Malaysia
Tiger cub seeks green tech solutions
Since achieving colonial independence in 1957, Malaysia has been a South-East Asian success story; its wealth of natural resources, rapid industrialisation and booming tech sector have lead fifty years of strong economic growth. Now the 25th largest economy in the world by purchasing power parity, this "Asian Tiger cub" has innovated its way to prosperity. But can it meet the pressing challenges of COVID and environmental exhaustion?
Malaysia's rise to upper-middle income status has brought prosperity to its 32 million inhabitants, who enjoy an unusual degree of affluence compared to the citizens of similarly-sized economies such as Mexico. This is thanks to relatively low cost of living and a comprehensive social welfare system with fully-subsidised universal healthcare and direct cash transfers for lower-income families.
As befits a thriving tech hub, Malaysia is strong on policies for innovation, research and technology – including cutting edge green technologies. Greentech Malaysia, a state-run body charged with “spearheading the development of green technology as an engine of socio-economic growth”, has been directing investment and regulation under the Ministry of Energy since 2010, and the Green Technology Master Plan 2017-2030 was launched in 2016 to set out a detailed roadmap for tech-led sustainability in key sectors, including energy, manufacturing, transport and water.
Malaysia is also a centre for social enterprise innovation and green SMEs, with a Social Enterprise Blueprint and sectoral support bodies providing technical support, investment and legal assistance aiming for a “self-sustaining, equitable, and people-centric sustainable entrepreneurship ecosystem.” However, this emphasis on technology and social enterprise has left Malaysia seriously lagging behind on environmental protection, energy transition and decarbonisation, with forest fires, flooding, serious urban air pollution and climate-related disasters all rising rapidly.
The advent of COVID-19 in the midst of a complex political crisis has further destabilised Malaysia's tentative green transition. Government stimulus packages announced thus far do include some green measures, such as investment in solar power and greentech. But in the main, the country's COVID response provides unconditional support to existing dirty industry, including fossil fuel power and car manufacturing.
The forthcoming release of the 12th Malaysia Plan in 2021 offers an opportunity to re-align Malaysia’s next 5-years with a greener, more resilient and inclusive recovery. But without more ambition and real commitment to economic reform, Malaysia is in danger of discovering that technology alone is not enough to confront the environmental challenges it faces.
Policy Scores
Last updated 26 Jan 2021
Green COVID-19 Recovery
Malaysia’s response to COVID-19 has been shaped by political crisis and a new federal governing coalition - Perikatan Nasional - formed in March 2020. After an immediate response package was announced in February, the new coalition government released a further four support packages, bringing the total stimulus to approximately USD$13.6 billion or 4.9% of GDP according to the IMF. Together, these packages introduce a raft of untargeted initiatives designed to support households and businesses in the broadest sense, using measures such as cash assistance, wage subsidies, tax exemptions and deferrals, loan guarantees, and extensive SME grants and micro-credit schemes.
Green stimulus and recovery measures are few and far between, but include the acceleration of a planned USD$3.2 billion investment to upgrade LED street lighting, rooftop solar panels and transmission lines. The government has also opened 1.4 gigawatts worth of tender contracts for solar power, which it estimates will attract USD$1 billion in private investment and create 25,000 jobs. However, unconditional support has been provided to existing environmentally harmful industries, for example through sales tax exemptions for car purchases without electrification or efficiency requirements, and a 15% electricity subsidy for the commercial sector (indirectly subsidising the fossil fuel industry which produces 94% of the country’s energy supply). Consideration of green conditionality has been completely absent.
Looking ahead, Malaysia’s USD$80 billion expansionary Budget 2021 contains a few green initiatives under its third goal ‘economic resilience’, though these are largely extensions of existing rather than new schemes. Notable measures include the continuation of the Green Technology Financing Scheme 3.0 (with a fund size of USD$500 million) for two further years until 2022, a commitment to issue the first sustainability bond in Malaysia for environmental and social initiatives in 2021, and USD$225 million to address waste in rivers and improve environmental quality monitoring and enforcement activities. However, despite Prime Minister Yassin’s language of a ‘green recovery pathway’ for Malaysia, the overall value and proportion of green initiatives is small, indicating a weak commitment so far. The release of the 12th Malaysia Plan in 2021, though, offers an opportunity to re-align Malaysia’s next 5-years with a greener, more resilient and inclusive recovery.
