After 54 years independence, Malaysia still sufferring in the middle income trap

By Dr Chen Man Hin, DAP life advisor

There is not much to celebrate after 54 years of independence, as Malaysia is still caught in a middle income trap, where 60% of our households are living below the poverty line of RM3000 per month.

In the past few weeks, PM Najib made some moves calculated to impress the people that the economy is resurging and well on the way to full recovery.

The first plan was to announce that FDIs (foreign direct investments) inflow was spectacular. He admitted that the FDI dropped to a low of US$1.5 billion in 2009 but in 2010 it had rebounded by over 500 per cent to US$9 billion. It looks impressive, but the increase was large only because it rebounded from a very low baseline.

However, the US$9 billion was minuscule compared to a FDI of US$38 billion in 2010 for Singapore, US$15 billion for Indonesia and US$105 billion for China.

It is quite clear that Malaysia has a long way to go to convince that there are liberal incentives for foreign investors to park their money in Malaysia.


Najib next strategy to give a better impression of his government was to announce that Malaysia had its Global Competitiveness Ranking rise to 21 in 2011 – 2012 from 26 the year before 2010 – 2011. this is nothing new, as Malaysia’s ranking had been hovering between 21 to 26 during the past four years.

However, looking at the performance rankings of Malaysia it is indeed surprising that better performing economies like New Zealand, South Korea, China could be lower in competitiveness.

Besides Malaysia’s corruption perceptions index stands at 56 way below the standing of S. Korea, or New Zealand. Corruption is so rife in this country that is hurting every aspect of the economy, big or small.


This is the program designed to stimulate the economy with super-gigantic projects in a desperate effort to stimulate the economy after the havoc wrought by the New Economic Policy. Najib tried to introduce a liberal strategy to the ETP by removing the bumi quota on all new investments whether foreign or local. This was gunned down by PERKASA which insisted that the bumi equity quota stay.

Hampered by the bumi quota ruling, foreign investments are still wary about investing in Malaysia. Hence the much lower FDIs to Malaysia compared to other countries like Singapore, Hong Kong and Indonesia. Najib is pouring hundreds of billions to stimulate the economy, in the same way that Tun Mahathir did during his tenure as Prime Minister (1982 – 2002).

All to no avail, as World Bank tabulated a chart which showed that Malaysia’s economy slowed down considerably after 1971 when the NEP was implemented, while other economics like Singapore, Hong Kong, Taiwan and S. Korea boomed.


After 1971, the Tiger economies of Singapore, Hong Kong, Taiwan and S. Korea zoomed upwards while Malaysia’s PCI stagnated. the following figures are explanatory.

MALAYSIA 8,519 47
SINGAPORE 43,324 12
HONG KONG 31,877 19
SOUTH KOREA 20,757 26
CHINA PR 4,393 74
JAPAN 43,161 13

At independence, Malaya had the second highest per capita income, after Japan. These are frank stark figures from World Bank. It depicts just how sorry the Malaysian economy has lagged behind other countries in Asia. Malaysia’s economy was dragged down by the NEP.

Secret of the success of the tiger economies of Singapore, Hong Kong, S. Korea and Taiwan. All these countries practise a market economy and they have a global outlook.

The solution for Malaysia is to be liberal and to be global. If Malaysia keeps the NEP and refuses to embrace globalism, then Malaysia will forever stay as a middle income economy. Most of Malaysian households will stay poor.

  1. #1 by asia on Thursday, 15 September 2011 - 12:13 pm

    Because it administrated by people who born as servant and follow rules

    Hardly allow to innovation

    Attend the _ecc_ reborn again and again

  2. #2 by yhsiew on Thursday, 15 September 2011 - 1:38 pm

    If Najib does not want to abolish the bumi quota on all new investments, he should at least do some “experiments” to test investors’ response by, say, temporarily reducing the bumi quota to 27% for a period of 2 years. If the response from investors is good and the national economy rallies, he can then progressively reduce the bumi quota from 27% to 25% to 22% and so on. It is better that he does some “experiments” on the NEP than not doing anything with it.

