MALAYSIA was ranked 32nd in the 2022 International Institute for Management Development world competitiveness ranking (WCR), down seven positions from the 25th spot in 2021 – the lowest position it has held in five years.
It faced a downturn in factors such as business efficiency (down from 24th to 38th), government efficiency (down to 38th from 30th) and infrastructure (down to 37th from 30th).
On the bright side, economic factor gained the third spot from 15th. Some specific sub-factors performing poorly are the domestic economy (50th under economic performance), business legislation (50th under government efficiency), productivity and efficiency (46th under business efficiency) and education as well as health and environment (both at 44th position under the infrastructure factor).
The WCR assessed 63 global economies, where 333 competitiveness criteria were selected as a result of comprehensive research using economic literature, international, national, and regional sources.
The results also used feedback from the business community, government agencies and academics as well as survey responses of senior executives from 56 local partner institutes.
Regionally, compared with the European Union and the United States, Thailand dropped from 28th to 33rd, while Indonesia fell from 37th to 44th, driven by the slow reopening of the economy post-Covid-19. China dropped one spot to from 16th to 17th, partly reversing its strong upward trend in recent years. It signals a poor economic recovery exacerbated by its zero-Covid strategy despite some easing or economic assistance programmes deployed by the authorities. Just days after the stringent lockdown was lifted, some districts in Beijing and Shanghai were under lockdown again, disrupting the recovery progress.
Going forward, China needs to restructure its own economy from full-fledged manufacturing to high-value services and from investment concentrated to consumption. Nonetheless, China is still among the Top 5 countries in the Asia-Pacific (Apac) economies along with Singapore (first), Hong Kong (second), Taiwan (third) and Australia fifth).
Singapore reaches the third spot in the overall ranking, up from the fifth, enjoying its top position in the Apac region.
Its recovery stemmed from substantial improvements in the domestic economy (first from 15th), employment (third from 18th), public finance (sixth from 12th) and productivity and efficiency (ninth from 14th). However, it remained low in several sub-factors including management practices (14th), scientific infrastructure (16th), health and environment (25th) and basic infrastructure (43rd).
India’s stellar performance
Meanwhile, India has the quickest rise among the Asian economies, ranking from 43rd to 37th. The stellar performance saw a six-spot jump after four stagnant years.
This was primarily due to gains in its economic performance and business efficiency.
It is important to note that besides inflationary pressure affecting most economies, other global challenges affecting the competitiveness of countries include new variants of Covid-19.
Switzerland lost its global top spot, moving down to second, despite remaining strong in the overall ranking. It was upseated by Denmark, which has reached the top spot in the overall ranking. This marked the first time that Denmark is top in the ranking’s 34-year history. It is supported by better policies and effective implementation, clear focus and strong drive towards sustainability as well as its robust and agile corporate sector. Changing the system
All in all, the drop in Malaysia’s ranking re-emphasised the need to undergo a major reform in its institution and economic system to remain competitive globally. The ongoing structural issues that are dragging the economy such as the mismatch in labour demand and supply, high dependency on foreign workers, food security, technology adoption among micro, small and medium enterprises, unequa wealth distribution among the states, sustainable and green economy as well as inefficient policy governance.
The inability to address the issues will not only cause the country to trail behind others, but prevent it from realising its high-income nation aspiration by 2025.
Fresh perspective
The pandemic, although devastating, provides fresh perspectives for Malaysia on its structural challenges. It is in dire need of new policies to reset the economy and protect the well-being of the people, especially vulnerable households and businesses.
Investor confidence as well as the peoples’ confidence in government institution are essential to boost the economy. Nonetheless, we still see a bright spot for the rest of the year. Against the backdrop of rising global interest rate, high inflation, limited mobility due to zero-Covid policy in China, and geopolitical tensions, we expect the local economy to grow by 5.6% by the end of 2022 with a downside of 4.8%.
Driving growth
Growth will be driven by the reopening of economy, firm commodity prices, private consumption, strong export position especially coming from the electrical and electronics sector, and policy support from Budget 2022 and the 12th Malaysia Plan (12MP).
On a longer-term perspective, by successfully executing the 12MP, Malaysia’s income per capita can be enhanced and the inequalities between the central region of Peninsular Malaysia and Sabah and Sarawak can be narrowed. The country will undergo a much-needed structural transformation from the mainstream linear economy model, which has shown to be damaging for the environment, into a sustainable circular economy model. This will also allow it to weather climate change and eliminate environmental degradation and biodiversity loss.
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