Malaysia high income perhaps, but developed?

On 28 February 1991, then Prime Minister of Malaysia, Dr Mahathir Mohamad made

a bold announcement as part of his speech to the Malaysian Business Council that
Malaysia aspired to be a fully developed country by 2020.
By the year 2020, Malaysia is to be a united nation, with a confident
society, infused by strong moral and ethical values, living in a society that
is democratic, liberal, caring, economically just and equitable, progressive
and prosperous, and in full possession of an economy that is competitive,
dynamic and resilient.i
Dr. Mahathir proposed that Malaysia would become a developed country if it were
able to overcome the following nine challenges:
The first of these is the challenge of establishing a united
Malaysian nation with a sense of common and shared destiny. This must
be a nation at peace with itself, territorially, and ethnically integrated,
living in harmony and full and fair partnership, made up of one Bangsa
Malaysia with political loyalty and dedication to the nation.
The second is the challenge of creating a psychologically liberated,
secure and developed Malaysian society with faith and confidence in itself,
justifiably proud of what it is, of what it has accomplished, robust enough
to face all manner of adversity. This Malaysian Society must be
distinguished by the pursuit of excellence, fully aware of all its potentials,
psychologically subservient to none, and respect by the peoples of other
nations.
The third challenge we have always faced is that of fostering and
developing a mature democratic society practising a form of mature
consensual, community-oriented Malaysian democracy that can be a
model for many countries.
The fourth is the challenge of establishing a fully moral and ethical
society, whose citizens are strong in religious and spiritual values and
imbued with the highest of ethical standards.
The fifth challenge that we have always faces is the challenge of
establishing a mature, liberal and tolerant society in which Malaysians of
all colours and creeds are free to practice and profess their customs,
cultures and religious beliefs and yet feeling that they belong to one
nation.
The sixth is the challenge of establishing a scientific and
progressive society, a society that is innovative and forward looking, one
that is not only a consumer of technology but also a contributor to the
scientific and technological civilisation of the future.

The seventh challenge is the challenge of establishing a fully caring

society will come before self in which the welfare of the people will revolve
not around the state or the individual but around a strong and resilient
family.
The eighth is the challenge of ensuring an economically-just society.
This is a society in which there is a fair and equitable distribution of the
wealth of the nation, in which there is full partnership in economic
progress. Such as society cannot be in place so long as there is the
identification of race with economic function, and the identification of
economic backwardness with race.
The ninth challenge is the challenge of establishing a prosperous
society, with an economy that is fully competitive, dynamic, robust and
resilient.ii
The concept of development what it means to develop, to be developing or
developed is a contested idea. iii To analyse the nine challenges outlined in Vision
2020 and measure its progress will certainly be difficult. This article has the less
daunting task of evaluating Malaysias progress towards Vision 2020 purely from
conventional development economics perspective.
Indicators developed by the International Monetary Fund (IMF), the United Nations
Development Program (UNDP), and the World Bank (WB) are often used to
measure development. The three approaches are summarised in the table above.
Concept
Term for
developed
countries
Term for
developing
countries
Development
threshold

IMF
Advanced
countries

UNDP
Developed
countries

WB
High income
countries

Emerging and
developing
countries
Not explicit

Developing
counties

Low and middle

income countries

75 percentile in the
HDI distribution

Type of
development
threshold
Share of
developed
countries in 1990
Share of
developed
countries in 2010
Subcategories of
developing
countries

Most likely
absolute

Relative

US$6,000 GNI per

capita in 1987prices
Absolute

13 percent

25 percent

16 percent

17 percent

25 percent

26 percent

(1) Low-income
developing
countries; and

(1) Low human

development
countries;

(1) Low income

countries
(2) Lower middle-

Concept

IMF
(2) Emerging and
other developing
countries

UNDP
(2) Medium human
development
countries; and
(3) High human
development
countries
(4) Very high
human
development

WB
income countries
(3) Upper middleincome countries

Source: Adapted from Nielsen (2011)

