Tan Sri Wan Abdul Aziz Wan Abdullah - the secretary-general of Treasury, Ministry of Finance, Malaysia wrote in The Star on 14 September 2009 in relation to Redefining Malaysia's Growth Model.
In it, he writes about the need to address new areas of economic growth - to move away from low value economic activities and reliance on low cost labour. He mentions a number of policy areas, but most importantly is our direction on human capital. Some excerpts from the article:
Now, we are at a critical juncture in our economic development path. While the input driven model was successful in transforming the Malaysian economy, there are now signs that export value-added is stagnating and investment by and large, is not contributing to the widening nor deepening of the product mix.
Depending too heavily on the external sector now is no longer an option. It is also not serving to increase domestic value-added through backward and forward linkages. Furthermore, investment is not building research capacity and domestic innovation capability.
In addition, companies operating in Malaysia are too dependent on cheap and low-skilled foreign labour, especially in the manufacturing and services sectors. Private companies are still reluctant to innovate and invest in labour saving technology and new production techniques. These conditions have led the our economy into the middle-income trap.
Transforming from the above model would require significant upheavel and reforms in a number of areas. The middle income trap that is mentioned above is very dangerous because it is comfortable. Unlike the low levels of poverty that drove our industrial model, the current middle income levels are considered satisfactory for many. Hence, moving out of this comfort zone is going to be very difficult.