Overview

  • Last updated: March 2018

    Since gaining independence in 1957, Malaysia has successfully diversified its economy from one that was initially agriculture and commodity-based, to one that now plays host to robust manufacturing and services sectors, that have propelled it to become a leading exporter of electrical appliances, electronic parts and components. Malaysia is one of the most open economies in the world, with a trade to GDP ratio averaging over 140 percent since 2010. Openness to trade and investment have been instrumental in employment creation and income growth, with about 40 percent of jobs in Malaysia linked to export activities. After the Asian financial crisis of 1997-1998, Malaysia’s economy has been on an upward trajectory, averaging growth of 5.4 percent since 2010.

    With less than 1 percent of Malaysian households living in extreme poverty, and the government’s focus has shifted toward addressing the well-being of the poorest 40 percent of the population (“the bottom 40”). This low-income group remains particularly vulnerable to economic shocks as well as increases in the cost of living and mounting financial obligations. Income inequality in Malaysia remains high relative to other East Asian countries, but is gradually declining. For example, from 2009 to 2014 the real average household incomes of the bottom 40 grew at 11.9 percent per year, compared to 7.9 percent for the total population of Malaysia, thus narrowing income disparities. Following the removal of broad-based subsidies, the government has gradually moved toward more targeted measures to support the poor and vulnerable, mainly in the form of cash transfers to low-income households.

    Malaysia’s near-term economic outlook remains favorable, reflecting a well-diversified and open economy that has successfully weathered the impact of external shocks. This is bolstered by strong macroeconomic management, with low and stable inflation and on-track fiscal consolidation. The financial system remains well-functioning and regulated, boasting a well-capitalized banking system and deep capital markets. Domestic demand is expected to continue to anchor economic growth, supported by continued income growth and a stable labor market, while an improving external environment would contribute positively to demand for Malaysia’s tradable goods and services. Ongoing efforts to push for structural reforms to enhance public sector performance and boost the productivity of public spending will be vital to sustain robust growth in a challenging external environment.

    While significant, Malaysia’s productivity growth over the past 25 years has been below those in several global and regional comparators. Over the medium to long-term, the need to accelerate productivity growth has become more pressing as traditional growth engines have slowed. Additionally, reinforcing the role of factor accumulation, such as female labor force participation, as well as creating more competition in the economy, will continue to be needed in order to complement productivity gains. As factor accumulation is expected to slow, accelerating productivity growth is the key path for Malaysia to achieve convergence with high-income economies. 

  • The World Bank Group Knowledge and Research Hub in Malaysia serves as a partner to the country and its people, in developing and implementing global development solutions.

    The hub draws global knowledge to further unlock Malaysia’s potential, catalyze knowledge, research and application for impact, and shares Malaysia’s development experience for the global development agenda.

    Policy makers improve development outcomes by learning from each other about successes and lessons learnt. Such collaboration leads to better decisions and accelerates the development process.

    Malaysia, as an upper-middle income country, is both a contributor to the development of low and middle income countries, and also a receiver from others in her journey towards high-income status.

    This work of the Hub is guided by three pillars:

    Pillar 1: Sharing the Malaysia Experience with the World. The ‘Malaysia Experience’ is relevant for developing countries in Asia and across regions that are transitioning out of poverty.

    Pillar 2: Supporting Malaysia’s Goal of Becoming a High-Income Economy. The World Bank Group’s international experience will provide Malaysia with a wide array of development solutions and expertise, customized to specific challenges.

    Pillar 3: Learning Together for Global Solutions.  The new hub carries out cutting-edge development policy research in partnership with local and international research institutions.

    Find out more about the World Bank Group Global Knowledge and Research Hub in Malaysia here.

  • The World Bank Group and Global Knowledge and Research Hub in Malaysia is committed in supporting the new Government and her people to implement reforms and achieving her aspirations towards an inclusive, developed nation status.

    Key highlights over the past six months (July to December 2018):  

    We engaged government and private sector in policy reforms

    • Reforms especially in competition, pricing and speeds via the Digital Economy report focused on (i) digital adoption; (ii) connectivity, (iii) entrepreneurship, and (iv) taxing the digital economy, 
    • Conducted a number of workshops and briefing sessions for PEMUDAH committees on Doing Business topics in the last 2 years on top reforming countries and deep dive for Malaysia

    We helped build the capacities and capabilities of the government, public agencies, private sector and academia:   

    • For all Development Finance Institutions (DFIs), organized fora on Monitoring & Evaluation framework and Performance Measurement for 500 participants, in September 2018
    • Conducted workshop on Implementing Value-Based Impact Assessment Framework - Learning from Practitioners with BNM and SBN, in October 2018 for 100 credit-risk officers from banking institutions in Malaysia
    • Conducted week-long courses in Impact Evaluation Methods, in November 2018 for 70 participants, including 35 local academicians 

    We acted as a global and regional convener for Malaysia on economic and development topics

    • Convened 50 government officials from 8 South East Asian countries for a technical workshop for the Planning Community of Practice in national economic planning.  The workshop focused on Operationalizing Planning  
    • Supported ASEAN Capital Markets Framework by promoting the ASEAN green bonds standard and issuance; and building the pipeline for green and sustainable finance in Malaysia and the region
    • Organized various platforms for policy makers to deploy Waqf model to address developmental challenges and discuss Islamic Finance solutions to support SDGs



PHOTO GALLERY

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In Depth

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The Digital Economy in Malaysia

In Malaysia’s journey towards achieving greater economic progress, the country could take further steps to unlock the full potential of its digital economy.

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Green Sukuk - Financing the Future

Malaysia launches its first green Islamic bond to finance sustainable, climate-resilient growth in countries.

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Youth Tackles Inequality for Inclusive Growth

Malaysia’s development story is unique and colorful, read how youth are tackling inequality for inclusive growth.

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Voluntary Treatment to Fighting Drug Addiction

For people who inject drugs (PWID) in Malaysia, voluntary treatment has been found to be effective in preventing relapses.

Additional Resources

Country Office Contacts

Kuala Lumpur
Level 3, Sasana Kijang, No. 2, Jalan Dato’ Onn, Kuala Lumpur, Malaysia 50480
Tel: +603-2263-4900
egomez2@worldbank.org
Washington DC
1818 H Street NW, Washington, DC 20433
Tel: +1-202-473-4709
eastasiapacific@worldbank.org