Bumiputera Commercial and Industrial Community (BCIC).

2.06. A major thrust under the second-prong strategy of the NEP was employment restructuring so as to reflect the ethnic composition of employment in the various sectors of the economy and at all occupational levels. This objective was crucial given that the occupational structure was, at the onset of the NEP, characterized by significant demarcations. As shown in Table 2-1, the Bumiputera were highly concentrated in the traditional agriculture sector and in low income job categories, while the non-Bumiputera were more favourably represented in the modern sectors of the economy and in the professional and technical occupations where productivity and incomes were higher. The attainment of this objective required substantial efforts at bringing about sizeable inter-sectoral labour movements. The absorption of the Bumiputera in new employment, particularly in the industrial and services sectors, was to be sustained at high rates.

2.07. Another important element in the restructuring strategy was the creation of the BCIC so as to ensure a viable participation of Bumiputera individuals in the modern sectors of the economy. The target was that within a generation, the Bumiputera would own and manage at least 30 per cent of the total commercial and industrial activities of the economy.

2.08. With respect to ownership restructuring, the target was to increase Bumiputera ownership of corporate share capital from 2.4 per cent of the total in 1970 to at least 30 per cent by 1990. To attain the desired target, Bumiputera share ownership was projected to expand at the rapid rate of 30 per cent per annum compared with 14.5 per cent per annum projected for the total value of equity capital in the corporate sector during the OPPI period. The equity shares of other Malaysians and foreigners were projected to grow moderately by 15.4 per cent and 10.3 per cent per annum, respectively. It was targeted that by 1990, with the Bumiputera share of corporate assets reaching 30 per cent of the total, the share of other Malaysians would increase from 34.3 per cent to 40 per cent while that of foreigners would decline from 63.3 per cent to 30 per cent.

2.09. As part of its restructuring goals, the OPPI also sought to bring about greater integration among the states and regions in the country. These objectives were to be achieved by implementing various strategies and programmes to reduce regional disparities and to bring about a more equitable distribution. Towards this end, efforts aimed at improving opportunities for social and economic advancement in the less developed areas and facilitating the mobility of people across regions and occupations were to be made.

Macro-economic Framework of the OPPI

2.10. The NEP was to be implemented within the context of rapid economic expansion. Thus, a high growth strategy was adopted during the OPPI, with real GDP targeted to grow at 8 per cent per annum. Such a rate of growth was necessary so as to generate sufficient number of employment and more opportunities to allow restructuring to occur without depriving other sections of the community and to provide the social services and infrastructure necessary to meet the NEP's socioeconomic objectives. It was also envisaged that with the economy growing at 8 per cent per annum, the unemployment rate would be gradually reduced from 7.4 per cent in 1970 to 3.6 per cent by 1990, thus reaching full employment.

2.11. The prospect for accelerated growth was to have its origin from the utilization of the nation's large natural resource endowment through expansion in agricultural production as well as raw material-based industrial development. The main stimulus for the rapid rate of growth was to come from strong expansion in investment, both public and private. During the period, total investment was projected to expand by 9.1 per cent per annum, so that the ratio of investment to Gross National Product (GNP) would increase from 17.7 per cent in 1970 to 22.3 per cent by 1990. Public investment was projected to increase by seven-fold or at an average annual rate of 10.1 per cent. A substantial part of the investment would be for infrastructural and rural development as well as for public enterprises entrusted with the task of increasing Bumiputera participation in modern commercial and industrial activities. It was envisaged that the rapid expansion of public sector investment would be accompanied by further acceleration in private investment which was projected to grow at 8.5 per cent per annum during the period.

2.12. A second major impetus for the rapid expansion of the economy was strong export growth. Export earnings were targeted to grow rapidly at 7.1 per cent per annum. Such an expansion was required, in part, to mobilize sufficient foreign exchange to meet growing import requirements, particularly for investment purposes. A significant stimulus to this growth would be from manufactured products, especially in resource-based and other industries, with potential for development. As a result, export of manufactures was anticipated to account for 38.1 per cent of total exports of goods and services in 1990 compared with II per cent in 1970. Imports, on the other hand, were expected to grow at a comparatively slower rate of 5.2 per cent per annum in line with efforts toward import substitution.

2.13. National savings as a proportion of GNP was expected to increase progressively from 14 per cent in 1970 to 16.5 per cent in 1990 in line with expected increases in income. This would allow for a high proportion of the required investment to be financed from domestic sources. The expected growth in savings and net export earnings implied that there would be no resource or foreign exchange constraints to capital formation. The requirement for foreign financing to supplement domestic sources was accordingly expected to be small and the balance of payments was projected to remain healthy throughout the OPPI period.

2.14. In terms of sectoral growth, substantial changes were expected in the structure of the economy during the period. The high growth in the GDP was expected to be accompanied by structural transformation towards greater modernization and diversification of the economy.

2.15. The agriculture sector was expected to expand at the rate of 5.4 per cent per annum during the period. The contribution to growth in output were to come from new as well as in-situ land development, productivity improvements, the promotion of new and higher value crops as well as the development of fishery and livestock. In spite of these expected improvements, the agriculture sector would account for a smaller share of output due to the more rapid expansion of the other sectors. Similarly, while additions to new employment in agriculture in absolute terms were expected to increase, the rate of increase was expected to be small.

2.16. The manufacturing sector was expected to be the fastest growing sector in the economy, growing rapidly at 12.2 per cent per annum, reflecting the expected dynamism, strength and potential of this sector. With this rapid growth, the sector would account for more than one third of the increase in the potential for GDP. Factors underpinning this expansion were the sizewaebllleansatural and human resources, the growth in private disposable income as production of intermediate and capital goods arising from the progressive enlargement of the industrial base. While the growth in the labour-intensive textiles and electronics industries would provide the momentum for the growth of the manufacturing sector, a new set of industries was also expected to emerge, including rubber and timber products, petrochemicals as well as metal works industries. At the end of the period, the sector was expected to be the largest sector in the economy, accounting for 26.2 per cent of GDP compared with 13.9 per cent in 1970, while employment in the manufacturing sector would double from 8.7 per cent of the total in 1970 to 16.8 per cent by 1990.

2.17. The services sector was expected to grow in consonance with the general economic activities. The strongest growth were to be in electricity, water and sanitary services and in the finance, banking, insurance and real estate sectors, in line with the efforts to improve the social, physical and institutional infrastructure.

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