Country Economic Work for Malaysia - Islamic Development Bank

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Governance Indicators Report (2010) show that the country ranked quite high in terms of better government effectiveness (82.3%), followed by regulatory quality (71.3%), rule of law (65.4%), control of corruption (61.2%), and political stability (51.9%) (Table 1.3). Recent studies have established positive relationships between good governance and improved investments, better economic performance, and improved human welfare and development, while corruption hinders development and therefore increases poverty 13 . Further, a strong positive correlation has been found between per capita income and the quality of governance across countries 14 . (iii) Quality of Institutions does not appear as binding constraint 51. In terms of quality of institutions, the Global Competitiveness Report (2011-2012) shows that Malaysia stands at a high ranking of 30 out of 142 countries – third best in 11 selected Asian economies (Figure 1.30). The quality of institutions has a strong bearing impact on competitiveness and economic growth in an economy. Strong and fair institutions play a positive role in terms of investment decision making. The role of institutions goes beyond the legal and regulatory framework. In particular, the government attitude toward markets and the efficiency of its operations are very important in achieving sustainable high economic growth. 15 120 100 80 60 40 20 0 Figure 1.30. Malaysia: Ranking of Institutions of Selected Asian Countries (out of 142 countries) 1 9 30 31 48 Source” Global Competitiveness Report, 2011-2012 65 67 69 71 87 117 iv. Constraints to Software of Economic Growth Weak Software of Growth appears as binding constraint 52. Generally, software of growth includes global competitiveness, innovation, business sophistication, quality of education, R&D and Reverse Linkages activities. Software of growth plays a key role in achieving sustainable high economic growth in Malaysia. In order to achieve sustained 6% growth, Malaysia needs to improve software of economic growth. In particular, efforts to innovation and creativity have been insufficient due to low R&D expenditure, which resulted in lack of innovation in the industrial and exports sector. Malaysia is relatively weak in 13 ODI (2006). Governance, development and Aid Effectiveness: A Quick Guide to Complex Relationships. Briefing Paper. 14 Ishrat Husain (2009). Economic Governance in Pakistan. 15 For further detail on this institution matter, see World Economic Forum, Global Competitiveness Report 2011-12. 25
growth software compared to its major competitor countries in the region. The following sub sections briefly describe the binding constraints to software of growth. (i) Weakening Global Competitiveness 53. Malaysia’s global competitiveness has been weakening and is considered to be one of the binding constraints to economic growth during 2000s. In terms of global competitive landscape, Malaysia is facing intense competition with both high income developing countries as well as developed countries. Malaysia’s exports began to experience erosion in competitiveness partly due to rising costs and partly due to the overvaluation of the ringgit as well as the depreciation of dollar. Malaysia has lost its comparative advantage in several products to newcomers due to relatively higher restrictive business environment. According to World Economic Forum Global Competitiveness 27 25 23 21 19 17 15 Figure 1.31. Malaysia: Global Competitiveness Ranking, 2006-2010 (out of 142 countries) 19 21 Source: Global Competitiveness Report, World Economic Forum (various issues) 21 2006 2007 2008 2009 2010 2011 Reports, Malaysia’s ranking continuously weakened during 2006-2010 as global competitiveness ranking slipped from 19 in 2006 to 26 (out of 142 countries) in 2010. However, recently Malaysia ranking improved to 21 in 2011. Comparing with the competing countries, Malaysia’s competitiveness is weaker compared to Singapore (3), Hong Kong (11), and Taiwan (13), while it better ranked compared to Korea (22), China (27), Thailand (38), Indonesia (48) and India (51) in 2011-2012 (Figure 1.31). However, compared to Malaysia, the other emerging developing economies like China, India, Thailand, and Indonesia, have the advantage of scale, both in terms of cost of production and size of domestic markets. More recently, a number of countries in South America and Table 1.4. Malaysia: Global Competitiveness Indicators Ranking, 2011-2012 (out of 139 countries) Basic Requirements 25 Institutions 30 Macroeconomic Environment 29 Health and Primary Education 33 Infrastructure 26 Efficiency Enhancers 20 Higher Education and Training 38 Technological Readiness 44 Labor Market Efficiency 20 Market Size 29 Goods Market Efficiency 15 Financial market Development 3 Institutions and Sophistication Factors 22 Business Sophistication 20 Innovation 24 Source: Global Competitiveness Report, World Economic Forum, 2011-2012 24 26 21 26
Page 4: Acknowledgements Appreciation for s
Page 7 and 8: ISRA : International Shari’ah Res
Page 9 and 10: (v) Foreign Direct Investment……
Page 11 and 12: (2005)), key insights emerged in tw
Page 13 and 14: drain. Further, the Government need
Page 15 and 16: macroeconomic indicators are given
Page 17 and 18: SMEs are concentrated in the servic
Page 19 and 20: easy technology adoption, pro-busin
Page 21 and 22: Kelantan with the lowest per capita
Page 23 and 24: Figure 1.12. General Growth Diagnos
Page 25 and 26: that the Government’s Economic Tr
Page 27 and 28: (ii) Low Returns to Investments app
Page 29 and 30: Figure 1.22. Malaysia's Exports by
Page 31 and 32: 43. Malaysia’s private firms are
Page 33: over the medium-term. Several initi
Page 37 and 38: esearchers and technicians in R&D p
Page 39 and 40: 59. Malaysia can further enhance it
Page 41 and 42: Annex Table 1.2. Malaysia: MDGs Ach
Page 43 and 44: 64. The Malaysian experience has al
Page 45 and 46: economic growth. The ETP is expecte
Page 47 and 48: 77. According to the Global Competi
Page 49 and 50: development of infrastructure throu
Page 51 and 52: a. Northern Corridor Economic Regio
Page 53 and 54: The challenge is for financial inst
Page 55 and 56: Original Equipment Manufacturing (O
Page 57 and 58: Intensify formalisation to promote
Page 59 and 60: Sukuk market has experienced unprec
Page 61 and 62: For innovation to become an importa
Page 63 and 64: y the United States (MYR2.3 billion
Page 65 and 66: (vi) (vii) Sharing Eexperience and
Page 67 and 68: institutions as well as Islamic pro
Page 69 and 70: Liberal Foreign Exchange Administra
Page 71 and 72: Issues/Challenges Facing the Islami
Page 73 and 74: Funding from Government of Malaysia
Page 75 and 76: programmes in the country. Initiati
Page 77 and 78: labeling and branding of Halal prod
Page 79 and 80: to over 200 industrial estates or p
Page 81 and 82: member countries can be provided te
Page 83 and 84: Figure 6.5: MATRADE Business Strate
Page 85 and 86:
offered by the 35 MTCP training ins
Page 87 and 88:
case of the economies in transition
Page 89 and 90:
Key Challenges Facing the MTCP
Page 91:
iii. Conclusion 185. Above diagnost
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Country Economic Work for Malaysia - Islamic Development Bank

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