KUALA LUMPUR, Feb 25 — Malaysia is still facing several structural challenges that need to be addressed to escape the middle-income trap, said the Economy Ministry.
These challenges include slow productivity growth, insufficient levels of innovation and technology investment, development and income disparities between regions, and limited fiscal space for the government, the ministry said.
“Addressing these issues consistently and in an integrated manner is an important prerequisite to ensure structural economic transformation can be achieved sustainably and inclusively,” it said in a written reply to the Dewan Negara on the Parliament website today.
It was responding to Senator Datuk Rosni Sohar’s question about structural economic changes being implemented to ensure Malaysia does not remain a middle-income country, especially as neighbouring nations rapidly become high-value economies.
The ministry said a more comprehensive approach under the Madani Economic Framework and the 13th Malaysia Plan (13MP) will realise the country’s aspiration to address structural economic challenges and achieve high-income status.
“This approach includes continued emphasis on efforts to boost productivity and strengthen economic diversification through the production of high-value, higher-complexity ‘Made by Malaysia’ products and services, particularly in strategic sectors.
“The main focus includes driving high-growth, high-value industries and strategic sectors such as AI technology, semiconductor reform, and the clean energy transition,” it said.
The ministry also said labour market reforms, especially through periodic reviews of the minimum wage, taking into account the concept of a living wage and the implementation of the Progressive Wage Policy, ensure workers receive fair compensation.
“This step is important to ensure workers earn sufficient income to cope with the cost of living and improve their quality of life in line with national income growth,” it said.
Meanwhile, the Economy Ministry said reforms to human capital development are being strengthened by improving the quality of technical and vocational education and training (TVET) and AI and digital skills training, as well as closing skills gaps in high-technology sectors.
“Increasing labour productivity is central to the strategy to accelerate Malaysia’s transition to a high-income nation,” it said.
As of this year, Malaysia remains in the upper middle-income category, with a gross national income (GNI) per capita of RM57,070.
Based on the criteria set by the World Bank in 2024, the threshold for high-income status must exceed US$13,935, or about RM60,000.
The threshold for last year will be released by the World Bank in July.
Malaysia, Indonesia, and Thailand are in the same category, while other ASEAN countries except Singapore and Brunei are in the lower middle-income group.
According to the Economy Ministry, considering the various priorities, strategies, and initiatives outlined in 13MP, the country’s GNI per capita is expected to rise to RM77,200 by 2030, which means Malaysia could achieve high-income status by the end of the 13MP period.
“This achievement, however, depends on current economic growth performance at an average rate of between 4.5 per cent and 5.5 per cent per year, the strengthening of the foreign exchange rate, and favourable prospects for strategic investment,” it said.
