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PETALING JAYA: It is more meaningful to target a higher gross domestic product (GDP) per capita than to be among the 30 largest economies in the world, an economist said today.
In questioning the significance of the top 30 ranking target, former Economic Action Council executive director Noor Azlan Ghazali said it would only take a growth of 2% a year to get there.
“Surely Malaysia does not want to just run on a 2% (annual increment),” he said at a press conference on the “Madani economy” at the Graduate School of Business, Universiti Kebangsaan Malaysia (UKM) today.
The top 30 ranking is one of the seven indicators under the Madani economy initiative announced by Prime Minister Anwar Ibrahim on July 27.
The other indicators are for Malaysia to be among the top 12 in the Global Competitiveness Index; achieve labour income that constitutes 45% of total income; 60% women participation in the labour force; top 25 in Human Development Index; top 25 in Corruption Perception Index; and fiscal sustainability with a fiscal deficit of 3% or lower.
Noor Azlan pointed out that Anwar also mentioned that Malaysia should be targeting for a 6% per year growth.
“At 6% annually, we would be the 20th largest economy in the world, roughly the size of Switzerland,” he said.
Nonetheless, he said, the size of the economy should not be the target, pointing out that although the Singapore economy could not match that of Indonesia in size, its revenue was still very high.
Noor Azlan also pointed out that the country’s economic growth was not evenly spread among its states and territories, with Kuala Lumpur, Selangor, Penang, Melaka and Johor accounting for 60% of Malaysia’s GDP, in 2019.
“What is worrying is that the nine other states remain in the low-growth and low-income quadrant. This becomes a problem because economic growth is somehow concentrated.
“Some states will be falling behind unless we take specific measures,” he said.
“If the World Bank announces that Malaysia is a high-income nation, some parts of the nation will question if it’s true,” he said.
He also stressed the need for a Fiscal Responsibility Act, and institutionalising the “Madani framework”, to ensure its seven key performance indicators are achieved.
On the issue of corruption, Noor Azlan said merely combating corruption might not be sufficient to drive substantial economic advancement.
“While efforts to curtail corruption are essential, they may not yield the desired economic outcomes on their own. In short, it’s necessary but not sufficient,” he said.
He highlighted the example of Bhutan which is ranked in a more respectable 25th position in Transparency International’s Corruption Perceptions Index compared to Malaysia at number 61.
“Bhutan’s case serves as a notable example. Despite being ranked 25th, the nation still struggles to fully harness the benefits of reduced corruption.
“This underscores the need to consider additional factors beyond corruption in pursuit of economic progress,” he added.
On Malaysia’s aim to reduce the deficit to 3% of GDP, he said tax collection must align with the size of the economy to fund high-standard facilities and services.
“Malaysians should not view taxation as a means for the government to accumulate unnecessary funds, but rather as a necessary investment in obtaining superior facilities.
“Everyone desires well-maintained highways and clean air, yet there’s reluctance towards paying taxes. This dynamic needs to shift,” he added.
Source: https://www.freemalaysiatoday.com/category/highlight/2023/08/09/better-to-target-higher-per-capita-gdp-than-ranking-says-economist/