As Malaysia continues to strive toward high-income status, accelerating productivity growth has become the country’s central economic policy challenge.
... See More + Productivity growth has become increasingly important as the country’s traditional economic engines have slowed. Declining oil and gas output, coupled with the slowing growth of the Malaysian mining sector, has reduced the pace of capital accumulation, while demographic trends are slowing the growth of the labor force. Demographic trends underscore the vital importance of productivity growth to the continued development of the Malaysian economy. Malaysia’s demographic transition is inhibiting the expansion of the labor supply, and female labor-force participation is low by the standards of comparable countries. Weakening external demand and intensifying global competition in Malaysia’s key export industries confirm the necessity of increasing productivity levels. The report presents an empirical analysis of the role of productivity in the Malaysian economy. It evaluates the country’s institutional and policy framework, and identifies key constraints to productivity growth. Using time-series data and cross-country comparisons, the report examines the ways in which infrastructure and institutional quality, market efficiency, innovation, and workforce skills influence productivity in Malaysia. This analysis is designed to inform a productivity-focused economic agenda, and the report concludes by presenting a set of policy recommendations and institutional reforms designed to bolster long-run productivity growth.
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The historic outcome of Malaysia's recent elections provides an unprecedented opportunity for change. The country's 14th General Elections which took place on May 9, 2018, in the context of widespread citizen concern regarding the degree to which the proceeds of economic growth have been shared across the Malaysian society and a call for increased government accountability, have resulted in the nation's first change in government since its independence in 1957.
... See More + The new government's emerging economic policy framework is strongly guided by its election manifesto Buku Harapan, which responds to these popular sentiments. Heightened uncertainty amid the political transition exacerbated the ongoing turbulence in the financial markets arising from external factors. In the period between the elections and end-May, Malaysia's 5- and 10-year sovereign spreads against US Treasuries increased by 24 and 27 basis points respectively, while the stock market fell by three percent. Meanwhile, RM19 billion of foreign capital was withdrawn from the domestic financial markets in May as post-election market turbulence coincided with heightened investor uncertainty about the emerging markets asset class. However, since then volatility in the financial markets has been largely driven by external factors amid increased global trade tensions, as the uncertainty surrounding the political transition has gradually reduced.
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Economic Updates and Modeling 127679 JUN 01, 2018
Record,Richard James Lowden; Chong,Yew Keat; Teh Sharifuddin,Shakira BintiDisclosed
The World Bank Group (WBG) is strengthening its partnerships with upper-middle-income countries and high-income countries to leverage private and public finance, and to create knowledge and new solutions based on the experiences of graduates for the benefit of clients.
... See More + Malaysia is a leading contributor to a stronger ecosystem of new research and knowledge, through the embedding of the Malaysia Experience in global discussions on development. This digest is widely disseminated to development practitioners and policy-makers in the East Asia and Pacific region and internally within WBG. The authors begin this issue with their experience with the Hub as they enter their second year, and how it is a pioneering example of how the Bank is leveraging knowledge for development finance. Then, the authors move into an update on the Bank’s involvement in the concluded World Urban Forum 9 in Kuala Lumpur. The authors also delve into topics like Malaysia’s lessons from the Asian Financial Crisis. Other articles include South-South exchanges on Malaysia’s Small and medium enterprise (SME) development, education, land administration reform, and a rich selection of pieces from the Development economics teams based in the Hub.
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Working Paper 125247 APR 01, 2018
Alawode,Abayomi A.; Ouazad,Amine; Arshad,Ashraf Bin; Ruggeri Laderchi,Caterina; Sitorus,Djauhari; Georgieva,Dorina Peteva; Mendez Ramos,Fabian; Govindasamy,Jeevakumar; De Luna-Martínez,José; Kelm,Kathrine M.; Sondergaard,Lars M.; Tan,Mei Ling; Amin,Mohammad; Loayza,Norman V.; Canuto,Otaviano; Record,Richard James Lowden; Ranciere,Romain; Wahba,Sameh; Schmukler,Sergio L.; Bell,Simon; Shetty,Sudhir; Kwakwa,VictoriaDisclosed
The reallocation of resources from low- to high-productivity firms can generate large aggregate productivity gains. The paper uses data from the Malaysian manufacturing census to measure the country's hypothetical productivity gains when moving toward the level of within-sector allocative efficiency in the United States to be between 13 and 36 percent.
