Malaysia’s 2026 Budget: A Strategic Framework for Sustainable Development

Malaysia’s 2026 Budget, in conjunction with the 13th Malaysia Plan (2026–2030), outlines a national economic strategy focused on high-value, innovation-led growth. The budget prioritizes three core sectors—semiconductors, the Islamic economy, and AI-driven Micro, Small, and Medium Enterprises (MSMEs)—to advance its commitment to the Sustainable Development Goals (SDGs).

Advancing High-Technology Industries and Innovation (SDG 9)

Semiconductor Sector Transformation for Economic Growth (SDG 8 & 9)

The government is strategically pivoting the semiconductor industry from assembly-based operations to high-value design and fabrication, contributing to resilient infrastructure and sustainable industrialization.

• The High Value-High Technology Semiconductor Industry Flagship Project has been allocated RM227 billion to drive this industrial transformation.
• The sector’s contribution to economic growth is significant, with exports valued at over $141 billion in 2024.

Human Capital Development for Quality Employment (SDG 4 & 8)

Investment in human capital is central to ensuring decent work and promoting sustained economic growth within the high-technology sector.

• Over 13,000 high-skilled workers have been trained, with graduates reporting salary increases of up to 20%, reflecting progress toward quality education and employment.
• Incentives for chip design and advanced packaging are designed to cultivate local talent and create high-value job opportunities.

Fostering an Inclusive and Ethical Islamic Economy (SDG 8 & 10)

Promoting Inclusive Financial Systems (SDG 10)

The budget leverages the Islamic economy to reduce inequality by creating accessible and ethical financial instruments.

• Tax incentives are provided for Sukuk issuance and SRI-linked investments.
• Labuan-based Islamic finance entities will receive income tax exemptions until 2028 to attract global capital for inclusive development projects.

Empowering MSMEs through Halal and Fintech Ecosystems (SDG 8)

The “Made by Malaysia” agenda integrates Islamic principles to support MSMEs, fostering inclusive and sustainable economic growth.

• Support for halal-certified startups and Islamic fintechs aims to empower local entrepreneurs.
• The strategy targets a larger share of the $3.2 trillion global Islamic economy, creating widespread economic opportunities.

Accelerating Digital Transformation for MSMEs and Sustainable Production (SDG 9 & 12)

Building a Resilient Digital Infrastructure (SDG 9)

The budget promotes the digitalization of MSMEs to enhance innovation and economic inclusivity.

• The Digital Ecosystem Acceleration Scheme (DESAC) offers a 100% investment tax allowance for qualifying digital infrastructure projects.
• The Global Services Hub initiative is designed to build a competitive and inclusive AI ecosystem.

Promoting Innovation and Sustainable Practices (SDG 8 & 12)

Initiatives are in place to foster digital entrepreneurship and align business operations with sustainable consumption and production patterns.

• A key target is the training of 5,000 digital entrepreneurs by 2030.
• The Smart AI-Driven Reverse Vending Machine initiative directly supports SDG 12 by promoting automation and sustainability in resource management.

Strengthening Governance and Committing to Climate Action (SDG 13, 16 & 17)

Enhancing Institutional Effectiveness (SDG 16)

Structural reforms are being implemented to build effective, accountable, and inclusive institutions at all levels.

• The Government Service Efficiency Commitment Act 2025 aims to streamline public services and reduce regulatory burdens.
• The National AI Action Plan 2030 will enhance digital governance, improving the ease of doing business and strengthening public institutions.

Fiscal Discipline and Green Energy Transition (SDG 7 & 13)

The budget demonstrates a commitment to fiscal sustainability and climate action through targeted investments and policy goals.

• A total of RM430 billion is allocated for the 13th Malaysia Plan to balance growth with fiscal responsibility.
• A national target has been set to achieve 35% renewable energy by 2030, contributing to affordable and clean energy (SDG 7).
• The focus on low-carbon growth aligns with global climate action efforts (SDG 13) and attracts ESG-focused investment.

Summary of Strategic Opportunities Aligned with Sustainable Development Goals

The 2026 Budget presents clear opportunities for investment that directly support Malaysia’s progress toward the SDGs:

1. Industry, Innovation, and Infrastructure (SDG 9): Investment in R&D-driven semiconductor firms and infrastructure providers to build a high-value, resilient industrial base.
2. Reduced Inequalities and Decent Work (SDG 10 & 8): Capital allocation towards Islamic fintechs, halal certification, and Labuan-based entities to promote inclusive financial systems and equitable economic growth.
3. Sustainable Economic Growth through Technology (SDG 8 & 9): Support for AI-as-a-Service platforms and innovative startups in key sectors such as agriculture, healthcare, and education to drive productivity and inclusive development.

1. Which SDGs are addressed or connected to the issues highlighted in the article?

SDG 4: Quality Education

• The article highlights Malaysia’s focus on human capital investment and talent development. It mentions that over 13,000 high-skilled workers have been trained for the semiconductor industry and that the government aims to train 5,000 digital entrepreneurs by 2030. This directly connects to providing inclusive and equitable quality education and promoting lifelong learning opportunities.

SDG 7: Affordable and Clean Energy

• The article explicitly mentions the government’s focus on green energy, with a specific goal of “targeting 35% renewable energy by 2030.” This commitment to low-carbon growth aligns with ensuring access to affordable, reliable, sustainable, and modern energy for all.

