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Monday, March 20, 2017

Malaysia severely off-track in Wawasan 2020 gross national income goal, says IDEAS

Author: Tan KW | Publish date: Mon, 20 Mar 2017, 03:35 PM

By Adela Megan Willy / | March 20, 2017 : 3:03 PM MYT

KUALA LUMPUR (March 20): The drop in the average income per person in Malaysia by as much as 15% to US$8,821 in 2016 from US$10,345 in 2013, according to the Economic Planning Unit, has raised questions about whether Malaysia is still able to achieve the high income nation status by 2020, according to The Institute for Democracy and Economic Affairs (IDEAS).

"The figures are rather alarming but the government has yet to give a full explanation on how they will address the issue. I think this is partly because when the figures were reported in Malaysian ringgit, it showed positive growth in average income at RM32,596 in 2013 to RM37,930 in 2016," said IDEAS research director Ali Salman in a statement.

"But in US dollars, which is what countries generally use as a benchmark, the story is vastly different. At an average yearly income of US$8,821, Malaysia today is severely off-track in our Wawasan 2020 goal of achieving a Gross National Income (GNI) of US$15,000," he said.

Ali added that seeing the GNI back in 2013, which was US$10,345, the goal was realistic but already challenging — with 2020 just three years away, it will be extremely difficult and "we simply cannot afford to drop further down".

One of the main reasons behind the decline is the currency depreciation, causing Malaysia to be the "biggest loser" in the region in 2016, according to Ali.

Still, the drop in currency is only the tip of the iceberg. The bigger issue is Malaysia's decline in competitiveness.

"Although, Malaysia is still relatively competitive, we have dropped in rank under IMD's World Competitiveness Yearbook in 2016 by five places from 14th in the world to 19th as well as the World Bank's Ease of Doing Business Index, from 17th in the world to 18th," Ali said.

"And one of the reasons why we are becoming less competitive is our lack of high-skilled labour. In 2015, only 27.4% of Malaysians had a university education whereas the number of workers in Malaysia with no formal education increased to 12.48% from 2014 to 2015," he added.

Ali further cited the increasingly unpredictable government policies as another factor that is not conducive to a business-friendly environment.

"For example, the Price Control and Anti-Profiteering Act, which was introduced to stop businesses from increasing prices during the GST introduction phase, is now being kept indefinitely. This direct intervention, although intended to protect consumers initially, in fact creates unnecessary burden to businesses and has increased the cost of doing business," Ali lamented.

The inconsistency, said Ali, ultimately puts investors off.

"In a dynamic economic environment, Malaysia needs a paradigm shift in its policies. What we need is more competition, more free trade and less controls and interventions by the government," he said.

"Only more economic freedom can help us break the Middle Income Trap, which seems to have been more gripping than ever," he added.

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