Introduction: The Malaysian Economy Towards 2020 and Beyond

• Published in: ASEAN economic bulletin 2017-12, Vol.34 (3), p.433-435
• Main Authors: Lee, Cassey, Hutchinson, Francis E.
• Format: Article
• Language: English
• Subjects: Decentralization; Deindustrialization; Devaluation; Developing countries; Economic crisis; Economic development; Economic growth; Forecasts and trends; GDP; Gross Domestic Product; High income; Industrialized nations; Labor market; LDCs; Low income groups; Manufacturing; Per capita; Planning; Poverty; Productivity; Structural change; Transformation
• ISSN: 2339-5095; 2339-5206
• DOI: 10.1355/ae34-3a

In 1991, Malaysia's then Prime Minister, Mahathir Mohamed, declared that the country should aim to be "fully-developed" and "industrialized" by 2020. To attain this goal, Malaysia would have to grow at an annual average of 7 per cent (in real terms) for thirty years. Prosperity and economic inclusiveness were overarching objectives, and education levels as well as scientific and technological progress were means to these ends.Twenty-six years on - and a mere three years away from the target date - Malaysia's economy has undergone profound transformation, incomes have risen, and extreme poverty has been virtually eliminated. However, the prospect of high-income status is - for now - just beyond reach. The country's economy has grown at a slower pace in recent years, averaging 4.5 to 5.0 per cent annually. While this is respectably above the global average of 2.5 per cent, it is about half the level achieved by the country before the Asian Financial Crisis. This is also below the target rate needed for sustained progress towards higher income status. Furthermore, in an era of metrics and rankings, the ringgit's sharp devaluation in 2015 saw Malaysia's per capita income in U.S. dollar terms actually decrease - a first since 1997.Apart from a temporary growth slowdown, Malaysia's economy has also undergone an unusual structural change. The share of manufacturing sector in the country's gross domestic product (GDP) has declined from 30.9 per cent in 1999 to 20.1 per cent in 2016. While it is common to observe deindustrialization among high-income economies, Malaysia is experiencing it at a lower income level than most economies.