MALAYSIA’s’s progress towards achieving high-income status has been accompanied by rising income inequality in recent years. Amid unprecedented economic pain caused by the pandemic, should we continue to obsess over high income?

       In 2020, Malaysia’s gross national income per capita came in at US$10,580 (RM44,647), just US$1,956 (RM8,254) shy of the World Bank’s high-income threshold of US$12,536 (RM52,901). The World Bank is optimistic that we can make the cut within the next few years.

       While achieving high-income status is certainly not a bad thing, the important question is not how fast we can achieve it but what it will mean for the rakyat.

       Will it mean, for example, that there will be more decent jobs with higher incomes? Will it mean that life will become less of a financial struggle?

       Based on the Department of Statistics Malaysia’s new Poverty Line Income (PLI) of RM2,208 per month, there were over 405,000 poor households in 2019.

       This, however, does not reflect Malaysia’s true poverty situation. The B40 group, which already numbered 2.91 million households in 2019, together with some in the M40 group, had already been struggling to put food on the table even before the pandemic hit.

       Malaysia needs an economic reset, and the Covid-19 pandemic has upped the ante and heightened the sense of urgency. We should, as they say, not let the crisis go to waste.

       Regarding immediate-term measures, the most important lesson is that we must act decisively to preserve economic and social capital.

       The more successful we are, the lesser the economic damage and the faster the recovery. If companies are merely put into “hibernation” without liquidation, workers not laid off and business relationships not cut off, recovery, when it happens, should be potentially stronger.

       Over the medium to long term, policymakers must reset the economy.

       They must re-strategise and develop new economic models to rekindle economic dynamism that can benefit the rakyat while elevating the country to high income.

       They must put in place policies to move the economy away from its broad reliance on low-cost production models.

       The economic reset will need to involve many policy reforms, for example, education and sustainable structural upgrades, that have to happen almost simultaneously.

       As it takes two hands to clap, the private sector must also recognise the need to move up the technology ladder and improve productivity.

       This is the only way to stay relevant and survive, especially in the post-pandemic world.

       They must acknowledge that their continued dependence on cheap low-skilled foreign labour has muted their desire to automate and innovate.

       Going forward, the National Recovery Plan (NRP) is of monumental significance. While it may be aimed at providing early solutions in the immediate term, it should also serve as a platform to support Malaysia’s economic reset over the medium to long term.

       Given the pandemic’s expected long-term damage, the NRP needs to be ambitious, bold, and imaginative.

       As the crisis could remain fluid for a few more years, it is important that the NRP should continue to evolve proactively in tandem with the uncertain situation.

       Quah Boon Huat is senior economist at Malaysian Rating Corp Bhd. The views expressed here are the writer’s own.