Navigating the path to high-income nation status

  • Letters
  • Tuesday, 27 Apr 2021

IN its transition to a high-income economy, Malaysia needs to create about two million additional high-quality jobs for workers of all backgrounds and skills levels so that it can be on par with other countries that have successfully managed this transition.

According to World Bank projections, Malaysia is expected to reach high-income status between 2024 and 2028. The challenge of creating high quality jobs is becoming more complex because of rapid technological progress and the associated changing nature of work – a phenomenon

that has been accelerated during the Covid-19 pandemic.

According to the recently launched report, “Aiming High: Navigating the Next Stage of Malaysia’s Development”, creating more high-quality jobs will require proactive policies both on the demand and supply sides. On the demand side, bottlenecks to productivity and competitiveness need to be addressed.

On the supply side, proactive policies are required in three broad areas:

1. Foundational human capital, which is integral to enabling all Malaysians to realise their full potential as productive members of society: According to the World Bank’s Human Capital Index, with a value of 0.61 (on a scale of 0 to 1), Malaysia’s foundational human capital, as measured by health and education outcomes, is lower than the average value of 0.7 in countries that have successfully transitioned to high-income country status.

Malaysia’s health system is running up against its limits, with a primary healthcare system that is not well equipped to manage the increasing burden of non-communicable diseases such as high blood pressure and diabetes. Better management of non-communicable diseases will result

in a healthier workforce but will require better payment mechanisms, better staffing of doctors, nurses and care coordinators, and better training in the management of these diseases.

In terms of learning outcomes, Malaysia’s performance in internationally comparable examinations, such as Trends in International Mathematics and Science Study (TIMSS) and Programme for International Student Assessment (PISA), is below the government’s target scores, as well as the average scores of aspirational high-income countries. Addressing these gaps in learning outcomes through a transition from teacher-centred teaching to student-centred learning will be a critical foundation to develop a high-skilled workforce, and to support future growth.

2. Upskilling and reskilling of the workforce, with an increasing focus on digital, socio-emotional and advanced cognitive skills: The changing nature of work means that lifelong learning becomes ever more important as these skills are increasingly in high demand. Today, about half of online job postings for high-skilled jobs in Malaysia require digital skills ranging from basic digital productivity tools, such as Microsoft Office, to more advanced skills, such as programming.

In parallel, jobs involving manual skills are gradually being replaced by those requiring advanced cognitive and socio-emotional skills, such as problem-solving, teamwork, and perseverance.

3. Mobilising sources of labour supply, particularly women and youth: Policy directions include fostering the school-to-work transition of youths through a unified governance structure for vocational education and enabling more women to participate in the labour market through legal reforms to improve support for parents and better provision of child and elderly care.

Without such proactive policies, women and youths will remain key underutilised sources of labour supply. At 55.6%, the female labour force participation rate in Malaysia is lower than in comparator countries. Boosting this rate can be a development outcome in its own right.

Similarly, the unemployment rate among youths aged 15 to 24 is three times higher than the unemployment rate for individuals aged 25 to 64.

It is truly time for Malaysia to aim high.


World Bank Practice Leader for Human Development.


Economist, Social Protection and Jobs Global Practice at the World Bank

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