Malaysia needs four growth changers to be a high income nation

KUALA LUMPUR: Malaysia must incorporate four growth game changers to become a high income nation by 2020, says Euler Hermes- Al lianz Research.

This includes providing a more supportive business environment in enabling the country to become a global capital magnet for investment.

“A more supportive business environment would require improvements in the regulatory framework to enforce contracts, tax environment and insolvencyrelated procedures,” said Senior Economist for Asia, Mahamoud Islam.

“Malaysia ranked 23rd in the World Bank’s Annual Doing Business 2017 report, but dipped low in key components of cont ract enforcement at 42nd spot and insolvency procedures at 46th ,” he told a media briefing on the Malaysia outlook, growth prospects and game changers beyond 2017, here yesterday.

He said Malaysia should invest further in innovation and infrastructure to increase competitiveness in the global market.

“Efforts to spur innovation could help Malaysia move up the value chain and increase global market share. Improving both hard and soft infrastructure will also help reduce transaction costs and boost overall competitiveness,” he added.

Mahamoud said Malaysia should focus on new growth areas, namely digitalisation and servitisation, as both areas are expected to be resilient moving forward.

Malaysia ranked 36th out of 137 countries in the Euler Hermes’ enabling digitalisation index.

“Digitalisation current ly accounts for 9.4 per cent of annual global economic output and is expected to account for 16.6 per cent by 2020.

“It has been in an uptrend for Malaysia in servitisation with service sector shares to the gross domestic product growing steadily at 54 per cent in 2016 and expected to increase to 56 per cent this year,” Mahamoud said.

On another note, he said Malaysia could deepen ties with fellow members within the ASEAN EconomicCommunityframework, where its merchandise exports to the grouping currently stands at 28 per cent.

“Malaysia can also strengthen ties with China to leverage on the ‘ One belt One Road’ mega trade initiative. This would lead to a capital boost, especially with China’s foreign direct investments approved for Malaysia’s manufacturing sector reaching some RM4.7 billion last year.

“It could also lead to a rise in new orders. China is Malaysia’s second largest export partner ( after Singapore), accounting for 13 per cent of merchandise exports,” he added. — Bernama