THE government expects the economy to grow by 5.5% to 6.5% in 2022, up from last year’s modest expansion of 3.1%. MARC Ratings Bhd’s forecast of 5.7% thus comes in within the ballpark of the government forecast.

       If the expected growth surge in 2022 bears out, Malaysia’s gross domestic product (GDP) should rise to above RM1.46 trillion, which is higher than 2019’s RM1.42 trillion. The country’s growth recovery amid significant headwinds has been commendable thus far.

       Whether the recovery down the road is going to be V, U or long U-shaped, a lot will depend on how the pandemic situation pans out, as well as political noise that continues to distract institutions from their policy priorities.

       From a long-term perspective, however, based on current developments, we expect the economy to remain on its slowing growth trajectory after normalising.

       We must remember that Malaysia has been prematurely deindustrialising since the early 2000s.

       What this means is that the manufacturing sector has seen both its share of employment and output falling due to declining productivity and competitiveness. This basically reflects weakening opportunities for industrialisation despite Malaysia still being a developing economy.

       It is thus not surprising that Malaysia’s long-term growth momentum has been weakening.

       For example, it has seen its GDP growth pace fall from above the 9% level before the 1997 Asian Financial Crisis to around the 5% level in the period between the 2008 Global Financial Crisis and the current pandemic crisis.

       Partly as a result, once war-torn Vietnam has already overtaken Malaysia in terms of economic size.

       Malaysia needs an economic reset, which the 12th Malaysia Plan 2021-2025 (12MP) promises.

       We need strategies to accelerate structural economic transition, enhance productivity, and promote quality investment, all of which can be found in the 12MP.

       It is worth noting though that these strategies are not new strategies. The government has been talking about, for instance, accelerating technology adoption and innovation – one of the 12MP’s four catalytic policy enablers – for years.

       Nevertheless, if such strategies can be effectively implemented this time around, we have high hopes that they will propel Malaysia to a higher growth and development trajectory.

       We see technology adoption and innovation – especially crucial in the post-pandemic environment – dictating whether an economy can remain relevant in an increasingly competitive world.

       We see digital labour technologies, for example, determining whether an economy can successfully move up the value chain and strengthen its growth dynamics.

       We think the 12MP’s lofty ambitions are achievable only if Malaysia improves its track record of policy implementation.

       The government recognises this crucial factor and has set “improving governance and policy” as a priority area in the 12MP.

       Unfortunately, governance continues to worsen.

       In 2021, for example, Malaysia dropped five spots to number 62 out of 180 countries in terms of public sector corruption in Transparency International’s Corruption Perception Index.

       According to Transparency International Malaysia, Malaysia’s drop in ranking over two consecutive years can be attributed to stalled institutional reforms.

       It said that there has been a lack of political will, among others, to table important legislation such as the Political Financing Bill.

       In the final analysis, it is not too much to say that our collective futures will depend on whether the government can find the political will to kickstart the country’s stalled institutional reforms.

       If not, Malaysia had better prepare itself to be overtaken by yet another Asean country.

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