SDG 8: Decent Work and Economic Growth

• The entire article revolves around Malaysia’s economic strategy to promote sustained, inclusive, and sustainable economic growth. It details plans for a “high-value, innovation-led growth model” by developing key sectors like semiconductors, the Islamic economy, and AI-driven MSMEs. The creation of high-skilled jobs with reported salary increases of up to 20% also supports this goal.

SDG 9: Industry, Innovation, and Infrastructure

• This is a central theme of the article. The government’s strategy is built on fostering innovation and upgrading industrial capabilities. Key initiatives like the “High Value-High Technology Semiconductor Industry Flagship Project,” the “Digital Ecosystem Acceleration Scheme (DESAC),” and the “National AI Action Plan 2030” are all aimed at building resilient infrastructure, promoting inclusive and sustainable industrialization, and fostering innovation.

SDG 10: Reduced Inequalities

• The article emphasizes “inclusive growth” and “equitable growth.” The focus on supporting Micro, Small, and Medium Enterprises (MSMEs) through AI and digital transformation, as well as promoting the Islamic economy and halal-certified startups, aims to empower smaller economic players and ensure broader participation in the nation’s economic development, thereby reducing inequality.

SDG 16: Peace, Justice and Strong Institutions

• The article mentions structural reforms designed to improve governance and institutional effectiveness. The “Government Service Efficiency Commitment Act 2025” is cited as a measure to “streamline public services, reduce regulatory burdens, and enhance digital governance,” which directly relates to building effective, accountable, and inclusive institutions at all levels.

2. What specific targets under those SDGs can be identified based on the article’s content?

SDG 4: Quality Education

• Target 4.4: By 2030, substantially increase the number of youth and adults who have relevant skills, including technical and vocational skills, for employment, decent jobs and entrepreneurship. This is supported by the government’s initiatives to train 13,000 high-skilled workers for the semiconductor sector and an additional 5,000 digital entrepreneurs by 2030.

SDG 7: Affordable and Clean Energy

• Target 7.2: By 2030, increase substantially the share of renewable energy in the global energy mix. The article directly supports this with Malaysia’s stated goal of “targeting 35% renewable energy by 2030.”

SDG 8: Decent Work and Economic Growth

• Target 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading and innovation, including through a focus on high-value-added and labour-intensive sectors. The article’s focus on pivoting the semiconductor industry from assembly to high-value design and fabrication, and investing in AI, directly addresses this target.
• Target 8.3: Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro-, small- and medium-sized enterprises (MSMEs). This is evidenced by the “Digital Ecosystem Acceleration Scheme (DESAC)” and support for AI-driven MSMEs and halal-certified startups.

SDG 9: Industry, Innovation, and Infrastructure

• Target 9.5: Enhance scientific research, upgrade the technological capabilities of industrial sectors in all countries, in particular developing countries, including, by 2030, encouraging innovation and substantially increasing the number of research and development workers per 1 million people and public and private research and development spending. The allocation of RM227 billion to the “High Value-High Technology Semiconductor Industry Flagship Project” and incentives for R&D in chip design are direct actions towards this target.
• Target 9.b: Support domestic technology development, research and innovation in developing countries. The “National AI Action Plan 2030” and the focus on creating a competitive AI ecosystem through local startups align with this target.

SDG 10: Reduced Inequalities

• Target 10.2: By 2030, empower and promote the social, economic and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status. The article’s emphasis on the Islamic economy as a “pillar of inclusive growth” and the support for MSMEs are strategies aimed at achieving this.

SDG 16: Peace, Justice and Strong Institutions

• Target 16.6: Develop effective, accountable and transparent institutions at all levels. The introduction of the “Government Service Efficiency Commitment Act 2025” to streamline public services and reduce regulatory burdens is a direct measure to improve institutional effectiveness and transparency.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

SDG 4: Quality Education

• Indicator for Target 4.4: The number of skilled individuals trained. The article provides specific figures: “over 13,000 high-skilled workers have already been trained” and a target to “train 5,000 digital entrepreneurs by 2030.”

SDG 7: Affordable and Clean Energy

• Indicator for Target 7.2: The share of renewable energy in the total final energy consumption. The article provides a clear metric: a target of “35% renewable energy by 2030.”

SDG 8: Decent Work and Economic Growth

• Indicator for Target 8.2: The article implies progress through several economic metrics, including the value of exports (“over $141 billion worth of chips in 2024”) and wage growth (“salary increases of up to 20%” for trained graduates).

SDG 9: Industry, Innovation, and Infrastructure

• Indicator for Target 9.5: Total government budget appropriated for R&D. The article specifies a key investment figure: “RM227 billion allocated to the Ministry of Investment, Trade, and Industry (MITI)” for the semiconductor project. Another indicator is the “100% investment tax allowance” for qualifying digital projects.

SDG 10: Reduced Inequalities

• Indicator for Target 10.2: While no direct number is given, progress is implied by the growth and support for specific inclusive sectors. The indicator would be the growth in the number and economic contribution of MSMEs and halal-certified startups, and the expansion of the Islamic finance sector.

SDG 16: Peace, Justice and Strong Institutions

• Indicator for Target 16.6: The primary indicator mentioned is the implementation of new legislation, specifically the “Government Service Efficiency Commitment Act 2025.” Progress could be measured by a reduction in regulatory burdens or improvements in the ease of doing business rankings, which are implied outcomes.

4. Table of SDGs, Targets, and Indicators

Source: ainvest.com