Can we become a high income economy?

Can Malaysia achieve  9% growth per year? Can we become a high income country by 2020?

Everything is possible in this world, but for Malaysia to achieve a consistent 9% growth, we need completely new thinking in both private and public sectors. We need innovative entrepreneurship, a good environment with minimal red tapes, meritocracy and good workers well versed in the English language.

We need to change our model from a low cost manufacturing centre where most of our industries and businesses depend on cheap foreign labour, to one that is based on knowledge and innovation.. In other words , we need a knowledge based business as well as labour community.

We need an environment that is free from rampant corruption, and a public service that is friendly to the businessesand practises good governance.. We need to have minimal interference from politicians or well connected people, and we need to do away with monopolistic control of businesses.

Knowledge based economy means a shift from the old fashion assembly of goods and products, to one that is based on research, knowledge, skill.

We need  to be able to not only assemble the products, but also to  have the knowhow to manufacture the products. Even in the profession, we need to innovate.

In a knowledge based economy, you need to have hardware such as properties, technology, equipment and financial resources.

More importantly , we need to have the soft ware — human capital . Human capital means that we must have  a workforce that has skills and correct work attitude. Skill is important and more importantly is the correct work attitude which will enable the work force to be resilient, innovative and daring to take up challenges. A workforce that not only works but also think. A workforce that can complete the assigned tasks, as well as ask why the need for such tasks.

So far, sad to say, we may have the hard ware , but we definitely do not have the software (human capital) that can propel us forwards to the forefront of Asia.. Our work force simply does not have the skills and the work attitude to produce innovation that is the key to a knowledge based society.

Our best university is not even in the top 150.. We are mass producing university graduates, but most of them are not really thinking individuals that can work as  stand-alone and produce new products or new inventions.

We have plenty of good graduates from overseas but unfortunately these innovative human resources are grabbed up by foreign countries and industries which treasure their expertise and attitude more than our own government.

 To produce innovative graduates from our own universities are easier said than done.. We simply do not  have the faculties to produce them.. When the teachers and lecturers are mediocre, you get mediocre graduates.

The quality of teachers and lecturers cannot be changed within a day or even a year or even five years. It can be achieved in a decade or 2 perhaps, only if we adopt meritocracy right from our primary schools all the way to tertiary institution now..It is like planting a tree. You need time for the tree to grow and you must provide the nutrients and correct environment for a plant to grow to a tree, and to have a tall tree,you must have all the trees competing for sunlight.

So when I look at all these hurdles, I do not think we are able to achieve the 9 % growth within these couple of years.

Having said so, we need a start somewhere, and if the government is sincere to change our economy to a high income one, we need to adopt meritocratic principles immediately , from primary all the way up …

For a start, perhaps the 2 tiered matriculation must be done away and university entrance must be based on true merits… but I am prepared to accept a reserve quota of 20% for those from poor family background and those from rural areas, irrespective of ethnic origins.– but these 20% too must achieve the minimal standards of entry.

Another important aspect is that we must have freedom of choice to enable healthy competition and meritocracy. By freedom of choice, we must  maintain the differing streams in our primary schools, so that parents can choose which is the best .. And with choice come the pressure to do well, and schools of different streams must buck up and compete for enrolments. With choice, we will have meritocracy. With meritocracy, we will have the good softwar that we are so glaringly lacking now.

We have lost so much time and now is the time to act .. Just talk alone will not convince the people that  we are serious to become a high income country..

We have been overtaken by Taiwan and South Korea, and if we do not buck up, we will soon be overtaken by Vietnam, Thailand.

If you are skeptical that this will happen,  you don’t have to look far; just look at  our football team.




36 Comments (+add yours?)

  1. klm
    Nov 09, 2009 @ 16:07:27

    Dr. Hsu. Note that the 9% figure had been changed to 6%. Even before anything has started.


  2. klm
    Nov 09, 2009 @ 16:57:02

    “I didn’t say nine per cent, I said around six per cent as nine is not realistic. We have to achieve six per cent as we have to be realistic to achieve a higher growth rate when the economy has really recovered.” – Najib

    It just shows the competence to make sure the speech was right was missing. How to have the brain power grow the economy?


