Introduction

3.01. The primary objective of Malaysia's national development has been to improve the standard of living and quality of life of all Malaysians through sustained and rapid economic growth. Growth, however, is influenced by developments on the external and domestic fronts as well as by the policies that are implemented to respond to these challenges. The assessment of Malaysia's development during the Second Outline Perspective Plan (OPP2) period takes into account the developments in the world economy, the determinants of growth within the domestic economy as well as the policy reforms in specific areas for the attainment of the sectoral targets envisaged for the coming decade. The assessment also includes the downside risks that the economy may be exposed to and their impact on key macro-economic aggregates.

Factors Influencing Development Planning

3.02. Development planning in Malaysia is guided by the objectives of the NEP which seek to promote rapid and sustained growth in an environment of social justice and stability. Despite the commendable achievements of the last twenty years in developing the economy and redressing the social imbalances, the problems of poverty and ethnic disparities will continue to remain as a major challenge to development planning. These challenges should be met by strengthening further the growth process so that with an expanding economy, more resources and opportunities can be created to generate incomes and employment and to enable the Government to assist the less advantaged groups in the society.

3.03. An important factor impinging directly on economic development is the open nature of the Malaysian economy. In 1990, exports and imports of goods and non-factor services represented 82 per cent and 80 per cent of GNP, respectively. Consequently, the economy is subjected to instability arising from wide fluctuations in external demand and in the prices for its exports and imports as well as in the inflows of foreign capital. Policy formulation under such circumstances is, therefore, fraught with uncertainties, thus necessitating a pragmatic and flexible approach in order to cope effectively with these external shocks.

3.04. With suitable policy adjustments, the Government is in a good position to reduce the uncertainties surrounding future growth. A key requirement is to restore efficiency in the economy. To this end, further policy initiatives are essential in accelerating the privatization programme, in strengthening the financial and capital markets, in encouraging private investment and in improving the quality of trained manpower. These measures are important fort the expansion of the industrial base. In particular, the investment climate must remain attractive to domestic and foreign investors. It is envisaged that with private investment continuing to expand and given the existing trend towards the dominance of manufactured exports, Malaysia can expect to do well during the OPP2 period, despite the external instabilities in the primary commodities sector.

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