With the release of the Financial Sector Blueprint 2022-26 last month, there is now a shortcut to understanding the distinct phases of Malaysia's economic and business policies thus far this millennium.
The Bank Negara Malaysia (BNM) document and its predecessors (the Financial Sector Masterplan 2001-10 and Financial Sector Blueprint 2011-20) form a triptych depicting how an essential driver of the economy is being guided through these unpredictable, eventful and fluid times.
Tone shift
It is instructive to look at the shifts in the central bank's tone, emphasis and direction, because banking, insurance and other financial services influence trade, investments, entrepreneurship, consumption and, ultimately, socioeconomic development. What the BNM does is felt throughout the business sphere and across communities.
Launched in March 2001, the Masterplan 2001 was formulated while Malaysia was still haunted by the 1997 Asian financial crisis, which explains the plan's central themes of stability, efficiency, effectiveness, robustness, prudential regulation and strong infrastructure.
Progress must be inclusive and sustainable, and the financial system must be aligned with this
However, it was not a plan if it lacked a forward-looking stance. In this case, the aim was to build a financial sector that supported the nation's transition to the so-called new economy, that is, 'a more globalised, more digitised and knowledge-based economy'.
The Masterplan 2001 recommendations reflected the overall strategy of first enhancing the capacity and capability of the domestic financial institutions. The next steps were to foster a more competitive environment and speed up integration with the international market.
Lessons learned
When the Blueprint 2011 came out in December 2011, the Asian financial crisis was a distant object in the rear-view mirror, although the lessons learnt had been well absorbed. The global financial crisis of 2007 and 2008 was a fresher memory.
The fact that Malaysia withstood the shock of the latter crisis showed that its financial system had acquired additional resilience and sturdiness under the Masterplan 2001.
The government's main priority in 2011 was to propel Malaysia towards becoming a 'high value-added, high-income economy' by 2020, and the Blueprint 2011 was part of the soundtrack to that ambition.
The blueprint covered mostly familiar ground when it talked about the characteristics – examples included robustness, stability, soundness, competitiveness and dynamism – that the financial sector should have in order to best serve the needs of the nation. A new element was the frequent mention of balanced growth.
As mapped out in the government's Economic Transformation Programme, Malaysia's journey to high-income economy status cannot just be based on hitting a per-capita income mark. Progress must be inclusive and sustainable, and the financial system must be aligned with this.
Financial inclusion was given significant weight in the Blueprint 2011, but sustainability, particularly in the environmental and social sense, was barely addressed. That had to wait until the Blueprint 2022.
Appropriate time-frame
Unlike the previous two plans, the latest blueprint is for five years instead of 10. This was not explained, but in this era of accelerated and dramatic change, it makes sense to halve the time-frame. Also, a five-year plan is more appropriate given that the Covid-19 pandemic causes huge uncertainty and demands a plan that facilitates economic recovery over the next few years.
A five-year plan is more appropriate given that the Covid-19 pandemic causes huge uncertainty
The Blueprint 2022 has many things worth highlighting, such as its three broad themes (finance for all, finance for transformation, and finance for sustainability), its strategic thrusts, and its list of key targets and milestones.
However, what I like best about the plan is that it recognises and embraces the ability of the central bank and the financial sector to touch the lives of Malaysians in so many ways, including through measures that directly affect society and the environment.
We are used to seeing regulators as monolithic bodies that have trouble relating to anything or anyone outside of their scope of supervision. It is therefore refreshing that the Blueprint 2022 right away acknowledges that financial services 'should ultimately improve lives and livelihoods'. It is indeed a core purpose of any government.
