Though growth does not necessarily reflect real development, Malaysia is a success story in terms of growth performance. The ‘Commission on Growth and Development’ under the sponsorship of the World Bank and Others in its 2008 report (The Growth Report, The World Bank, 2008) included Malaysia within a list 13 economies that have grown at an average rate of 7% per year for a period of 25 years or more since 1950 and at this rate an economy almost doubles its size in each decade. This performance is nothing short of a miracle though the Report prefers the nomenclature ‘sustained high growth’ economies over ‘miracle economies’. Malaysia achieved this spectacular performance during 1967-1997 and today Malaysia is classified by the World Bank as an ‘Upper Middle Income Country’ (per capita income ranging between US$ 4,086 and $12,616) with a per capita GNI of US$ 9,800 (in 2012 market prices) and $16,530 in PPP terms (World Development Report 2014). Malaysia has also successfully reduced the poverty rate from over 50% of the population living below the poverty line in the 1960’s to less than 2% currently.
In terms of the Human Development Index (HDI), which is a summary measure of long-term progress along three basic human dimensions (long healthy life, access to knowledge, and decent standard of living), Malaysia was classified in the ‘high human development’ category and ranked 64 out of 186 countries in 2012 with an HDI value of 0.769 (Human Development Report 2013). The index remains the same when adjusted against income inequality and Malaysia’s Gini coeffient in 2000-2010 was a high 46.2. However, with globalization and the gradual movement to higher value added industries, many fast growing economies including Singapore have experienced growing income inequality in recent years and so this trend is not at all surprising, though attempts should be made to narrow the gap between the rich and poor for a more balanced development. The above Growth Report suggests that the main features of these 13 economies are globalization, macroeconomic stability, high rates of savings and investment, efficient allocation of resources, and committed, credible and capable governments.
Malaysia’s success in achieving development goals did not happen overnight; they are the result of carefully planned policies for the past four decades. While growth remained the main objective, the government also took deliberate measures to reduce poverty and to increase the participation of Malay community in overall economic activities. Starting with the New Economic Policy (NEP) in 1970-1990 and then refining the policies in the light of experience and growing criticism of discrimination against Non-Malay population through the National Vision Policy (NVP) during 1990 to 2000, and finally New Economic Model (NEM) during 2000-2011 were pursued with a view to drive the country towards the achievement of ‘developed country’ status by 2020 under Vision 2020.
Can Malaysia be a developed country by 2020? If we examine the WEF’s recent report (The Global Competitiveness Report 2013-14), there is a strong possibility that Malaysia will reach that magic number of per capita income US$12,601 to be classified as a developed country. According to this report, Malaysia is currently in transition from stage 2 (efficiency-driven) to stage 3 (innovation-driven) and ranks 24 (above Korea, Rep and second in ASEAN behind Singapore) out of 148 countries. Malaysia ranks no lower than 51st in any of the 12 pillars of the Global Competitiveness Index and features in the top 10 of two of them-efficient and competitive market for goods and services (10th) and well-developed and sound financial market (6th). The report also adds that Malaysia successfully tackled the issues of corruption and red tape and the country ranks an impressive 8th for the burden of government regulation. Furthermore, Malaysia’s private sector is highly sophisticated (20th) and fairly innovative (25th) and this is essential for a country that aims to become a high-income knowledge- based economy by the end of the decade, the report adds. Besides overall positive assessments, the report also mentions some competitive weaknesses such as Malaysia’s high budget deficit, low level of female participation in labour force, and low technological readiness.
The World Bank in another report (Malaysia Economic Monitor December 2013) highlighted weaknesses in the Malaysian educational system and prevailing low standards. Though Malaysia performs very well with respect to access to education, the quality of education remains low and appears to be declining. In the 2012 PISA, Malaysian students only outperformed Indonesian peers but lagged even lower income countries like Vietnam by a wide margin, the report laments. Malaysian education system is most centralised and quality of teachers reportedly low with the report concluding that “there is an urgent need to transform Malaysia’s education system so that it produces quality graduates required by a high-income economy”. The problems in the Malaysian education system and consequently the low level of productivity have also been mentioned by local academics and leaders as major hindrance for achieving the developed country status by 2020. Former Prime Minister Dr Mahathir Mohamad believes too much emphasis on wealth may not be helpful in achieving the status of a developed country. Instead, more emphasis should be placed on industrialisation, innovation and research and development. Needless to say that good quality education is a pre-requisite for all these to happen and the government should undertake appropriate educational reforms.
It should however be mentioned here that achieving the income target may not be sufficient to be classified as a developed country. Singapore, for example, has exceeded that benchmark sometime ago with current per capita income of staggering US$47,210 but in many respects is still not a developed country. It is listed as a high-income economy as the country is small and per capita income may not truly reflect its real development. Also, the process of development involves transformation of the entire society and the citizens of a developed country are expected to be highly sophisticated and generous. Are Malaysians ready for exhibiting these features of a developed society? Only time will tell.