“Malaysia remains stuck in the middle-income trap as we have not yet been able to transition towards becoming a high-income nation,” Azmin said in his speech at the Khazanah Megatrends Forum 2018.
The government remains committed to grow and break out of the middle income trap to become an advanced high-income economy, according to Economic Affairs Minister Datuk Seri Mohamed Azmin Ali.
As of 2017, GDP per capita as measured in terms of nominal US dollars has fallen to 9,944 from a peak of 11,183 in 2014.
In order to break out of the middle income trap, Azmin said this would required a different economic logic for Malaysia.
“First, we need a focused shift towards new industries. In particular, we must adapt to the global technology landscape and establish ourselves as experts of the applications of breakthroughs in innovation and technology that will increase our economic productivity,” Azmin said, adding that there is also a need to reverse the slide in the decline of Electrical and Electronics exports.
“The second idea is economic complexity or diversification of the economy, via exports in agriculture, manufacturing or services because exporting to the world requires that whatever good or services we produce be globally competitive.
“Hence, our economy must be as far along the technology and efficiency frontiers as possible,” he said.
He noted that Toyota, Honda and Nissan emerged from a decision from the Japanese government to diversify their economy and build on their rapidly developing electronics industry.
“Firms also need to move away from being too narrowly focused on chasing short-term profits.
“Short-term thinking necessarily means that companies will hold off on reinvesting for the future, therefore reducing their long-term sustainability and profitability,” Azmin said.
“In sum, we must pursue a balanced development path, with policies that enhance inclusion, integrity and sustainability as well as delivering economic growth for the continued prosperity of Malaysians,” he added.
Meanwhile, Azmin said that growth in terms of GDP alone could not be considered successful, unless translated into real benefits for the people.
“We hold the position that real economic growth must also mean enhancement of the purchasing power of the people.
“This must be tackled hand in hand with measures to address the disparity of growth across the states and income inequities, particularly the B40 income group, high youth unemployment and the rising cost of living,” Azmin said.
On the subject of foreign investments, he said there’s a need to emphasise that while short-term capital inflows may do wonders to the stock market, that would not translate into value creation.
“That is why we encourage long-term FDIs in greenfield investments that would create jobs, boost purchasing power and help create better economic eco-system.
“Going forward, economic growth will also be driven by high-tech sectors, underlining the potential of the digital economy in ensuring Malaysia’s transition to a high-income and developed economy,” he said.