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Friday May 8, 2009

Don: M’sia needs to be high-income economy


To achieve this status, country needs consensus of its people

PUTRAJAYA: It is now the right time for Malaysia to move its economy from a middle-income to high-income model, according to World Bank experts.

“It seems pretty sensible for Malaysia to move up,” Arizona State University economist Professor Edward C. Prescott said at the sidelines of the Economic Planning Unit’s closed-door brainstorming session with World Bank experts yesterday.

The session was held to develop strategies towards higher growth and income.

Prescott, a Nobel Prize winner in economics and a member of the World Bank experts team, said while the country was moving up, it needed the commitment of the people.

Prof Edward C. Prescott and Tan Sri Nor Mohamed Yakcop at the brainstorming session

“You (Malaysia) need the consensus of the people. However, the resistance to change might be a little stronger,” he said, adding that it was possible for the country to achieve its ambitious plan of becoming a developed nation by 2020.

Ex-World Bank chief economist and Brookings Institution’s Wolfensohn Centre for Development, Global Economy and Development’s senior fellow, Homi J. Kharas, said there was an impetus for change and rethinking on policies and strategies in Malaysia every 10 years based on economic developments.

“Malaysia has been very successful as an exporting nation but has also been very export dependent. About 90% (of products) are being exported to the United States, Europe and Japan,” he said, adding that Malaysia needed to diversify its exports.

Kharas said Malaysia was extremely fortunate that it was located between two new economic powerhouses (China and India).

Agreeing with Prescott that Malaysians needed to embrace changes to move into a high-income model, he said: “Malaysians are the heart of the economy but they can also pull back the nation in moving forward.”

He said the economic corridors implemented by the Government were essential for the transformation.

Minister in the Prime Minister’s Department Tan Sri Nor Mohamed Yakcop said Malaysia might be losing some of its high growth momentum and appeared to be caught in a high-middle-income country trap.

The rules of the game were changing and Malaysia must change with the times, he said, adding: “If we stand still during these dynamic times, we will be swiftly overtaken by our competitors, as we have overtaken others in the past.

“We are at a critical point in time and failure to act today will have repercussions for many years ahead.”

To achieve a developed nation status by 2020, a 7.5% economic growth needed to be sustained from here on, he said, adding that this was only possible if the economy was re-energised towards higher income and growth trajectory.

“We cannot expect to be a high-income developed nation through incremental change. We need a model which is more relevant to current times.

“To move to a higher income-based economy, we have to move towards a knowledge and innovation-based economy where skilled labour is needed,” Nor Mohamed said.

To a question, he said details of the economic model would be finalised soon and announced by Prime Minister Datuk Seri Najib Tun Razak.

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