One of the aspirations that Malaysia is striving to achieve is to become a member of the Asia Tigers Club in Singapore, Hong Kong, South Korea and Taipei. The other Tiger Cub Economies or young tigers also refers to Indonesia, Philippines, Thailand and Vietnam, who attempt to follow the same export-driven model of technology and economic development which was already achieved by the Four Asian Tigers. In the 1990s, Malaysia was tipped to become the fifth Asian Tiger. However, a financial crisis and slow wage growth hindered its economic progress. The economic wound did not heal, even after several changes of prime minister.
Malaysia is on the right track to regain her Asian Tiger status until 2020, when the COVID-19 pandemic hit the world and the shutdown measures have plunged the global economy into a severe contraction. Malaysia has imposed several lockdowns to curb the spread of COVID-19 pandemic, causing a devastating impact to the economy. In 2020, Malaysia experienced the most significant contraction since the global financial crisis of 2008/09, the overall GDP shrank by 6.3% based on the recent GDP Current Price released by DOSM on 11 February 2021. The GDP performance was influenced by the fall of all economic sectors, with the worst hit in construction sector.
So, where does ASEAN and Malaysia stand against all the big players amidst the COVID-19 pandemic? According to the GDP performance announced by the respective national statistics department, China and Vietnam are the only two countries in Asia to attain positive growth in 2020. Not every Asian economy has reported their fourth-quarter and full-year economic numbers. But estimates compiled from official sources — where available — and institutions such as the International Monetary Fund showed Vietnam outperforming its regional peers last year.
Vietnam is the top-performing Asian economy in 2020 although China has the highest GDP growth, mainly due to the appreciation of home currency – Chinese Yuan against the US Dollar. The actual GDP growth of China is only 2.3% in terms of Chinese Yuan, whereas Vietnam achieved 2.9% growth in 2020 as reported by Vietnam General Statistics Office.Vietnam had accomplished positive growth without a quarter of economic contraction, while the other economy was weighted down by the COVID-19 pandemic.
Recently, Tengku Datuk Seri Zafrul Abdul Aziz, Finance Minister on Malaysia stated in his LinkedIn post reassuring Malaysia’s economic recovery plan is on the right track with the National COVID-19 Immunisation Programme that has hit the ground running:
“The World Bank has announced Malaysia’s economic growth projection to be between 5.6 – 6.7% for 2021 following the global rollout of the COVID-19 vaccine. This is in line with their projected global growth rate of 4%. With our own National COVID-19 Immunisation Program starting on 24 February 2021, our economic recovery plan remains on track.”
GDP per capita in Malaysia declined by 5.4% to USD 10,795 in 2020, logging the worst contraction since the Asian financial crisis in 1998. This is the first year China’s surging economy (USD 10,805) surpassed Malaysia’s GDP per capita. Likewise for GDP, only two countries among the selected peers experienced positive GDP per capita growth in 2020. The contraction of GDP performance and GDP per capita in 2020, making it even more difficult for Malaysia to climb up the ladder to the new benchmark of high-income country at US$15,000 per capita income, which was set by World Bank. In the early 1990s, Malaysia was economically ahead of China. According to a new study by the Japan Center of Economic Research, China is overtaking Malaysia now and it is likely to surpass US by 2030 as the Asian giant emerges from the coronavirus pandemic in a position of strength. Apart from that, Vietnam, which was way behind Malaysia in the 1980s, is now steaming ahead on a growth trajectory that would enable it to overtake Malaysia sooner than one can imagine.
In February 2021, Socio-Economic Research Centre (SERC) has reduced its baseline estimated for Malaysia’s gross domestic product (GDP) growth to 4% for 2021, from an earlier projection of 5% to reflect the reintroduction of the movement control order (MCO 2.0). With the prolonged MCO until March 2021, unemployment would remain challenging as more companies freeze their hiring. Hence, reviving foreign direct investment (FDI) flows into the country is vital to address quality job opportunities and stimulate economic recovery.
According to a United Nations Conference on Trade and Development (UNCTAD) report, the inflow of foreign direct investments (FDI) into Malaysia dropped by 68% to US$2.5 billion in 2020. The report also highlighted that Indonesia, Singapore, Vietnam and Philipines received more than 90% of the US$107bil in FDI that Asean countries pulled in 2020.
Malaysia, once a favoured destination for FDI, is now lagging behind Indonesia, Philippines and Vietnam in terms of FDI inflows which include losing out on key strategic investments. Based on the historical FDI net inflow statistics, Malaysia has registered a negative FDI inflow growth from 2015 to 2019 at -6.1%. In contrast, the other Tiger Cub Economies except Thailand remains sought after by the foreign investors.
