MALAYSIA is unlikely to achieve the 12th Malaysia Plan (12MP) target of being a high-income nation with an average household income of RM10,000 given the impact of the Covid-19 pandemic, economists and a business leader said.

The 12MP also has other policies that may work against the achievement of this goal while a higher average household income is target if wealth is not equitably distributed and the social safety net not improved, they added.

Wong Chin Yoong, professor of economics at University Tunku Abdul Rahman, said the RM10,000 average household income target by 2025 is “not impossible” on paper but might not be realistic.

“The average household income in 2020 was RM7,000. In the next few years, if it reaches RM10,000, the increase would be by 7%, even more than GDP (gross domestic product) growth.

“It seems quite unlikely for household income to grow faster than the country’s GDP,” he told The Malaysian Insight. GDP growth is projected to be between 4% and %5 under the 12MP.

Wong added that even if Malaysia reaches high income status, there is concern that this will be of no benefit to low-income households.

“How to ensure that these families enjoy the same benefits is an important consideration,” he said.

The target is not impossible, he said, based on the threshold of high income nations and Malaysia’s per capita income.

“According to the threshold, our economic growth must be around 4.7%. Past data have shown that Malaysia recorded between 4.5% and 5% in economic growth.

“The RMK12 also estimates an economic growth of 4% to %5. Barring any serious economic problems, this should be achievable.”

Besides GDP growth, it is also pertinent to ensure that the ringgit remains strong, Wong added.

“If the ringgit depreciates, Malaysia will have to work harder to meet its economic growth targets. If everything goes well, the country will achieve the status of a high income nation in 2025.”

Philip Capital Management Sdn Bhd chief strategist Phua Lee Ker agreed that the target can be achieved, barring a major economic crisis.

But it will mean little if the people’s quality of life, as well as the social safety net, is not improved.

“If there is too much disparity between the rich and the poor in a high-income country, it is actually meaningless,” said Phua.

He cited the US as an example, where although per capita income is high, an essential service like medical care is still too expensive for many.

“In addition to healthcare services, social safety nets and education are among other things that must be improved.

“Even in high-income nations, people are still facing difficulties especially after the Covid-19 pandemic, so improving social welfare is the key,” Phua said.

Malaysia-China Chamber of Commerce vice-president Kerk Loong Sing said it would be difficult to achieve high-income stutus will be difficult within five years because of the damage caused by the pandemic.

Kerk doesn’t expect the economy to stabilise until next year but adds that this is also dependent on the willingness of people to go out and spend their money.

“Malaysia may only return to pre-pandemic economic growth in 2023 at the earliest,” he said.

Furthermore, the pandemic has caused many in the M40 to drop to the B40 income group, he noted.

“So there is still a long way to go before we return to pre-pandemic household income levels.”

Kerk also highlighted the 51% Bumiputera equity requirement for freight forwarders, effective next year, as well as the ongoing foreign labour shortage as challenges to raising average household income.

The 51% Bumiputera equity rule, as well as the new requirements for Malaysia My Second Home, sends bad signals to foreign investors and expatriates, he said.

“Foreigners are afraid to invest here due to our requirements. The new requirements for MM2H has also scared away applicants.”

These problems combined will put Malaysia at a disadvantage.

And although the government is addressing foreign worker shortage situation, applications for migrant labour is always a time-consuming and expensive process.

“On top of that, the government keeps flip-flopping on its policies making it difficult for employers to employ new workers,” Kerk said.

Realistically, Malaysia can only reach high-income status by 2030, Kerk added.

Prime Minister Ismail Sabri Yaakob tabled the 12MP in the Dewan Rakyat on September 27. The five-year economic plan is currently being debated in Parliament. – October 2, 2021.