MALAYSIA needs to improve the quality of its education if it wants to become a high-income nation with a sound knowledge-based economy, said Khazanah Research Institute (KRI) in its report, The State of Households 2018: Different Realities, published today.

The state of human capital development in the country – of which 20% of government expenditure goes to education – “has plenty of room for improvement”, said the report.

“Despite Malaysians receiving 12 years of schooling, Malaysian students receive only nine years’ worth of schooling after adjusting for education quality,” it said.

“The central issue of generating high-quality human capital in this country is an important one, as the transition to a high-income nation requires human capital levels that continuously improve productivity, sustain growth and are able to create or utilise technological advancements rather than being substituted by it.”

Beyond knowledge and human capital, modern infrastructure and facilities were also needed, the report said.

KRI said that while innovation was a key driver of productivity and long-term income growth, Malaysia spent a relatively small amount of resources on research, dedicating only 1.1% of gross domestic product (GDP) to research and development (R&D) activities in 2016.

“In the case of entrepreneurship, Malaysian entrepreneurs, despite seeing easier conditions to set up a business, generally do not innovate,” the report said.

It did, however, note that the technical know-how and range of products Malaysia produces have been steadily increasing since the 1960s, albeit at a slower pace of growth post-2000s.

But several factors could threaten the Malaysian economy and well-being of its people, it said, including global and domestic trends ranging from technological disruptions to changes in the global economic and geopolitical landscape.

“Given the fact that it is difficult to accurately predict what the future holds, rather than reacting to events as they unfold, the best strategy for Malaysia instead, is to build and develop on our core fundamentals.”

These fundamentals include openness, human capital development, economic agility, inclusive growth and macroeconomic stability.

Improvements in the economy in the past also corresponded with a general improvement in the well-being of Malaysians, which could be observed through indicators such as increased life expectancy, lower mortality rates for children and improved access to utility facilities. – October 15, 2018.