  3. clearwater
    Nov 09, 2009 @ 17:37:50

    Only a foolish dreamer will believe Malaysia can achieve a consistent 6% growth (9%…ha ha …zzzzz) the next 10 years to 2020 following its current economic model, or that far reaching reforms will come in time or come at all, to make any appreciable difference.

    I still recall the ex-Prime Minister most associated with the 2020 number arrogantly state Malaysia can grow at 8% annually and this was in the 90’s just before the Asian financial crisis. Of course, if you ask him about it, he will say foreigners sabotaged Malaysia’s economy or he will just say he cannot recall having said that. Sorry, I don’t believe in fairy tales unless the fairy tells the tale.


  4. meet joe black
    Nov 09, 2009 @ 18:01:53

    let get real we are down 4% growth if u analyse the asian money magazine june 09 issue. to hit 6 % we need to get 9 % . china is maintaining between 8 % to 10.5 %.
    the klse index at 1250 points is no indicator if one go thru the taring criteria.with maxis ipo , the index will easily add in another 15 to 20 points upon listing.
    how does one evaluate health of a nation, as per se dr hsu commentary on credit cards…and if one ask himself honestly, we are all living on credit..look at the bank profit figures each year..doesnt this profit come from loans ?
    all these forecast by bank negara and business time are plain bull shit.


  5. disgusted
    Nov 09, 2009 @ 19:17:36

    9% probability but 91% FAT hopes! No moral value system overwhelmed by a corrupted network, weak enforcement, too much fat in the cyber brain, no consistency and persistence in good policies. Financial leakages and abuse of power. Rotting from the fish head right down to the tail. Sorry. Not under this B-end.


  6. klm
    Nov 09, 2009 @ 20:10:53

    eh! If someone cannot tell the difference between a 6 and a 9 then there is no hope.


  7. disgusted
    Nov 09, 2009 @ 22:11:35

    Kim, did I see the figure wrongly? 6 or (?


  8. frank
    Nov 09, 2009 @ 23:07:25

    Today marks the 20th anniversary for the Fall of Berlin Wall. Since Nov, 1989, the Berlin Wall was torn down and today, only after 2 decades, East and West Germany both in one and stand proud to show to the whole world that how they would have proven to the world peoples that – through their borderless co-operation and merger, they are able to excel together as a whole! And Germany has become one of the world largest economy bloc, amidst the world’s most advance Countries!

    Whereas here in Bolehland, we see only all the splits, apartheid policies down the list to further sub-divide the country into sectarians! How truthful is the one Malaysia concept and whether it’s based on the rakyat’s agenda, or still is the self-seeking Najibised agenda, the N2EP in disguise is yet to be seen!

    Mahathir gave more than 2 decades time frame for Malaysia to excel into one of the Asian (5th?)Dragon, until now, we see only all the tadpoles and frogs! Where to find a baby dragon, or its embryo?! Given another 10 years until 2020, I believe there’s still no baby dragon, only all the ‘cacing’!

    I personally have no faith in their leaderships and had been disenchanted by all their flip-flop hypocrisies and claptrap!


  9. meet joe black
    Nov 09, 2009 @ 23:44:49

    i chanced upon lee kuan yew interview.. at utube .maybe we can listen him out


  10. mycuntree
    Nov 10, 2009 @ 00:08:10

    Dear Dr Hsu,

    All the pre-conditions that you set for this country to achieve the 9% or 6% annual growth in the GDP is not going to happen…..not even by a long shot; and never ever, should the UMNO/BN government continue to rule this country. UMNO/BN just cannot exist within the kind of environment that you so eloquently set.

    And as you have pointed out in so many of your writings, this government has been taking 1 step forward and at least 2 steps backward every time it makes a move in anything and everything it did, do or will do. We are living this situation everyday for the past 3 decades.

    The proofs, as you have again so clearly stated, are the countries of Singapore,Korea and Taiwan vis a vis Malaysia of the 1960s – 2000;
    Thailand,Indonesia and Vietnam from the 1980s to 2008, and most likely Cambodia and Laos from now onwards. China and India is a given in this case! By the year 2020 Malaysia will probably be jostling for positions with some of the banana republics on the African continent.

