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Malaysia to use tech reach high-income status by 2020

According to a recent report, Malaysia continues to show that it is an innovation hub; it is now banking on technology to achieve its ambitious goal of attaining high-income status by 2020.

Malaysia is working to its GDP per capita to $12,476 (about £8,000) by 2020, in line with the World Bank’s high-income status. But with GDP of $9,977 in 2011, there a long way to go.

While the goal appears to be a stretch, the main objective is overcoming the “middle-income trap”. As countries move up the economic ladder, they lose their comparative advantage of cheap, labour-intensive manufacture. At the same time, they lack the skill levels and infrastructure to compete with higher-level countries.

The Malaysian government’s answer is an economic transformation programme, covering 12 areas ranging from agriculture to tourism, reforms in areas from human capital development to inequality reduction, and a government transformation programme, partly aimed at lowering crime and improving public transport.

Hi-tech is a priority in Malaysia’s economic transformation, according to the chief executive of the Multimedia Development Corporation, which was in London earlier this month to meet potential investors.

The CE noted that Malaysia cannot compete with China and does not want to compete with India on call centres; the current focus is high-end engineering research and development, instead.

ICT constitutes 10.5% of GDP in Malaysia, and the goal is to boost it to 17% by 2020.

The focus on technology starts at school. Primary and secondary schools are being equipped with wireless and netbook devices; the government wants a ratio of one device for every five students by next year.

In higher education, the government is strengthening ties with international universities, with new overseas campuses being built by Southampton and Nottingham universities.

A large part of Malaysia’s development strategy depends on attracting foreign investors. However, it faces stiff competition from its neighbours.

It was noted that the market is big enough for several, serving different clienteles; what seems on the surface to be competition is complementary, with Singapore and Malaysia focusing on different technology niches.

The CE noted that Malaysia is already building a distinct identity following the arrival and expansion of multinational companies.

The main attraction for taking a hi-tech route is that the sector – which created 9,500 jobs last year – pays well. Salaries in the technology industries are 90% higher than the average. This offers a chance to retain Malaysians who might otherwise leave for higher-paid jobs in neighbouring countries. In recent years, about 5% of the population has migrated.

To ensure that growth is inclusive, Malaysia wants to improve the livelihoods of the “bottom 40%”, which take home only 15% of total household income. In 2009, this group had an average household income of 1,440 ringgits (about £290) a month or less. The government plans to build thousands of kilometres of roads in Sabah and Sarawak – among Malaysia’s poorest regions – as well as extend electricity coverage, increase the number of mobile clinics, and build more affordable housing for families with incomes lower than 2,500 ringgits.

The vast majority of the bottom 40% are Bumis (ethnic Malays and indigenous groups) and they are the intended beneficiaries of an affirmative action programme called the Bumiputera (i.e., sons of the soil).

Under this policy, Bumis will get preferential access to economic opportunities including jobs, education, business ownership, real estate, procurement contracts and finance.

Analysts say that Malaysia’s goal of reaching high-income status is not far-fetched.

One analyst stated that the country will definitely reach the target but it is not likely to move above and beyond its competitors for a long time once it has reached this stage. However, the targets are credible.

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