What high income

Malaysia wants to be a high income nation. Jolly good. But at what currency exchange level are we talking about? It is good if the income is high and the denomination is in USD. What is the point if it is denominated in Indonesian Rupee or the Vietnamese Dong.

High income can only be sustained if the productivity is improved or we have advanced to a higher technological level. This would result in higher growth and increased GDP. But, we are not going along this line. We are trying to be competitive by manipulating the exchange rate. We lowered our exchange rate so that our products are cheaper to importers. Workers may get a raise on the take home pay, but their purchasing power is not better off.

Malaysia has not done well in terms of its currency exchange rate. It used to be 1 RM to 10 Baht in the 80s. In the Asian Financial Crisis of the 90s, Thailand’s currency was badly battered. They have recovered. Even with their political instability and turmoil, they have done better than us. Today, the exchange rate is less than 10 Baht to 1 RM.