Malaysia Among the Ranks of the Developed

Malaysia Among the Ranks of the Developed

Looking 50 years into the future is like star gazing with a touch of science fiction, and is actually a dizzy activity in hazardous guessing. Half a century from now, Malaysia in all probability, will be a post-industrial society which will increasingly be knowledge-based, that is, we have attained, possibly by 2020, what is now considered the status of a developed country, joining the ranks of the high income group, and moved beyond that for another more than 30 years of industrial growth. The pace of economic growth for the 2021-2057 period could be in the 3-3.5% per annum range, compared with the expected slightly more than 6% per annum growth for the 2006-2020 phase - halving the average gross domestic product (GDP) expansion rate as the growth curve tapers off.

By 2020, the manufacturing sector’s share of GDP will be slightly more than a quarter (28%), agriculture 7% and services about two thirds. Beyond 2020 in a post-industrial society, agriculture in the economy will keep on shrinking but what remains will be very modernised and producing new high-tech agricultural products, as rural industrialisation picks up pace. Employment in agriculture will decline as farms are expected to be much larger and technology use will displace labour.

Employment in the manufacturing sector will also fall but it will produce much more high-tech products, especially non-resource based products. New products, for example, for semiconductors, industrial electronics and consumer electronics, will appear and new technologies will be utilised as we move up the value-added chain.

We will still remain an open economy and be dependent on exports to world markets but the shape of the world’s trading pattern will change. China and India will be new economic forces, and other emerging, but as yet unidentified economies and competitors, will appear.

Services will probably take up more than 72% of GDP by 2057 and Malaysia will be a service economy. Financial services and wholesale and retail services will be even more important. New services will certainly crop up to meet new and changing tastes with the rise in incomes. Foreign direct investment in services has been increasing and this trend will probably persist. The liberalisation in services to increase the competitiveness of the economy will be a key determinant for the long-term growth of the economy.

Over the past 50 years, Malaysia’s population increased almost fourfold from about seven million in 1957 to 26 million in 2006. In 50 years time, with the decline in population growth rate, there will probably be about 52-55 million people in Malaysia.

Far more Malaysians than now, irrespective of race, will be residing abroad as they become more global and rootless in outlook. The bumiputra population will rise to more than two thirds of the total population while the number of non-bumiputra will decline. Urbanisation will continue to rise, and there will be a convergence of urban agglomeration and industrial conurbations, and the share of rural population will shrink.

Average life expectancy is likely to increase further and reach 76-78 years in the post-industrial society.

These developments will mean that absolute poverty, as we know it today, will disappear but new forms of relative poverty and deprivation will emerge, even in high income countries. Structural changes in the economy will mean that new sources of wealth will emerge, especially for income earned from financial and physical assets as income from labour will be reduced.

However, there is no certainty, as income increases in the post-industrial growth phase, that this will be a linear trend. There can be episodes of widening inequality, as the top 5%-10% of households increase their share of total income. In absolute terms, however, income disparities will be persistently large. What all these will mean for the welfare and happiness of Malaysians is anyone’s guess.

Source: Datuk Zainal Aznam Yusof, The Sun,Thursday, August 30, 2007
Related Blog: Malaysian Economy Update