Malaysia's Transformation: Propelling Malaysia to Developed Nation Status

Article excerpt

Malaysia has one overarching and transformative policy objective: to achieve high income and developed nation status by the year 2020. High income nations, as defined by the World Bank, are those with a gross national income per capita of US$12,480 or more in 2011. Malaysia's per capita income now stands close to US$10,000 and the aim is to increase it to US$15,000 by 2020. My view is that developed nations should also meet a number of other important benchmarks. For instance, a nation's wealth must be reasonably distributed, not concentrated in the hands of the elite; physical and social infrastructure must be robust; and, most importantly, a developed country should be democratic and respect basic freedoms. This is my vision for Malaysia: a high income nation, whose citizens enjoy a high standard of living, with a functioning and flourishing democracy.

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The government has worked hard to meet this national objective. When I assumed office in 2009, my first priority was to ensure we did not get blown off course by the global financial crisis. And so, after significant planning and consultation, in 2010 we launched our National Transformation Programme, a comprehensive plan to propel Malaysia's economy toward high income status. The National Transformation Programme encompasses a plan for reforming the economy, namely the Economic Transformation Programme, and a plan to transform government itself--the Government Transformation Programme.

Sparking Economic Growth

Under the Economic Transformation Programme, we identified 12 key areas to drive economic growth, with a particular focus on freeing the private sector so it could play its rightful role as the engine of the economy. We thus set to work cutting red tape, encouraging competition, reforming public finances, and curbing the government's involvement in the economy through a program of divestment of state-run companies.

Our economic policies have paid significant dividends. Malaysia successfully weathered the financial crisis and has consistently bucked the gloomy global trend. Last year, our economy grew at 5.6 percent, while inflation and unemployment remain low. The Kuala Lumpur stock exchange is at record highs a with market-capitalization-to-GDP ratio of 154 percent last year--the second largest in the region. Last year also witnessed some of the world's most significant Initial Public Offerings, including the world's third largest, listed in Malaysia. Foreign investment is pouring into the economy. On a trip to Malaysia last year, British Prime Minister David Cameron, described the country as a "powerhouse of the modern global economy."

In the midst of growth, Malaysia also avoided the worst excesses of free market capitalism that resulted in the financial crisis. We have adopted a more measured and pragmatic approach by liberalizing our economy and ensuring we have appropriate banking and financial services regulations in place to guard against excessive risk-taking. Likewise, we have avoided the steep post-crisis spending cuts that, in some countries, appear to have prolonged the economic pain. Malaysia has instead pursued policies that are both mildly expansionary, with an eye toward stimulating economic growth, but also fiscally responsible, to ensure we meet our strategy to bring the budget deficit down to three percent of Gross Domestic Product by 2015.

We are investing heavily in technologies and sectors that will power the economy once we attain developed nation status. For instance, Malaysia is currently the world's largest issuer of Islamic-compliant financial products, an industry with tremendous growth potential and one which is projected to be worth $2 trillion by 2015. We aim to expand our Information, Communication, and Technology sector so it contributes 17 percent of gross national income by 2020. Malaysia is also focusing on the clean economy and is now a major producer of solar modules, LED lights, as well as other low-carbon technologies. …