Malaysia may not be on track to becoming a high-income nation by 2020, as the target fails to take into the account the realities at play in different parts of Malaysia, said Universiti Sains Malaysia Professor Emeritus Dr Mohamed Ghouse Nasuruddin.
The outlook on Malaysia becoming a high-income country is “optimistic” at best, said the academic.
The improving gross national income, fiscal deficit position and also government’s debt may not be enough to get the country out of the “middle-income trap”.
He disagreed with the government’s view that improved numbers on gross national income, fiscal deficit position and reduced government debt might serve to burst the “middle-income trap”.
“There is a fly in this ointment of optimism. The macro-economic figures might look great on paper, but everyday life in Malaysia is governed by microeconomics that tell a very different story.
“For example, the health of our economy cannot be judged by palatial homes in urban areas and swanky Kuala Lumpur condominiums.
“That affluence should be weighed in balance with the daily struggle of millions in poverty-stricken Keningau, Beaufort and Nabawan in Sabah, Sri Aman, Mulu and Mukah in Sarawak and the rural areas of Peninsular Malaysia,” said the Fulbright Scholar in an article on Free Malaysia Today.
Ghouse comment was in reference to the statement made by Pemandu CEO Idris Jala, who said that Malaysia had moved out of the middle-income trap.
According to Pemandu, Malaysia’s gross national income (GNI) was 15% shy of the high-income benchmark of US$12,475. Currently, the GNI stood at US$10,570 per capita for Malaysia.
The sharp increase in prices of many basic essentials due to the rising cost of raw material, declining ringgit against US dollar, abolishment of many subsidies, and the implementation of the goods and services tax (GST), have contributed to the “eroding” quality of life among Malaysians, said Ghouse.
“So, are we really out of the middle-income trap, or are we descending towards the lower-income abyss?” he asked.
A good economy is evaluated based on strong purchasing power, with the help of subsidies and other relevant factors that will allow the lowest level of poverty-stricken citizens to lead a respectable life without having to forage or steal to make ends meet.
“What we need are long-term solutions to empower these bottom-rung millions to generate economic activities that are self-sustaining and not overly dependent on the government.”
This was echoed by Dr Mohd Nazari Ismail, a faculty business and accountancy professor in Universiti Malaya. He said that Malaysia’s aim to be a high-income nation was not going to make the lives of Malaysians easier.
The regulators should prioritise on reducing debts created by banks, instead of focusing on achieving high-income status, as the current economic system was based on debt, said Nazari.
“This leads to a situation of constant increase in money supply and therefore reduction in the purchasing power of money and hence a continuous increase in the cost of living.
“That is why achieving the status of a high-income country is not going to make our life easier.”
Effort should also be put into eliminating corrupt leaders who “were wasting resources of the country”, he added.
As a result, the people are forced to pay taxes for these losses, including GST, which increases the burden on the people, especially those in the lower-income group.
“Get rid of corrupt leaders and replace them with trustworthy ones and later revamp the financial system so that we do not have a situation of constant increase in the amount of debt burden in the economy.”