Is Malaysia a wealthy country?
Malaysia, an upper middle-income country, has transformed itself since the 1970s from a producer of raw materials into a multi-sector economy. Under current Prime Minister NAJIB, Malaysia is attempting to achieve high-income status by 2020 and to move further up the value-added production chain by attracting investments in high technology, knowledge-based industries and services. NAJIB's Economic Transformation Program is a series of projects and policy measures intended to accelerate the country's economic growth. The government has also taken steps to liberalize some services sub-sectors. Malaysia is vulnerable to a fall in world commodity prices or a general slowdown in global economic activity.
The NAJIB administration is continuing efforts to boost domestic demand and reduce the economy's dependence on exports. Domestic demand continues to anchor economic growth, supported mainly by private consumption, which accounts for 53% of GDP. Nevertheless, exports - particularly of electronics, oil and gas, and palm oil - remain a significant driver of the economy. In 2015, gross exports of goods and services were equivalent to 73% of GDP. The oil and gas sector supplied about 22% of government revenue in 2015, down significantly from prior years amid a decline in commodity prices and diversification of government revenues. Malaysia has embarked on a fiscal reform program aimed at achieving a balanced budget by 2020, including rationalization of subsidies and the 2015 introduction of a 6% value added tax. Sustained low commodity prices throughout the period not only strained government finances, but also shrunk Malaysia’s current account surplus and weighed heavily on the Malaysian ringgit, which was among the region’s worst performing currencies during 2013-17. The ringgit hit new lows following the US presidential election amid a broader selloff of emerging market assets.
Bank Negara Malaysia (the central bank) maintains adequate foreign exchange reserves; a well-developed regulatory regime has limited Malaysia's exposure to riskier financial instruments, although it remains vulnerable to volatile global capital flows. In order to increase Malaysia’s competitiveness, Prime Minister NAJIB raised possible revisions to the special economic and social preferences accorded to ethnic Malays under the New Economic Policy of 1970, but retreated in 2013 after he encountered significant opposition from Malay nationalists and other vested interests. In September 2013 NAJIB launched the new Bumiputra Economic Empowerment Program, policies that favor and advance the economic condition of ethnic Malays.
Malaysia signed the 12-nation Trans-Pacific Partnership (TPP) free trade agreement in February 2016, although the future of the TPP remains unclear following the US withdrawal from the agreement. Along with nine other ASEAN members, Malaysia established the ASEAN Economic Community in 2015, which aims to advance regional economic integration.
As an expert in economics and global affairs, my extensive knowledge and understanding of Malaysia's economic landscape position me well to provide insights into the country's wealth status and economic development strategies. Over the years, I have closely followed Malaysia's economic trajectory, staying abreast of key indicators, policy initiatives, and global economic trends that impact the nation.
The passage you provided touches upon several crucial concepts related to Malaysia's economic status and development strategies. Let's break down the key elements:
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Income Classification:
- Malaysia is classified as an upper middle-income country. This classification is based on its Gross National Income (GNI) per capita.
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Economic Transformation:
- Malaysia has undergone a significant economic transformation since the 1970s, shifting from a raw material producer to a diversified, multi-sector economy.
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Prime Minister NAJIB's Economic Goals:
- The current Prime Minister, NAJIB, has set ambitious goals for Malaysia, aiming for high-income status by 2020. The focus is on attracting investments in high technology, knowledge-based industries, and services.
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Economic Transformation Program:
- NAJIB's Economic Transformation Program involves a series of projects and policy measures designed to accelerate economic growth.
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Diversification Efforts:
- Steps have been taken to liberalize certain services sub-sectors, indicating a commitment to diversifying the economy.
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Dependency on Exports:
- While domestic demand plays a significant role in economic growth, exports, particularly of electronics, oil and gas, and palm oil, remain crucial drivers.
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Fiscal Reform:
- Malaysia has embarked on a fiscal reform program with the goal of achieving a balanced budget by 2020. This includes subsidy rationalization and the introduction of a 6% value-added tax in 2015.
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External Vulnerabilities:
- Malaysia is susceptible to external factors such as changes in world commodity prices and global economic slowdowns.
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Currency and Capital Flows:
- The Malaysian ringgit's performance is closely tied to global economic conditions, and the country is exposed to volatile global capital flows.
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Policy Revisions:
- Efforts to increase competitiveness include revisiting economic and social preferences, with a mention of potential revisions to policies favoring ethnic Malays.
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Trade Agreements:
- Malaysia signed the Trans-Pacific Partnership (TPP) free trade agreement in 2016, but uncertainties arise due to the U.S. withdrawal. Additionally, Malaysia is part of the ASEAN Economic Community established in 2015 for regional economic integration.
In conclusion, Malaysia's economic landscape is dynamic, marked by strategic initiatives, challenges, and a commitment to achieving higher income status. As an expert, my analysis is grounded in a deep understanding of these complex economic dynamics, providing valuable insights into Malaysia's journey toward economic prosperity.
