Malaysia To Remain A Middle-Income Nation?

Dr Sukhdave Singh, former Deputy Governor of Bank Negara Malaysia was quoted on TheEdgeMarkets.com (22 Nov 2020) on “Malaysia risks not being a high-income economy even over the next 20 years”. Dr Sukhdave gave an incisive exposition of why negative trends keep eroding our desire to be a high-income nation. Since the Asian Finance Crisis (AFC) we are growing at a pathetic 4-5% p.a. compared to above 8% before AFC.

The fall in growth is mirrored with fall in exports-to-GDP ratio. Is that because domestic demand is now the engine of growth? Overall trade has been on a long-term decline. Manufacturing sector to overall GDP has declined to 21% in 2019 from over 30% just after AFC. We are hollowing out our manufacturing sector. Will the RCEP reverse the trend? Unlikely, if we are uncompetitive compared to Vietnam or Indonesia.

 

Source: TheEdgeMarkets.com, 22 Nov 2020

 

So is productivity being destroyed?

 

·       Female labour force participation (in Malaysia) is lower than Singapore, Thailand or Vietnam;

·       Dependence on cheap foreign labour holds down any wage increase, or investment in higher-value added activities;

·       Failure of education system to produce “employable” graduates;

·       Creation of more “rent-seekers” than genuine entrepreneurs;

·       Large civil service that has increments and bonuses even in Covid-19 pandemic (when others are losing their jobs);

·       An ageing population to be felt by 2030 and beyond;

·       Weak fiscal management – revenue has stagnated while expenditure has ballooned; and

·       “Leakages” or poor governance tolerated with little accountability.

 

And beyond the above, one could list other “brakes” for a decent growth:

·       Rise of race and religious issues over last 20 years;

·       Toxic politics and political chicanery that threatens stability;

·       Flip-flop investment policies (e.g. cabotage exemption being revoked);

·       Lack of courage to make effective change;

·       Weak implementation of plans or master plans; and

·       Little R&D for innovation and change.

 

Can we allow the above malaise to continue? Are we happy with sedentary, placid growth? Why can’t we unleash the innovativeness of the private sector?

 

References:

1. Malaysia risks not being a high-income economy even over the next 20 years, Dr Sukhdave Singh, TheEdgeMarkets.com, 22 Nov 2020

2. Tech giants plead with PM over Wee’s “abrupt” move, flag monopoly, Emmanuel Samarathisa, www.thevibes.com

3. Malaysia: Slow-paced, stumped, stuck in the past, Dato M Santhananaban, www.theindependent.sg