Malaysia

When the pandemic struck, Malaysia was relatively well prepared thanks to past efforts to build a robust policy framework. Over the past decades, Malaysia showed remarkable commitment to improve its economy and address its social challenges. This commitment remains intact as shown by the upcoming 12th Malaysia Plan 2021-2025, a stepped-up pivot on further reforms.

Malaysia’s economy is doing well, but social and governance challenges must be addressed. The government prioritises inclusive growth and improving trust in public institutions. Further progress toward the planned target of high-income country status by 2024 will also require focusing on productivity growth with structural reforms to move up the value chain and improve skills. As well, ensuring environmental protection will improve the quality of growth. These issues are in line with the government’s priorities.

Malaysia has set for itself the goal of becoming a high-income economy by 2020. This objective can only be realised with the aid of more innovation-driven growth. Malaysia’s national intellectual property (IP) system can contribute meaningfully to supporting innovation, and various policy measures are available to the government to help strengthen these contributions.

Malaysia’s achievements in the 15 months of implementation of the National Policy on the Development and Implementation of Regulations (NPDIR) provide a strong foundation for advancing regulatory policy and governance in coming years. The NPDIR is closely linked with Malaysia’s policy and machinery of government reforms contained in the New Economic Model, as well as its Economic Transformation and Government Transformation Programmes. These reforms aim to position the government to support a streamlined, proportionate, market-focused and supportive regulatory framework, while retaining a role to manage market failures.

Malaysia stands out as one of the economic success stories in Asia over the past few decades. From a plantation economy at the time of independence, with rubber and tin representing one half of GDP, Malaysia has become a diversified, open economy. Poverty, which was widespread at the time, is now virtually eradicated, except in certain pockets of the country. GDP per capita is now seven times as high as it was in 1980 (in purchasing power terms) and Malaysia has become one of the countries the most integrated into the global economy through trade. The distribution of income among ethnic groups has also improved dramatically since the 1960s. Malaysia is now the second richest economy within the Association of Southeast Asian Nations (ASEAN) after Singapore.

Developed financial sectors provide payment services, mobilise savings, and allocate financing to firms wishing to invest. When they work well, they give firms the ability to seize promising investment opportunities, especially small and innovative enterprises and entrepreneurs that need external funding to expand and develop their business ideas. Well-functioning financial markets also impose discipline on firms to perform, boosting efficiency, both directly and by facilitating new entry into product markets. They also enable firms and households to better manage risks.Malaysia has one of the most developed financial systems among ASEAN countries. Broad-based reforms undertaken following the Asian financial crisis have improved the size, depth and soundness of the financial sector. As a result of reforms Malaysia has become the world’s most important Islamic financial centre. Malaysia is moving away from a bank-dominated financial system and towards a more sophisticated and diversified financial sector. This chapter describes the measures implemented to strengthen the banking sector and further develop Malaysia’s capital markets, and briefly draws on data and comparisons with other Asian countries to highlight developments or challenges ahead. Malaysia could push for policies that promote further regional and international financial integration and further enlarge the capabilities of its financial sector in order better to address the challenges of making the transition to a high-value added, high-income economy by 2020.

This Survey is published under the responsibility of the Secretary-General of the OECD. The draft report was discussed at a meeting of the Economic and Development Review Committee on 24-25 June 2021, with participation of representatives of the Malaysian authorities. The 2021 OECD Economic Survey of Malaysia was prepared by Kosuke Suzuki, Zahid Ismail, Wan Fazlin Nadia Wan Osman, Sugumar Saminathan, Mohamad Norjayadi Tamam, Zafrulla Hussein, Suraiti Zainal Abidin, Halimahton Sa'diah Let, Mohamad Muzaffar Abdul Hamid, Nurrul Nur Aisyah Hamran, Suhaimi Hamad, Peter Gal, Francesco Losma, Laurence Todd and Eva Tène, under the supervision of Patrick Lenain. It benefitted from contributions at various stages by Alvaro Pereira, Isabell Koske, Cristiana Vitale, Ashikin binti Abdul Razak, Adlina Merican binti Zainuddin Merican, Tan Fung Ling, Zaharel Reeza Bin Ruslan and Mohd Aizuddin Noor Azman. Isabelle Luong provided statistical assistance and Stephanie Henry and Karimatou Diallo provided editorial support. Support from the World Bank and the governments of Malaysia and Japan is gratefully acknowledged. Information about the latest as well as previous Surveys and more information about how Surveys are prepared is available at http://www.oecd.org/eco/surveys.

The OECD review of Malaysia’s innovation policy is part of a series of OECD country reviews of innovation policy.* It was requested by the Malaysian authorities, represented by the Science Advisor of the Prime Minister, Dr Zakri Abdul Hamid, and the Malaysian Industry-Government Group for High Technology (MIGHT) and was carried out by the OECD Directorate for Science, Technology and Industry (DSTI) under the auspices of the Committee for Scientific and Technological Policy (CSTP). The Steering Committee, co-chaired by Dato Lee Yee Cheong and Datuk Dr

The national intellectual property (IP) system provides a critical policy toolkit to foster innovation performance and knowledge diffusion. This report is part of a series of country reviews aimed at identifying how national IP systems can better serve these objectives. The publication National Intellectual Property Systems, Innovation and Economic Development presents the analytical framework used for these country reviews. The framework analyses the key mechanisms that enable IP systems to support countries’ innovation and development objectives. This allows identifying strengths and weaknesses in the IP system’s contributions to national innovation performance.

This first OECD Investment Policy Review of Malaysia presents an assessment of the investment climate in Malaysia, including the institutional and legislative framework for investment. Undertaken in partnership with the Secretariat of the Association of Southeast Asian Nations (ASEAN) it illustrates the growing ties between the OECD and Malaysia, and Southeast Asia as a region.

This report was prepared by the Public Governance and Territorial Development Directorate’s Regulatory Policy Division. The Directorate aims to help governments at all levels design and implement strategic, evidence-based and innovative policies to strengthen public governance, respond effectively to diverse and disruptive economic, social and environmental challenges and deliver on government’s commitments to citizens.

Malaysia has followed a comparatively equitable development path, largely eliminating absolute poverty and greatly reduced ethnic inequality. Income and wealth inequality have gradually declined since the mid-1970s. With the people economy at the centre of Malaysia’s ambition to become a high-income country by 2020, the focus is shifting to the challenges of relative poverty and achieving sustainable improvements in individual and societal well-being through inclusive growth. This shift would be aided by reforms in several policy areas where Malaysia may compare favourably within its region but less so relative to OECD countries. This includes reforms to increase access to quality education, provide comprehensive social protection, raise the labour force participation of women and older persons, maintain universal access to quality public healthcare, improve pension system sustainability and adequacy and move towards a tax and transfer system that does more for inclusiveness.