THE LEGATUM PROSPERITY INDEX™ 2016

Bringing Prosperity to Life

Malaysia

Ranked 38th of 149

At a glance

Ranks

38 th on the Legatum
Prosperity Index™

23rd
16th
40th
31st
37th
58th
112th
33rd
49th

SUB-INDEX RANKINGS

In the Prosperity Sub-Index rankings, Malaysia performs best on Business Environment and Economic Quality and scores lowest on the Personal Freedom sub-index.

Visit our Rankings table to see how Malaysia compares to other countries.

Prosperity Gap

The ‘Prosperity Gap’ takes a country's GDP and uses it as the yardstick to measure a nation's expected Prosperity Index ranking.

Malaysia delivers as much prosperity as expected given its wealth, though this is down from a small prosperity surplus in 2007. Despite this, Malaysia’s performance compares well to countries with a similar GDP per capita, such as Greece and Lithuania, which under-deliver prosperity. However, considering that Malaysia is one of the richest and most prosperous countries in South East Asia, it significantly under-delivers prosperity compared to its regional peers, especially Cambodia, Vietnam and the Philippines who have a very large prosperity surplus.

Note:
In the chart above, each dot represents a country. The curve shows the general tendency with which prosperity increases as GDP per capita increases. If a country falls below the curve, then we can say that compared to all other countries, it is under-delivering prosperity for its citizens. Likewise, if a country rises above the curve, then we can say that it is over-delivering prosperity for its citizens. Learn more about the Prosperity Gap here.

Alternatively, have a look at the Prosperity Gap view on our Rankings table for a full list of countries and to see how each of them are performing on the various sub-indices.

Commentary

The Prosperity Index portrays Malaysia as a symbol of stability since 2007, with a strong economy, highly competitive business environment, good education, and cohesive society. Steady growth has been well translated into good economic quality in Malaysia. With a similar GDP to some European countries such as Estonia and Lithuania, the best relative poverty rate in the ASEAN group, and an unemployment rate of two percent, well below the regional average of 3.3 percent, Malaysia is forging itself a path to prosperity and is close to catching up with the OECD.

There are still gains to be made however, as recognised by the country’s New Economic Model introduced in 2010 which aims for Malaysia to reach a high income status by 2020. It includes mechanisms to encourage private sector growth and to diversify the economy from commodities into higher value added activities in both industry and services. This should improve export quality and diversity, two areas of the Economic Quality sub-index where Malaysia is still below the regional average. While market liberalisation and political stability has brought a lot of foreign direct investment, the payoff has not been felt by all. The country may have the best anti-monopoly policy in East Asia following Singapore and Japan and the lowest prevalence of non-tariff barriers after Singapore, but Malaysia’s female labour force participation is 47.2 percent, the lowest figure in South East Asia and one which has hardly increased since 2007. The economy is liberalising, bringing promising prospects for prosperity growth, but improvements can still be made.

Due to its economic success and encouraging private sector growth policies, Malaysia performs impressively in the Business Environment sub-index where it is ranked 16th. The ease of starting a new business has increased by 25 percent since 2007 and is the highest in the region after Singapore. This is matched by the perception of the ease of starting a new business which has correspondingly increased by 25 percent in the same time. Various measures have been undertaken, from tax to social security efforts, to encourage local entrepreneurs and radically reduce the time required to start a business so that it now takes less than six days. Further factors contributing to this success are Malaysia’s high affordability of financial services and ease of obtaining credit which are both above the OECD average.

This economic progress, that has often challenged existing social structures elsewhere in Asia, has not come at the cost of Malaysian society. The country has risen 27 ranks in the Social Capital sub-index in the last decade, driven by rising altruism, growing social trust, and greater civic participation. However, with market liberalisation has not come personal freedom. The nation ranks just 112th globally in the Personal Freedom sub-index.

Malaysia’s Personal Freedom is lower than the regional average and continues to sit far behind the OECD average.
Malaysia’s Personal Freedom is lower than the regional average and continues to sit far behind the OECD average.

Malaysians’ satisfaction with their freedom has declined by 18 percent between 2007 and 2016. In many ways, this is unsurprising. LGBT rights are absent, the country has the highest government religious restrictions in South East Asia after Indonesia, and low press freedom. In contrast, Malaysia has few social religious restrictions, and general LGBT tolerance, although still low, has improved steadily in the last decade, slowly catching up with the regional average. These results suggest that the government seems to be holding back Personal Freedom in Malaysia rather than social convention. Although ranked 2nd best in Southeast Asia for Governance, Malaysia’s low Personal Freedom score suggests that its political stability has come at price. If Malaysia is to compound impressive economic and social improvements to reach the global top 30, market liberalisation must be matched by the freeing of its people.


Ways to make a change

Click on the Tweets to help make a change in your nation.


Data

How to read this graph:
When comparing multiple countries on a spider chart, data points that appear
further away from the center represent a better performance to the points that are closer to the center.