TWO weeks ago, The Star covered my keynote presentation on how Malaysia is no longer stuck in the middle income trap. This sparked a degree of scepticism from the public, some citing areas in which Malaysia is currently falling short. They are not wrong, but they are not completely right either.
In overcoming the whiplash from the 2008 Global Financial Crisis, Malaysia was faced with three key problems. Firstly, our government debt rose by 12% of gross domestic product (GDP) per annum. Secondly, our fiscal deficit stood at 6.6% of GDP. Thirdly, Malaysia has been caught in the middle income trap – as defined by the IMF and World Bank – since 1992.
To lend context to this, let me pose a question – would you consider the United States a high income country? By general consensus, I believe your answer is most likely a “yes”. By the World Bank definition, the United States recorded US$55,000 gross national income per capita in 2015, well surpassing the high income nation benchmark of US$12,475.
The United States is undeniably a high income nation. Yet in February this year, Bloomberg reported that 45.4 million Americans survive on food stamps provided by the Government. In April 2008 during the Global Financial Crisis wave, 28 million Americans received food stamps. That’s a 62.5% increase in people dependent on the domestic hunger safety net programme over the past seven years. This is a very real scenario today in a well-established, high-income nation. Despite the United States having poor people, doesn’t mean it is not high income.
Focusing back on Malaysia, the US experience demonstrates the importance of other socio-economic levers such as sustainability and inclusiveness. To think that being a high income nation means Utopia would be naïve.
My point is to illustrate how Malaysia has become unstuck from the middle income trap as benchmarked by both IMF and the World Bank. Let me share that perspective.
In 2009, Malaysia was said to be “stuck in the middle income trap” because the gap in preceding years remained around 30%-33% and it was not narrowing. However, as of 2015 we have closed the gap to 15%. That is precisely why I said we are no longer stuck in the middle-income trap.
We have achieved this without further compromising our fiscal deficit which in fact has improved from -6.6% of GDP in 2009 to -3.2% in 2015.
Let me be clear – pushing Malaysia towards a high income nation is not a target we set to achieve at all costs. The reporter from The Edge is right. There are many issues to be resolved. Disparity in income distribution, as some of you have cited, is only one of many. The Government recognises this. As I have said before in the past, do not make the mistake to think that nation building is a linear effort. As we work to resolve these issues, it is not wrong to acknowledge certain measurable achievements and milestones. Having our eye on a clear measurable target, does not dismiss other critical development needs of this nation.
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In overcoming the whiplash from the 2008 Global Financial Crisis, Malaysia was faced with three key problems. Firstly, our government debt rose by 12% of gross domestic product (GDP) per annum. Secondly, our fiscal deficit stood at 6.6% of GDP. Thirdly, Malaysia has been caught in the middle income trap – as defined by the IMF and World Bank – since 1992.
To lend context to this, let me pose a question – would you consider the United States a high income country? By general consensus, I believe your answer is most likely a “yes”. By the World Bank definition, the United States recorded US$55,000 gross national income per capita in 2015, well surpassing the high income nation benchmark of US$12,475.
The United States is undeniably a high income nation. Yet in February this year, Bloomberg reported that 45.4 million Americans survive on food stamps provided by the Government. In April 2008 during the Global Financial Crisis wave, 28 million Americans received food stamps. That’s a 62.5% increase in people dependent on the domestic hunger safety net programme over the past seven years. This is a very real scenario today in a well-established, high-income nation. Despite the United States having poor people, doesn’t mean it is not high income.
Focusing back on Malaysia, the US experience demonstrates the importance of other socio-economic levers such as sustainability and inclusiveness. To think that being a high income nation means Utopia would be naïve.
My point is to illustrate how Malaysia has become unstuck from the middle income trap as benchmarked by both IMF and the World Bank. Let me share that perspective.
In 2009, Malaysia was said to be “stuck in the middle income trap” because the gap in preceding years remained around 30%-33% and it was not narrowing. However, as of 2015 we have closed the gap to 15%. That is precisely why I said we are no longer stuck in the middle-income trap.
We have achieved this without further compromising our fiscal deficit which in fact has improved from -6.6% of GDP in 2009 to -3.2% in 2015.
Let me be clear – pushing Malaysia towards a high income nation is not a target we set to achieve at all costs. The reporter from The Edge is right. There are many issues to be resolved. Disparity in income distribution, as some of you have cited, is only one of many. The Government recognises this. As I have said before in the past, do not make the mistake to think that nation building is a linear effort. As we work to resolve these issues, it is not wrong to acknowledge certain measurable achievements and milestones. Having our eye on a clear measurable target, does not dismiss other critical development needs of this nation.
Click here for Free Signals OR Give A Missed Call : +60350219047 Follow Us On Twitter : www.twitter.com/epicresearchmy Like Us On Facebook : www.facebook.com/EpicResearchMalaysia Need Any Assistance Feel Free To Mail Us at : info@epicresearch.my
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