This article first appeared in Forum, The Edge Malaysia Weekly on November 20, 2017 - November 26, 2017

Few countries have managed to match Malaysia’s feat of transforming itself from a sleepy British colonial outpost to a roaring Asian Tiger within a few decades. It is arguably a case study for poverty eradication and wealth redistribution.

Currently classified as an upper-middle income nation with a highly open economy, it is no coincidence that it was among 13 countries to have recorded an average growth of more than 7% per year for 25 years or more, according to the World Bank’s Commission on Growth and Development in its 2008 Growth Report.

The World Bank was unequivocal in its assessment. According to the bank, economic growth was inclusive as Malaysia almost succeeded in eradicating hardcore poverty, with the share of households living below the national poverty line (US$8.50 per day in 2012) falling from over 50% in the 1960s to less than 1% currently.

On the road towards achieving Vision 2020, we now reflect on our previous achievements in the Tenth Malaysia Plan (10MP) while trying to realise the promises of the Eleventh Malaysia Plan (11MP). The New Economic Model (NEM) was unveiled by Prime Minister Datuk Seri Najib Razak in March 2010, with the main thrust being to propel Malaysia to a high-income economy that is both inclusive and sustainable.

Incidentally, the 11MP is the last of the five-year plans before Vision 2020 and it is targeted that the main crux of the NEM will spill over from the 10MP into the 11MP. The three main objectives of the NEM is aimed at making Malaysia more competitive globally and regionally, especially with the setting up of the Asean Economic Community (AEC).

It is anticipated that fulfilling the World Bank’s definition of a high-income economy, based on gross national income (GNI) per capita, will not be an issue. However, can historical performance predict future performance?

It can be argued that past performance does not guarantee future performance. This is because the cornerstone for projections is based on economic modelling. Extrapolating from current trends is only reliable when predicting growth in the next year and the following year. However, once the timeline gets longer, such assumptions become more questionable.

To be fair, when it comes to projecting future growth, economic modelling can offer only so much guidance. These models predict future economic outputs on the basis of projected future levels of economic inputs, but future economic inputs are impossible to predict. In the end, there is little to do but extrapolate from current inputs.

But inputs, as well as other key features of any economy, change over time. Malaysia’s economy has transformed rapidly but at some point in the future, high growth rates might level out and economic growth slow down. In other words, the rate of growth decelerates before eventually reaching a steady-state phase.

Fortunately, Malaysia is located in an economically dynamic region. Asean has emerged centre stage in the global economy and has been recognised as one of the most dynamic regions. The countries in the region all adopt open economic and social systems that encourage trade, investment, travel and communications. At this moment, the region is the fastest growing in the world. Thus, we can benefit by riding on Asean’s intrinsic strengths and prospects. In that way, our economic performance will be vastly better than that of the world average.

However, looking inwards, introspection will reveal regional disparities. Philosophically, we can argue that some regions are at a disadvantage due to geographical reasons and historical legacy. In addition, poor physical connectivity — such as road networks, railways and ports — will impede economic growth.

Have we done enough to correct these imbalances? Make no mistake — national integration will be a futile endeavour if there is glaring disparity. What the statistics tell us is that while some states will achieve developed status and enjoy a high income within the set time frame, others will take a much longer time. These states need assistance to help them develop at a faster pace. All of these have implications for economic development policies, both at the federal and state levels.

Malaysia is more blessed than other countries in terms of its development potential. We have a favourable resource base with a favourable land area relative to the population. In terms of geographical location, we are not within the areas where natural disasters, such as earthquakes and typhoons, frequently occur.

We have a diverse, multicultural population that has been able to absorb the best values of each community, and the legacy of a British colonial administration that placed a high value on law and order. We are situated in a region with progressive-minded neighbours — an attitude that transcends boundaries and energises our development.

In the final analysis, if regional economic integration in Asean were to be achieved, we must first put our house in order. There should be seamless connectivity, underpinned by strong institutions in Malaysia.

Samirul Ariff is an analyst with a think tank and has been engaged as a consultant for government agencies and international institutions. He did his graduate studies at Macquarie University in Australia. The opinions expressed in this article are his personal views.

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