PETALING JAYA: Malaysia needs more competition and less government intervention if it is to achieve its goal of becoming a high-income nation by 2020, says the Institute for Democracy and Economic Affairs (IDEAS).
Referring to the latest figures by the Economic Planning Unit, IDEAS said the average income per person had fallen by 15% from US$10,345 in 2013 to US$8,821 in 2016.
“At an average yearly income of US$8,821, Malaysia today is severely off-track in our Vision 2020 goal of achieving a gross national income (GNI) of US$15,000,” director of research Ali Salman said in a statement.
He said the drop in average income was due to the country’s decline in competitiveness, which had also caused a slide in ringgit value.
“Although Malaysia is still relatively competitive, we have dropped in rank under IMD’s World Competitiveness Yearbook in 2016 by five places from 14th in the world to 19th, as well as the World Bank’s Ease of Doing Business Index, from 17th in the world to 18th.”
Ali said this was thanks to Malaysia’s lack of skilled labor, adding that in 2015, only 27.4% of Malaysians had a university education. Meanwhile, the number of workers in Malaysia with no formal education at all increased to 12.48% from 2014 to 2015, he said.
He said Malaysia’s policies had also become increasingly unpredictable, which was not conducive to a business-friendly environment.
He gave the example of the Price Control and Anti-Profiteering Act, which was introduced to stop businesses from increasing prices during the implementation of the goods and services tax.
Now, however, the act was being kept indefinitely, which created an unnecessary burden for businesses, increased the cost of doing business and was off-putting for investors, he said.
“Malaysia needs a paradigm shift in its policies. What we need is more competition, more free trade and less controls and interventions by the government.
“Only more economic freedom can help us break the middle-income trap.”
Ali added that the government had yet to issue a full explanation on the figures, which might be influenced by the currency used in calculations.
“I think this is partly because when the figures were reported in Malaysian ringgit, it showed positive growth in average income at RM32,596 in 2013 to RM37,930 in 2016,” he said.
“But in US dollars, which is what countries generally use as a benchmark, the story is vastly different.”
