Govt plans to reform development expenditure allocation based on states’ needs, says Economy Ministry

KUALA LUMPUR, Oct 30 — The Malaysian government is set to overhaul its approach to allocating federal development expenditure, shifting from a spending-based model to one that emphasizes equity and efficiency in narrowing regional productivity gaps. The Economy Ministry aims to reduce the productivity gap between less-developed states and the national average, according to a statement released in response to a parliamentary question.

The ministry clarifies that larger allocations to states do not necessarily indicate underperformance compared to more developed states. Instead, these states might be better positioned to diversify their local economies by utilizing their existing resources effectively. The ministry's response comes in the wake of concerns raised by Datuk Seri Dr Ahmad Samsuri Mokhtar (PN-Kemaman) regarding the need to address structural economic imbalances between states, which could hinder Malaysia's overall competitiveness.

The Economy Ministry stresses that persistent regional productivity gaps pose a significant threat to national competitiveness. It warns that if left unaddressed, states with lower production capacities will continue to widen the country's overall productivity gap. To tackle this issue, the ministry argues that federal development allocations should act as a crucial fiscal stimulus.

These funds would be directed towards addressing infrastructure deficiencies, technology gaps, and labor market weaknesses in less-developed states. The ultimate goal is to promote sustainable regional economic convergence through targeted federal development investments.