Tan Sri Mohd Sidek Hassan

Tan Sri Dr. Wan Abdul Aziz Wan Abdullah“Now, we are at a criticaljuncture in our economicdevelopment path. Whilethe input driven model wassuccessful in transforming theMalaysian economy, thereare now signs that exportvalue-added is stagnating andinvestment by and large, is notcontributing to the wideningnor deepening of the productmix”Asean-5 economies. Malaysia’s growth rate during this period was more than thatof the world economy, even surpassing the advanced economies. Notably, growthwas accompanied by low unemployment and inflation. The input driven model,focusing on the intensification of investments, enabled the economy to leap frogfrom a low-income to a middle-income nation. We got it right then. We had awinning formula with the right ingredients and we were ahead of the curve amongcountries in the Asean region.Now, we are at a critical juncture in our economic development path. While theinput driven model was successful in transforming the Malaysian economy, thereare now signs that export value-added is stagnating and investment by and large,is not contributing to the widening nor deepening of the product mix.Depending too heavily on the external sector now is no longer an option. It isalso not serving to increase domestic value-added through backward and forwardlinkages. Furthermore, investment is not building research capacity and domesticinnovation capability. In addition, companies operating in Malaysia are too dependenton cheap and low-skilled foreign labour, especially in the manufacturing and servicessectors. Private companies are still reluctant to innovate and invest in labour savingtechnology and new production techniques. These conditions have led the oureconomy into the middle-income trap.95