Business

Saturday October 3, 2009

‘High income’ nation

Sideways by ANITA GABRIEL


What does it mean to you?

IF you were to ask the average Malaysian what he thinks a “high income” nation is, he may stare blankly at you. That’s because going by the rhetoric so far, it’s not something the man in the street can easily wrap his head around.

But know this – Malaysia’s latest quest is to make it to the global rung of high income economies, which ideally speaking, should mean more money in your pockets. Now, is that getting clearer?

Let me get the numbers out for you, first. Its origin is the World Bank’s income classification; as it stands now, together with 46 other economies, Malaysia belongs to the upper middle income class based on its gross national income (GNI) per capita of US$7,500 in 2008.

Prime Minister Datuk Seri Najib Tun Razak wants Malaysia to make it to the top rung of this classification – high income group – by 2020. That means, we’ve got 11 years to drive our GNI per capita to at least US$11,906 or by more than half. (Note: Malaysia’s GNI per capita has actually fallen to US$6,200 in the first quarter of this year on the back of the global crisis. In addition, by 2020, the threshold for high income economies could reach over US$17,000).

Naturally, more than the average income, people are more concerned with the absolute income. And those who will be most concerned usually fall below the mean.

While the administration is being income-centric, one critical aspect they should seriously look into and one that has long been a source of discontent is the not-so-fair distribution of wages. To achieve that, any growth strategy executed to reach this goal has to be far more inclusive than anything we’ve ever seen. Take note, that Malaysia’s income inequality on a relative scale is somewhat high.

There is a notion – rightly or wrongly – that Malaysia is caught in a middle income trap. In reality, Malaysia’s per capita income has actually been on the rise but the problem is that the rise has not been fast enough.

In fact, strictly speaking, Malaysia is not doing too bad – at least going by what World Bank’s data implies. In terms of GNI per capita, we have surpassed that of 98 other economies and we stand just a notch away from joining the 66-member high income economies.

But how many Malaysians can actually connect to that? Has there been a widespread positive net welfare impact? Again the culprit here could be the inequality of wealth. If that shortfall is not addressed, then it will mean very little even if the country reaches its goal by 2020.

Simply put, high income follows high growth. Najib has mentioned that to achieve developed nation status by 2020, the country needs to grow at an annual rate of 8% – indeed, a tall order at this point considering the current crisis and the fact that Malaysia has for the past ten years, averaged at a growth of almost 5%. As such, most economists expect the target deadline to be stretched beyond 2020, unless of course the country has a major growth spurt.

Still, to get there, Malaysia needs to address numerous structural issues which also include non-income indicators. They include aspects that are closest to the people’s hearts – quality and affordable education and healthcare and the issue of life expectancy.

For what’s the point of raking in more if your life expectancy is short? Then there’s the issue of equitable wealth distribution, higher purchasing power, poverty, entitlement, equal opportunities and democracy, and filling in the structural gaps in our economy.

That’s what “high income” nation should mean to the man in the street.

>Business editor Anita Gabriel acknowledges that the administration is making all the right noises but like always, the jury is out on implementation.

  • E-mail this story
  • Print this story