Malaysia’s Transformation: High Income, Middle Capability

The Malaysian economy, transformed over the past decades, is nearing the international high-income threshold, and will pass it as long as it grows faster than the high-income countries. However, given the persistence of low-skilled production and lagging progress of domestic technology, innovation, and research and development, Malaysia still has some distance to go before being considered an advanced economy – characterised by high levels of capability, technology, and empowerment. Within the overarching theme of Malaysia’s capability shortcomings, two challenges stand out: declining quality of education, and difficulty in enhancing the efficacy of affirmative action and charting exit paths for the policy. Addressing these challenges will crucially impact on the long-term progress of Malaysia’s economic transformation.