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Malaysia remains an upper-middle-income nation. It seems our gross domestic product (GDP) per capita is stagnating despite our overall GDP increasing. It means growth is generated mainly from population growth rather than an improvement in productivity.
According to the World Bank’s recent report, Malaysia’s total productivity is lower when compared with our regional peers. It is due to several structural problems.
First, our economic structure and the way we mobilise our financial capital. We established government-linked investment companies (GLIC) and government-linked companies (GLC) to balance the private capital, which are in the hands of rich individuals.
The GLICs and GLCs have the responsibility to create values by improving productivity and creating jobs for the masses. Sadly, several became victims to individuals who exploited them for their own benefit.
Second, the high dependency on cheap foreign labour. Since the supply of foreign labour seems to be endless due to our favourable policy, the desire to automate and innovate was somewhat muted.
Thus, we continue to depend on foreign direct investment (FDI) for technology, and now, we have to compete with Indonesia, Vietnam and even Cambodia. Due to our small population, it is a challenge to compete with our larger neighbours.
Third, our human capital. Despite spending billions and producing many graduates, we are not able to create an ecosystem where our graduates can thrive. Where are we in terms of quantum computing, nano and biotechnology? We are not funnelling enough resources towards creating a vibrant ecosystem.
So, here are some recommendations to take us upwards:
Firstly, create more opportunities for all Malaysians. The young should be made to feel that they can excel and thrive in a conducive ecosystem. We can start with the GLICs and GLCs. We need to revive the concept of empathy and social consciousness;
Secondly, reform in our governance structure is crucial and pertinent to our economic reform;
Thirdly, we should be worried about deep structural issues that will impede Malaysia’s growth and competitiveness. We need big and bold ideas. Spend big on infrastructures to create a vibrant and dynamic ecosystem. As such, we need a holistic tax reform to ensure the government has enough buffers to create opportunities for all, and;
Fourthly, spend more on public healthcare and improve the social safety net. Put our political interest aside. Think about what is best for the rakyat. Set up a dedicated team to chart our way out of this pandemic and make restoring the credibility of the government and institutions our utmost priority.
We need to address the structural problems now to minimise the residual damage of this pandemic, to avoid irreversible damage to the economy. Every crisis presents a great opportunity for a reset. Reform starts with us, and collectively, we can make the nation better.
By Assoc. Prof. Dr. Mohamed Eskandar Shah Mohd Rasid, Associate Dean, School of Graduate and Professional Studies (SGPS)
*The above was published on New Straits Times’s Letters page: https://www.nst.com.my/opinion/letters/2021/07/712012/covid-19-crisis-presents-opportunity-economic-reset-and-reforms