KUALA LUMPUR: Malaysia is still facing several structural challenges that need to be addressed to escape the middle-income trap, according to the Economy Ministry.
These challenges include slow productivity growth, insufficient levels of innovation and technology investment, development and income disparities between regions, and limited fiscal space for the government, the ministry said.
“Addressing these issues consistently and in an integrated manner is an important prerequisite to ensure that structural economic transformation can be achieved sustainably and inclusively,” the ministry said in a written reply to the Dewan Negara on the Parliament website on Wednesday.
It was responding to Senator Datuk Rosni Sohar, who asked about the structural economic changes being implemented to ensure Malaysia does not remain stuck as a middle-income country, especially as other regional countries are transitioning more rapidly toward high-value economies.
The ministry said a more comprehensive approach under the MADANI Economy framework and the 13th Malaysia Plan (13MP) will help realise the country’s aspirations to address structural economic challenges and achieve high-income nation status.
“This approach includes continued emphasis on efforts to boost productivity and strengthen economic diversification through the production of high-value, higher-complexity ‘Made by Malaysia’ products and services, particularly in strategic sectors.
“The main focus includes driving high-growth, high-value industries and strategic sectors such as AI technology, semiconductor reform, and the clean energy transition,” it said.
Additionally, the ministry said labour market reforms, particularly through periodic reviews of the minimum wage, taking into account the concept of a living wage and the implementation of the Progressive Wage Policy, help ensure workers receive fair compensation.
“This step is important to ensure workers earn sufficient income to cope with the cost of living and improve their quality of life in line with national income growth,” it said.
Meanwhile, the Economy Ministry said reforms in human capital development are being strengthened through improving the quality of technical and vocational education and training, digital skills training and AI, as well as efforts to close skills gaps in high-technology sectors.
“Increasing labour productivity is central to the strategy to accelerate Malaysia’s transition to a high-income nation,” it said.
As of 2026, Malaysia remains in the upper middle-income category, with gross national income (GNI) per capita of RM57,070.
Based on the criteria set by the World Bank in 2024, the threshold for high-income status must exceed USD13,935, or about RM60,000.
The threshold for 2025 will be released by the World Bank in July 2026.
Malaysia, Indonesia and Thailand are in the same income category, while other ASEAN countries – except for Singapore and Brunei – remain in the lower middle-income group.
According to the Economy Ministry, taking into account the various priorities, strategies and initiatives outlined in 13MP, the country’s GNI per capita is expected to rise to RM77,200 by 2030, thereby achieving high-income nation status by the end of the 13MP implementation period.
“This achievement, however, depends on current economic growth performance at an average rate of between 4.5 per cent and 5.5 per cent per year, strengthening of the foreign exchange rate, and favourable prospects for strategic investment,” it said. – BERNAMA