    This assessment certainly sound like gloom and doom, but so far that’s the only sound made by our government.


  11. Clarence
    Nov 10, 2009 @ 07:46:58

    klm said:

    “It just shows the competence to make sure the speech was right was missing. How to have the brain power grow the economy?”

    He must have read the report given to him upside down. So he saw 9% instead of 6%.


  12. Clarence
    Nov 10, 2009 @ 08:05:53

    Dr. Hsu,

    In the same report, the PM also spoke of the role of MSC Malaysia and a vibrant ICT sector to drive us to become a high-income country. Well, if that is the case, he should start by dismantling Telekom Malaysia’s monopoly on telecommunication services.

    As you had pointed out in an older post, Malaysia is ranked 48 out of 66 countries in a recent global poll on “Broadband Leadership”. The country today desperately needs more ISPs to increase the broadband penetration rate and to provide faster data speeds at much lower cost.

    A high-speed reliable broadband network, wired and wireless, is a prerequisite for a knowledge-based economy to thrive and succeed. Nurturing and developing innovative intellectual capital is essential but not sufficient. The output of all our creative energies must be disseminated quickly and cost effectively across the globe. Only then
    can a knowledge and IT-based economy enable us to produce higher incomes for all.

    A moribund Telekom can no longer be allowed to monopolize Internet services if we fully expect Malaysians to use multimedia tools, smartphones, and social networks to successfully conduct e-government and e-commerce activities.


  13. klm
    Nov 10, 2009 @ 10:58:27

    Can this be the KPI from the silly Gerakan backdoor KPI minister?


  14. klm
    Nov 10, 2009 @ 11:16:33

    Ok. Let us not simply criticise for the sake of criticsing. Let us examine the merit of what Najib said, inter alia :-

    “We aim to be a developed nation by the year 2020 and we are looking to more than double our per capita gross national income from US$7,000 (RM24,500) to at least US$17,000 by then in order to qualify as a high-income nation according to World Bank classification.

    If we use a CAGR of :

    (1) 6% – by Year 2020, GDP/capita (nominal) is USD 13.3K

    (2) 9% – By Year 2020, GDP/capita nominal) is USD 18K

    Mathematically, we cannot reach the the World Bank High Income Nation milestone of USD 17K per capita with a GDP growth rate of 6%. So the 6% is a fallacy.

    So, it has to be 9%. But Najib subsequent statement overturn the 9%.

    “I didn’t say nine per cent, I said around six per cent as nine is not realistic. We have to achieve six per cent as we have to be realistic to achieve a higher growth rate when the economy has really recovered.

    Taking just these two statements together, what Najib means is that Malaysia will NOT reach the developed rank by 2020.

    Is this the doing of the backdoor KPI Minister? If he cannot set the proper KPI, then what is he good for?


  15. Dr Hsu
    Nov 10, 2009 @ 12:08:57

    I use the investment rrule of 72.. If 6% growth , we double percapita income in 12 years. Say now we are at $7000 level.
    In 12 years, we double which means that by 2021 we achieve a percapita of $14000.

    Using 9% growth rate, we doble in 8 years, again using the rule of 72.. And by 2017, we will be at $14000, and so we can reach $17000 by 2020… Which means that we really needs 9% growth rate, the same growth rate that China is growing… I see this as impossible.

    So the first speech is correct saying that by growing 9% per year, we will attain a high income country by 2020.. But i think the think tank realise that we will not be able to do so, especially this year will be a negative growth year, and next year growth is expected to be 2-3% at most..


  16. klm
    Nov 10, 2009 @ 12:30:45

    Dr. Hsu. I cannot do mental calculation anymore. I have been spoilt by microsoft. I need my trusty excel worksheet. 🙂

    By the way, the Worldbank definition of high income country is based on GNI of USD $11,906 . Malaysia’s GNI (2008) is USD 6,540. The word GDP was used wrongly in Najib’s speech. See GNI definition below.

    To meet the World bankd definition, technically we just need a 5% average growth.

