by DASHVEENJIT KAUR / pic by ISMAIL CHE RUS

THE government has to address the significant gaps in labour productivity, human capital and living standards in order to achieve high-income status in the next six years as envisioned, the World Bank Group stated.

Its lead economist Richard Record (picture) said while the government has acknowledged economic inequality remains high, tackling these disparities will be a challenge.

“In our research, we have found Malaysia will only be able to achieve high-income status between the year 2022 and 2025, and that is believed to be in line with the government’s midterm review of the 11th Malaysia Plan (11MP).

“However, economic inequality would hinder Malaysia’s high-income aspirations,” he told reporters after the launch of the bank’s regional report titled “Resurgent East Asia” in Kuala Lumpur yesterday.

“This new study is about recognising what has worked so well may not be sufficient going forward, as countries in the region seek to transition from middle-income to high-income status,” he added.

According to the report, more than 90% of East Asia’s population now live in 10 middle-income countries, namely Cambodia, China, Indonesia, Lao PDR, Malaysia, Mongolia, Myanmar, the Philippines, Thailand, and Vietnam, many of which can realistically aspire to high-income status in the next generation or two.

The report has classified China, Malaysia and Thailand as upper-middle-income countries with China and Malaysia likely to become high-income countries in not too distant future.

“Under the 11MP, the government has come up with a combination of achievable policies that will foster outward-oriented, labour-intensive growth, while strengthening basic human capital and providing sound economic governance,” Record said.

To recall, under the midterm review of the 11MP, Malaysia’s per capita income is expected to reach RM48,789 or US$11,700 in 2020, below the US$12,235 threshold set by World Bank.

He suggested that in addition to continue to strengthen the business and regulatory environment, priority should be given to service sector reforms, deepening trade agreements, broader innovation policies and improve access to finance especially for small and medium enterprises.

Such adjustment to policies would help make the economic situation of the lower income bracket more favourable, Record urged.

Record said the government should focus on building skills beyond current focus on basic human capital.

“It will be increasingly important to support development of advanced skills, including socio-emotional skills and digital literacy.

“In addition to traditional social protection programmes, programmes to transition vulnerable workers to new job opportunities and ensure affordable access to digital technologies are needed,” he said.

Record also highlighted the importance for the government to work on ways to increase the level of education which will reduce the inequality in wages.

“Higher education leads to higher income, but since not everyone has the opportunity to receive higher education, the government should strive to make higher education as accessible as possible without abandoning quality standards,” he said.