Malaysia’s response to COVID-19 has been shaped by political crisis and a new federal governing coalition - Perikatan Nasional - formed in March 2020. After an immediate response package was announced in February, the new coalition government released a further four support packages, bringing the total stimulus to approximately USD$13.6 billion or 4.9% of GDP according to the IMF. Together, these packages introduce a raft of untargeted initiatives designed to support households and businesses in the broadest sense, using measures such as cash assistance, wage subsidies, tax exemptions and deferrals, loan guarantees, and extensive SME grants and micro-credit schemes.
Green stimulus and recovery measures are few and far between, but include the acceleration of a planned USD$3.2 billion investment to upgrade LED street lighting, rooftop solar panels and transmission lines. The government has also opened 1.4 gigawatts worth of tender contracts for solar power, which it estimates will attract USD$1 billion in private investment and create 25,000 jobs. However, unconditional support has been provided to existing environmentally harmful industries, for example through sales tax exemptions for car purchases without electrification or efficiency requirements, and a 15% electricity subsidy for the commercial sector (indirectly subsidising the fossil fuel industry which produces 94% of the country’s energy supply). Consideration of green conditionality has been completely absent.
Looking ahead, Malaysia’s USD$80 billion expansionary Budget 2021 contains a few green initiatives under its third goal ‘economic resilience’, though these are largely extensions of existing rather than new schemes. Notable measures include the continuation of the Green Technology Financing Scheme 3.0 (with a fund size of USD$500 million) for two further years until 2022, a commitment to issue the first sustainability bond in Malaysia for environmental and social initiatives in 2021, and USD$225 million to address waste in rivers and improve environmental quality monitoring and enforcement activities. However, despite Prime Minister Yassin’s language of a ‘green recovery pathway’ for Malaysia, the overall value and proportion of green initiatives is small, indicating a weak commitment so far. The release of the 12th Malaysia Plan in 2021, though, offers an opportunity to re-align Malaysia’s next 5-years with a greener, more resilient and inclusive recovery.
Governance
National green economy plan
The 11th Malaysia Plan 2016-2020 (2015) is the strategic document used. While it has a comprehensive chapter on GE it it will need to be updated soon in order to maintain this score.
The 11th Malaysia Plan 2016-2020 (2015) is the strategic document used. While it has a comprehensive chapter on GE it it will need to be updated soon in order to maintain this score.
Inclusive governance
There are several state-level community-based projects. However, a regular, NGO/community-based consultation on environmental, conservation issues is lacking, and occurs at the discretion of state authorities. There appears to be increasing recognition and efforts to include NGOs/community groups in policy (implication of local communities in conservation projects in the past).
There are several state-level community-based projects. However, a regular, NGO/community-based consultation on environmental, conservation issues is lacking, and occurs at the discretion of state authorities. There appears to be increasing recognition and efforts to include NGOs/community groups in policy (implication of local communities in conservation projects in the past).
SDG business strategy
Reporting tool exists, but does not mention SDGs especially,and it is limited to carbon reporting. Additional initiatives include national SDG Roadmap developed (applicable 2016-2030 and only finalised in 2017-2018), but reporting tools or follow-up absent.
Reporting tool exists, but does not mention SDGs especially,and it is limited to carbon reporting. Additional initiatives include national SDG Roadmap developed (applicable 2016-2030 and only finalised in 2017-2018), but reporting tools or follow-up absent.
Wealth accounting
Indicators will be implemented describing some if not all elements included in natural capital. Additional relevant initiatives include Project Chronos of the sovereign wealth fund for social and environmental impact measurement, but detail are not public. Work in progress to include indicators in national wealth accounts.
Indicators will be implemented describing some if not all elements included in natural capital. Additional relevant initiatives include Project Chronos of the sovereign wealth fund for social and environmental impact measurement, but detail are not public. Work in progress to include indicators in national wealth accounts.
Finance
Green finance plan
Some public commitments made by government officials to sustainable finance, particularly impact investing on social issues; support programmes for green finance at the Securities Commission and the Central Bank; and a Green Technology Financing Scheme, providing guidance to companies seeking investment for green economy. However, the green finance landscape can be confusing for companies due to coordination issues between agencies.