    Forgetting the USD 17,000 mentioned. I say Malaysia will get to be counted as high income country, strictly on World Bank definition of GNI USD 11K. but barely.

    Gross national income (GNI) comprises the total value produced within a country (i.e. its gross domestic product), together with its income received from other countries (notably interest and dividends), less similar payments made to other countries. (I.e. nett income)


  17. frank
    Nov 10, 2009 @ 13:46:41

    China revealed a record growth rate of 8.9% for the 3rd quarter economic review, and they unleashed 586-billions USD as the stimulus package to prop up the economic growth with such consistency, in the midst of all the negative growth rates in the world market!

    They have also overtaken Germany and replaced it as the 3rd largest economic bloc in the world tailgating closely with the Americans causing panic and pandemic flu syndrome to the pseudo-liberal Senators of the US, to be on their alerts of the leap and bounce of the Chinese economy outclass them as the World’s economic giant! Brickbats are common in their congress!

    Now that the big brother of China is in our Bolehland giving angpows like one giving baits to the turtles in the pond at the temple of kek lok si! Several bilateral packs will be sealed including – the recognition of Degrees of Us of China, the procurement of more jet fighters from China and the issue of licence for Bank of China, just to name a few from the list.

    Only our Ketuanan can come down to behave a little subservient, they will receive more angpows and the support of China to import more buatan Malaysia so as to help prop up GDP, so as the growth rate can escalate! Probably, Mr Hu can also throw in some light on how to achieve the 9% growth rate which is sub-sub-soi to the Chinese, only the umno monkeys know how to behave and dun simply scream in the usual monkey style to throw old shoes at the “Pendatang’, sudah lah!

    This is the time they should learn from the Chinese, like Dr Hsu’s grandeur eloquent writings and ideas, if Mr Hu is too big for them to embrace!


  18. klm
    Nov 10, 2009 @ 14:27:13

    frank. You have to look at the geopolitics issue as to why China is so nice to Malaysia. Or for the matter why Malaysia has to be nice to China. This has nothing to local politics.

    The US is surrounding China’s backyard of the South China Sea. Malaysia is considered as a good friend of US – courtesy of Mahatir. Hence, China is aggressively wooing Malaysia – loans etc.

    Malaysia on the other hand is a bit wary of the US – it is in control (geopolitically speaking) of Philistines, Indonesia, Singapore, Thailand and Vietnam. Courtesy of Anwar, the US has a hand in Malaysia stirring up problems. Looks like Najib is tilting towards China for now.

    At the moment, China need Malaysia to counter the US influence in this region.


  19. CYC
    Nov 10, 2009 @ 15:00:33

    Najib will surely try to improve FDI for next two years simply due to GE13. how is he going to achieve a nice figure? your bet is good as mine. Interestingly, a roadside news broadcast reveals that some of our govt agencies will channel some massive fund to order certain supplies from foreign corporation. These corporations will outsource the supplies from some local RM2 companies for those supplies that were not available locally. So, ultimately the RM2 company will have to source it from foreign countries instead. After a merry go round circuit, we will report just FDI increase by certain million or billion as truthfully we got an investment from foreign country, only thing is we never reveal the original source of investment is from our own pocket. This will be cooked up to fool the public.

    Now we know how good is Bee End’s economic manipulation.

    In my mind, the urgent thing to do now is find a way to prevent our economy from sliding further. Similarly, we also must address the continue sliding in every aspects be it sports, education, health care ……..etc. We need to worry a lot as u see how our football team was beaten by Laos recently.

    9% annual growth is a tall order that literally means we will double our GDP (not GNI) every 8 years. But mind u our domestic investment is declining at much faster rate than FDI lately. Of course the govt’s explanation was local companies were focusing on expanding externally. Perhaps some experts analysis should be published for our consumption. Any one out there, please.


  20. Chauncey Gardener
    Nov 10, 2009 @ 16:17:39

    Some of the largest Malaysian corporations have been acquiring assets and / or investing overseas – Maybank, CIMB, Telekom, Genting, Gamuda, YTL, Hong Leong Group, etc. The latest is Kuok Group divesting from the sugar industry. Do they know something that we don’t ?

