High-income nation goal too optimistic, academics say

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GEORGE TOWN: The rosy outlook on Malaysia becoming a high-income country is “optimistic” at best, said an academic.

Universiti Sains Malaysia Professor Emeritus Dr Mohamed Ghouse Nasuruddin said this prophecy was made without taking into account the realities at play in different parts of Malaysia.

He disagreed with the government’s view that improved numbers on gross national income, fiscal deficit position and reduced government debt might serve to burst the “middle-income trap”.

“There is a fly in this ointment of optimism. The macro-economic figures might look great on paper, but everyday life in Malaysia is governed by microeconomics that tell a very different story.

“For example, the health of our economy cannot be judged by palatial homes in urban areas and swanky Kuala Lumpur condominiums.

“That affluence should be weighed in balance with the daily struggle of millions in poverty-stricken Keningau, Beaufort and Nabawan in Sabah, Sri Aman, Mulu and Mukah in Sarawak and the rural areas of Peninsular Malaysia,” the Fulbright Scholar said in a letter to the media.

Ghouse was commenting on government efficiency unit Pemandu CEO Idris Jala, who said last week that Malaysia had moved out of the middle-income trap.

Pemandu had reported that Malaysia’s gross national income (GNI) stood at US$10,570 per capita and was only 15 per cent away from the high-income benchmark of US$12,475.

Ghouse said the “dramatic” rise in prices of basic essentials — fuelled by an increase in raw material costs, falling ringgit against the greenback, withdrawal of subsidies and the goods and services tax (GST) — were factors “eroding” the quality of life among Malaysians.

“So, are we really out of the middle-income trap, or are we descending towards the lower-income abyss?

“The benchmark of a good economy is strong purchasing power, aided by subsidies and other relevant elements targeted to allow the lowest level of poverty-stricken citizens to lead a respectable life without having to forage or steal to make ends meet.

“What we need are long-term solutions to empower these bottom-rung millions to generate economic activities that are self-sustaining and not overly dependent on the government.”

Meanwhile, Universiti Malaya faculty of business and accountancy professor Dr Mohd Nazari Ismail said Malaysia’s aim to be a high-income nation was not going to make the lives of Malaysians easier.

He said instead of focusing on high income, the regulators should focus on reducing debts created by banks.

Nazari said the current economic system was based on debt.

“This leads to a situation of constant increase in money supply and therefore reduction in the purchasing power of money and hence a continuous increase in the cost of living.

“That is why achieving the status of a high-income country is not going to make our life easier.”

Nazari added the government should weed out corrupt leaders who “were wasting resources of the country”.

“In the end, we are forced to pay taxes for these losses, including GST.

“This adds extra burden on us, especially those who are in the lower-income group.

“Get rid of corrupt leaders and replace them with trustworthy ones and later revamp the financial system so that we do not have a situation of constant increase in the amount of debt burden in the economy.”