Some public commitments made by government officials to sustainable finance, particularly impact investing on social issues; support programmes for green finance at the Securities Commission and the Central Bank; and a Green Technology Financing Scheme, providing guidance to companies seeking investment for green economy. However, the green finance landscape can be confusing for companies due to coordination issues between agencies.
Green fiscal & monetary policy
Limited information on fiscal reform or a sustainability evaluation of public spending, with the 11th plan outlining potential use of economic instruments like green tax, carbon tax, and REDD+ ‘where appropriate’, without funding or investment details. No particular green monetary policy in place, though systemic risks are recognised.
Limited information on fiscal reform or a sustainability evaluation of public spending, with the 11th plan outlining potential use of economic instruments like green tax, carbon tax, and REDD+ ‘where appropriate’, without funding or investment details. No particular green monetary policy in place, though systemic risks are recognised.
Safe & accountable banks
Banks are required to conduct regular systemic stress testing, but only against financial indicators. No mandated or voluntary environmental / social risk assessment.
Banks are required to conduct regular systemic stress testing, but only against financial indicators. No mandated or voluntary environmental / social risk assessment.
Pricing carbon
No carbon trading initiative, but a Clean Development Mechanism was launched in 2010 to benefit from Kyoto Protocol-era emission-reduction projects to earn certified emission reduction (CER) credits, but unclear impact to date. Carbon taxation mentioned in the 11th Malaysia Plan but no clarity on future plans.
No carbon trading initiative, but a Clean Development Mechanism was launched in 2010 to benefit from Kyoto Protocol-era emission-reduction projects to earn certified emission reduction (CER) credits, but unclear impact to date. Carbon taxation mentioned in the 11th Malaysia Plan but no clarity on future plans.
Sectors
Green sectoral policy plan
The Green Technology Master Plan outlines development plans for key sectors, including energy, manufacturing, transport, construction, waste, and water with key targets for 2010, 2020, and 2030, supported by the Green Technology Corporation within the Ministry of Energy, Environment, Technology and Climate Change. However, the master plan focuses almost exclusively on technology and thus ignores green finance, incentives, and other elements of the green economy (e.g. conservation, biodiversity etc.)
The Green Technology Master Plan outlines development plans for key sectors, including energy, manufacturing, transport, construction, waste, and water with key targets for 2010, 2020, and 2030, supported by the Green Technology Corporation within the Ministry of Energy, Environment, Technology and Climate Change. However, the master plan focuses almost exclusively on technology and thus ignores green finance, incentives, and other elements of the green economy (e.g. conservation, biodiversity etc.)
Small business support
The Malaysian Global Innovation and Creativity Agency (MaGIC) has launched a Social Enterprise Accelerator, with funding from the Ministry of Finance, to provide capacity building, legal assistance, and targets for a “sustainable entrepreneurship ecosystem.” The Malaysian Social Enterprise Blueprint, launched in 2015, sets out a strategy for achieving a “self-sustaining, equitable, and people-centric” social enterprise sector, but expired in 2018 and needs updating.
The Malaysian Global Innovation and Creativity Agency (MaGIC) has launched a Social Enterprise Accelerator, with funding from the Ministry of Finance, to provide capacity building, legal assistance, and targets for a “sustainable entrepreneurship ecosystem.” The Malaysian Social Enterprise Blueprint, launched in 2015, sets out a strategy for achieving a “self-sustaining, equitable, and people-centric” social enterprise sector, but expired in 2018 and needs updating.
Carbon budgeting
No specific carbon budget. Paris Agreement commitments target a 40% reduction in carbon by 2020, compared with 2005 levels. Target is conditional upon “receiving technology transfer and finance of adequate and effective levels from developed countries”.
No specific carbon budget. Paris Agreement commitments target a 40% reduction in carbon by 2020, compared with 2005 levels. Target is conditional upon “receiving technology transfer and finance of adequate and effective levels from developed countries”.
Clean energy policy
Policy commitment to achieving 20% renewable energy capacity share by 2030, but no clear pathways for implementation and no legally binding measures. Reducing transport and buildings emissions is not a clear priority, though public transport planning offers electrification opportunities.
