Can Vision 2020 be Far Away? Malaysia's Transformation Problems to a High‐income Economy
| Date | 01 November 2019 |
| Author | Henrik Søborg,Daniel Fleming |
| DOI | http://doi.org/10.1111/1758-5899.12700 |
| Published date | 01 November 2019 |
Can Vision 2020 be Far Away? Malaysia’s
Transformation Problems to a High-income
Economy
Daniel Fleming and Henrik Søborg
Roskilde University, Roskilde, Denmark
Abstract
At the beginning of 1990s, the then Prime Minister Mahathir Mohamad set the goal that Malaysia in 2020 should become a
high-income economy and a vigorous and economically just middle class society. We are not far away from 2020. We there-
fore raise the question whether Malaysia is close to or far away of becoming a high-income economy with this economic trap
issue in the article. Instead, we focus on income inequality as an inroad to economy seen from an OECD country level per-
spective. In our examination of this question, we first discus different strands in the debate on transformation from middle-in-
come to high-income economies. The debate has focused on the middle-income trap issue especially from an economic
perspective. It is an interesting and fruitful input to the transformation debate, particularly the question whether lack of indus-
trial upgrading and deepening keeps middle-income economies back from becoming high-income economies. We do not deal
so much with Malaysia’s transformation problems. From our point of view, income inequality (high Gini coefficient) is an
important but often neglected element in the mosaic to explain Malaysia’s transformation problems both in a domestic and
global policy perspective. We examine income inequality and transformation to a high-income economy from different angles.
We look into the business structure; income distribution compared with high-income economies; household income distribu-
tion, consumption, lifestyle and the middle class; education and tax system as lever or barrier for reducing income inequality;
old and new political coalitions as drivers for maintenance or change of income inequality. Through this analysis, we seek at
the same time to highlight whether Malaysia is close to become a vigorous and economically just middle class society.
Policy Implication
•Malaysia is not far away of becoming a high-income economy seen from a World Bank per capita income by gross
national income (GNI) measurement. But it is far away of being an OECD high-income economy. Our research results
would recommend the new government coalition Parakan Harapan to look closer into what barriers the high-income
inequality in Malaysia create for becoming an OECD high-income economy.
•In its 61-year old regime, the BN coalition has been successful in creating a new entrepreneurial class through its ethnic
favouritism policy. We have shown that this policy has had serious negative implications for developing a more just
income distribution. The old government coalition realised that it was very difficult to scrap the ethnic favouritism policy
because strong political groups within UMNO, the leading party in the BN coalition, want to preserve this ethnic favourit-
ism policy. The new government coalition, which has declared that it aims at a more equal income distribution, should
invite representatives from these political groups to dialogue meetings about how the income distribution should be in
the coming high-income economy.
•There seems to be an awareness in the new government coalition of the problems of high-income inequality and bottom
40 per cent (B 40 per cent) difficulty of climbing up i in the middle-class. Our analysis would recommend that the new
government to explore education and tax system as vehicles for uplifting B 40 per cent.
Contour of Vision 2020 and analytical framework
Malaysia is on its way towards a high-income economy. It
has been a long way: from 1950 to 2019. Malaysia has been
19 years in the low-income category and 50 years in the
middle-income category. The goal is to become a high-in-
come economy in 2020. On the way to this goal, Malaysia
has had high economic growth rates, and by that standard,
it has been a success story (Hill, 2012; Wade, 2010). When
the goal 2020 (Vision 2020) was launched at the beginning
of 1990s the then Prime Minister Mahathir in his strategy
paper ‘The Way Forward’, envisaged Malaysia in 2020 as a
vigorous middle class society that provides full opportunities
for all, including also those in the bottom third to climb out
of the pit of relative poverty. He saw an economically just
society that dramatically escalates its programmes of human
resource development. ‘The ultimate objective that we
should aim for is a Malaysia that is a fully developed coun-
try by the year 2020’(Mohamad, 1991, p. 1). For him, a fully
developed country is a country that is member of OECD.
©2019 University of Durham and John Wiley & Sons, Ltd. Global Policy (2019) 10:4 doi: 10.1111/1758-5899.12700
Global Policy Volume 10 . Issue 4 . November 2019
512
Research Article
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