Report Says The Country Should Seek Growth Through Innovation

KUALA LUMPUR: The World Bank which has forecast Malaysia`s economic growth at 5.7% this year, said the country must now look for growth through innovation. 

In 2009, Malaysia`s growth domestic products (GDP) contracted 1.7%. The World bank also estimated Malaysia`s GDP growth to be slightly lower in the next two years, at 5.3% in 2011 and 5.6% in 2012. The rebound in the domestic economy has been aided by a marked revival in exports, according to the latest World Bank Report. The report said the manufacturing sector has been the locomotive of growth, and noted that the services sector was a beacon of strength throughout the global economic crisis for Malaysia. 

“Now that Malaysia has broadly recovered from the effects of the crisis, it needs to return to its medium-term reform agenda,” said World Bank chief economist (East Asia and Pacific region) Vikram Nehru at the launch yesterday of a World Bank economic report on Malaysia called ‘Growth Through Innovation’. 

He said Malaysia’s New Economic Model (NEM) was encouraging as it had proposed to move the country’s economy up the value chain and promote inclusive and sustainable growth led by innovation. “By encouraging businesses beyond the high technology sector to engage in innovation, broad sectors of the Malaysia economy can gain a competitive advantage and for this to happen sources of innovation need to be energised,” Vikram said. 

Philip Schellekens, a World Bank senior economist, said multiple market failures as well as imperfections in the “enabling environment” had held back Malaysia’s innovation potential. “The experience of countries around the world suggests that if implemented well, the right combination of policies can make a big difference in unleashing a country’s innovation potential,” he noted. 

The World Bank Report said Malaysia could make reforms in three areas: 

• Improving innovation capabilities by ensuring firms have sufficient access to talent, technology and finance;
• Enhancing the driving force of innovation by promoting and protecting the process of competition; and
• Amplifying the impact of innovation by concentrating efforts on promising niche products and focusing economic activity in geographical clusters. 

The report said Malaysia would benefit in the long term if the reform programme under the NEM was implemented comprehensively and expeditiously. 

But it warned that if the reform momentum was stalled, it could hurt growth prospects and worsen the government debt-to-GDP ratio. 

The World Bank Report also warned that the strength of the global recovery remained a near-term risk which could provide surprises.