    The world’s largest rubber glove maker is KLSE-listed Top Glove. But they have more plants outside of Malaysia than within the country.

    What are the drivers for domestic growth in the next decade ? Manufacturing ? IT ? Call Centers ? Education ? Agriculture ? Oil & Gas ? Tourism ?

    Perhaps the EPU can provide more details of the grand plan.


  21. klm
    Nov 10, 2009 @ 16:58:53

    There is little opportunity left in the country. Every sectors are overcrowded. Many sectors are regulated. In regulated sectors, it is who you know rather that what you can do. It is that we fight each other and all die or go out and search for your fortune.

    We have to evolve our economy to be like the Swiss.

    Switzerland’s economy consists predominantly of low-bulk, high-value, service-orientated, export-driven activities utilizing a highly skilled, highly paid workforce.

    That should be Malaysia direction.


  22. ong
    Nov 10, 2009 @ 21:44:43


    You say we have to evolve our economy to be like the Swiss. I say that is being extremely unrealistic considering the fact that a large portion, if not the majority, of our population is not productive and also the fact that part of the still productive population is tending towards being unproductive instead of the unproductive becoming productive. And one more fact which over-shadows the earlier 2 facts : the people running this country either do not realise, or refuse to acknowledge those 2 facts.

    All the above facts are caused by the fact that our government has been and still continues to encourage our major population group to produce too many humans like in a factory production line who end up only good enough to be used as cheap labour.


  23. klm
    Nov 10, 2009 @ 23:28:39

    ong. If the govt do not want to anything to adjust the current condition, then this is the best Malaysia can do. Between where we are now and the next stage of development, we need structural change in the economic engine and in governance (govt institutions). Short of these, the economy will just move on autopilot until we crash one day.


  24. ong
    Nov 11, 2009 @ 09:50:58


    I do not disagree with your logic on evolving an (not our) economy to be like the Swiss. I only commented that such a proposal is extremely unrealistic for Malaysia. In fact “extremely unrealistic” was an understatement. “Practically impossible” for at least this and the next generation would be a better prognosis, considering the fact that a large section of the population continues to produce too many children but do not want or do not know how to bring up their progeny other than to let them become a source of cheap labour for some labour intensive industry. More tragic is the fact that such populace is becoming the source of ever increasing criminal activities.

    The fact remains that our present population is not suitable for “low-bulk, high-value, service-orientated, export-driven activities utilizing a highly skilled, highly paid workforce”.


  25. clearwater
    Nov 11, 2009 @ 09:51:21

    The 1st world Swiss economic model is far out of reach for Malaysia. We have hardly any of the desirable prerequisites to be the best in any given field; in fact we now have some of the undesirable traits to be among the worst. Even Singapore or Hong Kong have a long way to go in emulating the smart and industrious Swiss. Malaysia is just not there. Far, far back and still slipping and sliding.

    Our current situation is more the opposite of developed high income; we are moving towards 3rd world status where uncertainty, fear and corruption may dominate most aspects of our economic, social and cultural lives. The Marcos and Suharto regimes come to mind as examples of nations whose leaders which squandered the people’s future. If a nation does not uphold universal values of liberty, equality and opportunity for all its citizens regardless of race, religion or creed, it is doomed to eternal discord and ultimate failure. People are the most valued renewable resource. They create economic activity. If Malaysia fails to be high income by 2020, it is largely because its leaders failed its people through divisive policies and selfish politics.


  26. Trackback: Can Malaysia be a high income country? A Macro view of jobs and labour . « Dr. Hsu's forum
  27. klm
    Nov 11, 2009 @ 11:29:29

    Ok Ok. Maybe Switzerland is a big far fetched. The point is we need structural changes. Below is a comparison table to say why. This is more quantitative.

    Let us define income group as :

    1. High Income : Senior officials, Professionals, Managers, Executives & Technical workers
    2. Medium Income : Clerical, Sales & Service Workers
    3.Low Income : Production & Transport Operators, Cleaners & Labourers etc


    Occupational Distribution By Population

    Hi Income….+27%…..+34%….+51%…+48%…..+
    Med Income.+27%…..+29%….+25%…+24%…..+
    Lo Income….+47%…..+37%….+24%…+28%….+

    Taiwan, Spore and Switzerland being high income countries have different economic structure from Malaysia.

