QUALITY jobs and school system are among elements that should also count as “high-income status”, said economists as Malaysia works towards achieving the goal in three years.
According to the International Monetary Fund (IMF), the country could potentially achieve high-income nation status by 2022 based on its current growth trajectory.
The IMF’s assessment is earlier than that of the World Bank, which projects that Malaysia will become a high-income nation by 2024.
In its latest report, the World Bank classified countries earning US$12,375 (RM51,000) in gross national income per capita (GNI per head) as high income.
However, Dr Shankaran Nambiar of the Malaysian Institute of Economic Research (MIER) said Malaysia should also fulfil other conditions to reach the goal instead of purely meeting the income threshold.
“I think it’s possible (to reach high-income status), if we have a narrow definition of ‘high-income status’ that concentrates entirely on the quantum of income,” the senior research fellow told The Malaysian Insight.
“I’m not sure if that is what we want high-income status to mean.
“I think we should associate high-income status with a higher standard of living, more freedom, a wider and deeper basket of capabilities.”
Economists no longer see GNI as the sole yardstick to measure economic wellbeing, Shankaran said, adding that a high-income nation is one that also includes social wellbeing, such as freedom of choice, environmental security and meaningful employment.
“What would a multidimensional view of high income mean? Freedom of choice, access to real opportunities, enjoying a wide set of capabilities that include meaningful employment, environmental security and being able to do what we value doing.”
A high-income nation should also include an education system that nurtures creativity.
“When the notion of high-income status is broadened, it does not look like we are going to have a system of education that nurtures creativity in the next two years and that’s just one item on a possible agenda for ‘high-income status’.”
Blame the ringgit
According to the World Bank’s Atlas method of calculating GNI per capita, Malaysia reached US$10,460 in 2018.
Sunway University Business School head Dr Yeah Kim Leng said Malaysia would have crossed the high income threshold by 2020 if not for the depreciation of the ringgit.
Malaysia’s (GNI) per capita in local currency terms had been increasing at an average annual rate of 3.6% between 2011 and 2018.
However, the ringgit’s depreciation and higher inflation compared with advanced economies led to a decrease in the country’s GNI per capita between 2015 and 2017, Yeah said.
“However, (GNI per capita) rebounded by 6.6% in 2018, as the currency stabilised and inflation eased to 1%.
“If this growth rate is sustained over the next two years and the advanced economies grow more slowly, then there is a real possibility of the country attaining the high-income threshold within the next two to three years.”
If the ringgit, which is currently undervalued by 10%-15%, strengthens, then Malaysia’s GNI per capita will also see a boost when converted to dollars, Yeah added.
“The possible anaemic growth of the advanced economies is another tailwind pushing Malaysia past the high-income threshold earlier than 2024 as projected by the World Bank.”