  3. #3 by dagen on Thursday, 15 September 2011 - 3:11 pm

    Look at USA. It was unthinkable, say, 20yrs ago that one day the country would see a sizeable number of its people living below poverty line. And we are seeing that being played out today. Likewise, it was unthinkable that umno could one day lose its grip on the country. You see, nothing is forever. Events do not stay stagnant. Ever. Soviet Union broke up. Berlin wall came down. East – West germany unified. Longtime greedy dictators the world over got booted out. New scenario is being created all the time. What we see today in malaysia is a fast weakening and rapidly languishing umno. What we see today is a umno president who does not seem to know what is going on or what to do. What we see today is an obsolete umno. It time for umno supporters to abandon the party. Instead, it is now ripe for umno supporters to embrace that change and be a part of it. More importantly, do not get left behind by the change. Umnoputras who are too deeply ingrained with the greedy umno ideology need not bother. They are not welcomed.

  4. #4 by Loh on Thursday, 15 September 2011 - 3:37 pm

    ///The solution for Malaysia is to be liberal and to be global. If Malaysia keeps the NEP and refuses to embrace globalism, then Malaysia will forever stay as a middle income economy. Most of Malaysian households will stay poor.///–Dr Chen

    UMNO leaders are not bothered whether Malaysian households remain poor so long as NEP ensures that they return to power. With successful Petronas, they were as lucky as Libya having oil windfall to spend, and to prepare themselves to be permanent residents of any country of their choice. And more lucky than other oil producing countries, the oil and gas reserve within Malaysia territory are not attractive to super powers to intervene. So Malaysia government can remain corrupted and they will not meet the fate of the countries in the Middle East.

    Najib is seen to be retracting from the seen as impending GE 13, for lack of confidence. He could be waiting for the situation, if he did not create it, to bypass GE 13 and to rule like his father. Was it a coincidence that a Prof. Kankong hollow inside) declaring that Malaya had never been colonized? It follows that non-Malays had no role in securing Malaya’s independence and hence no right to citizenship. Consequently unless UMNO remains in power, uniformed personnel could be persuaded to decide who should rule.

  5. #5 by Jeffrey on Thursday, 15 September 2011 - 5:01 pm

    Talking about Malaysian economy lagging behind, the others – Singapore, Hong Kong, S. Korea and Taiwan – do not have a problem of Majority versus Minority competition as here where ruling elites could politically leverage under the pretext of socio-economic engineering (NEP). So its not so much of market economy and global outlook, which we too embrace like others, except that in our case our priority/policy focus, is, and has always remained, as what Mahathir said, active social/economic restructuring to prop one’s ethnic group to “catch” up or be better than other groups in terms of wealth distribution. Of course in that process, many investors (both foreign & domestic) other than those politically connected are spooked, especially to interface with a civil service that puts NEP culture as an entitlement above works ethics. And brains that underpin progress are also spooked and leave for greener pastures.

  6. #6 by Jeffrey on Thursday, 15 September 2011 - 5:03 pm

    How can one compare chop stick countries like Singapore, Hong Kong, S. Korea and Taiwan whose primary goal is economic growth with us whose principal policy goal is social/economic restructuring for political leverage? Its like a race of 5, 4 are running with focus and nothing in mind but just to win a cash prize whilst the remaining one does not prioratise the cash prize but whilst running, get distracted by other objectives like for eg how his style of running look to his other team mates, especially ladies, on the side lines cheering. Of course the last one would lag, after the initial spurt, he jogs (distracted) than sustain his race because his focus is different. Economic development is like a marathon and all policies geared toward it must focus on growth sustainability and continuity than distracted by political preservation goals. Comparing nations of different racial composition & goals/priorities is like comparing oranges and apples.

  7. #7 by boh-liao on Thursday, 15 September 2011 - 5:55 pm

    M’sia, a lost paradise 4 most inhabitants but a truly jiak-beh-liao paradise 4 a handful of UmnoB/BNputras n their cronies, jiak jiak um-bo, jiak jiak jiak ……..

