Title page
Contents
Foreword 4
Executive summary 9
1. Key policy insights 14
The post-pandemic recovery needs to be more inclusive and sustainable 15
A strong economic recovery needs supportive macroeconomic policies 17
Monetary policy should remain accommodative 26
Financial stability has prevailed, but risks remain 27
Fiscal policy should remain supportive 29
Anti-corruption remains a priority 35
The pandemic-hit labour market calls for more social protection 37
Malaysia needs to lower carbon emissions 48
References 58
Annex 1.A. Follow-up to past recommendations 62
2. Unleashing business dynamism for the post-COVID19 recovery 64
Malaysia needs to re-boost its productivity growth once again 65
Improving the business climate is crucial for the post-pandemic recovery 66
The pandemic calls for accelerating digitalisation 85
The pandemic has accelerated the transition to new forms of working 100
References 114
Annex 2.A. Demand fluctuation and productivity 120
Table 1. Growth is expected to rebound steadily 10
Table 1.1. Macroeconomic indicators and projections 16
Table 1.2. Stimulus packages have been large 23
Table 1.3. The pandemic is the present danger, but other lower-probability vulnerabilities exist 25
Table 1.4. Past recommendations on macroeconomic policies 33
Table 1.5. The fiscal cost of reforms is modest 34
Table 1.6. Past recommendations on public sector integrity 35
Table 1.7. Southeast Asian countries have pledged to reduce GHG emissions 48
Table 1.8. Past recommendations on green growth 48
Table 1.9. Table of Recommendations 56
Table 2.1. Digital uptake boosts firm-level productivity of services sectors 89
Table 2.2. Composition of respondents 106
Table 2.3. Table of Recommendations 112
Figure 1. Female employment has increased fast, but jobs are precarious 11
Figure 2. Malaysia needs to become greener 11
Figure 3. Barriers to competition are still high 12
Figure 4. Digitalisation boosts productivity 12
Figure 5. Digital infrastructure needs to be enhanced 12
Figure 1.1. Malaysia was hard hit by the COVID-19 outbreak, but it has recovered relatively fast 15
Figure 1.2. Recent macroeconomic developments 18
Figure 1.3. Malaysia has become a more domestic-demand-driven economy 19
Figure 1.4. Private consumption has become a key component in the economy 19
Figure 1.5. Exports by destination and products 20
Figure 1.6. Mobility has been severely restricted 20
Figure 1.7. Malaysia seeks to control the COVID-19 outbreak 22
Figure 1.8. Malaysia has imposed severe restrictions on economic activities 22
Figure 1.9. Malaysia's public health capacity is relatively high, and vaccination has picked up 24
Figure 1.10. Monetary policy has reacted promptly to the economic disruption 26
Figure 1.11. Recent developments in financial markets 28
Figure 1.12. The pandemic has rapidly worsened the fiscal position 29
Figure 1.13. Ageing-related spending will call for offsetting fiscal measures 31
Figure 1.14. Malaysia's social spending is low relative to total expenditure 31
Figure 1.15. Inequality has declined, but the tax and transfer system needs to be more efficient 32
Figure 1.16. Malaysia's tax revenue is low and has declined 33
Figure 1.17. Malaysia has stepped up its anti-corruption efforts 36
Figure 1.18. Malaysia's anti-money laundering has progressed 37
Figure 1.19. Malaysia's female labour participation rate has increased rapidly 38
Figure 1.20. The pandemic has affected females and young workers disproportionately 39
Figure 1.21. The job recovery of the self-employed has been weaker than for regular employees 40
Figure 1.22. Female self-employed workers increased, but social protection is weak 42
Figure 1.23. Poverty rates are high among elderly people 43
Figure 1.24. Many young workers have not yet come back to the labour market 44
Figure 1.25. Unemployment rates vary between different generations 46
Figure 1.26. Malaysia provides a significant number of jobs for non-Malaysian citizens 47
Figure 1.27. Malaysia's environment performance has improved, but more could be done 50
Figure 1.28. More liberalisation in the electricity market can be conducive to green growth 52
Figure 2.1. Malaysia needs to boost its labour productivity growth 65
Figure 2.2. Barriers to competition are high in Malaysia 66
Figure 2.3. Structural reforms are an ongoing process 67
Figure 2.4. Administrative burdens on start-ups are relatively high in Malaysia 68
Figure 2.5. Licences and permits to start a business are still burdensome in Malaysia 69
Figure 2.6. Lowering administrative burdens would stimulate new business creation 71
Figure 2.7. Improving insolvency regimes further could help stimulate business dynamism 72
Figure 2.8. Malaysia performs well in regulatory assessment 73
Figure 2.9. The share of services has increased rapidly 78
Figure 2.10. Several network sectors are strictly regulated in Malaysia 78
Figure 2.11. Malaysia's transport markets are more restrictive than those of OECD countries 80
Figure 2.12. Less restriction in professional services would foster productivity 82
Figure 2.13. Malaysia's retail services market is more restrictive than OECD countries 84
Figure 2.14. Online sales keep expanding during the pandemic 85
Figure 2.15. Digital uptake in Malaysia's businesses was evolving before the pandemic 87
Figure 2.16. In the services sector, SMEs adopting digital tools show higher labour productivity 88
Figure 2.17. Malaysia is open to digital trade, but could be more open to computer services 93
Figure 2.18. Malaysia is advanced in mobile broadband subscriptions, but less in fixed broadband 94
Figure 2.19. Malaysia's telecom market liberalisation has been progressing 95
Figure 2.20. Technology advance has changed the landscape of jobs 101
Figure 2.21. Demand for skilled jobs was robust during the pandemic 102
Figure 2.22. Demand for high digital skills would continue to increase 102
Figure 2.23. The pandemic has forced many workers to telework 104
Figure 2.24. Southeast Asian countries have experienced work from home during the pandemic 105
Figure 2.25. A number of managers and workers have positive views on teleworking 107
Figure 2.26. Managers find many obstacles to teleworking 108
Figure 2.27. Pandemic-induced teleworking will not continue in Malaysia while other countries will 109
Figure 2.28. Digital infrastructure is a major obstacle to teleworking in Malaysia 110
Boxes
Box 1.1. The targeted containment measures in Malaysia - a response to the COVID-19 pandemic 21
Box 1.2. Malaysia's main taxes 34
Box 1.3. An overview of Malaysia's pension system 43
Box 1.4. High unemployment of young people risks affecting their employability 45
Box 2.1. The role of technology in empowering economic regulators 75
Box 2.2. Initiatives to facilitate both domestic and foreign investments in Malaysia 77
Box 2.3. OECD Competition Assessment and Competitive Neutrality Assessment of the logistics sector in Malaysia 79
Box 2.4. Malaysia Digital Economy Blueprint - a national strategy for digitalisation 86
Box 2.5. Digital uptake and productivity - firm-level evidence in Malaysia 89
Box 2.6. New policy challenges posed by online platforms 97
Box 2.7. Telework Survey of the OECD Global Forum on Productivity for Malaysia 105
Annex Tables
Annex Table 1.A.1. Past recommendations on the other issues 62
Annex Table 2.A.1. Demand fluctuation affects the level of hotel occupancy rates 122
Annex Figures
Annex Figure 2.A.1. Productivity of the accommodation sector could be further improved 121