According to the World Bank, Malaysia's GDP per capita was USD $375 in 1970, higher than South Korea's USD $279. Both countries were low-income, with much of their economies dependent on agriculture and natural resources.
Malaysia’s economic growth has been steady but slower than South Korea's. In 1978, Malaysia and South Korea were in the same low-middle-income economic status, with Malaysia’s GDP per capita slightly lower than South Korea’s, at USD1,304 and USD 1,406, respectively. Both countries grew at the same pace until 1985, when South Korea’s growth significantly surpassed Malaysia’s progress.
South Korea took ten years to move into the upper middle-income economic group in 1988. South Korea made a rapid transition from upper-middle-income to high-income status within 15 years (1988-2003). On the other hand, Malaysia took 17 years to shift to an upper-middle-income economy in 1995. Malaysia has remained in the upper-middle-income category since 1995, indicating a slower rate of economic advancement. In 2023, South Korea’s GDP per capita almost tripled Malaysia’s performance. Nevertheless, the trajectory looks promising for Malaysia to achieve a high-income economic status in ten years. The country could do better to hasten the transition.
Both countries’ productivity performance almost mirrored their GDP per capita growth. Productivity performance correlates with GDP per capita. Between 1986 and 1995, both countries’ productivity levels grew at about the same pace. Between 1996 and 2022, South Korea’s productivity growth recorded an annual average of 2.9 per cent per year, while Malaysia’s productivity growth was almost half that of South Korea at 1.6 per cent annually.
Productivity accelerates because of the emphasis placed on supporting local industries through facilitating the business environment, accelerating the use of technology, automation, innovation, and R&D, and building a workforce that meets industry demands.
As a result of South Korea's policies to increase productivity through business participation in R&D, the country's R&D expenditure as a percentage of GDP rose to over 4.0 per cent in 2022, whereas Malaysia's was approximately 1 per cent, with most of its R&D expenditure coming from the government.
Malaysia had approximately 30 per cent of skilled labour in 2022, whereas the proportion in South Korea exceeds 40 per cent, and most established nations had around 50 per cent.
25 South Korean companies were included in the Fortune 500 list of the world's largest corporations, a result of the government's consistent support for domestic industries over the past fifty years. In contrast, Malaysia has only one company on the list, and that is an oil and gas company.
Malaysia’s
Growth in Comparison to Selected Countries, 1960-2023
Malaysia’s Growth in Comparison to Selected Countries, 1960-2022
References:
Productivity Report 2024, Malaysia
Productivity Corporation
www.macrotrends.net
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