World Bank reports on Malaysia

Since 2006 , I have been harping about Malaysia losing the competitive edge and would soon be marginalised by others. Countries such as Taiwan, SOuth Korea have leaped past us, and while we are dawdling in the middle income band since the Asian Financial crisis.

Not only FDI has dwindled, private investments by Malaysians have been decreasing. IN the mean time, a lot of businessmen have invested overseas, and many professionals have migrated to other countries. Many of those educated overseas, including many Malay Scholars, have not returned even after completing their education overseas.

We have languished in the middle income group as we have not been able to be innovative and move up the technological ladder. Malaysians are contented with making money by using cheap labour from neighbouring countries.

It is like running a 400 metre race. Malaysia led the first 100 metres, but was levelled at the 200 hundred mark, and by the 300 hundred, most have gone past us, and before we reached the finishing line, we faltered and ran out of steam and dropped on the asphalt without finishing the race.

Many people have refuted my harping on this marginalisation, and some have labelled me as overtly pessimistic.

The recent report from World Bank on Malaysia confirms what I have been saying all along and in a way, I feel vindicated (but deep in my heart, I would rather be wrong than being vindicated since as a loyal Malaysian, i would like my country to be in the fore front of the world, be a world beater in our economy as well as other fields). There is nothing joyous about being proven right on my observations that the country is no longer competitive. It would be a herculean task to reverse from this slum, and it needs a steely determination to change course and be able to move on again.

I will paraphrase one paragraph of the report here:

 The overriding medium-term challenge is for the Malaysian economy to join the select group of high-income countries. Malaysia has experienced solid growth over the last decades, but has relied on an economic model predominantly based on capital accumulation, although private investment rates never recovered from their 20 percentage point fall after the Asian 1997/98 crisis and are now among the lowest in the region. For Malaysia to climb the next step up the income ladder, it needs to focus on improving the investment climate to raise investment rates and focus on productivity growth. Against this backdrop, the authorities are developing a ‘New Economic Model,’ which will be squarely centered on boosting productivity. Promising reforms have already been announced in the areas of services and foreign direct investment, which will help revitalize private investment.


For the whole executive summary, please read here. The full report can be viewed here.(82 pages)


Further readings:

Can we become a high income country?

Can Malaysia become a high income country? A macro view of jobs and labour



3 Comments (+add yours?)

  1. klm
    Nov 19, 2009 @ 14:11:48

    Dr. Hsu. Now you can call your colleagues in Gerakan and say Haaah!. 🙂


  2. CYC
    Nov 19, 2009 @ 17:53:40

    Dr K S Jomo is well respected internationally but our country ignore him. This is the testimony of our achievement: we have the luxury of not wanting such a well respect economist is a living proof that we maintain exception standard in recruiting top class economist to chart our economy. Don’t doubt our ability, u silly bastards.

    Oh Tong Keong whacked LGE for telling the truth whereby he can’t promise 1000 e&e engineers to a potential foreign investor. This naive young man think Malaysia is full of professionals that even US and China will envy our achievement. Again, it is a testimony of Malaysia continue producing top grade youth. Celaka punya budak. lu inagt LGE tak mau pubilisiti ka? Kalau ada 1000 engineers, siang siang dia sudah announce berita terkini sampai Amerika. Kesian, OTK pun mau pubilisiti mah.


  3. Peter
    Nov 24, 2009 @ 06:26:39

    Malaysia will never achieve developed status.

    Thailand and Vietnam will have better chance to reach developed status.

    Take a look closely;
    Japan, Taiwan, Singapore, South Korea have something in common; they are not a Muslim country.


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