THE 241-page report of the World Bank’s latest Global Economic Prospects was recently released, and it points to a better world economy this year, with global economic growth expected to increase to 3.1 per cent.
The positive momentum,
anticipated to continue for a few more years, is also forecast to be across the board, where emerging markets and developing economies (EMDEs) are expected to do better than the rest of the world, where growth is projected at 4.5 per cent. The forecast for the Asian region, in particular, is that it will experience the fastest growth among other regions in the EMDE. This encouraging trend, according to the report, is due to some crucial factors, such as the recovery of global trade, investment, and manufacturing activities.
Of course, this trend is not without its downside risks,
as the report correctly pointed out. The risks, among others, are the issue of deep financial stress, the rise in geopolitical tensions, and an increase in protectionism.
All these, might, depending on their nature and magnitude, threaten the growth and development of EMDEs in the near future. It is also dependent on how well the EMDEs anticipate and
respond, and how resilient and strong their economic fundamentals are when confronted with these risks.
The report also disclosed some worrying trends, where it
sees the rate of growth of EMDEs to gradually slow down. The World Bank scenario suggests that the potential growth of EMDEs between now and 2027 may drop, on average, by 0.5 percentage points from the period of 2013 to 2017, and 0.9 percentage points below its average a decade ago. It also says, moving forward, a structural reform is necessary to offset this slowdown. One of the aspects of the reform is to improve the total factor productivity (TFP), which is the measure of output given the quantity of labour and capital.
Indeed, as far as boosting TFP is concerned, focusing on labour market reforms is paramount. It is also apparent that EMDEs have to find a new source of growth in the future as some analysts have argued that one of the reasons for the drop in TFP is the saturation of the information and communications technology (ICT) of the 1990s, which is the main source of their TFP growth. These are areas, which I think EMDEs have to prepare from now since the economic outlook is still good. We don’t know for sure for how long this is going to last.
Malaysia, in this regard, has made its move earlier. Under Vision 2020, Malaysia has reaped abundant opportunities from ICT, especially from the Internet. But, today, this may not be sufficient. To boost our TFP, we need to prepare for the inevitable fourth industrial revolution (4IR), which is basically about digital economy, artificial intelligence (AI), the Internet of things (IoT), cross border e-commerce, and many more.
This is what Transformasi Nasional 2050 (TN50) must emphasise on to prepare the nation and youth for the challenges of 4IR. The transformation has already started with the launch of the Digital Free Trade Zone last
November, which is the first in the world outside China. This is testament to the government’s vision and long-term economic plans. The appointment of
Alibaba Group executive chairman, Jack Ma as Malaysia’s
digital economy adviser, is another milestone for Malay sia, and Malaysians must tap the vast expertise from him to grow and develop in this industry.
To date, there are more than 2,000 small and medium enterprises (SMEs) registered under this new platform, and there are many programmes and incentives provided, such as the Malaysia Tech Entrepreneur programme to build this industry further.
But, I believe it is the education sector which needs to play a crucial role in the future, as we need to build the right ecosystem for the growth of digital economy, including producing a talent pool of e-commerce entrepreneurs.
Last year, as part of the joint effort between the Higher Education Ministry and Alibaba Group Limited, a memorandum of understanding (MoU) was signed between Universiti Utara Malaysia (UUM) and the Chinese Internet giant. (UUM) will be responsible for coordinating the joint effort which will benefit students in all public universities and polytechnics nationwide. Public universities and polytechnics will be offering programmes conducted with the collaboration of Alibaba Business School. UUM will also offer courses such as e-commerce, information technology, and big data.
Just a few days ago, an international training programme — the Global E-Commerce Talent (GET) “Train the Trainers” was conducted in UUM, where lecturers from six public universities attended the programme.
GET’s objective was to equip lecturers with the necessary knowledge and skills to groom students in their respective universities.
All these efforts are examples which prove that Malaysia is ahead of the curve and is serious in addressing the structural issues of the economy and boosting total factor productivity. This also means Malaysia is soon expected to “graduate” from the EMDE category and join the rank of high-income economies, as predicted by the World Bank.
Dr Irwan Shah Zainal Abidin is director of the Asean Research Institute of Banking and Finance, Universiti Utara Malaysia, and visiting research fellow in Islamic Finance at OCIS, Oxford University