Compare South Korea and Malaysia in 1970 and compare them again in 2009. South Korea was a third poorer back then and is now three times richer. Even more remarkable has been South Korea’s ability to widely share the benefits of this spectacular feat across broad segments of society. South Korea’s strong focus on broad-based human capital development allowed the country to transform itself into a high-income economy, while at the same time reducing income inequality and improving social outcomes.
|Malaysia's New Economic Model proposes a number of strategic reforms.|
The objective of the NEM is for Malaysia to join the ranks of the high-income economies, but not at all costs. The growth process needs to be both inclusive and sustainable. Inclusive growth enables the benefits to be broadly shared across all communities. Sustainable growth augments the wealth of current generations in a way that does not come at the expense of future generations.
As Malaysia redefines its growth strategy, the question of which sector to promote has been a subject of ongoing debate. Some have argued that the strategy should emphasize manufacturing – and preferably high-tech manufacturing – as innovation activity is most forthcoming in this sector. Others have countered that services are key, as the typical economic structure of an advanced economy is oriented towards services. Tradable services are also fast becoming an engine of growth.
|Some recipients of a scholarship given to young girls in Cambodia at the end of primary school. The program has had a significant effect on girls’ secondary enrollment. (photo by Deon Filmer)
Those of us who have had the pleasure of raising an adolescent girl – and survived the experience – might blanch at the thought of a program to stimulate education that gave her, rather than the doting parent, a grant equivalent to 3% of the family’s average per capita monthly consumption. And yet, that’s exactly what a policy experiment, conducted by my friend Berk Ozler and other researchers, did in Malawi. What’s more, they found that raising these girl-targeted cash transfers increased school attendance much more than raising those given to parents.
Empowering women with resources has long been recognized as a powerful weapon to safeguard investments in human capital. Research has shown that transfers to women have a more powerful effect than to men in raising school attendance and ensuring that kids are immunized. But more recent research, like Berk et al.’s, is showing that policies aimed directly at adolescent girls and young women may have an even greater effect, not only in encouraging schooling but in ensuring reproductive health. Pascaline Dupas’ policy experiment in Kenya showed that simply giving young women information showing that older men were more likely to be HIV-positive led them to eschew partnering with ‘sugar daddies’.
The winds of change are blowing in Malaysia, as the government is taking on an ambitious agenda of structural reform. The objective is to climb up the income ladder and join the league of high-income economies. This is a difficult challenge – one which not many countries have successfully met in the post-war period.
Against this backdrop, the World Bank’s launch of a new report on the Malaysian economy (full disclosure: I lead the team who authors the report) is timely. The Malaysia Economic Monitor, which will be published twice a year, aims to provide context to the challenges facing Malaysia and serves as a platform for discussion and the sharing of knowledge.
Regionally speaking, developing countries in East Asia and Pacific have rebounded surprisingly quickly from the financial crisis and global recession. But according to a report just released by the World Bank, the regional economic picture isn’t as rosy when China is taken out of the equation. The latest East Asia and Pacific Update report, an assessment of the economic health of the region released every six months, is titled “Transforming the Rebound into Recovery.” The rebound, the report says, was driven in part by large and timely fiscal stimulus spending led by China and Korea. Still, despite the well-performing economies of Indonesia and Vietnam, developing East Asia excluding China is projected to grow at just around 1 percent in 2009. And for Cambodia, Malaysia and Thailand, GDP is contracting.
The China Quarterly Update – a separate report released at the same time as the latest regional assessment and focusing specifically on the Chinese economy – gives a more complete picture of why the country has seen such robust economic growth and what the future may hold. The Bank now projects China to see GDP growth of 8.4 percent for 2009, says the report. The report’s lead author (and blogger) Louis Kuijs wrote an accompanying blog post, which can be read here.
I really recommend taking some time to explore the findings of both reports by visiting the East Asia Update and China Quarterly pages, where you can also download high resolution graphs and watch video interviews with the economists. Also, you'll be able to ask two World Bank economists questions about the regional report in an online chat taking place Thursday, November 12, at 10 a.m. DC time (15:00 GMT or 11:00 p.m. in Beijing). Send your questions now for a better chance of getting them answered.
I have received many encouraging responses to my first blog. Thank you. This time, let's look at Indonesia's budget. Last year, Indonesia's budget reached the magical threshold of US$100 billion.