Bawani Lelchumanan of Sunway University’s Business School said the 2025 budget focused on enhancing Malaysia’s global competitiveness by supporting initiatives in sectors such as semiconductors, green energy, Islamic finance as well as digital transformation.
“These initiatives could position Malaysia as a competitive player both regionally and globally,” she told FMT.
One of the seven benchmarks set by the government under the Madani economy framework is to make Malaysia among the top 12 in the global competitive index in the next decade.
The 2025 budget allocated RM100 million in matching grants to support the development of Islamic finance solutions; RM20 million was also announced for UiTM to produce more engineers in the semiconductor sector and RM1 billion for greentech financing.
Khazanah Nasional Bhd would also allocate RM1 billion to spearhead investments that support the local semiconductor industry.
Industrial transformation
Bawani also noted that significant resources are being channelled towards automation, artificial intelligence (AI), and machine learning to drive productivity and sustainable growth.
“The digital and innovation sectors are set to benefit from improvements to the ecosystem, attracting both foreign and domestic investment in high-value industries.
“These efforts are critical for Malaysia’s industrial transformation and economic resilience, while also reducing dependency on foreign labour,” Bawani added.
The budget allocated RM10 million to the National Artificial Intelligence Office to boost AI adoption by fostering collaboration between academia and industry. AI-related education will also be expanded to all research universities with an allocation of RM50 million.
However, Bawani pointed out that the budget fell short by lacking targeted interventions for the growing population who are not engaged in education, employment or training.
“Without tailored policies — such as career counselling, vocational training programmes, and incentivised employment schemes— they are at risk of being left out of the broader initiatives aimed at fostering innovation and employment.”
Madani philosophy
Nungsari Ahmad Radhi, chairman of Khazanah Research Institute, said the 2025 budget reflected Anwar’s Madani philosophy of being fiscally prudent but emphasising the development of a stronger safety net.
He said it was also forward-looking in its emphasis on future industries and was determined in repositioning Malaysia not as a low cost economy.
“I agree that the economic transformation requires a re-pricing of inputs, and while reduction in subsidy will see some input prices adjusted upwards, wages too are adjusted upwards,” he said, referring to the rise in minimum wage from RM1,500 to RM1,700 per month starting on Feb 1.
Nungsari added that the additional RM3 billion for the Rahmah cash aid initiatives is a positive step as such direct transfers reach their intended beneficiaries. The initiative was allocated a total of RM13 billion, which is expected to benefit 60% of the adult population.
Fiscal numbers on the right track
He also said that the overall fiscal numbers are on the right trend and in accordance with the Fiscal Responsibility Act, which sets the target for fiscal balance to be at 3% or less of gross domestic product (GDP) within the next three to five years.
“The (projected) deficit rate for 2025, at 3.8% of GDP, is lower than the 4.3% in 2024, which indicates a slower rate of government debt growth. This demonstrates that Anwar has made slowing debt growth a priority in his fiscal reforms.”
Nungsari also commended measures announced to enhance revenue such as the 2% tax on dividend income of more than RM100,000 earned by individual shareholders. The government also plans to fully implement the expanded sales and services tax starting May 1 of next year.
Targeted RON95 subsidies
At the same time, Nungsari said, the budget recognised the need to further reform subsidies with the targeted RON95 subsidies petrol expected to start in the second half of 2025, to the detriment of those in the higher income bracket.
Anwar said 85% of the rakyat will continue to benefit from government subsidies for 2025, estimated at RM12 billion.