THE well-being of the Malaysian population is improving at a better rate than the average achieved by 162 countries across the globe, plus Hong Kong, based on the current rate of its economic growth. This is according to the latest edition of the annual Sustainable Economic Development Assessment (SEDA) that was created and has been undertaken by the Boston Consulting Group since 2012.

In the assessment, BCG looked at each country’s performance across three elements — economics, investments and sustainability — comprising 10 dimensions, based on data it gathers from global and reputable organisations such as the World Health Organization and World Bank. Economics cover income, economic stability and employment while investments cover education, health and infrastructure. Sustainability covers environment, income equality, civil society and governance.

“It’s really a way to help new leaders or prime ministers think about what their priorities should be. GDP (gross domestic product) is the most commonly used measure — as far as progress goes — today. But we think there should be a broader measure that government leaders can use to measure progress and set goals. That’s why we created SEDA. But if it’s not GDP, what is it that a leader of a country is trying to achieve? We think it should be the well-being of the population,” says Doug Beal, BCG Dubai managing director and partner. He is also one of the authors of SEDA 2016, published on July 21.

SEDA does not just look at a country’s current level of well-being compared with other countries but also its recent progress in each of the dimensions — and in totality — over an eight-year period (2006-2014).

This year, the 10 countries that top the list in terms of current well-being are mostly Western European nations, with Norway at No 1 — as it has been since 2012. In terms of recent progress, the list is dominated by African and Asian countries, with Ethiopia first in the line-up.

Countries with the most similar GDP growth to Malaysia are Indonesia, Peru, the Philippines, Saudi Arabia, Singapore and Vietnam, says Beal. They saw their GDP grow at a compound annual growth rate (CAGR) of 4.5% to 6% between 2006 and 2014. “Compared to the average of these countries, Malaysia is making slightly less progress across all dimensions, with the exception of the environment, where it is making better progress,” he adds.

But Malaysia, which is aspiring to become a high-income nation, likes to compare itself to Organisation for Economic Co-operation and Development (OECD) countries, says Beal. It is performing especially well in terms of employment and infrastructure when compared to the OECD average. The country is also better than average at improving those two dimensions when compared to the same group, says Beal.

In the other eight dimensions, Malaysia is lagging behind the OECD average — though in five of them, namely health, education, governance, income and economic stability, the country is catching up. In the three remaining dimensions, namely civil society, income equality and the environment, Malaysia is not doing too well and has been falling behind.

“Yes, income equality is worsening. The [last] three dimensions are all sustainability-related dimensions … they are the softer aspects, such as women’s equality, public safety and inter-group cohesion, which is how well the different social and ethnic groups within a country get along.

“To summarise, Malaysia is improving better than average at the equivalent rate of its GDP growth. [It is] strong and catching up to the OECD on some harder factors. Meanwhile, for healthcare, education, infrastructure, income and governance, the country is behind but improving. The key areas to improve on are the softer things, such as civil society, income equality and environment. Those are the key areas to focus on for Malaysia,” says Beal.

And money alone is not the cure. “China has got tons of money to build bridges and airports, but it’s more difficult to affect [issues such as] corruption … to ensure women’s equality. It’s the soft stuff that is difficult for governments to tackle,” Beal remarks. The same is true for Malaysia.

And while political will is key, governments are not the only entity with a role to play. “There’s a big trend around the world. More and more people are recognising that the private sector needs to step up to support the sustainable development goals and really use its core business to create social impact,” Beal adds.

One area of private sector involvement that has been found to significantly improve well-being — even if the influence of income level is normalised — is financial inclusion. So when there are two countries with the same income level, the one with better financial inclusion is more likely to have better well-being, says Beal.

Financial inclusion, which BCG views as more important than having credit, is a measure of anyone over the age of 15 having a bank account with which to transact. It is also a good example of how the government and private sector can work together — the former has to provide the right regulatory environment under which the latter can innovate for financial inclusion to flourish.

“Malaysia has actually done pretty well at improving financial inclusion. Its financial inclusion rate is at 80%, a big jump from the 66% seen in 2011,” says Beal.

Financial inclusion is found to help improve civil society, public safety — it is safer to do electronic transactions — and gender equality. “Women don’t have to turn their pay cheques over to their husbands, so they’re more empowered, more connected to society. There’s more money for children and education, and less [is spent] on alcohol and so on. There’s very strong correlation to civil society,” Beal explains.

It even helps control corruption. “In Afghanistan, when the policemen started to get their pay cheques deposited straight into their bank accounts, they all thought they got a 30% raise. The reality was that their bosses weren’t able to skim off part of their pay,” says Beal.

So, governments need to think about how they can partner the private sector, with civil society, to improve the areas in which they are falling behind, and making the “tough decisions” to implement the measures needed.

“It does mean that the government’s role will be reduced. You’re reducing it because you believe private organisations might give you better outcomes, at lower costs.” Hence, the size of government ministries may shrink, as will the budgets. But this also means the population will have less taxes to pay.

“The incentives for ministers need to be shifted from the size of their budget and their ministries to what outcomes they’re getting in areas they’re responsible for. To bring ministers to this realisation is one of the toughest things. They shouldn’t think of it as reducing their role and responsibility — it’s just changing them,” says Beal.

He adds that Putrajaya has shown it has the political will to address the country’s problems. “In fact, Malaysia is actively thinking of innovative ways of addressing social issues. For example, AIM, Agensi Inovasi Malaysia, is embarking on a programme to use innovative partnerships with social enterprises to improve social outcomes at lower costs.”

Putrajaya is also working with BCG on a five-year productivity blueprint that looks at how productive enterprises are in the way they do business, whether the regulatory environment is conducive for them, and how to improve the ease of doing business in Malaysia. “There are a lot of dimensions we look at, beyond just GDP. It’s under development now. It should be launched later this year,” says Yong Su-En, the project leader of BCG SEDA 2016. 

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