The priority for Malaysia now is to focus on policies for its huge middle class.
Dr Caterina Ruggeri Laderchi, a senior World Bank economist, said yesterday that for progressive prosperity in countries such as Malaysia, “the priority is to satisfy the middle class’ growing aspirations, while mobilising resources to address remaining disparities”.
Laderchi said this during the launch of the report entitled ‘Riding the Wave: An East Asian Miracle for the 21st century’. She co-authored the report.
Laderchi gave three pillars to support such a policy agenda: fostering economic mobility, enhancing economic security across economic classes, and strengthening institutions.
Noting that each country’s circumstances could be different and not all pillars would be important for each of the economic classes, she suggested each country identify its priorities.
The World Bank has classified Malaysia as a country with “progressive prosperity”, alongside Mongolia and Thailand. This is one of its five classifications.
The other categories include: “lagging-progress” countries such as Laos and Papua New Guinea; “out-of-extreme-poverty” countries such as Cambodia and Indonesia; “out-of-poverty-into-prosperity” countries such as China and Vietnam. The “Pacific Islands” countries are in their own category.
The edgemarkets.com quoted Dr Sudhir Shetty, the World Bank’s chief economist for East Asia and Pacific, as saying Malaysia needed to narrow the gap on income inequality in the country.
“The Gini coefficient in Malaysia continues to remain high, as compared to its peers such as Indonesia and Thailand. It is lower than China’s, but it is considered to be relatively high,” Shetty was quoted as saying during a panel discussion, following the report’s launch.
The Gini coefficient is a statistical measure to gauge economic inequality. A “zero” implies everyone has the same amount of wealth or perfect equality, while “1” means the centralisation of wealth in one household or perfect inequality.
In 2016, Malaysia’s Gini coefficient stood at 0.399, compared with 0.441 in 2009.
Prof Dr Norizan Abdul Razak, director of the Women Leadership Centre and chair for the grand challenge on B40 empowerment at Universiti Kebangsaan Malaysia, said Malaysia, under the 11th Malaysia Plan, was working to narrow the income inequality gap by increasing its middle income society to 45% of the population.
It aims to do so by doubling the average monthly income of the B40 (bottom 40) households from RM2,537 in 2014 to RM5,270 in 2020, and to increase their median monthly income from RM2,629 in 2014 to RM5,701 in 2020.
The edgemarkets.com quoted her as saying that crucial issues faced by B40 households needed to be addressed first.
This includes a lack of opportunity for continuous education for skills development, rising cost of living, fragmented implementation of social safety net programmes that yield ineffective results, the inability to own a house, as well as limited access to quality healthcare services.
Norizan said education would be the key to elevate the B40 households’ earnings power.
“As a lot of these B40 individuals are involved in low skills and low value-added jobs, most of them would be affected by the 4th Industrial Revolution and replaced by automations and robots. We need to make sure these groups are being helped to improve their skills so that they will not be further marginalised,” she was quoted as saying by theedgemarkets.com