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Malaysia focused on 2020 vision

A polished voice reminds passengers over the tannoy that central Kuala Lumpur is just 28 minutes away.

Malaysians are regularly reminded of their long-term aspirations

Malaysians are justifiably proud of the high-speed rail link connecting their capital with its ultra-modern airport 30 miles south of the city.

The line - part of a huge investment in the transport system over the past 15 years - enables jet-lagged tourists to curl up in their hotel beds in double-quick time.

Just as importantly, it ensures that executives from the growing number of multinationals lured to Cyberjaya - Malaysia's new hi-tech city on the outskirts of KL - do not miss any important deadlines.

Fourteen-year countdown

Much of this development has taken place in the name of another deadline - one which has been the subject of public debate for 15 years and which policymakers dare not ignore.

In 1991, Prime Minister Dr Mahathir Mohamad grandly set out a vision of Malaysia becoming a fully developed country by 2020.

Despite industrialisation, the rural economy is still important

Malaysia is now more than half way through this 30-year journey and Dr Mahathir's successor as prime minister, the unobtrusive but respected Mr Abdullah Ahmad Badawi, knows the clock is ticking.

Unveiling the government's latest five-year economic blueprint earlier this year, Mr Abdullah said the 2020 goal was "challenging".

He acknowledged that much had to be done if the country's dream of achieving advanced social and economic status was to become a reality.

For this to happen, he said, the often stark economic inequalities which exist within Malaysia's diverse ethnic population of Malays, Chinese, Indians and other races had to be tackled.

Racial imperative

Malays have dominated the country's government and civil service since independence in 1957, but they lag well behind their Chinese counterparts in terms of average incomes and economic clout.

Economic disparities have narrowed since 1991, as poverty has been substantially reduced and unemployment has stayed low.

The government wants more Malays to own shares

But the government knows many people have been left behind - and the fruits of strong growth must be spread more widely and opportunities increased if the country's famed racial harmony is to be maintained.

Other worries include Malaysia's declining global competitiveness - it fell below neighbouring Thailand for the first time in a recent study - and the need to improve governance and public administration.

Most pervasive, however, is a sense that while Malaysia has made huge strides economically since 1991, its people, in terms of their mindset and outlook, have struggled to keep pace.

In the prime minister's own words, the country needs to "move away from the notion that it is a nation with first-class infrastructure but third-class mentality".

Signs of this anomaly were evident when Mr Abdullah recently visited Pulau Pangkor, a small island off the west coast of the country, for the inauguration of a planned fish farm and nature reserve.

Backers of the 100m Malaysian ringgit (£14m) biotechnology project - including Taiwanese company HiQ Biotech International - are eyeing up the huge Chinese export market for fresh fish.

Explaining its decision to invest in Malaysia, HiQ Biotech praised its political stability, infrastructure and the investment incentives on offer - factors which have also persuaded the likes of Dell and Tesco to announce new ventures here in recent weeks.

But while emphasising Malaysia's commitment to foreign investment, Mr Abdullah publicly warned the Malaysian boss of the business to work hard and not to let his foreign backers down.

Malaysians are urged to be more entrepreneurial but warned of risks

Later, he urged Malaysian entrepreneurs not to become greedy and to avoid diversifying before their core businesses were solid.

With a well-educated, English-speaking workforce, business-friendly government and strong transport infrastructure, Malaysia is well-equipped to compete in the global economy.

But critics fear that a lingering ambivalence over the social changes resulting from wealth creation, allied to the bureaucratic machine of a powerful state, could stunt growth.

Economic competence

Nevertheless, most experts forecast a rosy future for Malaysia's economy which - apart from 1998 - has grown every year since 1991.

The International Monetary Fund has praised the government's "skilful and pragmatic" handling of the economy and expects average growth rates of above 6% over the past decade to be maintained.

On a recent visit, EU Trade Commissioner Peter Mandelson held Malaysia up as a "showcase for rapid industrialisation".

Wealth generated by Malaysia's oil and gas reserves has bolstered the public finances, while the Malaysian ringgit has risen steadily against the US dollar since its peg to the currency was removed in 2005.

Below this apparently serene surface, however, there are doubts about Malaysia's capacity to drive its growth agenda.

Wealth gaps have narrowed but are still acute in some rural areas

Critics argue that red tape and outdated laws - such as preferential quotas for Malays in education and housing and restrictions on foreign interests owning Malaysian companies - are hampering growth.

More emphasis is needed on sectors like outsourcing, tourism and Islamic finance, where Malaysia can compete globally, rather than high-cost manufacturing industries such as the troubled car sector, they say.

"There is a reliance on old strategies and programmes - including failed or outdated racial-based ones in a wide range of sectors - which will adversely affect the country's competitive and human resource edge," argues Lim Teck Ghee, director of the Centre for Public Policy Studies.

Fast-growing companies need to be given incentives, whatever the ethnicity of their key players, Dr Lim says.

"Malaysian companies are uniquely constrained by outdated race-based social and economic policies that add considerably to the cost of doing business and prevent them from expanding more rapidly."

Neighbourhood rivalry

As well as the challenge of India and China, Malaysia faces fierce competition on its doorstop.

Singapore trumped Malaysia when it signed a free trade agreement with the United States in 2003, the first Asean member to do so.

This was particularly painful since Malaysia-US trade, now worth $44bn, comfortably eclipses that between Singapore and the US.

Malaysia remains an ally of the US and talks on a free trade agreement, now underway, could be concluded by 2008.

Publish Post The authorities have pledged to get to grips with entertainment piracy

One potential obstacle is US concerns over entertainment piracy.

Travellers on Malaysian buses can enjoy Mission Impossible III in its entirety although the film is not available on DVD, illustrating the scale of the problem facing the authorities.

Counterfeit DVDs and CDs are two a penny on Petaling Street in Kuala Lumpur, proving an inevitable draw for tourists.

The array of titles is as remarkable as the speed in which the hawkers hustle away their tables when policemen appear on the scene.

Malaysia is economically vibrant, but with 2020 on the horizon, its leaders will be as aware as anyone that appearances can sometimes be deceptive.