• Sunday, September 24, 2023
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Malaysia shows Nigeria how to close income inequality gap

Malaysia shows Nigeria how to close income inequality gap

In a space of 20 years, Malaysia has grown its income per person, what economists call GDP per capita by nearly three times from $4,000 to $11,200 in 2021.

What is going on there, 10,000km away, shows how Nigeria can improve the economic lifestyle of its over 200 million citizens whose living standards either worsened or stagnated after the economy exited recession.

Although Nigeria was growing faster than Malaysia by the last quarter of 2014, however, in less than seven years Southeast Asian country has learned how to use its relations with the rest of the world to benefit its citizens and organisations in economic terms.

According to a 2021 report by the World Bank, Malaysia is one of the most open economies in the world with a trade to GDP ratio averaging over 130percent since 2010.

Openness to trade and investment has been instrumental in employment creation and income growth, with about 40 percent of jobs in Malaysia, linked to export activities.

Read also: Poverty in Nigeria lingers on the back of FG’s Inefficiency

The World Bank expects Malaysia’s exports to jump to 11.2 percent in 2021, a significant rebound from the -8.9 percent seen in 2020, as global demand stabilizes and investments in export-related activities continue to improve.

Malaysia‘s Gross national income (GNI) per capita, which provides a rough measure of annual national income per person, is at $11,200 according to the latest estimates from World Bank, only $1,335 short of the current threshold level that defines a high-income economy.

Progress towards the threshold has been slowed by the impact of the COVID-19 pandemic however, the Malaysian government has undertaken bold reforms to sustain future growth and to ensure that the proceeds of growth benefit all segments of the population.

For instance, Malaysia’s next five-year socio-economic development blueprint under the 12th Malaysia Plan will feature the government’s priorities on various matters such as tackling poverty among Malaysians and continuing the empowerment of the majority group to reduce disparity with other ethnic groups

“The 12th Malaysia Plan is the vehicle through which the Government aims to steer Malaysia’s recovery from COVID-19 and propel the country towards high-income and developed country status,” said Victoria Kwakwa, The World Bank’s Vice President for East Asia and Pacific.

The government had previously introduced the Shared Prosperity Vision (SPV) 2030 as a continuation of Vision 2020, with SPV 2030 aimed at enabling all Malaysians to have a decent standard of living by 2030.

The SPV 2030 has three main objectives of development for all, addressing wealth and income disparities and building Malaysia as a united, prosperous, and dignified nation.

Malaysia’s Prime Minister Tan Sri Muhyiddin Yassin noted that SPV 2030 would be implemented via the 12th Malaysia Plan (2021-2025) and the 13th Malaysia Plan (2026-2030), with the 12th Malaysia Plan aimed at achieving a Malaysia that is “prosperous, inclusive and sustainable”.

He said the policies and strategies that are being framed under the 12th Malaysia Plan show the commitment of a government that cares about the public’s problems and places Malaysia’s economy on a stronger and more competitive pathway.

Unlike Malaysia, Nigeria has been unable to harness the economic potential of its $400 billion economy in solving its gross income inequality and poor distribution of wealth which have ensured that many of its citizens do not benefit from this wealth, with about 100 million living in poverty.

Over the years, Nigeria’s economy has grown without creating adequate opportunities for the broader population. Resources are unevenly distributed, resulting in persistent inequities across generations and regions.

Few job prospects met by a high concentration of economic opportunities (beyond agriculture) in a handful of cities like Lagos and Port Harcourt have left residents of other cities to lag behind in wages and living standards.

Analysts have said Nigeria’s economy could grow as much as 11 percent if it channels the huge amount of money it spends on fuel subsidy into reforming its social security, education, agriculture, and health sector.

These reforms would enable the country in tackling its current illiteracy rate that is making the populace ignorant of the right to health care and access to credit facilities, according to Charles Robertson, global Chief Economist for investment banking and advisory firm, Renaissance Capital.

UK-based Oxfam International in a report stated that economic inequality in Nigeria has reached extreme levels, despite being the largest economy in the continent. The country, it noted, has an expanding economy with abundant human capital and the economic potential to lift millions out of poverty.

The report further stated that the combined wealth of Nigeria’s five richest men, which is at $29.9 billion, could end extreme poverty at a national level, but demurred that in the face of such stupendous wealth, five million Nigerians face hunger.

“Nigeria needs to find sustainable ways to fund its education and health sector if it wants to empower its citizens and one of such sustainable strategies is through the adoption of endowment funds, which have successfully established in the West and will take little or nothing to implement in Nigeria,” PricewaterhouseCoopers (PwC) said in its report titled ‘Closing social infrastructural gap’.

Endowments are restricted funds that are essentially got from charitable donations, private investments, among other sources. This becomes the principal, which is then invested with a fund manager to earn income. The income earned is then used for very specific purposes that are articulated in a charter.