“Now is not the time to implement mega projects,” said prime minister and finance minister Anwar Ibrahim when presenting the 2025 budget in Parliament on Friday.
This signals a fundamental shift in economic strategy to focus on peoples’ well-being while boosting productivity, enhancing national income, and making Malaysia a more attractive destination for high-value investments.
The strategy of focusing on large-scale mega projects as a means of lifting Malaysia among the ranks of developed nations was arguably the brainchild of former prime minister Dr Mahathir Mohamad, the country’s longest-serving leader.
The iconic multi-billion-ringgit projects initiated during his first term as prime minister included the Petronas Twin Towers, Putrajaya, and Kuala Lumpur International Airport.
The trend of mega projects continued under his predecessors, including Najib Razak, whose administration signed off on the Mass Rail Transit (MRT), KL118, TRX, and the East Coast Rail Link (ECRL) projects, which cost tens of billions of ringgit each.
Anwar said national development will now focus on projects of public interest and facilities that support industrial areas according to state priorities.
He cited projects of public interest, including the Integrated Green Industrial Park in Perak – the first high-tech green hub in Southeast Asia – by SD Guthrie and Permodalan Nasional Bhd (PNB).
Other such projects include the high-priority flood mitigation projects involving rivers in Pahang, the Cameron Highlands Bypass, expansion of the North-South Expressway (PLUS) to six lanes in Phase 3, and construction of the Machang water treatment plant in Kelantan.
These are less high-profile than mega projects and they cost considerably less, yet they benefit more people compared with the others. Mega projects invariably exacerbate the country’s huge national debt with limited benefits to the wider population.
Essentially, the government is ditching mega projects in favour of much-needed development projects around the country that have high multiplier effects that can create high-paying jobs and generate economic activities.
Protecting the vulnerable
The new direction under the Madani economy framework prioritises uplifting the dignity of the people, improving basic infrastructure, enhancing value of existing services and creating a resilient and inclusive society.
The move to raise the minimum wage to RM1,700 from RM1,500 starting from Feb 1, 2025, will be a boon to those in the lower income group and help alleviate the impact of the cost-of-living crisis.
A key focus of the budget is to continue providing targeted subsidies for essential goods and services, including fuel, electricity, and healthcare, ensuring 85% of the population is protected from price hikes.
By shifting subsidies away from the wealthiest citizens and foreign nationals towards the most vulnerable, the government aims to alleviate financial burdens for lower-income groups.
The government has also allocated RM13 billion for Rahmah cash aid initiatives in 2025, compared with RM10 billion this year. This increase will benefit 60% of the adult population.
A total of 4.1 million households will get RM100 in cash aid a month, compared with 700,000 households this year.
To promote home ownership, the government will provide RM12.8 billion in guarantees for over 57,000 first-time home buyers. Nearly RM900 million has been set aside for People’s Residency Programmes.
The budget also has significant funding for sustainable financing of small and medium enterprises (SMEs), recognising their critical role in the country’s economy.
The Dana Pembangunan Industri NIMP (NIDF) will support SMEs in transitioning to high-value, sustainable production, enabling them to integrate into global supply chains.
Boosting investment in high-value sectors
Another key focus of the 2025 budget is increasing productivity and national income, and making Malaysia a more attractive destination for high-value investments.
Anwar’s government has outlined plans to elevate productivity by prioritising high value sectors such as electrical and electronics (E&E), green industries, and semiconductors.
Under the National Investment Policy (NIMP) and National Energy Transition Roadmap (NETR), these industries will receive tax incentives and other benefits to attract foreign and domestic investment.
A new investment incentive framework will be introduced including expanding export tax incentives for integrated circuit design and offering special tax deductions for private institutions developing courses in artificial intelligence (AI), robotics, and financial technology (fintech).
The budget also promotes automation and advanced manufacturing through tax incentives for companies adopting AI, robotics, and IoT (Internet of Things) technologies.
The Kulim Hi-Tech Park expansion and the development of Batu Kawan Industrial Park 3 are key projects that will facilitate this shift, positioning Malaysia as a leader in Southeast Asia for high-tech manufacturing.
The government is to be commended for seeking to restore fiscal discipline and ensure resources are used efficiently and transparently.
The 2025 budget aims to cut the national deficit from 5% in 2023 to 3.8% by 2025 and bringing it down to 3% by the mid-2020s.
This will be achieved through a phased reduction in borrowing, with new debt expected to fall to RM80 billion by 2025.