KUALA LUMPUR: Malaysia’s target to achieve high-income nation status by 2020, as set by the previous administration, has been pushed back by at least four years as the new government resets its growth priorities.
Gross national income (GNI) per capita at current prices rose at an average rate of 6.7% from RM36,119 (US$9,248) in 2015 to RM41,093 (US$9,556) in 2017.
Based on the minimum threshold of a high-income economy set by the World Bank at US$12,056 for 2017, there was a gap of 21% before Malaysia could graduate to its upper middle-income nation status.
Given the current pace of growth parameters, the target of a high-income economy is expected to be achieved only in 2024.
But the goal to become a developed and inclusive nation, the government said, goes beyond attaining a high-income level as it must also be accompanied by higher purchasing power.
At the same time, the aspiration of becoming a developed nation requires Malaysia to progress in many other dimensions, such as economics, politics, culture, psychology, spiritual and social.
Moving forward, the government said policy priorities will balance the objectives of fiscal consolidation and ensuring inclusive growth.
The economy, it said, is expected to expand between 4.5% and 5.5% per annum in the remaining Plan period, 2018-2020. This growth will be spearheaded by productivity improvements and sustained domestic demand.
These goals will be pursued together with qualitative aspects through the various respective policy pillars to ensure an inclusive growth.
While the country is giving itself more time to achieve the developed nation status, long-standing structural economic issues is affecting the pace of reforms.
Among others, the economy is still dependent on traditional factor inputs and less on productivity to drive growth.
Investment has risen in the last decade to reach 25.3% of gross domestic product (GDP), but mostly (57.7%) concentrated on physical assets.
During the same period, investment in information and communications technology (ICT) equipment as well as other machinery and equipment, deemed crucial to lift the economy out of its middle income trap, had decreased from 26% to 22.2%.
The lower share of investment in ICT equipment as well as other machinery and equipment in Malaysia impedes greater adoption of advanced technologies and automation by industry.
This is reflected in many industries that are still operating in the low-end to mid-range of the value chain, limiting the creation of high-income jobs.
In the Eleventh Malaysia Plan 2016-2020, the thrust on re-engineering economic growth focuses on strengthening the economic foundation to propel Malaysia from a middle-income to a high-income economy premised on innovation, creativity and high value-added activities.
In this regard, strategies and initiatives are outlined to accelerate the momentum of economic growth by expanding knowledge-intensive activities, increasing productivity, propelling digital-based activities and producing complex and
high value-added products as well as developing regional economic corridors and competitive cities.
At the same time, the economic sectors continue to face structural challenges, complex regulatory framework as well as low innovation and technology adoption. There is also a need to upskill the workforce while reducing reliance on low-skilled workers and improve environmentally friendly measures that are sustainable.
Concerted efforts in creating an effective ecosystem and improving productivity across all economic sectors and regions are imperative to achieve an advanced nation status.