KUALA LUMPUR, March 16 — The factor-driven growth that has served the country well in the past to bring it on the cusp of attaining high-income status is not enough to carry the nation past the high-income threshold, said Minister in the Prime Minister’s Department (Economy) Datuk Seri Mustapa Mohamed.
He said this factor-driven growth is becoming more costly to sustain, with every unit of input injected into the economy yielding less Gross Domestic Product growth compared to the past.
“New sources of growth are needed to ensure that it is driven by multifactor productivity. We need to build a workforce for the future, drive digitalisation, and spur productivity improvements at the sector- and enterprise-levels.
“With this mind, Malaysia has strengthened its resolve in intensifying the digitalisation journey, that first began with the Multimedia Super Corridor and (now) the Malaysia Digital Economy Blueprint launched by the Prime Minister on February 19,” he said.
He said this in his speech at the launch of the World Bank Flagship Report: Aiming High – Navigating the Next Stage of Malaysia’s Development .
Malaysia has a strong growth trajectory, he said, experiencing strong economic growth over recent decades that resulted in a transformation of its economy and sustained improvements in living standards.
The COVID-19 pandemic has however interrupted the progress, but the goal to become a high-income and developed economy and one which embraces shared prosperity remains, he said.
“Despite the economy recording a significant contraction of 5.6 per cent in 2020, this year, it is expected to improve in line with the vaccine rollout and reopening of most economic sectors.
“Malaysia’s economy recorded steady growth of 6.1 per cent during 1971 to 2019, in spite of facing five economic downturns since 1970. The country has been able to rebound quickly after each crisis due to its economic resilience and competitiveness.”
He also noted that the current economic crisis is one that is different and unprecedented – as it began as a health crisis, that has led to major economic consequences worldwide as no country was spared from the COVID-19 pandemic, which caused an economic shock that is worse than the Global Financial Crisis and created the worst economic downturn since the Great Depression.
Mustapa said while the Government is currently focusing on efforts to overcome the COVID-19 pandemic and reviving the country’s economy, it also needed to plan for the economic development and progress for the long term.
Moving forward, he said addressing poverty and income inequality is among the key development agendas for the country.
Based on the Household Income and Basic Amenities Survey Report 2019, the Gini coefficient has increased from 0.39 in 2016 to 0.41 in 2019.
In addition, he said the income gap between regions and states has gone up, as are that between races and within races as well, thus, it is paramount to find new ways to address income inequality.
“While we have done well in the past, there is certainly a lot more that needs to be done,” he said.
“In accelerating balanced and inclusive development, regional economic potential will be optimised and rural areas will be transformed to bridge the development gap.
“Strategic collaboration and coordination between the Federal Government and state governments will be strengthened to support effective regional development planning and implementation,“ he said.
Mustapa added that the challenge now is finding ways to do things differently, creatively and innovatively, hence, the need to learn from shortcomings, do things better, as well as taking into account the best practices in other countries.