Woo Wing Thye, economist and president of the Jeffrey Cheah Institute, argued that although there had been encouraging economic development in the country, the speed of its progress lagged behind that of other developing countries.
Woo sees decentralisation as the main pillar to address the slow economic progress in Malaysia.
“Decentralisation — the empowerment of the lower units — should be the principle that guides the new economic strategy.”
He argued that financial and administrative power should be decentralised from Putrajaya to state governments and local councils.
He said this should include transferring bigger financial responsibilities to the state governments.
It would also include transferring many regional responsibilities of the different ministries to the state and local governments, he said.
He said the monopolistic banking system should also be broken down by issuing licences to private small and medium banks, arguing that this would result in more efficient financing of small and medium enterprises (SMEs), which make up over 90% of businesses in the country.
He also recommended privatising the bulk of government-linked companies using transparent market-based procedures, to shift economic power away from GLCs to the private sector.
“We should also decentralise the education system to diversify the monolithic teaching system and reduce the power of the education ministry in regulating public and private universities.”
Introduce ‘living wage’
Meanwhile, economist Ramon Navaratnam argued that the government must allocate more funds for the poor and introduce a living wage beyond having a basic minimum wage to address the economic inequality plaguing the country.
“At least introduce the concept of a living wage and make concrete proposals. Then, we can make the recommendations for different living wages, based on the different cost of living in the various states,” he said.
There also needed to be an effort to narrowly define the elements that made up the living wage, he added.
They were responding to a recent World Bank statement about Malaysia’s current income status as a nation.
“It is very kind of the World Bank to give courage to the Malaysian public by stating that Malaysia, under the new government, is on its way to becoming a developed nation.
“It was correct for the World Bank to point out that the direction of growth for Malaysia is encouraging but it would also have been correct for the World Bank to point out that the speed of that growth has not been encouraging.”
The World Bank recently stated that Malaysia was well on its way to becoming a high-income and developed country.
‘Economy well-diversified’
Vice-president for East Asia and Pacific Victoria Kwakwa said Malaysia’s economy was well diversified and stood on solid foundations, which were primed to take the country to the next level.
“We welcome the government’s efforts as part of this process to strengthen institutions, develop human capital and protect the vulnerable in the society. The World Bank Group stands ready to support Malaysia during this important transition process,” she said.
Meanwhile, Woo cited the 2018 Angus Maddison dataset for cross-country comparison, which was a project led by the Groningen Growth and Development Centre at the University of Groningen.
The project collected historical economic statistics, such as GDP, GDP per capita, and labour productivity.
Comparing the data, Woo argued that in the 20-year period from 1996 to 2016, Malaysia reduced the development gap with the United States by 0.43 percentage point a year compared with 0.74 percentage point a year for China, 1.15 percentage point a year for South Korea, and 1.35 percentage point a year for Taiwan.
This meant that Malaysia’s progress has been slow compared with countries such as South Korea, when measured against the United States as the benchmark.
“Awareness of this very slow improvement of the Malaysian economy is reflected in the switch in the economic focus of the (former) Najib Razak government from Wawasan 2020 to Transformasi Nasional 2050,” Woo said.
He added this move had pushed back the “deadline” of achieving the status of a developed country by 30 years from its original date.
“In short, this government has inherited a very difficult task and a new economic strategy is urgently needed, besides being a non-corrupt government,” Woo said.
The World Bank has also launched its 2018 Regional Flagship Report: A Resurgent Asia – Navigating a Changing World.
The report, which was co-authored by World Bank chief economist for East Asia and Pacific Sudhir Shetty, highlighted the rising development challenges facing countries in East Asia and how they could navigate these challenges in the years ahead.
The report illustrates how the slowing growth and pattern shifts in global trade, technological development and the evolving economic circumstances within countries pose unique challenges for middle-income East Asian countries to sustain inclusive growth and productivity.
The report states that policy-makers in the region, including Malaysia, would need to focus on “emerging policy priorities” — reforms that require special emphasis as countries transition to high-income status — and also “foundational policies” or areas of reform that the countries have already been pursuing.
Under “emerging policy priorities” the World Bank report stated that countries should increase competition and have lower barriers to entry for the broadband market, among others.
On the other hand, the “foundational policies” included improving business climates and reforming heavy market regulations within different industries.