The never-ending quest to transition from upper-middle-income to high-income status requires necessary reforms.
ONE of my most memorable overseas trips – “missions” they still call it – while working at the World Bank in Washington DC 15 years ago was back home to Malaysia.
After the IMF-World Bank Annual Meetings in Singapore in 2006, I was tasked to help organise a visit of more than 30 economic or planning ministers from African countries to Kuala Lumpur and Putrajaya and meet with government, government-linked and academic institutions.
The objective was to facilitate knowledge exchange: here was a South-East Asian country that attained independence around the same time as many African countries.
As I had largely been away from home for my own education and career since 1995, this was a highly enlightening trip for me.
I recall some of the ministers being in awe at what Malaysia had accomplished in terms of economic development, even if I and many friends were critical of some government policies (I had already co-founded the predecessor to the Institute for Democracy and Economic Affairs (Ideas) by then).
In more recent years the focus among Malaysian economists and think tankers is how to ensure Malaysia escapes the middle-income trap.
Since that World Bank mission in 2006, Malaysia’s GDP has doubled, but according to a recently-issued World Bank report, “Aiming High: Navigating the next stage of Malaysia’s development”, key reforms in six areas will be necessary in order for Malaysia to be a high-income and developed economy.
These are revitalising long-term growth, boosting competitiveness, creating jobs, modernising institutions, promoting inclusion, and financing shared prosperity.
From the perspective of my colleagues at Ideas, one key economic driver will be improving human capital.
This will involve maximising educational opportunities for all Malaysians and ensuring access to quality healthcare.
In recent times there has been much use of terms like STEM, TVET and (increasingly throughout Covid-19) digitalisation, but those basics must be strong if we are to generate cohorts of industry-ready graduates.
These efforts must include both men and women: while it is often anecdotally observed in some universities that girls outnumber boys, Malaysian women’s labour force participation is relatively low for Asean.
The quest to transition from upper-middle-income to high-income status will see a vital role being played by government-linked companies (GLCs) and statutory bodies, too.
Malaysia needs to foster more competition within the state-owned enterprises ecosystem and strengthen oversight over these institutions.
Much has been said about the reforms of GLCs, but frankly, progress has been limited.
Ideas has done some work in this area, urging for clarity on the role of GLCs in the economy, and advocating the creation of a Parliamentary select committee specifically to oversee them.
At the same time, measures to stamp out corruption, abuse of power and cartels must be effectively pursued so that economic gains are sustainable.
The World Bank’s webinar following the release of the report saw attention being paid to strengthening the National Anti-Corruption Plan (NACP), which Ideas has also urged to be fully implemented.
This will involve enacting procurement legislation (previously much-touted) and appropriate use of artificial intelligence, big data and cryptocurrency.
In the slides that accompany the report, the World Bank is blunt (in a helpful way) in visualising the disparity in terms of Malaysia’s institutional performance compared to what is required to achieve high-income status.
While other middle-income trap escapees experienced reduced public sector corruption, Malaysia’s has increased. And while other high-income countries have increased the independence of their judiciary, Malaysia has gone the other way.
As ever, there will be critics who will question the World Bank’s data, methodology or agenda. But many of the same conclusions have been independently arrived at by numerous public policy and academic institutes, verified by the work of civil society organisations working with Malaysians of all backgrounds.
It continues to be the case – as I observed when working there – that the relationship between the World Bank and national governments is most interesting.
The latter are stakeholders, sometimes beneficiaries, and sometimes the target of criticism from the former, but diplomacy and geopolitics plays a part in moderating the relationship too.
At the same time, the international organisation’s objective in reducing poverty has evolved, and as can be seen in “Aiming High”, recommendations can encompass all aspects of a country’s government and society.
What is good about this report, then, is its recommendation that oversight of institutions vital to Malaysia’s development be given to the representatives of the rakyat in Parliament.
Ultimately, whatever narratives of economic development exist, they must be propelled by a legitimate government answerable to a functioning parliament and an independent judiciary if they are to enjoy sustained public confidence.
Tunku Zain Al-‘Abidin is the founding president of Ideas. The views expressed here are the writer’s own.