Malaysia’s competitiveness has been on a downward trend for years, a phenomenon that cannot be attributed solely to short-term factors such as recent economic performance, US interest rates, or geopolitics. Prominent economist Prof Tan Sri Noor Azlan Ghazali emphasizes that the decline in Malaysia’s competitiveness ranking is the result of the entire country’s lack of full commitment to enacting necessary changes.
Analysis of the Downward Trend
According to the recently published International Institute for Management Development (IMD) competitiveness rankings, Malaysia’s position dropped from 27th in 2023 to 34th in 2024. This decline is not a sudden occurrence but rather a reflection of deeper, structural issues within the country.
Structural Elements Affecting Competitiveness
Prof Tan Sri Noor Azlan Ghazali, a respected academic from Universiti Kebangsaan Malaysia (UKM) and director of UKM’s Malaysian Inclusive Development and Advancement Institute, points out that competitiveness is influenced by various structural elements. These include:
- Taxation: The complexity and rates of taxation can impact business operations and investment attractiveness.
- Productivity: The efficiency and effectiveness of the workforce play a crucial role in determining competitiveness.
- Expertise: The level of skills and knowledge within the workforce is essential for driving innovation and growth.
- Regulations: Business regulations need to be conducive to fostering a positive business environment.
- Labour: Labour market policies and conditions affect the availability and quality of the workforce.
- Infrastructure: Adequate infrastructure supports economic activities and enhances productivity.
- Education: The quality of education influences the development of a skilled and knowledgeable workforce.
Business and Investment Ecosystem
Noor Azlan also highlights the importance of the quality of the business and investment ecosystem. Efforts to improve competitiveness require firm decisions and a commitment to address structural issues. This includes enhancing the regulatory environment, investing in education and infrastructure, and creating policies that foster a conducive business climate.
Collaborative Efforts for Improvement
Addressing Malaysia’s competitiveness issues is a collective responsibility. It requires the government, industries, and the public to work together to identify weaknesses and implement effective solutions. Noor Azlan urges a unified approach to fix what is wrong and strengthen weak areas.
Addressing Fiscal Challenges
One of the significant challenges facing Malaysia is the burden of unsustainable fuel subsidies, which threaten the country’s fiscal position. Noor Azlan suggests that addressing these subsidies is crucial for improving competitiveness and ensuring long-term economic stability.
Government and Industry Roles
Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz acknowledged the drop in Malaysia’s competitiveness ranking, attributing it to the ringgit’s weakness. However, Zafrul emphasized that structural reforms and strategic investments are necessary to enhance the country’s competitiveness.
Future Outlook and Recommendations
To reverse the downward trend and improve Malaysia’s competitiveness, the following steps are recommended:
- Implement Structural Reforms: Focus on long-term structural changes that address taxation, productivity, labour market conditions, and regulations.
- Invest in Education and Skills Development: Enhance the quality of education and provide continuous skills development opportunities to build a knowledgeable and skilled workforce.
- Improve Infrastructure: Invest in infrastructure projects that support economic activities and enhance connectivity.
- Enhance the Business Environment: Simplify regulations and create policies that attract investment and foster a positive business climate.
- Address Fiscal Challenges: Review and reform unsustainable subsidies to ensure fiscal stability and allocate resources effectively.
Conclusion
Malaysia’s declining competitiveness is a complex issue that requires a multifaceted approach to address. By focusing on structural reforms, investing in education and infrastructure, and enhancing the business environment, Malaysia can improve its competitiveness and secure a better ranking in future assessments. Collaborative efforts from the government, industries, and the public are essential to drive these changes and ensure long-term economic growth and stability.
