Bangkok, January 13, 2014 — The Asia Foundation in Bangkok today launched a new study, Middle-Income Trap: Economic Myth-Political Reality: Case Studies from Malaysia and Thailand. The report is based on case studies from Thailand and Malaysia, and uses the framework of the “middle-income trap” (MIT) concept to focus on key challenges to growth in both countries, as viewed from a political economy perspective. This report was launched in Kuala Lumpur on January 7.
While Asia continues to set pace as the world’s fastest growing region, some Asian middle-income countries (MICs) are showing signs of economic slowdown and face stiff competition from lower-cost economies. The implications that could result from this economic growth slowdown in MICs are of serious concern to economists and political decision-makers.
“New economic reforms and, more importantly, improved governance, are key if Asia MICs such as Thailand and Malaysia, the two countries profiled in this research initiative, are to graduate to upper level incomes and avoid the middle-income trap,” said Véronique Salze-Lozac’h, the Foundation’s chief economist and director of Economic Development.
The MIT concept refers to the risk of a country that has experienced rapid growth based on low-wage, unskilled labor, low-added value manufacturing, and heavy reliance on exports, stagnating at the middle-income level and failing to graduate to upper-income status. Both Thailand and Malaysia have advanced to upper-middle-income status, per the World Bank’s classification of economies according to their gross national income (GNI) per capita.
The Asia Foundation has a long history of supporting inclusive and sustainable economic growth across Asia through both public and private channels incorporating a political economy approach to development.
Ms. Salze-Lozac’h continued: “These case studies examine the underlying dynamics that are deterring meaningful structural reforms in Thailand and Malaysia. Reforms continue to be shaped by the context of political decision-making, and how politics affect economic choice; for example, influential networks, the capture of power by elites, or entrenched and unaccountable interests at the national and local levels can undermine or block change measures.”