Experts have described Malaysia's fall in a recent international competitiveness ranking as a "wake-up call" for the government to address the problems mentioned in the report.

The World Competitiveness Ranking 2024, issued by the Swiss-based International Institute for Management Development (IMD), placed Malaysia in 34th position out of the 67 countries on its list.

In addition to dropping seven spots from last year's ranking, Malaysia was also placed for the first time behind neighbours Indonesia and Thailand.

Speaking to MalaysiaNow, Doris Liew from Penang Institute said statements and rhetoric about the country's economic prospects were no longer sufficient.

"The reality is that our economy is facing significant challenges, and these urgently need to be addressed.

"The government must take concrete steps to address its weaknesses, including stagnant wages, outdated management practices, and lack of agility in responding to market changes," she told MalaysiaNow.

Following the release of the report, Investment, Trade and Industry Minister Tengku Zafrul Aziz said Malaysia's fall in the ranking was due to the value of the ringgit in addition to the use of data from the year 2023 to measure the country's competitiveness.

Zafrul also said that a decline in exports of electronics products last year had affected Malaysia's performance.

"This was in tandem with the slowdown in trade worldwide, but this year we can see that the sector has improved," he was reported as saying.

The decline in Malaysia's ranking this year was recorded in nearly all sectors including economic performance, government efficiency and business efficiency, although the country maintained its position in the infrastructure sector.

The IMD report also listed five challenges for Malaysia: investment in research and development to strengthen business resilience, labour market and workforce productivity, policies and regulations to improve global competitiveness, the use of advanced technology to accelerate productivity growth, and mitigating cost increases through productivity improvements.

In 2020, Malaysia was ranked at 27th spot, rising to 25th in 2021 before dropping the following year to 32nd and rising again to 27th in 2023.

In the latest edition, the domestic economy saw the most significant drop, falling 19 spots to 35th place.

International trade dropped three places to 17th, while the price factor dropped to second place.

Two factors that saw improvements were foreign investment and the employment rate, which rose by one and three notches respectively.

Liew agreed that the domestic economy and international trade had been affected by the fall in the value of the ringgit, and that trade balance was not in the country's favour.

She said the increase in deficit, as well as protectionist policies, also contributed to the fall in the ranking.

Analyst Lee Heng Guie said the government should look again at the areas that experienced a drop in ranking.

"The government needs to control the deficit and debt. This has been done with some subsidy rationalisation on diesel, and before that, electricity," said Lee, who is executive director of the Socio-Economic Research Centre.

"There should be social protection for the lower income group. Improving public finance should not burden businesses, which need to adjust their costs."

Lee also expressed surprise at the drop, saying Putrajaya should be able to at least maintain last year's ranking if it wished to achieve its goal of reaching 12th position.

"Malaysia's ranking dropped in most of the factors. So the government should work on the factors that they can improve to ensure that the ranking can improve consistently," he said.

A technological company founder meanwhile noted that rankings are the result of surveys based on perception.

He said this was why expectations, domestically and internationally, had been high in the wake of Prime Minister Anwar Ibrahim's appointment to the top office at the end of 2022.

Shahryn Azmi, co-founder of MakeTimePay, said that after more than two decades of leading the opposition, Anwar should have wasted no time in coming up with unique solutions to the challenges faced by Malaysia in the aftermath of the 1MDB scandal.

"But there were none. It took almost a year for a slightly amorphous economic plan to be announced and even then, it wasn't built on the critical points that stood out.

"If 100 business leaders and political heads were asked to describe Madani after its announcement, it's unlikely that anyone could have done it or done it right. There was thus a massive communication problem," Shahryn told MalaysiaNow.

He said the technology penetration rate was still limited in Malaysia, and that the popularity of social media or smartphones did not reflect a technologically advanced society.

"We still have knee-jerk manual solutions. We have yet to use knee-jerk tech solutions. This is why, for instance, we have massive over-reliance on foreign labour.

"Schools have not yet committed to the importance of technology as part of basic education for the masses, which is why we are now scrambling to force technology familiarisation onto university students."

Liew said while fiscal consolidation measures, industrial strategies and trade cooperation could improve Malaysia's competitiveness in the coming years, the government could not ignore the weaknesses listed.

"The government must take a more proactive and decisive approach to addressing these challenges rather than simply relying on optimistic projections and platitudes."

https://www.malaysianow.com/news/2024/06/25/fall-in-competitiveness-ranking-a-wake-up-call-for-putrajaya-experts-say