Malaysia needs to boost its competitiveness to maintain economic growth at 6.0 percent and keep pace with the dynamic economies of China and India, a business analysis group warned Monday.
"We see growth this year at about six percent ... (In) the longer term, Malaysia faces numerous challenges to keep its economy growing at a similar clip," said Justin Wood, a director at the Economist Intelligence Unit.
"Faced with a thundering China, a rising India and the rapid development of countries such as Vietnam, Malaysia needs to work hard at boosting its competitiveness," he told reporters.
Wood said Malaysia must invest in education and research and development, increase productivity, improve government effectiveness and transparency, and increase information technology and telecommunications usage. Malaysia's economic growth in 2007 will likely be driven by domestic demand as exports, especially of electronic and electrical goods, are expected to weaken due to softer global demand particularly the United States, he said.
Wood said private sector investment in plant and machinery, government expenditure on infrastructure projects and higher consumer spending are expected to boost domestic spending this year. Activity in the construction sector will increase and "possibly suggests that Malaysia is returning to the mega projects of the past," Wood said.
Prime Minister Abdullah Ahmad Badawi shelved several large-scale infrastructure projects when he came into power in 2003, citing a greater urgency to reduce a budget deficit swollen by years of pump-priming under former premier Mahathir Mohamad.
But Abdullah has now revived several projects under a five-year development plan launched last year, including the building of an economic hub known as the Iskandar Development Region in southern Johor state. Wood was speaking ahead of Tuesday's roundtable discussions between senior business and government leaders organised by The Economist Group. In March, the central bank said Malaysia's economy will expand 6.0 percent in 2007, up from last year's 5.9 percent.