Time to patch cracks in economic system, says World Bank expert
PETALING JAYA: The current Covid-19 crisis is an opportunity to enact long-term economic reforms geared towards creating a thriving ecosystem long after the pandemic’s effects have waned, according to a World Bank expert.
Richard Record, lead economist at the World Bank Malaysia, said many structural issues on display now existed well before the pandemic and have just been magnified due to the severity of the crisis.
“While the immediate short-term priority is to focus on lives and livelihoods, reforms to lay the foundations for an effective recovery are also needed,” he told FMT.
Since Malaysia’s rapid growth post-independence, driven by the shift from an agriculture-based economy to one rooted in manufacturing, economic expansion has slowed in recent years.
While Record said this is common for countries approaching high-income status, Malaysia’s reduced growth rate is more pronounced when compared to countries that have made similar transitions in the past.
However, “a combination of reforms to boost human capital, increase productivity and raise the rate of female labour force participation could see Malaysia’s rate of GDP (gross domestic product) growth doubling,” which he forecasts to be in the 2%-3% range in 30 years if changes aren’t made.
In order to achieve this, the government must focus on improving education to produce higher quality graduates and hone in on encouraging innovation in all areas of enterprise, so that businesses can be more efficient and higher performing.
In addition, Record said that the country will need to shift towards a new social contract predicated on equality, one that encompasses aspects of gender parity, poverty eradication and similar ideals, in order for the quality of life for Malaysians to be aligned with the expectations that come with high-income status.
However, this would likely come with more taxes as the government would need funds to roll out these social initiatives, such as providing better access to quality education for the poor, providing opportunities to women in the workforce and finding ways to provide financial assistance to the elderly.
“Under such a system, the government will better meet the rising aspirations of all Malaysians for a high-income standard of living, and in exchange the citizens must be allowed to exercise accountability, be treated equally, invest in their own country and be prepared to pay more taxes,” he said.
This is the fourth and final part of FMT’s series on economic recovery, and how policymakers can set the stage for long-term sustainability, so that the new normal can be a more prosperous one for the country and its people. - FMT
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