High Income Nation: What Does it Take?

 

The World Bank has declared Kuala Lumpur, Labuan, Penang, Sarawak and Selangor to be high-income states. The bad news, though, is that Malaysia is not there yet. This is the latest high-income data based on Gross National Income (GNI), which is the total amount of factor incomes earned by the residents of a country. The country’s GNI per capita of RM53,400 annually falls short of the high-income threshold of RM63,000. 

Sarawak has joined the high-income state ranks in 2023. It must be doing something right. Three years ago, there were only three states – Penang, KL and Labuan – on the list but Sarawak joined two years ago, and Selangor made the cut last year. A total of five high-income states (including Federal Territories) but the others are below the threshold. 

Malaysia remains in the middle-income trap. We are too rich to compete with low-cost economies like Vietnam and Cambodia, but we are just unable to stand alongside high-income nations like South Korea and Singapore. 

South Korea, once poorer than Malaysia in the 1960s, is now a global tech powerhouse. It achieved this through strategic industrial policy, heavy investment in education and R&D, and a relentless focus on productivity. Singapore, without natural resources, became a financial and innovation hub through clean governance, meritocracy, and human capital development. 

Malaysia now finds itself outpaced by these countries that were once on equal or even lesser footing, and if we are not serious, we could soon be overtaken by Vietnam. 

This is not just about achieving a statistical milestone. It’s about ensuring Malaysians enjoy better jobs, stronger public services, global competitiveness, and the ability to keep our brightest minds at home.

The next five years will be crucial for Malaysia. 

For a start, the government must tackle governance and institutional weaknesses. Policy inconsistency, bureaucratic inefficiency, and rent-seeking behaviour. 

We must increase funding for TVET (technical and vocational education and training), with incentives tied to graduate employability. Among others, we need:

 

·     STEM scholarships and national reskilling initiatives for workers displaced by automation.

·     Tax incentives and matching grants for R&D, automation, and green technologies.

·     Expanded digital infrastructure, particularly in rural areas, to promote inclusive growth.

·     A Malaysian Innovation Fund to support start-ups in Artificial Intelligence, biotech, and climate tech

·     A revamped education system tuned for global needs.

Are our tertiary institutes producing the right kind of graduates who are trained and marketable? Malaysia needs graduates with strong technical skills in in-demand fields like IT, engineering and healthcare. Strong soft skills, adaptability and an entrepreneurial mindset certainly help. It will be even better if they can speak and write in Bahasa Malaysia, English and Mandarin. 

The World Bank high-income threshold is not fixed, and it adjusts its measurement each year.

The bottom three worst performing states are Kedah, Perlis and Kelantan, reflect the politicians in power. We can’t help these states if they prefer politicians who promise a ticket to heaven for voting them in. 

We must act – boldly, intelligently, and urgently for those willing to change – Melaka, Perak, Pahang, Johor and Negeri Sembilan are next best to graduate to high income status. Sabah has potential to do so in the longer term.

 

Reference:

A high target ­– can we meet it? Wong Chun Wai, The Star, 20 July 2025