... See More + Across three census periods in 2000, 2005, and 2010 (the most recent available), the productivity gaps appear to have somewhat widened. This suggests that the "catching-up" process remains a challenge and a potential opportunity, particularly if total factor productivity is expected to be the dominant source of future economic growth. The simulations, based on different magnitudes of the realization of hypothetical productivity gains, show that Malaysia's gross domestic product growth can potentially increase by 0.4 to 1.3 percentage points per year over five years. The analysis accounts only for resource misallocation within sectors. There may be other, possibly large, resource misallocation across sectors. If so, closing those gaps could boost total factor productivity and gross domestic product growth even further.
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Policy Research Working Paper WPS8368 MAR 19, 2018
Performance based budgeting (PBB) has been a popular reform among ministries of finance across the world, accompanied by high expectations for its ability to transform national budget processes.
... See More + PBB offers the hope of a more evidence-based rationale for making budget decisions across an array of competing policy and program areas. It offers a framework for linking medium-term national strategies with the annual budget process, while the program logic structure gives a more transparent view of the activities being undertaken than a traditional line item budget does. Ultimately, PBB holds out the allure of providing incentives for improved public service delivery. Despite significant time and effort devoted to PBB implementation, the experience of many countries is rather mixed. This report explores some of Malaysia’s successes and challenges in implementing PBB in recent years, the rationale for undertaking the reform, and how Malaysia’s experience with PBB compares with that of other countries.
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This report is part of the World Bank’s Malaysia development experience series that strives to document the country’s approach to improving public sector performance.
... See More + The report builds on the previous installment in the same series that focused on Malaysia’s experience with driving performance from the center of government through the Prime Minister’s Management Delivery Unit (PEMANDU). The more drastic overhaul of the sector was envisioned to come from the application of the DU approach to transforming sector performance. This report describes how the DU method worked in both the design and implementation stages of literacy and numeracy screening (LINUS). This includes the interface between Ministry of Education (MOE) and PEMANDU, as well as PEMANDU and Education Performance and Delivery Unit (PADU). The core of the document focuses on implementation details: the institutions, leadership, and incentives that contributed to the program’s success. It also describes how the implementation agencies worked together to implement LINUS.
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Securities Commission Malaysia (SC), together with the World Bank Group, convened a two-day conference on Islamic Finance and Public-Private Partnership (PPP) for Infrastructure Development from 8 to 9 May 2017 at SC in Bukit Kiara, Kuala Lumpur.
... See More + Conference discussed and deliberated the ways to deploy Islamic project finance in PPP delivery frameworks. The latitude of the discussion covered the ecosystem needed for Islamic capital market, PPP developments and, more importantly, the identification of relevant policy, legal, regulatory and institutional interventions to attract and expand Islamic financing for infrastructure development. Additionally, a set of case studies on PPPs employing Islamic finance instruments was presented at the Conference and discussed in this report. This report aims at synthesizing the essence of the discussions deliberated at the Conference.
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Working Paper 123425 JAN 01, 2018
Kamil,Wan Abdul Rahim; Bakhor, Syed Azhan Syed Mohd; De Luna-Martinez,Jose; Zhang,Wei - GFCPN; Abdul Aziz,Ahmad Hafiz Bin; Mahmud,Mohd Lukman; Fauzi, Hanif Mohsein Mohd; Ahmad,Aijaz - GTPPPDisclosed
In this edition of the Malaysia Economic Monitor, the focus of the special topic is macro-financial policy. This year marks 20 years since the onset of the Asian financial crisis (AFC), which caused a major shock to Malaysia's economy.
... See More + At the time, Malaysia's policy response was considered unorthodox. This response included the imposition of selective capital controls, counter-cyclical fiscal policies as well as bank and corporate restructuring. Yet with the passage of time, many of these policies have become part of the standard toolkit for policymakers in both developing and developed economies when faced with a crisis. Malaysia's experience, both during the crisis and in the years since, offers important insights for other countries. While sharing a common destination, not all East Asian countries took the same path towards a more resilient set of macro-financial policies. Clearly not all of Malaysia's experience is likely to be transferable to the specific contexts of other countries, but there are useful lessons for other highly open trading economies that are exposed to the risks associated with international capital flows.
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Economic Updates and Modeling 122007 DEC 01, 2017
Record,Richard James Lowden; Ping,Alan Lau Sie; Zaourak,Gabriel Roberto; Chong,Yew Keat; Zhang,Wei - GFM08Disclosed
Doing Business 2018 is the 15th in a series of annual reports investigating the regulations that enhance business activity and those that constrain it.
