This article first appeared in Forum, The Edge Malaysia Weekly on May 29, 2023 - June 4, 2023

The term “middle-income trap”, as it applies to Malaysia, was given prominence in 2010 during the tabling of the New Economic Model and the rollout of the Economic Transformation Programme (ETP) under the Najib administration. The purpose of the ETP, according to its 2010 report, was to “lift Malaysia’s gross national income (GNI) per capita from RM23,700 in 2009 to more than RM48,000 in 2020, propelling the nation to the level of other high-income nations”.

I had argued, back in 2012, that we would have reached the GNI per capita target regardless of the existence of the ETP. In 2019, our GNI per capita had risen to RM45,298 and would certainly have crossed the RM48,000 threshold in 2020 if not for the Covid-19 pandemic.

We finally crossed this threshold in 2022 by reaching RM53,043 GNI per capita on the back of a higher-than-expected economic growth of 8.7% post-pandemic. In many parts of the Klang Valley, Penang and Johor Baru, we crossed this income threshold before the pandemic.

The important takeaway here is that we were never in a middle-income trap. What we were and continue to be trapped in is a “middle-income mindset”.

The “middle-income mindset” fails to see the need for, and prioritise, other characteristics of a high-income nation that are not captured by GNI figures. These include delivering a better quality of life and work, evolving a civic-minded society, reducing urban and regional inequalities, and the creation of higher quality private and public institutions.

This mindset is created and perpetuated by several factors — poor institutional leadership with a lack of vision, working in silos and protecting one’s own turf within and between institutions, and being too comfortable with the status quo, just to name a few.

And the manifestation of this kind of mindset can be seen all around us — non-responsive customer service, poorly maintained public and private infrastructure, pollution in the air and in our streams, rivers and lakes. The non-physical manifestations probably cause more harm in the longer run, such as the lack of long-term planning, institutionalised corrupt practices and poor management of human capital.

I am convinced that we can break out of this “middle-income mindset” because I have seen concrete examples of success. For example, earlier this year, the Department of Immigration introduced an online option to renew one’s passport, which meant that the effective waiting time to pick up the passport was reduced to an hour! If the digitalisation of government services could be extended to all government ministries, the time saved by ordinary Malaysians could be put to much better use, including enjoying a higher quality of life with our families and friends!

I have also seen examples of visionary leadership in the private sector that have been institutionalised in the DNA of a company. Penang-based ViTrox Corp Bhd, a leading vision inspection solutions provider in the electrical and electronics (E&E) sector, has invested its own resources to create ViTrox Academy to provide industry-centric education programmes and training to enhance human capital in the sector.

It is also one of the three E&E companies behind the Penang Automation Cluster, which aims to improve the technical capabilities of small and medium enterprises or SMEs that are part of the local E&E supply chain. The philosophy of contributing back to the community and the environment can be easily felt in its state-of-the-art campus in Batu Kawan, where space is set aside to grow organic vegetables and where free vegetarian lunches are provided daily (but you must wash your own plate and cutlery!).

There are reasons to be cautiously optimistic that such progressive thinking and action will be more evident under the Madani government led by Prime Minister Datuk Seri Anwar Ibrahim. The conceptualisation of Madani itself focuses on aspirations beyond purely monetary outcomes and includes values such as sustainability, innovation, respect, trust and compassion. 

Of course, the operationalisation of these values into concrete actions and policies that will facilitate the breaking out of this “middle-income mindset” will be key.

We already see such examples in practice in the recent announcement by Economy Minister Rafizi Ramli and Natural Resources, Environment and Climate Change Minister Nik Nazmi Nik Ahmad on ambitious plans to liberalise and grow the renewable energy (RE) sector in the country, including lifting an export ban on the sale of RE overseas. This is a positive concrete move away from the zero-sum thinking that exports of RE will be detrimental to supply of RE domestically, whereas in reality, the extra profits generated from RE exports can be ploughed back into the domestic RE generation ecosystem. 

The decision to move towards an open data platform by the Department of Statistics Malaysia (DoSM) has already yielded fruit in the form of a phone application by KitaJaga which, by tapping into DoSM’s platform, allows users to check grocery prices around the country.

I am in firm agreement with Deputy Investment, Trade and Industry Minister Liew Chin Tong that Malaysia can experience a second take-off in terms of the country’s development for the next 10 years in a comprehensive and holistic manner that delivers not only high-paying jobs, but also a more sustainable and liveable country. This is provided we can escape the clutches of the “middle-income mindset”.

Professor Dr Ong Kian Ming is the programme director for Philosophy, Politics and Economics (PPE) at Taylor’s University. He can be reached at [email protected].

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