Malaysia plans development funding reform to narrow productivity gaps
The Economy Ministry says equity and efficiency would guide the proposed allocation model, rather than historical spending.
Malaysia’s government plans to replace its reliance on historical spending when allocating federal development expenditure with a model prioritising equity and efficiency. The Economy Ministry said the proposed reform aims to narrow productivity disparities across regions.
In an October 30 reply to the Dewan Rakyat, the ministry identified closing the gap between less-developed states and national average productivity as its central objective. Datuk Seri Dr Ahmad Samsuri Mokhtar (PN-Kemaman) had asked about regional productivity targets and mechanisms to distribute funds according to state and residents’ needs.
The ministry said annual allocation increases in Budget 2027 should not be taken to mean that states given less funding were performing worse than more-developed states. Those receiving smaller allocations may have greater capacity to diversify their economies through existing resources, it said.
Economic imbalances among states endangered national competitiveness, the ministry warned. It said development allocations should address infrastructure shortfalls, technological disparities and labour-market weaknesses in less-developed states, adding that unresolved production-capacity constraints would further widen the national productivity gap.