... See More + This economy profile presents the Doing Business indicators for Malaysia. Doing Business presents quantitative indicators on business regulation and the protection of property rights that can be compared across 190 economies; for 2018 Malaysia ranks 24. Doing Business measures aspects of regulation affecting 11 areas of the life of a business. Ten of these areas are included in this year's ranking on the ease of doing business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures features of labor market regulation, which is not included in this year's ranking. Data in Doing Business 2018 are current as of June 1, 2017. The indicators are used to analyze economic outcomes and identify what reforms of business regulation have worked, where and why.
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This report is part of the series focusing on documenting the lessons from Malaysia for other developing countries in improving their public-sector management.
... See More + These lessons include those at the center of government, such as the delivery unit method applied to the implementation of the national priorities, or implementing the elements of performance-based budgeting, as well as deeper analysis of specific approaches in various sectors. Strategies for improving public sector performance will differ in education, health, public transport, or land administration. Yet at this sectoral juncture, public sector management has the most direct impact on service delivery and citizens’ outcomes. This report focuses on land policies and land administration services because they are key for good governance. They are fundamental for secure land rights, developing land markets and managing land resources in a manner that best contributes to economic growth, efficient public sector service delivery, environmental protection, and social cohesion and security. Land and buildings generally represent between half and three quarters of the national wealth in all countries. The importance of secure land rights and good land administration have been recognized in several international forums including the 2030 Sustainable Development Goals (SDGs), the United Nations Committee on Food Security and the World Bank and International Federation of Surveyors (FIG) Fit for Purpose Land Administration publication.
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Doing Business 2018 is the 15th in a series of annual reports investigating the regulations that enhance business activity and those that constrain it.
... See More + This economy profile presents the Doing Business indicators for Malaysia. Doing Business presents quantitative indicators on business regulation and the protection of property rights that can be compared across 190 economies; for 2018 Malaysia ranks 24. Doing Business measures aspects of regulation affecting 11 areas of the life of a business. Ten of these areas are included in this year’s ranking on the ease of doing business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures features of labor market regulation, which is not included in this year’s ranking. Data in Doing Business 2018 are current as of June 1, 2017. The indicators are used to analyze economic outcomes and identify what reforms of business regulation have worked, where and why.
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This background note, prepared for the inaugural meeting of the Planning Community of Practice (PCoP), describes Malaysia’s experience with national development planning at the federal level.
... See More + Malaysia’s planning system can be considered as being relatively sophisticated among countries in its income group worldwide. The country has had sixty years of experience with national development planning and is now implementing its eleventh five-year development plan (the 11th Malaysia Plan, 2016-2020).These medium-term operational plans are developed within the framework of a longer-term perspective or vision covering ten to twenty (or even more) years. They are linked to the budget cycle, ensuring that the policies, strategies, programs and projects contained in the medium-term plans receive annual budgetary allocations to fund their implementation.Across the developing world, national development planning has been a feature of the development paradigm since the end of World War II and gained currency during the “independence era.”Historically, the existence of a planning document (“the Plan”) served several purposes. First, it was considered a prerequisite for attracting foreign direct investment (FDI) and accessing foreign aid and loans.Second, the planning process served a political purpose by establishing priorities and injecting realism and rationality into political discourse, exerting a certain degree of discipline over both government and opposition. Third, from a public administration standpoint, the existence of a Plan can impart a strong sense of collective purpose and establish clear priorities among government ministries and agencies.In the above context, this note focuses on the nuts and bolts of Malaysia’s approach to national development planning. The remainder of this note is divided into four sections. The following section, Section two provides a brief history of Malaysia’s planning system. It relates when national development planning was introduced, the modalities employed, and the early goals and objectives. Section three describes how the planning function works in practice, the institutions and stakeholders involved, the long-, medium-, and short-term planning, the connection between planning and budgeting, as well as the monitoring of the national development plan implementation. The section also describes the central role of the Economic Planning Unit (EPU) in planning, coordination and the preparation of the development budget. Section four traces how the planning machinery has evolved in terms of new approaches, tools and structures introduced to keep up with the changing local and global scenario. The final section describes some of the challenges and lessons learnt.
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The Development Digest is a half-yearly publication that features key works from teams based at the World Bank Group Global Knowledge and Research Hub in Malaysia.
... See More + This third issue of the Development Digest focuses on green Islamic financing, where Malaysia leads the way with the issuance of the world's first green corporate sukuk. This digest also looks into topics like ASEAN at 50, open data, the role of GDP in development, migration, and microfinance. Other articles include one on industrial policies versus public goods to spur growth, and another on economic forecasting.
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Good policies are necessary but insufficient for delivering high quality public services. Building organizations capable of implementing increasingly complex policies at scale is crucial.
