PUTRAJAYA (Nov 14): Malaysia must re-evaluate its economic strategy to balance growth with social equity, said veteran economist Dr Nungsari Ahmad Radhi, stressing the need for a structural shift in the country’s factors of production, particularly labour, land, and capital, to stimulate sustainable economic growth and improve income distribution.

Nungsari, who is chairman of Khazanah Research Institute and a member of the Policy Advisory Committee to the Prime Minister, said the focus of economic policy must shift towards encouraging investment in high-growth, high-risk sectors that can offer long-term solutions to Malaysia’s income inequality issues.

“Currently, we are using a lot of our domestic capital to maintain the status quo, focusing on traditional sectors like plantation, real estate, and utilities. These sectors provide good dividends, but they are not driving the growth we need,” he told The Edge after delivering his keynote speech at the Perdana Discourse Series, organised by the Perdana Leadership Foundation.

“We need to sort out the production function of the economy. What we do, what firms do — it’s time to rethink the way we use these resources,” Nungsari added.

The economist noted that many of Malaysia’s large companies, particularly those in established sectors like Tenaga Nasional Bhd (KL:TENAGA), Telekom Malaysia Bhd (KL:TM), and Malaysia Airports Holdings Bhd (KL:AIRPORT), have become “good dividend companies”. But while they are stable, they are not innovative enough to generate significant growth in share prices, he said.

This lack of dynamism, Nungsari argued, hampers Malaysia’s overall economic potential and fails to create sufficient opportunities for future generations.

One of the fundamental issues facing Malaysia’s economy is the lack of “risk capital”, he said, referring to funds allocated for high-risk, high-reward investments.

“I’ve met many start-ups that have great ideas and potential, but without adequate support, they cannot survive,” Nungsari said. “We need a different mandate [for government funds] — one that fosters new firms to do new things.”