MALAYSIA could transition into a high-income economy between the years 2024 to 2028, according to a World Bank flagship report.

The Aiming High – Navigating the Next Stage of Malaysia’s Development report launched today said the projection is based on the country’s economic trajectory of the past decades.

However, the country will have to undertake further reforms if it were to join the ranks of leading and developed economies.

According to latest estimates Malaysia’s Gross National Income (GNI) per capita is at US$11,200 (RM46,000), which is only US$1,335 short of the current threshold of a high-income economy.

The impact from the Covid-19 pandemic has slowed progress toward the high-income nation threshold. Nonetheless, the country now has the opportunity to undertake bold reforms to sustain future growth and to ensure that the proceeds of growth benefit all segments of the population, the World Bank said.

The report also noted that the development model that worked in the past is no longer enough to help Malaysia navigate the next stage of its development.

“A different set of policies and institutions will be required to improve the quality, inclusiveness, and sustainability of economic growth in the future,” it said.

“What worked in the past will not work in the future. Gearing up for a high-income transition will require different solutions to thrive,” the World Bank said.

Compared to peers, Malaysia’s growth is slower, inequality is higher and high-skilled jobs make up a lower share of employment compared to other countries that have achieved high-income status in recent decades.

“Labour compensation, tax collection, spending on social protection, environmental management and control of corruption, all lag behind high-income OECD (Organisation for Economic Co-operation and Development) countries,” it said.

“Domestically, there is a growing sense that the aspirations of the country’s middle class are not being met – that the economy isn’t producing enough well-paying jobs and that the proceeds of growth have not been equitably shared,” the World Bank added.

To compete with high-income countries, Malaysia needs broader economic development that is focused on the quality, rather than quantity of economic growth.

The World Bank report also noted Malaysia’s strengths, such as its trade ties with 90% of the world’s countries. The report said this is considerably higher than other “transitional, regional and aspirational” countries.

It also noted that less than 1% of Malaysia’s population lives below the international extreme poverty line of US$1.90, and only 2.7% live below the average poverty line among its upper-middle-income peers at US$5.50.

Other positives are the increase in life expectancy at birth rates, from 59 years in the 1960s to 75 years in 2019.

The report attributed these successes to the country’s outward-oriented and labour-intensive growth, investments in basic human capital to raise labour productivity and credible economic governance to maintain macroeconomic stability.

Meanwhile, Finance Minister Tengku Zafrul Tengku Abdul Aziz who spoke at the launch of the report said Malaysia has to re-examine the development model it has been using that enabled the country to transition from low- to middle-income.

“(Transitioning) to a high-income economy within the next five years… is not guaranteed. Malaysia faces not only a global pandemic and a worldwide recession, but also a looming international debt crisis, a heightened risk of a resurgence in trade disputes, the potential unraveling of global value chains, and the impact of disruptive technologies that could change the socio-economic dynamics of nations.

“We need to re-look at the way policies are set and the roles of government and institutions to improve Malaysia’s future socio- economic growth.”

The senator said Malaysia must also look towards more knowledge-intensive and productivity-driven growth.

“I am also aware that Malaysians aspire to have not just a high-income economy but also one that delivers meaningful improvements in living standards for the whole population. 

“Malaysians increasingly aspire for both economic and social wellbeing, a high standard of living, not just high incomes.

“Fulfilling jobs, not just something that pays the bills. And better public service delivery, not just the existence of such services. In that spirit, it is important to reassess not just the speed of Malaysia’s growth, but also its quality, inclusivity, and sustainability,” he added.

This will include ensuring equal opportunities for all Malaysians, providing upward mobility opportunities and good incentives to remain and work in Malaysia, Zafrul said.

Greater resources will also have to be invested in building high-quality human capital to facilitate better economic opportunities, especially for women.

Zafrul said the Finance Ministry will focus on six key priorities to steer Malaysia forward in its post-pandemic economic recovery, rebound, and growth.

The six priorities are job creation; targeted aid for those affected by the pandemic; digitalisation; revisiting the roles and mandates of GLICs and GLCs; empowering small and medium enterprises; and, accelerating the implementation of specific projects to drive economic recovery. – March 16, 2021.