In order to achieve the desired GDP forecast and continue attracting more FDI, we should embark on nation-building activities for a new economic paradigm and inclusive growth in Malaysia. In 2019, we introduced our 9 Transformation Strategies for Malaysia (9TS4M), aiming to deliver a sustainable and significant impact in rebuilding the economy. The 9TS4M are nine (9) transformative strategies curated by the Senior Advisors of 27Group, comprised of industry veterans and subject matter experts who have a deep understanding of Malaysia’s economy and unique insights on specific industry dynamic. The following nine transformation strategies are still relevant to rebuild and revive economic activities:
Pro-Rakyat Approach to Large Scale Project
Bringing a holistic approach to large-scale projects (RM20 million and above) – applying socio-economic engineering modules to create and curate better jobs and higher incomes for families across the nation.
Making Home Ownership a Reality
Creating Affordable Housing Trust Funds (AHTF) to finance down-payment obligations
and provide loans at reasonable interest rates to make home ownership a reality.
Spurring Private-Public Partnerships (PPPs)
Private investments are vital for Malaysia’s developed nation status aspiration. The government should improve the architecture/ framework to spur PPPs, more so when fiscal prudence has become a priority.
Disrupting Agriculture
To propel Malaysia into an Agri-Food Powerhouse by harnessing the 4IR technologies, which offer an opportunity to increase jobs and income levels in the agriculture industry.
Getting our Education Priorities Right
The pace of technology-led disruptions is increasing exponentially. Young Malaysian must be equipped for this reality. STEM, Business Concepts and Coding subjects must be explored and introduced in primary school.
Creating New Opportunities in Healthcare
The silver economy is a potential engine of growth for this sector. By integrating hospitals and homes into a unified system for post-acute care facilities, we can drive growth and serve our ageing population better.
Smart Cities: The Malaysian Future
To jumpstart our leap towards smarter cities, it is imperative that we establish a Malaysia Smart City Council to act as a neutral advisor to coordinate policies towards this direction.
Better Tracking of Learning & Training
Leverage digital technologies that provide real-time feedback with digital analytics, which generate insights that open room for improvements to educational and training programmes.
Creating a Sustainable Future
Malaysia is well placed to apply technologies to convert palm oil biomass for green chemicals.
According to the latest external trade statistics released by DOSM, Malaysia’s trade in January 2021 increased to RM 162.6 million, registering an expansion of by 6.1% as compared to the same month of 2020. Exports continued it’s positive momentum and with a surge from RM 84.1 million in January 2020 to RM 89.6 million in January 2021, 6.6% year-on-year (y-o-y) growth. Malaysia’s import also recorded a y-o-y growth of 1.3% which is RM 72.1 billion. With the highest annual increase in exporting to China, amouting to RM 2.7 billion, 26% higher than January 2020. There was also an increase of Malaysia’s import from Taiwan, resulting in RM 1.0 billion or 22% higher than the same month in previous year.
Export expansion in January 2021 was driven mainly by the growth in manufacturing sector, while agriculture and mining sector reported a decline. Mining sector experienced the worst hit due to lower export and import for petroleum and natural gas related products. E&E products, rubber products and metal were the main products that attributed to the expansion in manufacturing sector. Apart from this, the expansion in import was driven by higher imports of manufacturing and agriculture sector while mining sector registered a drop in January 2021. This was underpinned by higher imports of E&E products as well as rubber products, but it was offset by lower imports of petroleum products.
The January trade report provides optimism for a rebound of manufacturing sector, although Malaysia was in the second lockdown since Juary 2021. The agriculture and mining sectors are expected to recover with the roll out of the vaccination globally. The higher volume of trade indicates the country is prepared for economy recovery and policymaker should also be ready with the national plan to regain momentum in post-crisis recovery. The Malaysian government needs to be crucial in formulating the fiscal policy to build and expand innovation ecosystems that helps rejuvenate growth by encouraging public- and private-sector innovation. Policymakers could also assist in investing programmes related to job creation and reskilling that will ease the labour dislocation, hence facilitating the transition to the post-pandemic economy.
It is also important for the government and private sector to implement short, mid and long-term measures to redefine the “next normal” after pandemic to boost the inclusive growth further. As we advance in the effective rollout of COVID-19 vaccine and proper recovery plan, we should expect an improvement in the overall economy but the pace may differ across different sectors. Let’s rebuild our nation towards achieving a rapid recovery and reclaiming our status as the ‘roaring’ Asian Tiger.
