24 July, KUALA LUMPUR – Malaysia’s historic election that saw a change of government in over sixty years is a unique window of opportunity to deepen reforms and ensure economic growth benefits everyone, says World Bank Group Macroeconomics and Fiscal Management Global Practice Lead Economist, Richard Record.
Describing Malaysia as a remarkable country by many metrics, he said what was apparent was there was a large disconnect between what the numbers showed and how people felt.
An intensely fought campaign saw the cost of living issues featured prominently, as well as, a debate on whether economic growth was really being translated into gains that improve the lives of Malaysians, he said.
What we find is that, while average growth might be robust, there is a growing disparity between Malaysians working in services versus manufacturing. Wages in the manufacturing sector, which is mostly export-oriented, are growing at four times as in services, he said in an article entitled, “Why it’s important to look beyond averages when it comes to Malaysia’s development, released today.
Similarly, while average inflation might be low, food and housing costs have been rising at a much faster pace for several years, even more so in urban areas, where they are now a third higher than in 2010.
Low-income households spend much more of their income on food and housing, and in fact, the poorest 10 per cent of Malaysians spend two-thirds of their income on these two items, which has seen the greatest cost build-up, explained Record, who is based in Kuala Lumpur.
Coupled with stagnant wage growth for those outside manufacturing, it then becomes clearer why many Malaysians feel that growth isn’t benefiting them.
Ensuring that people have greater opportunities to improve their lives and access to social safety nets to help protect them from shocks are essential to inclusive growth, he pointed out.
Record, however, said priorities must be given, among others, to raise productivity level, strengthen social assistance for low-income households and facilitate the achievement of inclusive growth, through policies that level the playing field in access to services and economic opportunities, including measures to increase women’s labour force participation. Indeed, as the country moves closer towards achieving high-income country status, it was important to be aware of the broader aspects of development that are not captured by Gross Domestic Product growth such as in health, education and environmental sustainability. He acknowledged that navigating this change won’t be easy.
But, the country now has an opportunity to become known as a nation that is remarkable for not just achieving high rates of economic growth, but for sustainable and inclusive growth that truly benefits all Malaysians, he added.