"IS becoming a high-income nation all that matters?" It's a question that cuts to the heart of Malaysia's economic aspirations.
Recently, Economy Minister Rafizi Ramli announced that Malaysia is on the cusp of achieving high-income nation status. This milestone, while impressive on paper, exposes a deeper and more troubling narrative: the disparity in development between regions.
The SG4 states - Perlis, Kedah, Kelantan and Terengganu - are home to 17.3 per cent of Malaysia's population but contribute a mere 7.3 per cent of the nation's GDP. Compare this to Selangor and the Federal Territories, which together drive over 40 per cent of Malaysia's GDP and stand as shining beacons of development.
What emerges is a tale of two nations within one: a vibrant, urban Malaysia that has already crossed the threshold of "developed," and another Malaysia that remains stuck in a slower gear.
The glittering skyline of Kuala Lumpur and the industrial might of Selangor showcase what is possible when infrastructure, investment, and innovation converge.
Meanwhile, the SG4 states grapple with underinvestment, limited access to high-quality jobs, and an exodus of talent.
The question is not just whether Malaysia can achieve high-income status as a whole, but whether the benefits of that status will be equitably shared. A nation cannot truly call itself "developed" when nearly one-fifth of its population is left behind.
The high-income dream must not obscure the pressing need for inclusive growth, where all Malaysians - regardless of their postcode - can participate in and benefit from the nation's prosperity.
What is GDP? It's the sum of goods and services produced within a country - a snapshot of economic activity, not a blueprint for economic welfare.
GDP measures production, investment, and consumption, but it leaves out critical elements of a nation's true health: inequality, environmental degradation, and social well-being.
It can count a factory's output but not the forests it cuts down; it tallies profits but not the lives spent earning minimum wage.
In Malaysia, this distinction becomes stark when viewed through the lens of its "two nations."
Rust Belt
On one side, you have the SG4 states - Perlis, Kedah, Kelantan and Terengganu - a Malaysian Rust Belt where economic activity is muted, opportunities scarce, and poverty persistent.
These states lag behind, underdeveloped and neglected, their GDP contributions a mere fraction of the national total.
Vulnerable and impoverished, many of their residents leave for Selangor and Kuala Lumpur, Malaysia's glittering growth engines, to seek employment. Yet even as these migrants fuel the productivity of urban centers, their home states remain stuck in a cycle of stagnation.
This is the GDP paradox: while the economy grows, the disparity widens. If GDP is Malaysia's scorecard, then the game isn't over until prosperity reaches the forgotten corners of the nation.
True progress lies in bridging these divides, ensuring that the ladder of opportunity extends to every Malaysian, not just those in the economic winners' circle.
Imagine Malaysia without Selangor and Kuala Lumpur. Stripped of its shiny skyscrapers, bustling highways, and dazzling malls, it would be like losing the crown jewel of its economy —a catastrophic blow to the nation's fiscal federalism.
These regions, already developed by most measures, are not just economic engines; they are Malaysia's face to the world, its financial heartbeat, and its innovation hub.
If a hypothetical secession were to occur, Malaysia would be left grappling with a harsh new reality, one more akin to a struggling nation in the Global South than an aspiring high-income economy.
Selangor and Kuala Lumpur contribute more than 40 per cent of Malaysia's GDP and are home to key industries, financial institutions, and infrastructure that bind the country together. Without them, the remaining states - especially the SG4, already grappling with underdevelopment - would be left to shoulder a disproportionate fiscal burden.
Federal revenues, heavily reliant on these urban powerhouses, would plummet, leaving Malaysia to navigate a bleak landscape of budget deficits and stalled development. This isn't just a nightmare scenario; it's a wake-up call. Malaysia's unity, prosperity, and identity hinge on bridging the divide between its developed and underdeveloped regions, not carving them apart.
A nation's strength lies not in the wealth of its most glittering parts but in the resilience and inclusion of its whole. Without Selangor and Kuala Lumpur, Malaysia would lose not only its economic edge but also its vision of a shared future.
The Limitations of Economic Modeling
While Malaysia is poised to meet the World Bank's high-income economy benchmark based on Gross National Income (GNI) per capita, the real question is: can historical performance reliably predict future success?
The answer is less certain. Economic projections, often grounded in modeling and trend extrapolation, are reasonably accurate in the short term - next year or the year after. But as the timeline stretches, these assumptions grow increasingly tenuous.
A nation's development trajectory can falter without constant renewal, particularly when economies rely on outdated technologies or fail to innovate - what economists term 'technological obsolescence.'
Take the United States as an example. Its economy continues to grow, not simply because of size or scale, but because of relentless technological innovation.
From genomics to artificial intelligence and advanced computing, the US thrives by constantly reinventing itself. Without this culture of innovation, even the American economy could stagnate, overtaken by more agile and inventive players.
Malaysia, too, must focus on economic rejuvenation - investing in cutting-edge industries and technologies - to avoid the pitfalls of stagnation and ensure its path to sustained prosperity.
Addressing Disparities
Five powerhouse regions - Kuala Lumpur, Selangor, Penang, Johor, and Melaka - contribute a staggering 62 per cent of GDP while hosting just under half the country's population.
Meanwhile, the remaining nine states lag behind, grappling with slower development and limited opportunities. This disparity isn't just a statistic; it's a growing divide with the potential to fracture national cohesion if left unaddressed.
As Malaysia nears the World Bank's threshold for high-income status, the question arises: high-income for whom?
For some regions, the dream of developed status is within reach, but for others, it remains a distant goal.
Without focused intervention, the slower-growing states risk falling further behind, leaving their residents trapped in a third-world reality within a nation labeled as first-world. This imbalance threatens to turn Malaysia's high-income status into a statistical mirage - where progress is celebrated in isolated pockets but remains elusive for the majority.
Ultimately, the solution requires a unified effort transcending political divisions. Federal and state governments must work hand-in-hand to accelerate growth in lagging regions, integrating them into the broader narrative of national success.
Malaysia's inherent advantages - favourable geography, resource abundance, multicultural diversity, and a legacy of strong institutions - provide a solid foundation. Yet these strengths must be harnessed through policies that promote connectivity, inclusivity, and sustainable development.
*The writer is an adjunct lecturer at Universiti Teknologi Petronas, international relations analyst and a senior consultant with Global Asia Consulting. He did his graduate studies at Macquarie University in Sydney, Australia.