... See More + But most developing countries lack such organizations and – alarmingly – most are not improving. Effective reforms in China, Singapore, and Vietnam, however, and from unlikely service delivery successes elsewhere, suggest that three key factors are essential to building implementation capability: beginning with problems nominated and prioritized by local staff; promoting iterative experimentation to identify a range of plausible alternatives; and sharing emerging solutions through a frontline community of practice. These factors also suggest there is much to be gainedfrom embedding researchers into delivery systems themselves, the better to understand context, to map and explain variation, and to facilitate real-time decision making in response to changing realities.
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Malaysia’s economic growth expanded strongly in first quarter (1Q) 2017. Gross domestic product (GDP) growth rate for 2017 is expected to accelerate to 4.9 percent, slightly above the government’s current projection range of 4.3 to 4.8 percent.
... See More + The current account surplus has declined (1Q 2017: 1.6 percent of GDP; 4Q 2016: 3.8 percent of GDP) due to strong import growth. Gross imports growth, mainly of capital and intermediate goods, outpaced the significant increase in gross exports, resulting in a lower goods surplus. The current account surplus is projected to narrow further to 1.6 percent of GDP in 2017. Monetary policy is expected to remain accommodative and supportive for growth. The higher growth trajectory projected for 2017 opens up room to accelerate reduction in the fiscal deficit. Risks to the economy in the short-term stem mainly from external developments. Focus on implementing further structural reforms to raise the level of potential growth should continue. This include looking into measures to raise the level of productivity, encourage innovation, invest in new skills, leverage digital technologies, and continue ongoing efforts to improve efficiency of public service delivery.
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"Project Greenback 2.0 –Johor Bahru" is the product of a partnership between the World Bank and Bank Negara Malaysia, aimed at supporting the development of an efficient and transparent remittances market.
... See More + Previously, the World Bank Group launched the Project Greenback 2.0 in Turin, Italy (2013); and Montreuil, France (2014). As part of the project, a survey was conducted among 401 migrant workers from Indonesia, Bangladesh, Nepal, Myanmar, Vietnam, China and India in order to understand their remittance behaviour and level of financial inclusion. The survey focuses on the economic and financial profile of migrants working in urban areas of Johor Bahru and surrounding plantations, and analyses their remittance and financial behaviors. Particular attention has been given to the use of regulated and unregulated remittance channels to transfer money abroad.
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On 3 to 5 May 2017, an international workshop re-inventing public service delivery took place in Singapore and Johor Bahru, Malaysia focusing on delivering services through one-stop shops (OSS).
... See More + The workshop focused on citizen centric OSS, presenting examples from a wide range of contexts, including Albania, Azerbaijan, Bangladesh, Kazakhstan, Malaysia, Moldova, and Vietnam, to illustrate the diverse experiences and models. The objective of this workshop was to strengthen government capacity for the design and implementation of OSS for public services. This report summarizes the discussions, deliberations, and conclusions of a three-day international workshop focused on service delivery through OSS. This report captures highlights from the deliberations of the workshop and offers takeaways for policy makers. The key high level conclusion of the meeting was that high level political leadership, phased approach, and whole-of-government coordination during implementation are critical preconditions for successful transformation of service delivery.
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The pros and cons of making data more accessible to the public have been widely debated. Proponents of open data argue that it is good practice for governments because it fosters transparency, promotes greater participation, and encourages sharing of ideas, which is important in building a research-oriented culture.
... See More + Others, however, are less convinced of the merits of open data. This research policy brief finds that there is a relationship between accessibility of data and income levels of a country, and between data availability and the productivity and quality of economic research.
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Malaysia has achieved one of the highest levels of financial inclusion among Southeast Asia countries, due in part to policies taking advantage of mobile phones and banking agents to expand access.
... See More + The report looks at specific actions, programs, and strategies that have contributed to enhance financial inclusion in the country and highlights key learnings to benefit low- and middle-income countries with similar ambitions. The report also notes that there is no single factor that can explain Malaysia's success in financial inclusion. The progress that Malaysia has achieved is the result of efforts undertaken by authorities and the financial sector industry over the past 20 years. The country has been able to achieve sustainable growth of its financial system over a long period of time, reconciling two policy objectives, namely "financial stability" and "financial inclusion", in a successful manner so far. Malaysia faces two main challenges in terms of financial inclusion. First Malaysia will need to reach out to the remaining under-served population. Secondly, a major challenge is how to ensure that the people with access to financial services actually make active use of their accounts.
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