By Abdul Rahim Sabri
SHAH ALAM, Nov 12 — Selangor is on the right track in shaping its economic direction, thanks to a series of achievements by the state administration, especially in recent years.
Bank Muamalat chief economist Mohd Afzanizam Abdul Rashid said deficit reduction serves as a crucial indicator to a government’s economic direction, noting the RM120 million decrease in last year’s budget compared to the previous year.
He said Selangor’s financial position is strong, supported by high revenue collection, which is closely linked to the robust economic activities within the state.
As of October, the state recorded RM2.218 billion in revenue collection, exceeding this year’s initial target of RM2.2 billion by approximately RM18 million.
Selangor remains the largest contributor to the national gross domestic product, pushing 25.9 per cent this year — a slight increase from last year’s 25.5 per cent.
Afzanizam also noted the economic growth rate of 5.4 per cent, surpassing the national rate of 3.6 per cent. As of October, the state has also secured RM35 billion in investments, moving closer to this year’s target of RM50 billion.
“The Selangor government appears to be heading in the right economic direction,” he said.
However, Selangor faces competition from states like Johor, which offers various incentives to attract foreign investment. Therefore, Afzanizam suggested streamlining bureaucratic processes to stay competitive.
“Investors prioritise speed to save both time and costs. Time is critical — if an agreement is made today, work should begin the next day. This demands strong cooperation between the agencies involved.
“Rather than complicating the bureaucracy, procedures should be streamlined to ensure that when investment arrives, processes move swiftly. It doesn’t cost much, but it requires effective coordination,” he said.
Regarding the focus of this year’s state budget, he anticipates that artificial intelligence (AI) will be a priority, alongside investments in education infrastructure and food security.
The rapid development of data centres, which he described as a global trend, will bolster AI development in Selangor, with plans to open 17 more centres by 2025.
This excludes three data centres in Cyberjaya, established through an agreement with a Singaporean company in 2023, as well as a data centre being developed by Google in Elmina Business Park, set for completion in early 2026.
However, Afzanizam said developing a sound data centre ecosystem is crucial to ensure the high demand for electricity and water does not impact the needs of other sectors.
“The target is to establish 17 more data centres, each of significant size. This will undoubtedly require substantial consumption of both water and electricity.
“Therefore, I believe it’s essential to focus on improving the data centre for AI development, while also considering the impact on other sectors,” he said.
The economist believes that the technical and vocational education and training sector should also be a key focus in the upcoming budget, as the development of data centres requires a large pool of highly skilled workers.
“The state should encourage the recruitment of Bumiputera and local talent to maintain the data centres. This creates job opportunities for the people, which in turn generates economic spillover,” he added.
Addressing income inequality
Afzanizam is confident that the state budget, modelled after Budget 2025, includes substantial allocations aimed at addressing the income gap among the most disadvantaged groups.
Low- and middle-income households, as well as youth and women, are expected to receive focused support through various forms of assistance. Entrepreneurs may benefit from matching grants, digitalisation grants, or training programmes aimed at enhancing competitiveness, he said.
One of the state initiatives that caught his attention was the Smart Rental Scheme, which he believes needs further development. He emphasised its importance, given that the average salary of the population does not align with the rising cost of housing.
“The average house prices in Selangor and Kuala Lumpur remain high, and when compared to salaries, the population’s purchasing power is significantly low, as acknowledged by Bank Negara Malaysia. Given this, the growing trend of people renting homes comes as no surprise.
“We see that even in developed countries, like those in Scandinavia, renting is more common, so how do we improve the rental market here? It requires legislation and proper oversight to ensure the housing rental market is fair and transparent, safeguarding the interests of both parties,” he said.
Afzanizam is confident Selangor is well positioned to face the global recession, which typically occurs every seven years, with the most recent one during the Covid-19 pandemic in 2020.
Explaining the state’s vulnerability to external economic threats, he described the deficit reduction as a precautionary measure aimed at building reserves during periods of economic growth to better weather potential downturns.
“The deficit is shrinking, and in a year or two, balanced spending could be achieved. In other words, Selangor’s finances are strong. In the event of a recession, support can be extended to businesses and individuals affected,” he said.
