Malaysia can be economic powerhouse, says ADB
In a report titled “Asia 2050”, ADB said that Asia’s rise will be led by China, India, Indonesia, Japan, South Korea, Malaysia, and Thailand.
The seven countries are expected to have a combined GDP of US$14.2 trillion (RM42.3 trillion) in 2010, 87 per cent of Asian GDP, and a total population of 3.1 billion, or 78 per cent of Asia’s total population.
The report also forecasts the average per capita income across the seven countries will be US$45,800 in purchasing power parity terms, or 25 per cent higher than the global average of US$36,600.
The ADB divided Asian economies into three groups — High Income Developed Economies, Fast Growing Converging Economies and Slow or Modest Growth Economies.
Malaysia was included as part of the second group — Fast Growing Converging Economies — which meets the World Bank’s criteria of “sustained long-term success.”
It warned, however, that: “Most of the countries in this group are middle-income countries and still vulnerable to the middle-income trap,” adding, “Their success in avoiding the middle-income trap will determine whether they will join the first group of developed economies by 2050.”
The other countries in Malaysia’s group were China, India, Armenia, Azerbaijan, Cambodia, Georgia, Indonesia, Kazakhstan, Thailand and Vietnam.
The report said that measures to sidestep the middle-income trap include reducing inequalities and consolidating the fundamentals of development such as training a world-class labour force and building credible and predictable institutions.
Over three decades, Malaysia has largely eradicated poverty, built world-class infrastructure, and emerged as a major exporter but the country has been mired in the middle-income trap — per capita gross national income was approximately US$7,350 in 2009 — because the strategies adopted to attain the current level were inadequate to elevate the economy to the next stage.
The ratio of private investment to GDP has stagnated at below 25 per cent of GDP for a decade, compared with rates of over 30 per cent of GDP in the mid-1990s, partly because many businesses find it difficult to start and expand operations in Malaysia.
The Najib administration is attempting to transform Malaysia into a high-income economy by 2020 with an ambitious slew of “transformation” programmes that emphasise productivity, efficiency and innovation. But observers contend that it would require even more significant structural reforms, including in the field of education, that so far appear to be lacking.
No Malaysian university made it to the Times Higher Education (THE) 2010-11 ranking of top 50 Asian universities or top 200 global universities.
In contrast, Singapore had three universities in the THE top 200 global universities, Hong Kong had eight, while Japan and Korea had five each.
Malaysia is also suffering from a damaging brain drain which the World Bank said has not only grown rapidly but is set to intensify.
The country is also losing its attractiveness as an investment destination, falling in ranking in the Global Competitiveness Index from 24 to 26 in 2010.
Another vulnerability the country faces is that its exports are heavily concentrated on electrical and electronic products — eventually destined for markets in industrial countries where demand is volatile — and primary commodities (such as petroleum and palm oil) whose prices are volatile.
Both types of exports, however, generate little added value and employ mainly low-skill, low-wage workers, of which large numbers consist of foreigners. And although labour productivity is growing, it is doing so slowly, inhibiting creativity and innovation. Socially, the gap between rich and poor is widening.
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