  8. #8 by dagen on Thursday, 15 September 2011 - 6:32 pm

    In the race of 5 jeff mentioned, I would add this. I am no expert on running. But I can say this: It takes both legs (this is obvious), and both arms (the arms swinging motion is needed to propel one forward) as well as good stamina to run fast. So winning means working all these five elements together and well.

    Here in malaysia not only is umno not concerned about the prize. Umno actually sets the running standard based on the weakest of those five elements. Instead of strenghtening that weak element and bringing it up to level with the rest, the rest is conditioned to accept and keep pace with that one weak element. Not doing so means anti-umno, anti-islam jenis islam, anti-agung, an act of terrorism and communism and ungratefulness etc etc.

    Of course, luckily and sensibly, we did not comply. Otherwise malaysia will be on par with zimbabwe today!

  9. #9 by drngsc on Thursday, 15 September 2011 - 8:00 pm

    We can’t get out of any trap with this bunch of BN / UMNO rouges and crooks in power. They are prepared to see their own kind use clutches for evermore. They have no pride, no work culture. Always waiting for handouts. How to improve? How to compete?

    We must change the tenant at Putrajaya. GE 13 is our best chance, Failure is not an option. Let us all work very very hard, for the future of Maalaysia.

  10. #10 by Jeffrey on Friday, 16 September 2011 - 2:21 am

    We can understand “vaguely” this nebulous term “middle income trap”; with some common sense also how the NEP causes the country’s economic performance to be laggard than what it could otherwise do without it. But to try prove /justify it by statistics, this a bit mind boggling (at least to me).For eg, 1st sentence, “60% of our households are living below the poverty line of RM3000 per month”. What does this poverty line prove, we’re poor nation? In first place this poverty line (RM3000) was concocted by UMNO’s FT chief Raja Nong Chik to depict the Urban big cities “poor”-not national poor- based on some kind of KL cost-of-basic needs computation taking into consideration spiraling (speculative) cost of house/mortgage payments, lifestyle, transportation (households having at least 2 cars) etc where the poor is richer the urban rich in Uganda Kenya etc…

  11. #11 by Jeffrey on Friday, 16 September 2011 - 2:31 am

    They spin statistics like that for their own political agenda either to ‘sendiri siok’ that our poverty line is RM3000 high because our expectations/standard of living of living (at least in Cities) also very high, albeit under pressure due to inflationary/ cost of living hikes. Also if they want “give money” to get votes, then moving poverty line benchmark up to RM3000/60% of poor urbanites provide pretext to some “dole out” (gestures) to show a “caring” govt sympathetic to economic pressures. Its amusing one side uses poverty line to score political points whilst opposite side uses same point to attack! Stats from international agencies also have “hard to understand” methodology to compute, compare competiveness – let alone our Raja Nong Chik’s poverty line statistics. For eg Dr Chen acknowledges, “However, looking at the performance rankings of Malaysia it is indeed surprising that better performing economies like New Zealand, South Korea, China could be lower in competitiveness”. There you are – reliability of the statistics to bolster arguments!

  12. #12 by Jeffrey on Friday, 16 September 2011 - 3:02 am

    I am not saying statistics per se are not useful but their reliability for comparison to advance an argument -for or against- could be a minefield due to diferent approaches to the measurement methodology or criteria adopted.

  13. #13 by monsterball on Friday, 16 September 2011 - 5:37 am

    It is heading towards a country with the richest and poorest…… middle class….the clear sign of a country with the most corrupted government you can find on earth.

  14. #14 by bruno on Friday, 16 September 2011 - 6:02 am

    In the mid seventies forward Malaysia was considered among one of the rising tigers in our region.We were among the top few countries attracting FDI,and our parlimentary and political systems were condidered the most stable among our neighbours.Hotspot neighbours Indonesia,Thailand,Philippines and even Vietnam have overtaken us in FDI’s today.Because of massive corruption,racial,religious and political indiscrimination,the Umno and its cronies member coalition have taken Malaysia from once a rising fierce tiger to a beaten tiger with it’s tail between it’s legs.

