Malaysia misses Vision 2020 targets in face of corruption, pandemic, inequality

But it now has a Shared Prosperity Vision 2030 that aims to create a more equitable economy and make the country the centre of Asia

Malaysia has missed its target of being a developed economy by last year, with its progress hampered by graft, the coronavirus pandemic and income inequality, say analysts.

Achieving high-income status was one of nine objectives set out in the Vision 2020 plan – the road map introduced in 1991 by then Prime Minister Mahathir Mohamad to improve the country. Most of the remaining targets focused on social values, such as becoming a more fair and tolerant society, as well as one that is more democratic and competitive.

Economists say that while Malaysia is not far from crossing the high-income threshold, it has regressed in terms of ensuring an equal distribution of wealth – another key economic indicator of the policy.

Vision 2020 aimed for an average of 7 per cent annual growth in gross domestic product (GDP), which would have translated to an economy worth RM1.9 trillion (S$623 billion) by last year, taking into account inflation.

Malaysia’s current GDP stands at RM1.34 trillion, but it did reach a high of RM1.45 trillion before the pandemic battered the economy.

Economist Yeah Kim Leng of Sunway University said Malaysia is currently only 10.4 per cent short of reaching the high-income GDP per capita threshold of US$12,535 (S$16,582) set by the World Bank. He expects the country to reach this figure within four years, based on its current trajectory.

Professor Yeah pointed out that Malaysia’s purchasing power parity per capita had increased by 20 percentage points in the past 40 years when compared with the world’s largest economy, the United States. However, he noted that other Asian economies had outperformed Malaysia in the same period.

“It (income level) also pales in comparison with the spectacular growth achieved by two outperformers, South Korea and Singapore. South Korea, which had a lower per capita income than Malaysia and only 17.2 per cent of the US’ in 1980, rose to 70.2 per cent in 2020, a gain of 53.1 percentage points over the four decades. Singapore’s gain is even more impressive, rising from 70 per cent to 151.6 per cent of US income per capita income... over the same period,” he told The Straits Times.

Malaysia ranks well on life expectancy, education and per capita income, scoring 0.81 on the United Nations’ Human Development Index (HDI). According to Prof Yeah, a 0.8 score on the HDI would denote a developed economy, but the country lacks advanced technological infrastructure – a key determinant for developed status.

Meanwhile, wealth distribution has worsened recently, despite marginally improving in the early years of Vision 2020.

Malaysia’s income equality, measured using the Gini coefficient, is higher than the average reported by countries with similar HDI rankings. It had a 0.45 score in 1990, which improved to 0.399 in 2016, but climbed back up to 0.407 in 2019. A higher score denotes less equality.

“Among the 52 countries with HDI scores higher than 0.8 that report the Gini coefficient... Malaysia’s score of 0.41 is higher than the group average of 0.33,” Prof Yeah said.

Malaysia’s reform efforts were also hampered by a series of economic shocks, such as the Asian financial crisis, the 2008 financial crisis and the ongoing pandemic, which have forced the government to pump-prime the economy, said Bank Islam chief economist Afzanizam Abdul Rashid.

Dr Afzanizam also said that a trust deficit in how the country has been administered, particularly since the 2015 billion-dollar graft scandal surrounding state fund 1Malaysia Development Berhad, has made economic reforms more difficult. Tackling corruption is key, he said.

Still, he said, Malaysia has emerged as market leader in several sectors, such as aviation, glove making and Islamic finance.

“Perhaps focusing too much on financial or material gains may have obscured how we define success. And along the way, it breeds greed and ultimately corruption,” he told ST.

Meanwhile, a new plan has been rolled out to take over from Vision 2020. Launched in 2019, again by Tun Dr Mahathir during his second stint as prime minister, the Shared Prosperity Vision 2030 aims to create a more equitable economy and make Malaysia the economic centre of Asia by 2030.

DEFINING SUCCESS

Perhaps focusing too much on financial or material gains may have obscured how we define success. And along the way, it breeds greed and ultimately corruption.

DR AFZANIZAM ABDUL RASHID, Bank Islam chief economist, who said that economic reforms in Malaysia have been made more difficult by a trust deficit in how the country has been administered, and that tackling corruption is key.