THE recently launched 11th Malaysia Plan articulates the government’s commitment to growth that is “anchored in the prosperity and well-being of its rakyat”. As Malaysia transitions into developed nation status, the capital economy must complement the people economy for holistic growth and development.

Governments, including Malaysia’s, are starting to pay more attention to the quality and implications of growth to the people — after decades of measuring economic progress solely in terms of income growth.

This shift stems from the realisation that an impressive rise in gross domestic product (GDP) per capita means little if living standards are undermined by inadequate healthcare, an underperforming education system, a degraded environment or a widening gap between the rich and the poor. Instead, governments now recognise that it is important for rising national income to translate into greater well-being for the population at large.

Today, more than half of the global population still lives in countries that are weak and falling behind the rest of the world when well-being measures are considered, whether this is income equality, civil society, governance or the environment.

This finding is based on The Boston Consulting Group’s (BCG) recent Sustainable Economic Development Assessment (SEDA) — a diagnostic designed to assess how well countries convert wealth, as measured by income levels, into well-being. The findings raise fundamental questions for governments around the world about what needs to be done to make the most of wealth and economic growth to achieve sustainable development.

Another key finding is that middle-income countries are making the most progress in terms of improving well-being. This serves as a warning sign for the lack of improvement among low-income countries and raises the possibility that the often-discussed middle-income trap or the notion that countries plateau once they hit some middle range in terms of income does not necessarily apply when a country’s trajectory is examined through the lens of well-being. It reflects the effort that many middle-income countries are making with regard to improving areas such as economic stability, healthcare, education and infrastructure.

Indonesia, for instance, is taking steps to address its poor infrastructure, which the government has recognised as an impediment to growth. Among other things, the country has refined its policy on the use of public-private partnerships to drive infrastructure development, established an infrastructure bank and strengthened institutional collaboration that can help accelerate high-priority infrastructure projects.

Overall, the list of countries with the highest current level of well-being is dominated by Western European countries, making up 9 out of the top 10 countries. Norway is at the top of the list with its strong performance in the areas of employment, income equality and civil society. Singapore is the only non-European country in the top 10 in overall well-being with particularly strong progress in governance and education, although it continues to lag in terms of income equality.

SEDA also demonstrates that countries with comparable growth do not necessarily achieve the same levels of progress when it comes to well-being. The US and Germany, for example, both posted annual growth rates of about 1.1% in recent years, but Germany has a much better record of converting its growth into improvements in well-being, particularly in areas such as employment and the environment.

If we cluster the countries by the make-up of their economies, the SEDA diagnostic points to oil-rich nations — which BCG defined as countries that received revenue from oil equivalent to more than 10% of GDP in 2012 — as being below average at converting both wealth and growth into well-being.

This is driven primarily by weak governance. The link between oil wealth and weak governance has been extensively researched. An analysis by the World Bank notes that where governments are heavily dependent on resource rents rather than on direct taxes from citizens, “the accountability chain between citizens and governments can be weak”.

BCG’s findings demonstrate that when growth is viewed through the lens of well-being, it raises questions as to what governments need to do to make the most of wealth and economic growth to achieve inclusive, sustainable development.

Tracking GDP alone is insufficient. Economic growth may be a prerequisite for increasing prosperity but it is not a sufficient condition. Economic development strategies are at the core of any pursuit of improvement in well-being and the key to success is to find the appropriate mix of strategies and actions — implemented in the right sequence — to achieve overall progress.

The Malaysian government appears to understand and appreciate this dynamic between growth, wealth and well-being as reflected in the priorities of 11MP. Leaders and policymakers must now embark on a new era and actively pursue well-being — not just GDP — as the primary goal. They should measure well-being and hold themselves accountable for it.

Nor Azah Razali is partner and managing director at The Boston Consulting Group

This article first appeared in Forum, The Edge Malaysia Weekly, on July 20 - 26, 2015.

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