Achieving the status of a high-income nation will reflect the incredible transformation shouldered by every segment of society since Malaysia’s inception — climbing from low- to upper-middle-income in a single generation, massively reducing poverty rates, uplifting the standards of living of every Malaysian. But it will also reflect the transformation that is needed ahead of us, said Economy Minister Rafizi Ramli.
Malaysia will also reach a significant milestone in the next few years. Between next year and 2028, Malaysia will transition from an upper-middle income to a high-income nation. We will finally break out of the prolonged ‘middle-income trap’. Make no mistake, the ‘high-income nation’ bracket is an exclusive club and a coveted status — only 33 countries have successfully transitioned to this status in the past 30 years, he said
This was on the basis of this administration which came into power in December 2022 is the government with the largest majority in nearly 20 years. After the past few years of political uncertainty, there is now a sense of unity among political parties to set aside our differences and serve the people as priority. The stable majority also gives us political will to do what is necessary to restructure the economy so that we are no longer reliant on our finite advantages of natural resources and low-value manufacturing, and move into high-value work that is more resilient against global headwinds.
Speaking at the third instalment of the National Economic Forum (NEF), which gathers the captains of the industry to discuss the most pressing economic issues and collectively chart the path ahead today (May 18), he said this year, the NEF 2023 is different as it stands at an inflection point in Malaysia’s economic history.
Between 1967 to 1999, Malaysia was one of the fastest-growing economies in modern history, with a sustained annual growth rate of 9%, increasing our gross national income per capita by a triumphant 14 times. Thereafter, the growth pace slowed, and our growth rate today is lower than rates of any transitional peers 10 years before they achieved high-income status.
The once-in-a-lifetime pandemic revealed the structural problems that undergird our economy for a long time. We could no longer talk about economic growth without considering the pace, quality, and sustainability of growth.
“Restructuring our economy means paying attention to how and where we grow, ensuring that when our GDP numbers go up, the growth is high-value (coming from increased innovation and productivity), inclusive (benefiting a wide base in society), and is climate-friendly,” he said, adding, he Government administration started our tenure by emphasising good governance as the central value of the government. We took a strict approach against corruption and mismanagement.
This was important not only because Malaysia needed to rebuild its anti-corruption credentials in the eyes of international and domestic investors, but also because a clean government is a fundamental prerequisite for a thriving economy. Corruption stifles growth and erodes trust; modernising our institutions to meet international standards is an ongoing promise this administration makes, he added.
Rafizi said restructuring the economy ultimately answers the twin questions of “Where to grow?” and “How to grow?”
“On “Where to grow?”, it is becoming increasingly obvious that investing heavily in the digital and green economy is the right path forward. There is growing evidence around the world that digital technologies contribute to growth, productivity, employment, and poverty reduction — and this is especially important for a country like Malaysia where productivity growth has lagged our peers even before the pandemic.
This administration will continue to create an enabling digital ecosystem by preparing the infrastructure, platforms, and frameworks to protect consumers and uplift digital businesses.
The Ministry of Economy’s emphasis on open and centralised data is also foundational so that data is widely available and accessible. A government built on open data is more likely to make good, data-backed decisions; a society founded on centralised and transparent data will more likely develop products that are widely consumed.
Relatedly, a green economy shall be founded on a new philosophy that economic growth and environmental sustainability are no longer opposing goals, but complementary ones. Seeing where the money is going is a sign of what is to come. Last year, up to $1.1 trillion was invested globally into energy transition, with storage, mobility, food and agriculture, and renewables taking up the lion’s share. Many of the most exciting investments are a combination of public and private funding, showing once again that the role of government in directing money flows is critical for market creation.
Government efforts of lifting the renewable energy export ban last week and launching the energy transition roadmap in June 2023 are essential starting points for making Malaysia a serious player in the renewable energy space. By significantly increasing our renewable energy capacity to 70% by 2050 and introducing a cross-border electricity exchange system, we will attract high-quality global investments, especially from RE100 multinationals, into Malaysia, besides creating high-quality jobs for Malaysians in the country, he said.
Rafizi stressed in order to take advantage of this new frontier, the most important element is to ensure that we have the right talents with the right skills in Malaysia.
That brings me to the second question of “How to grow?”, he added, saying labour shortage and skills mismatch are dominant narratives by the industry since the post-pandemic recovery. And this will remain the case if Malaysia does not reskill and upskill our workers in a scaled manner.
He explained today, half of our workers are mid-skilled, and only about 30% are considered high-skilled. While this is slightly better than our regional partners, they are far behind our aspirational peers, where high-skilled workers in OECD countries is around 40%. To reach the same level as the OECD countries, we need to create 2 million additional high-skilled jobs, according to a World Bank report.
That is the gap that we are dealing with.
Figuring out how to create an ecosystem of continuous and sustained high skills training would be a core focus of this administration, and it is an area that will require cross-ministerial and cross-agency coordination to be successful.
Rafizi is clear, in that, Malaysia has all the right characteristics to achieve the vision this administration has set forth. We are one of the most digitally connected countries in the region, we are an open trading economy at a strategic location, we are economically resilient and competitive in the region, and now, the nation has a stable government that is intent on strong reforms.
“We will harness our existing advantages and remind the world that we are a country of opportunities, so that when we look back at this inflection point, we would be proud that we were bold enough to make the changes necessary for generations to come, Rafizi added.
