Can Vision 2020 be Far Away? Malaysia's Transformation Problems to a High‐income Economy

Abstract

In 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 therefore raise the question whether Malaysia is close to or far away of becoming a high-income economy seen from an OECD country level perspective. In our examination of this question, we first discus different strands in the debate on transformation from middle-income 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 industrial upgrading and deepening keeps middle-income economies back from becoming high-income economies. We do not deal so much with this economic trap issue in the article. Instead, we focus on income inequality as an inroad to highlight 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 distribution, 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. Introduction.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-income 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 in 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, 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 country by the year 2020" (Mahathir Mohamad 1991 p.1). For him a fully developed country is a country that is member of OECD.We are close to 2020 and Malaysia's economy has still fine growth rates -on average at 5.3 per cent in the period 2011-2015 (The Eleventh Malaysia Plan 2016-2020 Ch. 2 p. 3). The economic growth...

The Economic Impact of Malaysia’s Institution on the Failure of the Wawasan 2020

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