Business

Thursday November 19, 2009

World Bank: M’sia needs faster structural reforms

By YEOW POOI LING


PETALING JAYA: Malaysia’s mid-term outlook will depend on how quick the country can implement its structural reforms, which are to “make the next step up the income ladder from upper-middle to high-income economy,” according to a World Bank report yesterday.

“For Malaysia to reach its ambition of becoming a developed nation by 2020, the World Bank argued that the strategy consists of efforts to specialise the economy further, improve the skills of its workforce, make growth more inclusive and strengthen public finances,” it said.

The World Bank has forecast Malaysia’s gross domestic product (GDP) to grow 4.1% next year after an estimated contraction of 2.3% in 2009 based on the conditions of the manufacturing sector, which accounts for 30% of GDP.

Lee Heng Guie ... ‘Regulations deemed to stiffen private sector investment are removed.’

Its Malaysia Economic Monitor November 2009 said local companies needed to become more innovative in order to specialise the economy further, and in promoting innovation, the economy should become more competitive internally and to have highly-focused technology and urbanisation policies.

Boosting higher skills base requires incentives, competition and merit-based recruitment in education, as well as curriculum development, teacher training and private sector involvement.

To make growth more inclusive, there needs to be effective and well-targeted social safety nets and social insurance programmes to help households cope with poverty, promote entrepreneurship and support social cohesion, the World Bank said.

Meanwhile, to strengthen public finances, it called for measures to broaden revenue base, lessen the role of subsidies and consider fiscal rules to stabilise public finance.

The feedback was echoed by economists. CIMB Investment Bank Bhd head of economics Lee Heng Guie told StarBiz that the Government had recognised the challenge to revive private sector investment, which had been “sluggish” since the global economic slowdown.

Impediments and regulations deemed to stiffen private sector investment were being removed, such as the measures to liberalise further the services and financial sectors, he said.

RAM Holdings Bhd chief economist Dr Yeah Kim Leng said the World Bank report “reaffirmed” the conditions necessary for Malaysia to reach its developed nation status.

The country has the basic fundamentals to achieve the growth rate targeted to become a developed nation, as it has established infrastructure and relatively good knowledge workers.

The challenge was to move up the value chain and emphasise on human capital development to stimulate private sector dynamism and entrepreneurship, Yeah said.

“Malaysia’s entrepreneurship is relatively low versus other developing countries. To deepen the private sector, it needs high innovations and responsiveness to respond to threats and opportunities arising from the shift in world growth from advanced economies to emerging ones in Asia, led by China and India,” he added.

  • E-mail this story
  • Print this story