Malaysia

About a year ago, the Government of Malaysia and the World Bank set up a knowledge partnership centered on the policy objective of transforming Malaysia into a high-income... Show More + economy. The Malaysia economic monitor series is a key pillar in this partnership and serves as a platform for public discussion, analysis, and the sharing of knowledge on the challenges facing Malaysia in achieving this objective. This third issue of the Malaysia economic monitor is themed inclusive growth. The report reviews recent economic developments, updates the World Bank's view on the economic outlook, and analyzes in the report's thematic section how Malaysia can promote the objective of inclusive growth. Following a spectacular year-on-year recovery, the growth momentum of the Malaysian economy is ebbing. After a period of crisis-related volatility, the economy transitioned into more normal patterns of growth: the pronounced inventory cycle began to subside, private consumption became more buoyant, and fixed investment picked up as capacity utilization gaps were closed. Interrupting this process was the return of external weakness, with exports slowing in the second quarter and then contracting. Since import demand for export processing did not react immediately, inventory volatility picked up again. Achieving Malaysia's Vision 2020 goal of high-income status requires average growth of 6 percent during the 10th Malaysia plan period a marked improvement on the 4.4 percent achieved over 2006- 2010. The challenge is not only to boost the level of growth but to ensure that growth is inclusive and sustainable. The policies and projects of the Economic Transformation Program are the key to meeting this challenge through greater, and higher-quality, investment and productivity improvements. Show Less -

Malaysia is emerging from one of the worst export slumps in its economic history as manufacturing and exports have started growing again. With East Asia leading the... Show More + recovery and advanced economies showing progressive improvement, the Malaysian economy is projected to grow at 4.1 percent in 2010, following a contraction of 2.3 percent in 2009. The medium-term outlook remains promising with growth reaching 5.6 and 5.9 percent in 2011 and 2012, respectively, though that will depend on sustained global recovery from the crisis. The overriding medium-term challenge is for the Malaysian economy to join the select group of high-income countries. Malaysia has experienced solid growth over the last decades, but has relied on an economic model predominantly based on capital accumulation, although private investment rates never recovered from their 20 percentage point fall after the Asian 1997/98 crisis and are now among the lowest in the region. For Malaysia to climb the next step up the income ladder, it needs to focus on improving the investment climate to raise investment rates and focus on productivity growth. Against this backdrop, the authorities are developing a 'new economic model,' which will be squarely centered on boosting productivity. Promising reforms have already been announced in the areas of services and foreign direct investment, which will help revitalize private investment. Show Less -

This note presents the lessons from the assessments that are likely to be most useful to country directors, and task teams preparing new adjustment operations. The five... Show More + adjustment loans (two in Argentina, and one each in Korea, Malaysia, and Russia) show that applying basic lessons is not always straightforward, however, and, sometimes involves making tradeoffs among Bank objectives. It is stipulated policy objectives are more likely to be achieved, if there is substantial borrower ownership. To this end, support for new policies should be established, towards generating broad political ownership, including engaging key players in incoming administrations, to help build ownership of reforms. Moreover, combined, the Bank's country knowledge and global expertise, can generate quality operations, that forge local partnerships, draws on prior experience, and maintains a minimum knowledge base. This is to say, setting priorities, and sequencing reforms should be carefully included during the design phase, with particular attention to avoid excessively broad conditionality, which may reduce the probability of real progress on key reforms. Show Less -