To reach First World, Malaysia has to pass Gabon (an Africa country)

Malaysia will have to fundamentally rework its economy to become more productive and R&D based if it is serious about making the quantum leap to become a high income economy and move out of the income bracket currently occupied by countries such as Gabon and Botswana. The nation, one of the wealthiest in Asia at the time of independence in 1957, has now fallen behind Hong Kong, South Korea and Singapore and is now trying to play catch up.

The World Bank classifies a high income country as having a gross national income (GNI) per capita of US$11,456 or more. According to the latest figures available from the World Bank, in 2007, Malaysia had a GNI per capita of US$6,420, far behind high income societies such as Singapore (US$32,340), South Korea (US$19,730), Japan (US$37,790), Hong Kong (US$31,560), Australia (US$35,760), Finland (US$44,300), and Switzerland (US$60,820) and Norway (US$77,370).

Malaysia falls into the World Bank’s upper middle income bracket defined as GNI per capita of between US$3,706 and US$11,455. Other countries with similar GNI per capita include Gabon (US$7,020), Russia (US$7,530), Romania (US$6,390) and Botswana (US$6,120).

Industry officials warn, however, that without addressing key issues such as productivity and subsidy mentalities, Malaysia will not be able to transform itself into a sustainable high income society. Many Malaysian companies have become dependent on a relatively weak currency, cheap foreign labour and subsidies for electricity and water instead of striving to become more efficient and developing high quality and high value good and services.

Malaysia’s lack of R&D and investment in downstream activities means that it has wasted the opportunity to leverage its natural resources into a high income base unlike other resource rich countries like New Zealand, Norway, Canada or Australia.

While favoured by many low end manufacturers, a weak currency also makes imported goods more expensive, including capital goods such as sophisticated equipment required for high-end manufacturing and R&D.

A weak currency also means imported inflation, thus making Malaysians feel poorer as they cannot afford to buy the same goods and services of their counterparts in, say, Singapore or Australia.

It also makes it difficult for Malaysian companies to expand abroad as the cost of setting up overseas operations become prohibitive since one ringgit is worth little abroad.

On a dollar-to-ringgit basis, Malaysians do not appear too badly off. According to one senior executive with an international accounting firm, Malaysian accounting fresh graduates earn about RM2,500 per month as compared to about US$3,000 for their peers in the United States.

However, when factoring in the ability to purchase imported goods or to travel abroad, the value of the income shrinks dramatically due to the unfavourable exchange rate.

Edited from "themalaysianinsider.com"