To achieve high income status, Malaysia needs institutional reform

MALAYSIA's aspirations to achieve "high income status" by 2020, once deemed fairly reasonable when it was reaffirmed by Prime Minister Najib Razak in 2010, is looking somewhat elusive now as the window narrows on the back of a challenging global economic backdrop.

One major blow to the open economy's efforts to yank itself out of the so-called "middle-income trap" may be the change of heart by the United States under President Donald Trump who has decided to abandon the Trans Pacific Partnership (TPP) free trade deal.

Moody's Investors Service points out as much in a recent report, saying that the boost to competitiveness from reform and improved market access to the US under TPP would have been an integral element in attracting higher value-added investments. This in turn would have helped Malaysia escape the middle income trap but without that, challenges abound.