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Malaysia’s New Economic Model:
Risks and Rewards
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AseanAffairs Magazine May - June 2010

Prime Minister Najib Razak vows to take Malaysia forward and transform it into a high income nation through economic and social reforms. Initial responses to this ambitious drive are mixed, details are scarce and investors play wait-and-see.Yet, Najib insists he’s got support to push ahead.

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The Hon. Dato’ Sri Mohd Najib bin Tun Abdul Razak , Prime Minister of Malaysia along with (L - R) Ramanathan Sathiamutty, Managing Director, IBM Malaysia Sdn Bhd, Tan Sri Dato’ Seri Dr. Jeffrey Cheah, Chairman of Sunway Group & ASLI, Dato’ Haji Syed Zainal Abidin Syed Mohamed Tahir, Group Managing Director, Proton Holdings Berhad, Dato’ Michael Yeoh, Chief Executive Director, ASLI, Mr. Mirzan Mahathir, Founder and President, ASLI, H.E. Keo Puth Rasmey, Deputy Prime Minister, Cambodia, Tunku Zain Abidin Tuanku Muhriz, President of the Institute for Democracy and Economics Affairs Malaysia, Mr. S. Roy, Founder &CEO of AseanAffairs, and H.E. Secretary Annabelle T. Abaya, Presidential Adviser on the Peace Process, Republic of the Philippines.

New Economic Model: Why Malaysia Needs it

Rajiv Biswas

Malaysia achieved great economic success in previous decades by attracting multinational FDI into low-cost manufacturing, notably electronics. However, the global competitive landscape has changed, and Malaysia itself has changed. It is no longer a low income nation, and therefore has become increasingly an unattractive location for low-cost manufacturing processes, with other Asian countries such as Vietnam, China and India competing for such FDI.
On the other hand, it has struggled to move up the value-adding chain, squeezed by advanced competitors with highly skilled workforces and advanced technology, such as Singapore, South Korea and increasingly, China. Therefore Malaysia must rapidly strengthen its competitiveness in the high-value adding segment, first and foremost, by strengthening its human capital.
Malaysia only spends 0.7 percent of GDP on R&D, compared to an average of 2.3 percent of GDP spent on R&D in OECD countries. This is a key indicator that reflects Malaysia’s current weakness in its ability to compete in higher value-adding segments of manufacturing and services. To become an industrialized country, Malaysia must drive forward rapidly with boosting its R&D spending – there is no time left to wait.

Ramon Navaratnam

Malaysia needs a new model because the old model - the NEP, which worked well for about 10 years, has got too politicised and gone ugly. It caused income and racial inequity whereby the minority gained disproportionately at the expense of the less fortunate majority.

Jamaludin Ibrahim

Past successful factors are no longer applicable for the future. It is important to set new goals and high standards. This is important to achieve excellence and avoid mediocrity. The government has a big and bold vision, to transform the nation into a developed high-income economy that is sustainable and inclusive.

Mohamed Iqbal Rawther

The NEM captures the essence of the emerging realities. First, moving the nation on a higher income trajectory is an economic goal: Malaysia’s growth has been impressive, but per capita income growth has not. Second, growth and income distribution have to be on a sustainable and inclusive basis. The NEM addresses the twin objectives as necessary components to the high income aspiration and the status of an advanced nation by 2020.

Michael Yeoh

Malaysia is caught in a middle-income trap. It needs to take bold, pragmatic and decisive measures to move ahead and to become globally competitive and regionally connected. If we don’t transform, we could be left behind our neighbours.

Jeffrey Cheah

Malaysia needs to upgrade its competitiveness. The new model will help propel Malaysia forward to be a more dynamic nation.

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