Policy commitment to achieving 20% renewable energy capacity share by 2030, but no clear pathways for implementation and no legally binding measures. Reducing transport and buildings emissions is not a clear priority, though public transport planning offers electrification opportunities.
People
Green jobs
Inclusivity mentioned as an essential element of the 11th Malaysia Plan, but ambition somewhat lacking on inequality, and no specifics on sustainable employment or green jobs.
Inclusivity mentioned as an essential element of the 11th Malaysia Plan, but ambition somewhat lacking on inequality, and no specifics on sustainable employment or green jobs.
Pro-poor policy
No significant policies found in relation to the inclusion of environmental issues in poverty reduction. Malaysia’s main social welfare strategy is the B40 programme, which includes cash grants, health screening and insurance, student loan supports etc; but no integration of environmental or green factors in social support.
No significant policies found in relation to the inclusion of environmental issues in poverty reduction. Malaysia’s main social welfare strategy is the B40 programme, which includes cash grants, health screening and insurance, student loan supports etc; but no integration of environmental or green factors in social support.
Participatory policymaking
Gender inequality is mentioned only briefly in the 11th Plan, and no mention given to gender-sensitive consultation. Planning for including Indigenous and local communities (ILCs) in biodiversity conservation and alternative livelihood opportunities is considered in the 11th plan, but little policy detail is available. No requirements for assessment of government policies for impacts on women and marginalised groups.
Gender inequality is mentioned only briefly in the 11th Plan, and no mention given to gender-sensitive consultation. Planning for including Indigenous and local communities (ILCs) in biodiversity conservation and alternative livelihood opportunities is considered in the 11th plan, but little policy detail is available. No requirements for assessment of government policies for impacts on women and marginalised groups.
Innovative social protection
Malaysia has a long history of innovative social policy, since the “New Economic Policy” of 1970. Land resettlement programmes have been successfully used to alleviate rural poverty, while an innovative unconditional cash transfer scheme, the BR1M, was launched in 2012. These policies are not explicitly linked to green economy, but they have had a notable impact.
Malaysia has a long history of innovative social policy, since the “New Economic Policy” of 1970. Land resettlement programmes have been successfully used to alleviate rural poverty, while an innovative unconditional cash transfer scheme, the BR1M, was launched in 2012. These policies are not explicitly linked to green economy, but they have had a notable impact.
Nature
Ocean & land conservation
Specific strategies in place for both SDG14 and 15, however targets are unclear and implementation remains limited. The 2017 Voluntary National Review identifies institutional capacity and monitoring as key areas for improvement.
Specific strategies in place for both SDG14 and 15, however targets are unclear and implementation remains limited. The 2017 Voluntary National Review identifies institutional capacity and monitoring as key areas for improvement.
Natural capital accounts
No national-level natural capital accounts, although the Ministry of Finance is currently preparing national wealth accounts with the support of UNDP. Environmental indicators across marine, land, aquaculture, forestry etc are included in the national Compendium of Environmental Statistics, and the Natural Resources Department has conducted a valuation of marine biodiversity based on Malaysia's Marine Parks.
No national-level natural capital accounts, although the Ministry of Finance is currently preparing national wealth accounts with the support of UNDP. Environmental indicators across marine, land, aquaculture, forestry etc are included in the national Compendium of Environmental Statistics, and the Natural Resources Department has conducted a valuation of marine biodiversity based on Malaysia's Marine Parks.
Natural capital committee
No mention of a commission to provide guidance on natural capital accounting. Current biodiversity valuations conducted by private, third-party consultants and civil services.
No mention of a commission to provide guidance on natural capital accounting. Current biodiversity valuations conducted by private, third-party consultants and civil services.
Nature-based fiscal reform
Some mention of payments for ecosystem services (PES) under the 11th Plan, but no follow up to date; some state-level PES programmes planned around forestry but yet to be implemented. Broad reform ambitions need to be met with clear policy.
Some mention of payments for ecosystem services (PES) under the 11th Plan, but no follow up to date; some state-level PES programmes planned around forestry but yet to be implemented. Broad reform ambitions need to be met with clear policy.