    If Malaysia cannot do this, then our growth is stumped. We will become an economic dwarf.
    The table above is more illustrative of what this really means to us.


  28. klm
    Nov 11, 2009 @ 11:32:30

    Today, about half of Malaysians works as production operators, lorry drivers, mandors in plantations etc.


  29. frank
    Nov 11, 2009 @ 12:36:14

    Hi klm,

    Is klm = Kim Quek?

    Well articulated discourse you have in MT. A job of kudos!


  30. klm
    Nov 11, 2009 @ 13:06:49

    frank. No. I am not that guy. Sorry lah.


  31. ong
    Nov 11, 2009 @ 16:10:41

    Let me comment on klm’s chart of “Occupational Distribution By Countries”. I know nothing about Thailand and Taiwan. Therefore let me compare Malaysia and Singapore figures.

    Malaysia: Hi income=27%, Mid income=27%, Lo income=47%. S’pore: Hi income=51%. Mid income=25%, Lo income=24%.

    My working life spans the last 40 years, with experience in both public and private sectors, both as employee and employer and my experience tells me that a very significant percentage of the Hi income group (Senior officials, Professionals, Managers, Executives & Technical workers) in Malaysia actually collect ‘gaji buta’. Those from this ‘gaji buta’ group will be un-employable in S’pore’s hi income sector and at best can only be employed in the mid or lo income sector. Similarly there is also a significant percentage in our mid income group who will be either un-employable or employable only in Singapore’s lo income sector.

    Therefore in a global competition, Malaysia’s hi income group percentage may drop to the region of 20% and the lo income percentage may rise to more than 55%. This means that jobs as Production & Transport Operators, Cleaners & Labourers etc will need to be created for the 55%.

    “low-bulk, high-value, service-orientated, export-driven activities utilizing a highly skilled, highly paid workforce” economy will remain a mirage in Malaysia for a long time.


  32. Dr Hsu
    Nov 11, 2009 @ 16:21:49

    on the other hand, if those who work overseas come back to Malaysia (Malaysianinsider put it at more than 700,000, and this excludes those already becoming citizens of other countries),then the HI income group will probably go up to quite a sizeable proportion.

    Brain drain has cost us dearly, and if nothing is done to correct the unfair practises, and brain drain continues, then good luck to the country..

    We depend on Indon and Bangla for cheap foreign workers. When these countries go past us, we will probably sorce from Cambodia and Sudan. And when even Sudan goes past us, then we Malaysians will probably go to Indon and Bangla and work as cheap foreign labour..

    Just a thought!


  33. klm
    Nov 11, 2009 @ 16:53:06

    Let me comment a big on these figures. They were collated from published labour force survey data from each of the countries dept of stats websites.
    Singapore started the analysis the occupational distribution in this way and i did similar analysis for the other countries for comparison. The result was illuminating. I send that to Dr. Hsu which he kindly posted.

    The quality of labour as mentioned by ong is not considered. It is relative. This is just statistics.

    On Dr. Hsu’s comment on Malaysian working overseas. There may not be enough jobs in the high income group to absorb all of them. They will still not come back.


  34. BabaNyonya
    Nov 14, 2009 @ 07:55:58

    Dr Hsu,

    Here is a timely article from the Economist about how difficult it is for countries that don’t have it to develop entrepreneurship and innovation – the keys to high income. Malaysia is quoted as one of the countries that tried and failed:

    “The road to the entrepreneurial future is littered with failed government schemes. Malaysia’s massive BioValley complex, which opened in 2005 at a cost of $150m, is now known as the “Valley of the BioGhosts””

    “Although Malaysia had few skilled biologists, its politicians decided to build BioValley on the ruins of Entertainment Village, an attempt to create a Malaysian Hollywood that failed for lack of media nous.”


  35. Dr Hsu
    Nov 14, 2009 @ 10:17:30


    Thanks for the link.. I will post the whole article and let us have a discussion on that.


  36. Trackback: World Bank reports on Malaysia « Dr. Hsu's forum

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