Beyond High Income: 3 Key Ways To Track Development

In March 2021, the World Bank Group predicted that Malaysia would likely become a high-income economy between 2024 and 2028. Putrajaya welcomed the move as a confidence booster to achieving developed country status. But for Geoffrey Williams, Professor at Malaysia University of Science and Technology, high income should not be the defining marker for economic progress.

The Morning Run asked the economist what key markers policymakers should consider when assessing Malaysia’s development. Here’s what he thinks the government should prioritise:

1. Income distribution, not just income levels

While income levels are an important gauge of socioeconomic progress, distribution is just as crucial. Williams says, “We don’t want to have an economy where on average income is very high, but most of our income is in the hands of a very small group of billionaires, and the mass of the population is very poor.” This could lead to inequities across social groups, especially if areas like healthcare, education, and living conditions are neglected.

2. Underemployment 

“The real issue isn’t the headline figure for unemployment, the real issue is underemployment,” Williams points out. 

While many Malaysians have lost their jobs, a lot have also been forced to take up semi-skilled and low-skilled jobs that don’t  guarantee a stable income. According to the latest data from the Department of Statistics Malaysia, 1.89 million people are now underemployed—that’s 37.4% of employed persons with a tertiary education. Williams also warns that if data on underemployment isn’t captured, segments of society may be excluded from social policies that address welfare and development.

3. Potential growth rate

While some government forecasts are optimistic about Malaysia’s economic growth, policymakers should be wary of the underlying situation. Bank Negara recently estimated that the COVID-19 pandemic slashed the country’s potential growth rate from 4.8% to 3.5%.To address this, Williams urges the government to create more opportunities for the economy to generate growth, via new startups, business scale-ups, and new jobs that are resilient to technological change. 

What other economic indicators should policymakers prioritise to strengthen Malaysia’s growth trajectory? Tweet us @BFMRadio and check out the full Morning Brief podcast below.

Written by Hezril Asyraaf and edited by Lee Chwi Lynn.