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Anwar's tough fight to pull Malaysia out of middle-income trap – Free Malaysia Today

PETALING JAYA: After a turbulent election that produced a unity government, new Prime Minister Anwar Ibrahim faces the challenge of leading the country toward its decades-old goal to join the ranks of advanced economies.
Anwar and his Pakatan Harapan (PH) coalition see entrepreneurship as a remedy for Malaysia’s years of lacklustre growth.
Yet a long-time preference policy favouring the Malay majority continues to push many of Malaysia’s best and brightest overseas, clouding its path out of the so-called middle-income trap.
“All the characteristics of a middle-income trap of the economy” are there in Malaysia, Anwar told Nikkei in a Nov 17 interview, days before the vote.
Malaysia set a goal in 1991 of becoming a developed economy by 2020. But its per capita gross domestic product has stalled since crossing US$10,000 (RM43,950) in 2011. The figure totalled around US$11,400 (RM50,100) in 2021 – short of the roughly US$13,000 (RM57,133) threshold to be considered a high-income country.
Its sluggish growth stems from weak fundamentals, including a temporary setback in productivity, as well as from rampant corruption under former prime minister Najib Razak.
Over US$4.5 billion (RM19.8 billion) is believed to have been siphoned from sovereign wealth fund 1MDB, while Najib was in office from 2009 to 2018. As a result, national investments in digital technologies and other fields have suffered.
Anwar also told Nikkei that Malaysia should seek “to move into new areas” such as digitalisation, artificial intelligence and the service industry.
PH pledged in its campaign to foster entrepreneurship in Malaysia as a way to re-energise the economy. With a population of about 33 million having an average age of around 30, the country has favourable demographics for start-ups.
But brain drain holds Malaysia back. Of roughly two million Malaysians living abroad, around 500,000 are highly skilled individuals 25 and older, Malaysian think tank Emir Research estimates.
Malaysians of Chinese descent say they often face discrimination in school admissions, employment and professional advancement under the Bumiputra policy, which favours the Malay majority.
Josephine Chew, a public relations executive, said she chose to work in neighbouring Singapore because “advancement is based on more transparent and meritocratic principles” there.
“If I had worked in Malaysia, I would probably be a fifth of where I am now career-wise and net worth-wise because of that combination of factors,” Chew said, who also points to Singapore’s good mix of international exposure and interesting, expansive work and strong currency.
Grab group CEO and co-founder Anthony Tan and other entrepreneurs with Chinese roots have also moved their work and residences outside Malaysia.
The country is now home to just one unicorn – used-car sales platform Carsome – according to CB Insights, trailing behind its neighbours.
PH enjoys support from many ethnic Chinese and Indian voters, and pushed for more inclusive policies after taking control of the government in the 2018 elections.
But the group lost power less than two years later due to infighting before it could make much progress on Malaysia’s economic and societal challenges.
Anwar’s new unity government is backed by PH as well as Barisan Nasional and Borneo-based parties.
It faces even more potential fault lines than the ruling coalition in 2018. The rise of Malay nationalism also poses another governing challenge as PAS nearly tripled its seats in Parliament in the latest vote.
Malaysia’s talent shortage could become worse as neighbours like Singapore, Indonesia and Thailand launch new visas geared toward skilled workers.
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