28
Sep
16

Has Malaysia really escaped the “middle income trap”?

Analysts: Numbers cloak Malaysia’s income quagmire

KUALA LUMPUR, Sept 10 — Malaysia’s underlying structural problems risk being buried by officials citing growth in the average household income as proof the country has escaped the “middle income trap”, several policy and economic experts said.

Income alone cannot indicate if a country is fully developed, the pundits added in their counter-argument to a recent assertion by Datuk Seri Idris Jala, chief executive of the government’s efficiency unit, Pemandu.

They pointed out that Malaysia continues to trail first-world nations in terms of skills, innovation and social well-being.

“The biggest problem with Idris Jala’s narrative is that he’s made the story of economic development rest on macroeconomic fiscal issues: he’s made it about debt, deficits and incomes,” policy analyst Yin Shao Loong told Malay Mail Online when contacted.

“While you can’t entirely set this issue aside, anyone who has studied development economics will tell you this part of the story pales in comparison to the core issues about how successful industries get developed; how workers engage in higher-value, better-paying jobs; and, how the wealth from all this gets more fairly distributed,” he added.

Idris declared last month that Malaysia had escaped the “middle income trap” and is inching closer to a developed country status, based on its growing gross national income.

He reiterated his argument in a September 1 opinion piece in The Star daily and touted various economic reform programmes undertaken by the government which he said has helped narrow the nation’s gross national income (GNI) per capita gap with the standard of the World Bank threshold to 15 per cent last year from 33 per cent in 2009.

But Idris’ assertion does not appear to hold up under scrutiny. A similar point has been noted and acknowledged in a recent State of the Household report by government-linked Khazanah Research Institute which stated that having a high GDP per capita or per household does not always translate into high household income and high average income because GDP per capita can be distorted by the income of the very well-off.

“The better measure is median household income, the halfway mark. Our median household income, like our GDP per person, is one of the highest in Asia after the developed nations [Japan, Singapore, South Korea and Taiwan],” the KRI report said.A researcher with a public institute familiar with the report concurred and pointing to the Gulf countries as an example.

“I would argue that this push for a high income nation is wrong from the beginning. Many countries are high income such as those Gulf countries but they are not developed,” the researcher, who requested anonymity, told Malay Mail Online.

And in Malaysia’s case, income disparity, a key trait for more egalitarian developed economies like the Scandinavian countries, remains a huge problem.

Data from the government’s Economic Planning Unit still indicated persistent disparity of income share for those in the top 20 per cent, middle 40 per cent and bottom 40 per cent.

Although the economy has been growing since the 1970s, the share of income appears to not have trickled down to the bottom 40 enough or towards the middle class.

…more
Analysts: Numbers cloak Malaysia’s income quagmire
September 10, 2016 – MMO


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REJECT such a leader!
We cannot afford ridiculously expensive RM55 Billion ECRL!
All that is necessary
for the triumph of evil
is for good men
to do nothing.

- Edmund Burke
When the people
fears their government,
there is TYRANNY;
when the government
fears the people,
there is LIBERTY.

- Thomas Jefferson
Do you hear the people sing?

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