KUALA LUMPUR – Ahead of crucial state elections, Prime Minister Anwar Ibrahim on Thursday launched an ambitious economic plan to transform Malaysia into one of the world’s top 30 economies in the next 10 years and uplift the wages and quality of life of its people.

Key initiatives of the Madani Economy plan include setting up a special financial zone in the Iskandar Malaysia region in Johor, a review of minimum wages, bringing more women into the workforce, as well as reducing corruption and reliance on foreign labour.

“It is about elevating the status and dignity of our nation,” said Datuk Seri Anwar at the launch of the framework.

He said the plan had two main focuses – first, to restructure the economy towards “making Malaysia a leader among Asian economies”, and second, to ensure that “the enlarged wealth is benefited equitably by the people”.

He also revealed that RM100 (S$29) in e-wallet credits will be given to all adult Malaysians with an annual income of RM100,000 and below. The move is expected to benefit more than 10 million people. On top of this, some civil servants will get a bonus of RM300, while military veterans and pensioners will receive RM200.

Mr Anwar said the government could afford the handouts because there were more funds than expected when Budget 2023 was tabled, due to the efficiency in revenue collection.

The launch of the Madani Economy plan comes just two days ahead of the start of campaigning for state polls on Aug 12. The elections are widely viewed as a referendum on Mr Anwar’s leadership and his biggest test since last November’s general election led to a hung Parliament and an uneasy alliance between his Pakatan Harapan (PH) and its former rival Barisan Nasional (BN).

Mr Anwar is hoping to at least retain the states of Selangor, Negeri Sembilan and Penang, which PH and BN currently govern, in the contest against the conservative, Malay-centric opposition Perikatan Nasional (PN). Led by former premier Muhyiddin Yassin, PN controls Kedah, Kelantan and Terengganu, the other three states holding elections.

Bread-and-butter issues, including inflation and a weak ringgit, have been a key focus for these state elections.

Expanding on his economic vision, Mr Anwar said half of the workers in Malaysia earn less than RM2,250 a month, describing this as “undoubtedly worrisome”.

As part of the Madani plan, he wants 45 per cent of the country’s gross domestic product to come from wages, up from 32.4 per cent in 2022, to be closer to developed economies where wage shares are mostly above half. He also said the government will carry out a review of the minimum wage level and explore the use of a progressive wage model to achieve income growth.

Malaysia must also reduce its dependence on low-skilled foreign labour, which contributes to the overall low wage levels, he added. “The fact is that we are caught in a vicious circle of high costs, low wages, low profits and a lack of competitiveness.”

The government will also provide home loans of up to 120 per cent for houses valued up to RM300,000, to help those who cannot afford to pay deposits, he said.

At the national level, the government will work on attracting companies with tax breaks to create high-income jobs for locals, boost manufacturing, and implement reforms to make its stock markets attractive. A special financial zone will also be set up in the Iskandar Malaysia region in Johor to woo international investors and knowledge workers with tax incentives and fast-track immigration facilities.

Malaysia is currently the world’s 37th-biggest economy based on World Bank data, and ranks 62nd out of 191 countries for its human development index (HDI). The Madani plan seeks to push Malaysia’s HDI ranking into the top 25, said Mr Anwar.

He also wants to increase female labour force participation to 60 per cent from about 53 per cent currently, improve Malaysia’s position in the Corruption Perceptions Index from 61st to the top 25, and achieve a fiscal deficit of 3 per cent or lower. The deficit was 5.6 per cent in 2022.

The government expects the economy to expand from 4 per cent to 5 per cent in 2023, but is aiming to boost growth to 6 per cent in the short term.

“If we are just satisfied with the status quo, it is expected that our economic growth will continue to grow between 4 and 5 per cent,” Mr Anwar said. “However, if we work hard towards implementing reforms, we are more than capable of reaching 5.5 per cent, and I believe it is not impossible to reach even 6 per cent growth.”