The Year 2020

There was much excitement in Malaysia when Vision 2020 was unveiled some 30 years ago. Vision 2020 was heralded as the game changer that would hugely transform the Malaysian economy. There was much hope — not to mention the hype — that Malaysia could finally take off on a long ambitious journey towards the coveted developed-country status.

It even seemed easily doable in the early 1990s when the Malaysian economy was flying high at near-double-digit GDP growth rates. Calculations showed that it would take annual GDP growth of only 7%, on average, for the country to reach the high-income goal. The benchmark for a high-income economy was then set at US$10,000 per capita by the World Bank. The assumption then was that this was within striking distance, as Malaysia’s potential growth rate was high enough to reach this target.

However, subsequent regional and global happenings revealed how wrong our visionaries were in their assumptions. The China factor was not adequately factored in. When China woke up from its slumber and entered the global arena with an open economy, it became a completely new ball game. The old equations were no longer tenable or relevant. China became a gigantic black hole that could suck in foreign investments, diverting foreign direct investment (FDI) flows away from Southeast Asian countries.

With FDI drying up, huge balance of payments deficits were financed largely by portfolio investments that were footloose. This was indeed the case not only in Malaysia but also its neighbours, especially Thailand and…