Enhancing Skill Sets and Productivity to Advance Nation Status
In a move to regain its status as an Asian Tiger economy, Malaysia is working towards strengthening its economy and fiscal status by 2021.
It is also aiming to be a hub for Industry Revolution 4.0 (IR4.0) in South-East Asia.
Prime Minister Tun Dr Mahathir Mohamad has said that in view of the accelerated speed new technologies are evolving, Malaysia cannot waste any time in adopting IR4.0.
Despite facing some headwinds, the government intends to reduce the current debt and liabilities of RM1.087 trillion or 80.3% of the gross domestic product (GDP) in the course of this period to 65%, through the renegotiation of mega projects, such as the mass rapid transit.
Meanwhile, the confidence of some foreign investors in Malaysia remains strong. Malaysia’s credit rating has also remained intact.
The country’s foreign direct investments (FDIs) grew by 48% in 2018, while exports and the current accounts are also in positive territory.
Last year, there was a 48% increase in approved FDIs across all sectors at RM80.5bil.
IQI Global chief economist Shan Saeed (pic) provides his opinions and strategies on Malaysia’s journey towards regaining economic prowess:
The Asian Tiger countries have seen tremendous successes in their economies. What are the key factors that Malaysia can emulate?
Malaysia is currently emulating certain variables that other Asian Tigers are applying, namely:
> Political stability,
> Maintain economic confidence,
> Solid macro fundamentals,
> Enhanced skill set and productivity,
> Price inflation is under control, and
> Balance sheet is on solid footing.
In terms of adoption strategy, Malaysia can adopt a more aggressive stance towards output; specifically, speed to market strategy.
It is about the game of speed, efficiency and reaching markets profitably.
Is there a need for Malaysia to study its economic model in order to achieve the same success that these countries have achieved? The government is already focused on moving faster in terms of technology and its deliverables. The government is in control of the economy and doing its utmost to maintain strong aggregate demand.
In the end, the consumption pattern needs to remain solid in order to bolster GDP growth, given that consumption holds significant weight in the overall GDP equation.
The government is taking steps to reduce debt levels and improve revenue streams to buttress tax to GDP ratio, in order to strengthen the balance sheet.
What are the priority areas that Malaysia should look into? Malaysia needs to look into enhancing its skill sets and productivity, in order to enable income levels to increase, which in turn will benefit the masses at the macroeconomic level.
The Government needs to continue to provide incentives to people to upgrade their skill set to achieve better productivity and enhance marketability for their careers or income level.
A technology-driven labour force can actually help drive the growth of many economies globally in the next five to 10 years.
Is the Malaysian tax structure efficient enough for the government to raise enough tax revenue to not only fund development objectives but also over the long term pare down the growing debt burden and also to rely less on fiscal stimulus? The Malaysian tax structure is in line with market forces and lowers in comparison to the APAC region.
According to KPMG, the corporate tax rates of neighbouring countries are as follows:
> Indonesia – 25%
> Malaysia – 24%
> Thailand – 20%
> Vietnam – 20%
> Singapore – 17%
Asian Tiger economies have achieved significant progress in attracting FDI from global players.
In my opinion, the best way to increase tax to GDP ratio is by increasing the GDP size.
Malaysia was an Asian Tiger economy. What went wrong? How do we correct our mistakes? The economy cannot be played like a piano, where one can press specific fiscal, monetary and structural notes to get standard answers.
The only method to achieve standard answers is through mathematics. The economy is a combination of complex variables.
The way to accomplish positive economic results is art for governments.
Whenever there are momentous aspirations to achieve, there are inevitable bumps and hiccups along the way.
It is how you tackle those impediments and challenges that will make the road smoother towards the hill.
At times, you need to revisit your economic strategy which might have gone wayward and bring it back to the original plan.
Efforts and energies should be focused on realigning all important variables which are significant in the overall economic strategy.
Moreover, all stakeholders need to be on the same page in order to execute the strategy with the utmost professionalism to achieve Asian Tiger status.
Economic outcomes delivered efficiently should become a new priority for the government.
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