Published in The Malay Mail Online 24 September 2016

KUALA LUMPUR, Sept 24 — Malaysia needs to liberalise its economy to escape the middle income trap soon or risk seeing its growth levels cut, which will affect the spread of wealth and lead to dire racial conflicts, an associate professor with the National University of Singapore said today.

Dr Razeen Sally said the Najib administration’s reform initiatives like the Government Transformation Programme (GTP) and the Economic Transformation Programme (ETP) have helped liberalise the market, but stressed that measures must be taken to phase out policies favouring only the Bumiputra.

“I think Malaysia does need a liberal rejuvenation on the economic front, which is at least  as important as the political and social fronts,” he said in his keynote speech at this year’s Liberalism Conference organised by think tank, the Institute for Democracy and Economic Affairs.

“So it needs a much stronger version of the GTP and ETP, it needs restrictions and the eventual removal of the Bumiputera policy which is profoundly illiberal because of its discriminatory elements.”

He said Malaysia is not far behind making the leap to developed nation status based on the country’s per capita GDP.

But he said the country needed to shift out of playing “catch-up” if it wanted to bust out of the middle income trap.

“With catch-up growth, all you need to do is get some basics right and you can continue to have authoritarian politics, bad governance and other things and you can still have very high rates of growth.

“When you reach a certain level of income, when you’re in that upper middle income strata, then you need to switch to a different kind of governance for growth because then deeper structural reforms to promote competition become much more important,” he said.

Razeen stressed that liberalising and increasing privatisation needs to be paired with reforms in public administration, which would in turn need a more liberalised political system.

“Malaysia needs that kind of very difficult institutional transition, which is every bit political and social if it is to have continued economic success because the danger otherwise is that Malaysia is going to be stuck with lower and persistently lower growth rates, and the danger of that, if and when that happens, the distributional conflict will actually get much worse and this will translate into racial, ethnic conflicts,” he said.

Prime Minister Datuk Seri Najib Razak said last April that the GTP had hit 99 per cent of its key performance indicators while the ETP’s National Key Economic Areas and Strategic Reform Initiatives recorded 109 per cent and 108 per cent respectively.

He added then that the GTP has passed phase 1 and 2 and is now heading towards the next phase through the 11th Malaysia Plan to lift Malaysia to developed country status.

Najib introduced the GTP and ETP after assuming office in April 2009 with the ambition of making Malaysia a developed nation by 2020.

The GTP aims to make the government more effective in the delivery of services, while the ETP targets a gross national income per capita of US$15,000 (RM61,897) by 2020.

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