KUALA LUMPUR: Malaysia must do more to attract quality investments to promote a more innovative economy, including to do so more deliberately and thoughtfully, Bank Negara Malaysia governor Datuk Nor Shamsiah Mohd Yunus said.
She said currently the deficit in the innovation capability of the country remains and Malaysia does not spend enough on research and development (R&D).
“In fact we spend less than half of other frontier economies like South Korea, Taiwan and Singapore. Our R&D efforts have focused on generating scientific knowledge, but less on applying that knowledge and this has resulted in low commercialisation of R&D, ” she said during the World Bank webinar themed “Seeing the Finish Line: How Countries Navigated the High-Income Transition”.
According to Nor Shamsiah, Malaysia has come a long way from being a commodities-based economy to diversifying into high-end manufacturing and modern services.
This helped Malaysia advance into a middle-income economy in the early 70s. Yet, since then, the country has struggled to achieve productivity- and innovation-driven growth needed to become a high-income economy.
She said today, agriculture’s productivity can be increased by adopting modern farming and addressing climate change offers opportunities to attract investments and create high-quality jobs.
Besides these, Malaysia is among the best positioned within Southeast Asia to embrace the Fourth Industrial Revolution.
She also called industry and academia to work together so that research can be better oriented towards serving the needs of the economy, and so that policy support and funding can be directed at areas with the greatest commercial and social potential.
Nor Shamsiah said spending on education, while it is high relative to peers, the returns have not commensurate with the investments made.
She elaborated that the education and training system must be more forward-looking and cater to shifts we anticipate over the next 20-50 years. The key is to prepare the next generation with 21st century skills to meet these demands.
“Malaysia already has one foot through the door in each of these opportunities; we are major producers of petro- and oleo-chemicals, solar panels, as well as E&E (electrical and electronics) components that will power future mobility.
“We must engage in serious conversations on moonshot strategies to build innovative industries and companies. Only then can we set the foundation for a sustainable, dynamic and competitive Malaysian economy, ” she said.
Meanwhile, the governor cautioned that Malaysia will transition to an ‘aged nation’ status, with the old-age dependency ratio expected to increase to 16.6 per cent by 2040.
Having said that, in a 2018 Employees Provident Fund study, two out of three active contributors are projected to have insufficient retirement savings to meet a minimum pension of RM1,000 per month.
She said the nature of work will evolve, as the country transitions to a more knowledge-based, service based and gig-based economy.
Work arrangements are expected to become more flexible, and provisions must be made to ensure that workers remain adequately protected. Notably, provisions for shorter and more flexible working hours may entice women to participate in the labour force.
Lastly, she posed the question on how the government can execute its plans better.
“Focus should be as much on process and governance as it is on the outcomes. While we have achieved leaps and bounds in economic development since our Independence, past reforms also provide important lessons in areas where we must strive to do better.
“We have had roughly 60-70 blueprints and masterplans over the years; not all have been executed to their maximum potential. Let us identify the gaps and shortfalls and move forward from there.
“Although Malaysia’s journey to transition to a high-income economy will be challenging, it is not out of reach. The key is to have the right mindset and values so that we attain, not just the high-income target, but also the qualities of a developed nation and society, ” she said. – Bernama