KUALA LUMPUR, Feb 2 — The differences and divergence in Covid-19 responses are testaments to governance and state capacity in public health as well as the economic policy that will make a difference in the future economic performance.
Lee Kuan Yew School of Public Policy visiting associate-professor Razeen Sally said that within the Asean region, Singapore, with the exception of the migrant issue in the early phase of the crisis and lockdowns, and Vietnam had clearly done best in handling the crisis in terms of public health and economic policy.
He said Malaysia and Thailand had handled it well in the first phase but had gotten worse with the second wave and beyond while poor responses were seen in Indonesia and the Philippines.
“On the positive side, the Southeast Asian growth outlook remained very good with an average of five per cent growth across the region, while foreign direct investment was higher into the region compared to China.
“(The region) also has promising higher returns on investment and it has great gain in production and relocation in global supply chains with Singapore, Thailand, Vietnam and Malaysia among the top gainers while Indonesia although it has great potential, its potential had not materialised,” he said in a three-day online conference themed “Malaysia Outlook Conference 2021” here today.
Of the negatives for the region, he noted post Covid-19, Malaysia and Thailand were seen to be in the middle income trap territories amid big question marks about politics and economic governance as well as other issues such as innovation capabilities and labour cost.
Commenting further on Malaysia’s risk of being in the middle income trap, he said the country needed structural reforms in its economic policy to graduate from the trap.
“A combination of more international regulation pressure and no market reforms would result in the worst-case scenario for Malaysia, to just not only graduating from the middle income trap but also drifting and declining with the prospects of further domestic tension, ethnically and politically.
On that note, he said the big challenge for the country is to diversify its economy in favour of higher value manufacturing and away from the status quo, towards greater innovation and productivity with emphasis particularly on services, clean energy and environment.
But this required tough reforms in the Malaysian capital market such as land, labour and capital, he added.