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Malaysian Economic Development: Looking Backwards and Forward

Author

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  • Hal Hill

Abstract

This paper provides an analytical and forward-looking overview of Malaysian economic development. Looking back over its 53 years of Independence, we identify the key stylized facts to include the country's generally rapid economic growth and structural change; its consistent openness, especially for merchandize trade and foreign direct investment; its creditable record of macroeconomic management; its consistently high inequality, in spite of the developing world's most consistently implemented affirmative action program; and its mixed record with regard to institutional development. Looking forward, the government has identified the country's key development challenge as graduating to developed country status from its current upper middle income developing country ranking. Can Malaysia make this transition? Growth rates and especially investment levels have fallen substantially since the Asian financial crisis. We identify three key, interrelated challenges, which will be key determinants of its upgrading efforts: fiscal policy reform; the development of institutions and incentives that underpin more rapid innovation and technological progress; and a complete overhaul of affirmative action programs so that they become well targeted social policy instruments.

Suggested Citation

  • Hal Hill, 2010. "Malaysian Economic Development: Looking Backwards and Forward," Departmental Working Papers 2010-13, The Australian National University, Arndt-Corden Department of Economics.
  • Handle: RePEc:pas:papers:2010-13
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    File URL: https://crawford.anu.edu.au/acde/publications/publish/papers/wp2010/wp_econ_2010_13.pdf
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    More about this item

    Keywords

    Malaysia; ASEAN economies; upgrading; middle-income trap;

    JEL classification:

    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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