The Finance Ministry recently pronounced that building economic resilience matters more than worrying about gross domestic product (GDP) growth. I cannot agree more.
In a world that is becoming increasingly volatile and uncertain, effectively managing economic disruptions is critical. Economists have offered tested strategies to build the country’s economic resilience. But executing such strategies calls for collaboration, persistence and patience.
If conflicts and natural disasters have long been the usual roots of disruption, the new source now lies in trade disagreements.
The United States – the world’s largest economy – has argued that globalisation has hurt its domestic industries. As one of the biggest buyers of global goods and services, such a stance has rattled its trading partners. Malaysia is no exception. And we must deal with this.
Malaysia’s economy has long relied on growth driven by exports – particularly palm oil and electronics – foreign investment, and domestic consumption. However, global shocks such as the pandemic and climate change have exposed vulnerabilities in this model.
We need to build economic resilience – the ability to withstand shocks, adapt, and recover. Many now agree this must take precedence over short-term, debt-fuelled or environmentally unsustainable growth.
Resilience matters more than growth. It will help us manage our vulnerability to external shocks.
Malaysia’s export-dependent economy – with over 70 per cent of GDP tied to trade – is highly sensitive to global demand fluctuations. Our over-reliance on foreign labour also creates systemic risks, as seen during the Covid-19 disruptions.
Economists also point to several structural weaknesses. Our middle-income trap, stagnant wages, low productivity growth, and brain drain continue to hinder long-term competitiveness. Another concern lies in our debt and fiscal risks – household debt now stands at 84 per cent of GDP, and our subsidy dependence further strains public finances.
There are also climate and resource risks. Palm oil and fossil fuels – still our top revenue earners – both face mounting sustainability pressures, such as EU deforestation laws and global carbon taxes. Extreme weather events, floods, and haze disrupt agriculture, infrastructure, and supply chains.
We need workable strategies for building economic resilience.
Diversifying the economic base is seen as paramount. We should expand our high-value services such as the digital economy, Islamic finance, and medical tourism. We also need to strengthen domestic demand through SME (small and medium enterprise) growth and rural entrepreneurship.
Localising critical industries is also a form of economic diversification. The food sector is one area that needs urgent focus. We must boost food security and reduce our 60 per cent dependence on food imports. At the same time, we should invest in building out the renewable energy industry.
Strengthening social and labour resilience
It is imperative that we upskill our workforce. Technical and vocational education and training (TVET) programmes must align with automation and artificial intelligence (AI)-driven job markets, while also reskilling displaced workers for green jobs.
We must provide stronger social safety nets. This includes expanding unemployment insurance and adaptive welfare programmes.
At the same time, fiscal and financial shock-proofing need to be strengthened. The government has taken a good first step by initiating debt and subsidy reforms. We have started replacing blanket fuel subsidies with targeted cash aid. There is also a need to incentivise private investment in research and development (R&D) through tax breaks.
Creating sovereign resilience funds is also strategic. This involves establishing strategic reserves to help manage commodity price shocks, for example.
We must invest in climate and infrastructure adaptation. A green industrial policy is already on the national radar. Investing in the circular economy – which focuses on resource efficiency and waste minimisation – would be a major step forward. Carbon pricing is a necessary enabler, and its implementation is expected under the 13th Malaysia Plan.
We have experienced repeated economic upsets as a result of natural calamities – all the more reason to invest in disaster-resilient infrastructure. This includes upgrading drainage systems, flood barriers, and decentralised energy grids, among others.
Governance and institutional reforms are also key to building resilience. Open procurement systems and strengthening the Malaysian Anti-Corruption Commission are essential. Decision-making needs to be decentralised, including greater empowerment of state and local governments.
The secret is to strive for balanced growth. Malaysia must pivot from growth-at-all-costs to resilience-by-design. This means prioritising productivity over cheap labour, investing in diversification over commodity booms, and embedding sustainability into all aspects of economic planning.
Key metrics for success should include GDP growth stability (reduced volatility), employment resilience, and a diversification index (such as a Gini coefficient for sectoral balance).
By anchoring policies in resilience, Malaysia can achieve sustainable prosperity – growth that lasts and benefits all.
A key policy recommendation is the adoption of a National Economic Resilience Act to institutionalise these reforms beyond political cycles.
Only then can we achieve sustained resilience.
The views expressed here are the personal opinion of the writer and do not necessarily represent that of Twentytwo13.
