KUALA LUMPUR, March 5 — Malaysia needs to transform into a global exporting player, grow its manufacturing capabilities and create its homegrown multinational companies (MNCs) to break out of the middle-income trap, said Prime Minister Tan Sri Muhyiddin Yassin.
According to the prime minister, in the decade before the 1998 Asian Financial Crisis, Malaysia’s cumulative gross domestic product (GDP) growth stood at 8.4 per cent annually, but had fallen to 4.6 per cent in the following two decades since then.
“With productivity growth now stagnant, annual per capita income has stalled at about US$10,000 (US$1=RM4.068) for nearly a decade, suggesting Malaysia is ensnared in the middle-income trap,” he said in his opening remarks at the virtual Youth Economic Forum 2021, themed “A Brave New World” today.
Speaking on the need to transform into a global exporting player in order to break out of the middle-income trap, Muhyiddin said, historically, most countries grew rich by learning to produce new, higher-value products for export.
“Hence, entrepreneurs with global ambitions will be critical to drive growth,” he said.
Malaysia also needs to grow its manufacturing capabilities to make increasingly complex and sophisticated products, he said.
“Based on the Economic Complexity Index, even a one standard deviation increase can elevate Malaysia’s GDP growth by between 0.7 per cent and 1.6 per cent a year.”
In terms of creating Malaysia’s homegrown MNCs, Muhyiddin said the move is important as the payoff from this is very high in terms of economic growth.
“For example, it is reported that global giants Samsung and Hyundai collectively at one point drove 30 per cent growth in South Korea’s GDP,” he said.
Meanwhile, the prime minister also said that Malaysia needs to pursue a “moon-shot” approach to create competitive domestic firms in frontier technologies.
“The startups you build today could and should be the next Amazon, Apple, or Tesla,” he added.