  15. #15 by HJ Angus on Friday, 16 September 2011 - 9:16 am

    Malaysia is still suffering from lack of FREEDOM even after 54 years of independence.
    I wonder if we are going to be fooled one more time?

  16. #16 by k1980 on Friday, 16 September 2011 - 11:39 am

    Open letter to Profmamak Keling—

    Millions of malaysians have been duped into singing “MALAYSIA BERJAYA” during our schooldays. According to the lyrics,
    Dari Perlis sampailah ke Sabah
    Kita sudah merdeka which translates as “We have achieved independence”. But the great Professor now asserts that we have never be colonised, so why were we led to sing that We have achieved independence?

    Malaysia kita sudah berjaya
    Aman makmur bahagia
    Malaysia abadi selamanya
    Berjaya dan berjaya

    Berbagai kaum sudah berikrar
    Menuju cita-cita
    Satu bangsa satu negara
    Malaysia berjaya

    Dari Perlis sampailah ke Sabah
    Kita sudah merdeka
    Negara makmur rakyat mewah
    Kita sudah berjaya

    Dengan semboyan kita berjaya
    Menuju di angkasa
    Satu bangsa satu negara
    Malaysia berjaya

    The above lyrics should be amended to Dari Perlis sampailah ke Sabah
    Kita tok pernoh dijajoh!

    How about dat, profmamaak keling?

  17. #17 by Jeffrey on Friday, 16 September 2011 - 11:51 am

    Are we going to be fooled one more time? Chances are – yes. Jib’s admin is focusing on perception/image. It spends millions in PR consultancy. What it wants to do is to be “seen” (up to the time of GE) sensitive to people’s expectations/demands and willingness to implement for eg Bersih’ reforms, repeal of ISA (the very acronym itself invokes negative sentiments) and worry about the details of what could be done, and what could not, what may be conceded by the govt and what may not, in terms of details of these proposed reforms AFTER the GE (when they would have won riding on such rekindled public support based onm perception before fact). To be sure this kind of reforms -by repeal new renactment etc- will actually take long time, way way after the time expedient to dissolve Parliament for GE. Thats because there’s too much of distrusts/suspicion across political divide. Every word (eg definition of terrorism) and motive will be challenged by Opposition accros the aisle. Within UMNO/BN/Govt itself also there’s also neither unity nor consensus, for eg they’d challenge why take definition of terrorist from West which is bias against Islamic freedom fighters etc. The Man of the moment actually anticipate all this. He doesn’t care if consensus for reforms can be reached or they take forever. All he wants is to be seen doing something now before the GE using that perception to boost popularity for GE. After that he doesn’t care.

  18. #18 by boh-liao on Friday, 16 September 2011 - 12:14 pm

    After 54 years of continued rule by Umno n UmnoB, d nation is in a mess n stuck in mud
    Umno/UmnoB Malays hv been given many chances 2 govern, but sorry lah, USELESS 1
    TIME 2 change or d nation b condemned 2 sink deeper: CUKUP lah, UBAH n ABU

  19. #19 by waterfrontcoolie on Friday, 16 September 2011 - 9:27 pm

    The comparison with those “Tigers’ is relevant, as we were on par then. The misrule is without doubt, otherwise how would Malaysia has fallen so far behind against those Tigers? To have plenty of Cash to spend, we can always follow Zimbabwe by printing karge notes to make us feel good. Singapore’s dollar was ‘smaller’ than ours, now it is 250% higher; in spite of the fact that Malaysia has all the natural resources but she has none; maybe having black-gold is a curse to any nation; except to the whitemen! It has been proven beyond doubt that nations without too much resources could create more competitive people in a more condusive environment! Well, we have repeated such story so many times, I guess it serves no purpose to repeat it; except changing the leaders!

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