Keys to Progress '3-6': Malaysia - Self-reliance is the key

Mohamed Ibrahim El-Desouky
Friday 15 Mar 2024

Four decades ago, Malaysia was one of the poorest countries in the world. It was plagued by social and ethnic unrest, stemming from appalling income disparities, unfair wealth distribution, and deprivation of basic services such as quality education, healthcare, and food.


In addition, there was a lack of political and social stability.

This dire situation left Malaysia with two choices for its future: either sink further into the quagmire of underdevelopment and economic deterioration or dust itself off and roll up its sleeves to escape and join the ranks of progress and modernization, taking advantage of its strengths and assets to drive it forward.

Malaysia chose the latter. It entered the difficult challenge and made significant and remarkable strides over the past forty years. It has secured a comfortable seat on the train of advanced industrialized countries, having transformed itself from an agricultural to an industrial country where investors are eager to pump their abundant funds.

Looking at the data and statistics for 2023, we find that Malaysia's exports - with a population of 33 million - reached $110.9 billion, an increase of about 13.4% from 2022. Its total GDP reached $358.7 billion, making it the third-largest economy in Asia by GDP and the 33rd-largest in the world. In addition, $18.9 billion in foreign direct investment has been pumped in since the beginning of this year, thanks to the attractive investment environment, with the majority concentrated in the manufacturing and services sectors.

Space does not permit a detailed review of the multiple economic and investment strengths of Malaysia, which demonstrate how it has become a leading industrial country with a rich and distinctive development experience. However, we will focus on the key that quickly brought it to this position, which is, in short, self-reliance and the leadership of former Prime Minister Mahathir Mohamad, who held the position twice between 1981-2003 and 2018-2020.

When Mahathir took office, Malaysia was a hostage and deeply immersed in violent and bloody conflicts between the three ethnic groups that make up its social fabric: the Malays, Chinese, and Indians. This was due to the deterioration of services, income disparities, and each party accusing the other of monopolizing wealth and depriving others of it. In addition, the economy was stagnant and lacked a practical plan to revive it, and it relied entirely on agriculture.

Mahathir's thinking led him to believe that there was no way to restore social harmony except by making a major change in the economic situation by turning Malaysia into an industrial country, attracting foreign investment, and stimulating domestic investment and consumption.

His policy also focused on improving the quality of life and reducing the gaps between segments of society and the congestion they cause, the consequences of which the country bears and cast a heavy dark shadow on its security and stability.

Mahathir preferred that Malaysians rely on themselves as much as possible throughout the stages of economic reform and revival. He enacted policies that combined the capitalist and socialist systems and worked hard to enable the Malaysian economy to absorb sudden shocks and overcome them with limited losses that could be treated without leaving deep wounds that take a long time to heal. Perhaps the most serious of these shocks was the Asian financial crisis that erupted in 1997 as a result of currency speculation in global stock exchanges.

At that time, Mahathir followed a path contrary to the treatment plan prescribed by the International Monetary Fund at the time and accepted by the severely affected parties, including Japan, South Korea, and Thailand. He rejected it and the worst thing he did was to remove the Malaysian currency "ringgit" from the basket of currencies for several months until it regained its health and cohesion. Some analysts described what he did as crazy, but he did not back down or waver in his full confidence in the ability of the national economy to overcome it, which was later achieved.

The lower classes of the poor and unemployed were the biggest beneficiaries of the economic development returns. Mahathir's government wisely, tactfully, and skillfully addressed the issues of poverty, unemployment, and corruption, and developed the infrastructure in an amazing way that benefited the economy to the farthest extent we can imagine.

In parallel with the industrialization that was the mainstay of Malaysian economic activity, Mahathir paid great and comprehensive attention to two things:

First, the quality of education, whose budget currently stands at $12.9 billion to serve more than five million students at different educational levels. He focused on vocational education, so it is not surprising to learn that the illiteracy rate in Malaysia is 2.7%. Currently, Kuala Lumpur and other cities are major destinations for those seeking high-quality university education, both from within Asia.

Second, giving the private sector-wide spaces to operate without obstacles, frustrations, and unproductive bureaucracy. This allowed it to capture a significant portion of economic activity. If we look at the Malaysian economic development plan announced in July 2023, which has a ten-year implementation period aimed at building a resilient, competitive, and sustainable economy, we will find that the private sector will invest $27.7 billion under the Industry 2030 clause. This clearly shows the size of its role and its connection to the national economy, which is shedding the aftereffects of the COVID-19 pandemic.

The previous plan was not limited to this aspect, but it also presented visions for what the Malaysian economy will be like in the coming decade. It set a medium-term target for economic growth of between 5.5% and 6% and aimed to create a suitable climate to attract foreign direct investment, especially in the high value-added manufacturing sector, encourage the creation of new projects, and promote domestic investment, fair distribution of wealth, and raise the average citizen's income ($2,200). 

It also aimed to support the health sector, reduce the fiscal deficit from 5% of GDP to 4.3% this year, and ensure that low-income families benefit from the provided support, especially in energy, to achieve the principle of social justice. Other goals included reforming the tax system and upgrading the skilled workforce, which has become highly valuable in the labour market.

In addition to maximizing the benefits of Malaysian tourist destinations, which attracted over 17 million tourists last year, and brought about $7 billion to the state treasury in 2023, the government of Anwar Ibrahim seeks to attract 19.1 million tourists in the coming period.

Therefore, the Malaysian recipe, so to speak, emphasizes the value and importance of the following:

First: Self-reliance and self-confidence.Second: Industry is the guaranteed lifeline for the economy.Third: Investment in education.Fourth: Improving the quality of life provides society with a strong shield against unrest and friction between its segments, and transforms citizens into real partners in the process of development and modernization.

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