In measuring income, the WB has made an important contribution towards
measuring global and national poverty especially since the late 1990s. Humanistic
ideasiv of standards of living have influenced these indicators developed by the WB,
which has also had an impact on economic indicators developed by the IMF and
economic and social indicators developed by the UNDP. For example, calculations of
absolute poverty lines is based on incomes that afford the individual (or the
household) an acceptable minimum economic standard that could include a persons
ability to consume sufficient nutrients to avoid being malnourished and to live in a
dwelling with certain basic characteristics (e.g. access to potable water, lighting, size,
etc.). Thus one way to define developed countries is that they have a negligible
number of people living below the absolute poverty line. v Furthermore, this global
poverty line (with country specific poverty lines) is then followed by different levels of
progression in country level incomes towards a high-income economy. The WB
currently classifies countries as low-income; lower middle-income; upper middleincome and high income. As of 1 July 2016, low income economies are defined as
those with a GNI per capita, calculated using the World Bank Atlas method, of
US$1,025 or less in 2015; lower middle-income economies are those with a GNI per
capita between US$1,026 and $4,035; upper middle-income economies are those
with a GNI per capita between US$4,036 and US$12,475; high-income economies
are those with a GNI per capita of US$12,476 or more.
The UNDPs country classification system is built around the Human Development
Index (HDI). To capture the multifaceted nature of development, the HDI is a
composite index of three indices measuring countries achievements in longevity,
education and income. From 2010 onwards, countries in the top quartile in the HDI
distribution are developed countries while those in the bottom three quartiles are
developing countries.
The IMF in turn uses a simple classification of advanced countries and emerging and
developing countries with no strict criteria for the basis of classification.
How does Malaysia measure up?
The Malaysian government has selected the World Banks method to benchmark its
aspirations to become a high income economy as targeted by the Najib
administration. Using this method, the threshold for high-income as set by the WB
would be US$14,700 in 2020. The 11th Malaysia Plan (11MP) projects that Malaysias
income in the year 2020 will be US$15,000 thereby achieving the high income

economy status. Dr. Lee Hwok Aun had pointed out that the Malaysian government
is able to achieve this high-income target due to the revisions in the base year made
in the 11MP.vi That Malaysias absolute poverty rates are already below 2 percent
further strengthens this claim. Should Malaysia achieve high income status
according to the WB classification, it is likely to also achieve advanced country status
in the IMF classification.
Malaysia HDI value for 2014 is 0.779 which puts the country in the high human
development category positioning it at no. 62 out of 188 countries and territories.
Between 1980 and 2014, Malaysias HDI value increased from 0.569 to 0.779, an
increase of 37.0 percent.vii However, as Malaysia is not in the top quartile of the HDI
distribution. However, countries such as Brunei (no. 31), Saudi Arabia (no. 39),
Bahrain (no. 45) and Kuwait (no. 48) are categorised as countries with very high
human development index.
Hence, from an economic and economic related social indicator perspective,
Malaysia appears to be heading towards high income level. This begs the question
--- what does development actually mean? Articles discussing the nine challenges
the qualitative dimensions of development may provide a more comprehensive
view of Malaysias progress towards Vision 2020.

Greg Lopez is a lecturer at Murdoch University Executive Education Centre,

Murdoch University, Perth, Australia.

GDP (current US$) 2015

2E+13
2E+13
2E+13
1E+13
1E+13
1E+13
8E+12
6E+12
4E+12
2E+12
1E+10

Source: World Development Indicators (2016)

GDP per capita (current US$), 2015

120000.0
101450.0
100000.0

80000.0

60000.0

52888.7

40000.0

20000.0
9766.2
0.0

Source: World Development Indicators (2016)

GNI per capita, Atlas method (current US$), 2015

100000
90000
80000
70000
60000
50000
40000
30000
20000
10000
0

Source: World Development Indicators (2016)

i Mohamad, Mahathir. Malaysia: the way forward, paper presented at the inaugural meeting
of the Malaysia Business Council, Kuala Lumpur, 28 February, 1991.

ii Op. cit.
iii As example, Sen argues that development expands freedom by removing
unfreedoms e.g. hunger, tyranny, etc. that leave people with little choice and
opportunity (Sen, Amartya. Development as freedom. Oxford Paperbacks, 2001) while
Gudynas provides a diverse range of views articulated by various Latin Americans on
development (Gudynas, Eduardo. "Debates on development and its alternatives in
Latin America: a brief heterodox guide." Beyond Development (2013):15).
iv Influenced primarily by the works of Sen (2001).
v Nielsen, Lynge. "Classifications of countries based on their level of development:
How it is done and how it could be done." IMF Working Papers (2011): 1-45.
vi Refer to Dr Lees articles and the Economic Planning Units response: Lee, H.A.
2015a, The11 MP is resting on flawed foundations Lee Hwok Aun, 23 May 2015, The
Malay Mail Online; EPU 2015, Response to Lee Hwok Auns The 11MP is resting on
flawed foundations Economic Planning Unit, 25 may 2015, The Malay Mail Online;
and Lee, H.A. 2015b, Rejoinder to the EPU Dr Lee Hwok Aun, 03 June 2015, The
Malay Mail Online.
vii UNDP, 2015, Human Development Report 2015 Malaysia, UNDP.
http://hdr.undp.org/sites/all/themes/hdr_theme/country-notes/MYS.pdf