STRIKING A BALANCE

Malaysia 2019 | ECONOMY | INTERVIEW

Malaysia's 2019 budget looks promising, according to the World Bank, though it must invest in education and human capital development if it is to reach developed country status.

Firas Raad
BIOGRAPHY
Firas Raad, a Jordanian national, is the World Bank Country Manager in Malaysia. He was formerly the Country Manager for Kuwait. Raad joined the World Bank in 2002 as a Senior Health Policy Specialist. More recently, he was working in the Health, Nutrition and Population (HNP) Global Practice. Prior to 2009, Raad focused on implementing health sector reforms in Lebanon, Palestine and Egypt. He also served as the World Bank Human Development Coordinator for the GCC countries. Between 1997 and 2000, Raad was the Private Secretary for Health Affairs in the Royal Jordanian Court providing health sector reform policy advice. He holds a PhD in international health policy and economics from the Harvard School of Public Health, and a master’s degree in international relations from the Johns Hopkins School of Advanced International Studies.

How do you assess the measures taken by the Malaysian government in the 2019 budget to restore fiscal buffers, improve governance, and regain consumer and investor confidence?

It is important to see the budget and policies for 2019 within the context of Malaysia's broader development narrative. The development model of this country has traditionally been based on an export-oriented strategy. Recently, however, questions have been raised about the appropriateness of this model going forward and how Malaysia can shift to a new development model to further climb up the income ladder and reach high-income and developed country status. Part of this challenge is boosting education outcomes and productivity growth. When the new government assumed power, there were a number of challenges it had to confront, and the budgetary cycle was an opportunity for it to unveil its policy directions vis-a-vis these challenges. In the near term, it had to manage its budget and fiscal position, grow the economy, give confidence to the private sector, and protect the vulnerable in society. The government knew it had to strike a careful balance, and we were fairly pleased that the budget included a number of pragmatic elements. We are still fairly positive as the economy still rests on strong fundamentals.

What are your expectations around the impact of the National Industry 4.0 Policy Framework on the performance of Malaysia's manufacturing industries?

In October 2018, the National Industry 4.0 Policy Framework was launched. Its success will ultimately rest on the ability of firms, particularly SMEs, to adopt new digital technologies. This framework will have to tackle issues like providing credit to firms that need it and getting connected digitally. Our recently completed report on Malaysia's digital economy found that the country was doing fairly well in terms of connectivity and e-services, both on the government and individual levels. The digital adoption rate of firms in Malaysia, however, is relatively low compared to other regional countries. One key factor was the comparatively high prices for fixed broadband services and a lack of competition. The government is now encouraging greater competition in the telecoms sector, which is leading to lower prices and higher digital adoption.

How does the World Bank support Malaysia toward realizing better human capital?

Human development outcomes around the world need to improve if we are to meet the Sustainable Development Goals (SDGs) by 2030. Over the last two decades, there has been a real emphasis on the development of human capital by various organizations. There has also been a recognition that we are not moving fast enough as a community of nations to meet the challenges of human capital accumulation, particularly in health and education. In the health domain, there are twin challenges of infectious diseases and non-communicable diseases. On the education front, the latest World Development Report highlighted that enrollment rates are insufficient as an indicator of progress; we also have to look at learning outcomes. To that end, the World Bank introduced the new Human Capital Index in 2018, which provides a measure of the future potential of a child born today given the prevailing human development conditions in her or his country. It is both astonishing and encouraging that four of the top five performers of the HCI came from the East Asia and Pacific region. Malaysia did well in certain areas but lagged behind in other areas. The two areas where improvements are needed are in childhood stunting and the quality of education. Another area of concern is the quality of education. The country's most recent scores in education do not compare as well as those of its aspirational peers. We hope to support the government in its efforts to make improvements in this critical area for development.