Learn how the World Bank Group is helping countries with COVID-19 (coronavirus). Find Out

Overview

  • Last updated: April 2020

    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 service sectors, which have propelled the country 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 130% since 2010. Openness to trade and investment has been instrumental in employment creation and income growth, with about 40% 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% since 2010, and is expected to achieve its transition from an upper middle-income economy to a high-income economy by 2024.

    However, the COVID-19 (coronavirus) pandemic has had a major economic impact on Malaysia, particularly on its vulnerable households. With less than 1% of Malaysian households living in extreme poverty (according to the official national poverty line), the government’s focus has shifted toward addressing the well-being of the poorest 40% 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. While income growth for the bottom 40 has outpaced the top 60 over much of the last decade, the absolute gap across income groups has increased, contributing to widespread perceptions of the poor being “left behind.” 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 will be more dependent than usual on government measures to sustain private sector activity as the shock of COVID-19 reduces export-led growth, and as a depleted fiscal space limits public investment-led expansion. Over the longer term, as Malaysia converges with high-income economies, incremental growth will depend less on factor accumulation and more on raising productivity to sustain higher potential growth. While significant, Malaysia’s productivity growth over the past 25 years has been below that of several global and regional comparators. Ongoing reform efforts to tackle key structural constraints will be vital to support and sustain Malaysia’s development path.

    According to the World Bank’s Human Capital Index, Malaysia ranks 55th out of 157 countries. To fully realize its human potential and fulfil the country’s aspiration of achieving the high-income and developed country status, Malaysia will need to advance further in education, health and nutrition, and social protection outcomes. Key priority areas include enhancing the quality of schooling to improve learning outcomes, rethinking nutritional interventions to reduce childhood stunting, and providing adequate social welfare protection for household investments in human capital formation.

     

     

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

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

    The Hub draws on global knowledge to further unlock Malaysia’s potential; catalyzes knowledge, research, and application for impact; and shares Malaysia’s development experience for the global development agenda.

    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, through its Global Knowledge and Research Hub in Malaysia, is committed in supporting the government of Malaysia and her people to implement reforms and achieve her aspirations toward an inclusive, developed nation status.

    Key highlights over the past four years include:

    Engaging the government and the private sector in policy reforms that have:

    • Increased competition, reduced prices, and increased speeds for broadband internet via research on Malaysia’s digital economy.
    • Established a new asset class for the world with the Green Sukuk, pioneered in Malaysia by Bank Negara Malaysia (BNM) and the Securities Commission with the support of the World Bank Group.
    • Reduced the costs of doing business in Malaysia, through training and advice provided to the PEMUDAH special task force to facilitate business.
    • Modernized Malaysia’s indirect tax framework with the extension of the Sales and Services Tax to include digital transitions, through advice provided to the Ministry of Finance.
    • Helped make the direct tax framework more progressive with the introduction of a new top rate of personal income tax, through advice provided to the Ministry of Finance.
    • Improved the focus of investment policy with the development of a set of national investment aspirations and a new focus on quality investments, in partnership with Bank Negara Malaysia.
    • Contributed to the development of the 12th Malaysia Plan, in cooperation with the Economic Planning Unit, Prime Minister’s Office.

    Helping 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

    Acting as a global and regional convener for Malaysia on economic and development topics:

    • Convened 50 government officials from eight Southeast Asian countries for a technical workshop for the Planning Community of Practice on operationalizing national economic 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 policymakers to deploy Waqf model to address developmental challenges and discuss Islamic Finance solutions to support the United Nations’ Sustainable Development Goals (SDGs).



PHOTO GALLERY

More Photos Arrow

In Depth

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.

Connecting Malaysia’s Islamic and Sustainable Finance to the World

The Hub partners with its Malaysian counterparts in cementing the country’s global leadership in Islamic finance.

Youth Tackles Inequality for Inclusive Growth

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

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
malaysia@worldbank.org
Washington DC
1818 H Street NW, Washington, DC 20433
Tel: +1-202-473-4709
eastasiapacific@worldbank.org