Nobel Laureate Joseph Stiglitz: Malaysia Miracle, Transforming the country from Developing to a Developed Country

Istanbul, Turkey | October 03, 2007 by D-8 Secretariat

While certain media, columnist, and politicians in Turkey goes so far as pointing at Malaysia and fearing that Turkey would similarly turned into a “moderate moslem” country as Malaysia, since most of their moslem female population are wearing headscarfs - which is perceived as symbol of “backward Islamist” society, on the contrary, Nobel Laureates Joseph Stiglitz, a prominent economist of the US, praised the advancement of Malaysian economy as a miracle.

Stiglitz wrote that at independence, Malaysia was one of the poorest countries in the world. Its GDP (in purchasing power parity terms) was comparable to that of Haiti, and Honduras, and some 5 percent below that of Ghana. Today, Malaysia’s income is 7.8 times that of Ghana, and more than five times that of Honduras. In the global growth league tables, Malaysia is in the top tier, along with China, Taiwan, South Korea and Thailand.

Hard-core poverty is set to be eliminated by 2010, with the overall poverty rate falling to 2.8 percent. Malaysia has succeeded in markedly reducing the income divides that separated various ethnic groups, not by bringing the top down, but by bringing the bottom up.

Part of the country’s success in reducing poverty reflects strong job creation. While unemployment is a problem in most of the world, Malaysia has been importing labor. In the 50 years since independence, 7.24 million jobs have been created, an increase of 261 percent, which would be equivalent to the creation of 105 million jobs in the United States.

Malaysia attained success by taking an alternative course, looking instead to the highly successful countries of East Asia. It invested in education and technology, pushed a high savings rate, enacted a strong and effective affirmative action program, and adopted sound macroeconomic policies.

Malaysia also recognized that success required an active role for government. It eschewed ideology, following or rejecting outsiders’ advice on a pragmatic basis. Most tellingly, during the financial crisis of 1997, it did not adopt International Monetary Fund (IMF) policies — and as a result had the shortest and shallowest downturn of any of the afflicted countries. When it re-emerged, it was not burdened with debt and bankrupt firms like so many of its neighbors.

This success was, of course, not only a matter of economics: had Malaysia followed the policies recommended by the IMF, it would have torn apart the social fabric created over the preceding four decades.

“Malaysia’s success thus should be studied both by those looking for economic prosperity and those seeking to understand how our world can live together, not just with toleration, but also with respect, sharing their common humanity and working together to achieve common goals,” concluded Stiglitz.

D-8 Secretary General personally also regrets the misapplied comparation of Malaysia and Turkey that triggered a heated debate in the Turkish media recently. He believes that with current Malaysian good economic performance, soon Malaysia transformed to be a developed country. This advancement and the sucess of Malaysian economy is the benchmark for other D-8 member states.

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