Malaysia still competitive, says economist
02 Sep 2022
Malaysia is still doing well in the context of the world competitiveness index, and ranked high at 74.6 points out of 100 in 2020, well above Indonesia, Thailand, Vietnam and the Philippines, said Universiti Utara Malaysia economics professor Dr K. Kuperan Viswanathan.
Furthermore, the economy is recovering well and the projected gross domestic product (GDP) growth for 2022 is 5% or more, he said.
Expressing his opinion on PKR deputy president Rafizi Ramli’s comments on Tuesday that Malaysia will soon lose its tag as Southeast Asia’s third-largest economy to Vietnam and the Philippines as it has lost its “competitive edge”, Kuperan said Rafizi was merely reiterating what others have been saying over the past 10 years.
“In terms of economic size, Vietnam, Indonesia, the Philippines and Thailand will overtake Malaysia as these are much larger countries when it comes to population and land mass,” Kuperan said.
However, he added that there is some truth to what Rafizi said as production costs in Malaysia have gone up by some 20% relative to other Southeast Asian countries.
“But this is not the only basis for comparing competitive edge. Institutions, political stability, infrastructure, labour skills, productivity, and the diversity and spread of the economy matter a lot in determining the overall competitiveness of a nation.”
Kuperan said Malaysia is not far behind its neighbouring countries but has been losing ground over time as the cost of production increases and institutional problems become greater.
“We do not have to replace oil and gas to sustain the economy. We need to put more effort into food production and focus on environmentally sustainable technologies and products, such as solar power panels, electric batteries and information technology (IT) commodities and infrastructure.
“Palm oil production is still good and will continue to provide us with much-needed revenue to buy food. But we need to invest more to modernise food production.”
Kuperan said policies should focus on attracting investments in the food production, IT and green environment sectors.
“Incentives for investments should be provided while skills enhancement in new technologies should be pushed forward.
“Low-wage labour from foreign countries should be reduced to encourage investment in more productive technologies. Political stability and greater cooperation and unity among our diverse population must be given priority and fostered as a major overriding policy,” he said.
Sunway University economist Prof Dr Yeah Kim Leng said with populations larger by over three times, it is not surprising to find the size of the Philippine and Vietnamese economies overtaking Malaysia.
“Nonetheless, Malaysia’s per capita income level, which is a measure of purchasing power and a commonly used proxy for living standards, remains higher by a similar multiple.
“Nevertheless, the concerns expressed by Rafizi are shared by many as Malaysia’s poorer neighbours, including Indonesia, are fast catching up. Likewise, countries that had overtaken Malaysia decades ago in terms of per capita income, such as South Korea, Taiwan and Singapore, continue to widen their lead.”
Yeah said with quicker economic growth, neighbouring countries have steadily narrowed the income per capita gap with Malaysia.
“With larger populations and markets, the rising income trend will enable these countries to attract domestic and foreign investors.
“Not surprisingly, such countries, especially Vietnam and Indonesia, are receiving greater foreign direct investment inflows while Singapore continues to be the hub for global investors,” he said.
Source: The Sun Daily