Malaysia should be able to leap from being a middle-income nation to a high-income one by 2028, said the Economy Minister, Rafizi, in a recent press report. In February2023, Rafizi had said that Malaysia will cross the high-income threshold by 2026 if growth rate stays above 4 per cent for the next three years. That also assumes population growth remains below 1%. The resulting per capita income growth of around 3% will enable the country’s per capita income level to rise above the projected high income threshold, as defined by the World Bank. That’s the view expressed by Dr Yeah Kim Leng. In addition, the country’s exchange rate must perform well. Why? If exchange rate depreciates, the threshold (in USD) will require more ringgit per capita.
Dr Yeah also pointed out that besides growth, “the country’s inflation and currency also need to perform well against the global average.” Malaysia’s economic growth is heavily reliant on domestic consumption while investments have been lacking.
Investments are just 20% of the GDP now (4.5% government investments and 15.5% private investments). In Indonesia, investments remain stably above 30% of GDP. This is the key for building a path to sustainable growth –strengthening investments rather than consumption.
The World Bank defines high-income countries as those with gross national income per capita of $12,536. Malaysia is classified as an upper middle-income country, based on GNI per capita of $11,230 in 2019.
Malaysia has aspired to leap to the next tier for some time. Back in 2009, then-Prime Minister sought to build a high-income economy by 2020 through a national transformation plan. Then in October 2019, Mahathir set a new high-income target as part of what he called the Shared Prosperity Vision 2030. The 10-year initiative was to guide the Malaysian economy toward sustainable growth with fair and equitable distribution across income groups, ethnicities, regions and supply chains, providing a decent standard of living for all citizens in 2020. In 1991, Malaysians were introduced to Vision 2020, which aimed to build a self-sufficient industrialised nation. But that has not happened.
So is it by 2026, 2028 or 2030? The safest bet is 2030. The optimistic case is 2026 and a more conservative view is 2028. Why? Nothing is predictable. But we could improve the climate for investments – DDI and FDI; we could reform our tax structure; we could encourage more foreign residents under a revamped MM2H; we could focus on new technologies and renewable; we could suggest more R&D and collaboration with universities; we could appreciate the ringgit to RM3.50 to the dollar; we could do structural reforms and effect many other such initiatives.
The key question is do we have the guts and gumption to follow through? Many times we start well but end-up with a whimper because we lack the stamina of a marathon runner. The fixation of a developed nation is not just income per capita but a sense of equality, fairness and justice for all. And that should be our objective.
References:
Rafizi: Malaysia can reach high-income status in next five years, if all goes well, Zarrah Morden, The Malay Mail, 18 May 2023
Conditions for achieving a high-income nation possible, say economists, Thomas Huong, The Star, 17 Feb 2023
Malaysia to renew push for high-income goal by 2030 despite Covid, P Prem Kumar, Nikkei, 26 Feb 2021
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