Malaysia, a Southeast Asian nation blessed with abundant natural resources, has undeniably achieved remarkable economic progress. Yet, our neighbour Singapore, with hardly any natural resources, has become a global economic powerhouse. According to the World Bank Data (2023), Malaysia's GDP per capita based on current prices is $12,494 USD, while Singapore's is $87,283 USD. This begs the question: Why is Malaysia lagging behind despite its natural wealth?
Resource Dependence vs. Human Capital
Malaysia's initial economic boom relied on oil, palm oil, and other natural resources. While resources provided a good starting point, dependence on commodities poses a risk as global market prices fluctuate.
Singapore, on the other hand, Singapore recognized the importance of education and invested heavily in its people. This created a skilled workforce that could attract foreign investment in technology and manufacturing. According to UNESCO Institute for Statistics (2021), the adult literacy rate in Malaysia is 94.4%, while Singapore boasts a rate of 97.0%.
Religious Sensitivities
Malaysia's rich cultural tapestry, with a predominantly Muslim population alongside significant Buddhist, Hindu, and Christian communities, presents both beauty and challenges. Companies operating in Malaysia often need to navigate religious sensitivities to avoid offending any group. This can stifle creative freedom in marketing and limit economic dynamism. For example, the recent Grab controversy, where a marketing campaign promoting safe rides after alcohol consumption sparked a boycott due to religious reasons, exemplifies this challenge. Not only that, there was a recent incident where socks with the word "Allah" printed on them were found for sale in some KK Super Mart outlets. This caused outrage among some Malaysians who felt it disrespected the sanctity of the word.
Singapore's separation from Malaysia in 1965 allowed it to pursue its own development strategy without the complexities of managing a multi-ethnic nation. Singapore values religious freedom but also emphasizes social order and stability. The government actively promotes racial and religious harmony through various policies and initiatives. Among these is the Maintenance of Religious Harmony Act (MRHA), which aims to prevent religious tensions. Under the MRHA, the government has the authority to restrict certain religious activities if they are seen as potential threats to peace. On top of that, Singapore's decision to promote English as the working language across the multi-ethnic nation helped create a common ground for communication and business. This facilitated a more unified approach to economic development.
Political Instability
Frequent changes in government in Malaysia can result in inconsistent economic policies, making it challenging for businesses to plan for the long term and discouraging investment. Politicians focused on re-election may prioritize short-term projects over long-term economic development plans. Political instability can also foster an environment where corruption thrives, deterring ethical businesses and hindering fair competition.
In contrast, Singapore has established a stable and corruption-free government, making it attractive for foreign businesses to invest and set up operations. As of 2024, Malaysia ranks 84th globally in the World Bank Ease of Doing Business ranking, while Singapore consistently ranks in the top 10. Transparency International's Corruption Perception Index consistently rates Singapore much lower in corruption compared to Malaysia. This perception of stability and a corruption-free environment enhances Singapore's attractiveness to foreign investors.
Infrastructure
Singapore prioritized building world-class infrastructure, including ports, airports, and communication networks. This facilitated efficient trade and economic activity. While Malaysia has improved its infrastructure, it hasn't reached the same level of efficiency and connectivity as Singapore.
Looking Forward
Despite these challenges, Malaysia possesses immense potential for future growth. Malaysia can overcome these challenges by:
Fostering greater religious tolerance and understanding.
Promoting political stability through strong institutions and democratic processes.
Implementing transparent and consistent economic policies.
Investing in education and developing a skilled workforce.
Malaysia's path to becoming a leading economic power requires a multi-pronged approach. By addressing its dependence on resources, navigating religious sensitivities, ensuring political stability, and investing in education, Malaysia can unlock its true economic potential and establish itself as a force to be reckoned with in the global marketplace.
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