By Dr Ahmad Fauzi Bin Puasa (AMN) Deputy Director of MIER

By Dr Ahmad Fauzi Bin Puasa (AMN) Deputy Director of MIER

MALAYSIA Source: DOSM (2017) 2

PROFILE ALL STATES 2015 Area: 795 KM 2 Population: 0.25 mill GDP: RM 4,917 mill GDP per Capita: RM 21,413 Area: 9,425 KM 2 Population: 2.10 mill GDP: RM 36,008 mill GDP per Capita: RM 18,253 Area: 1,031KM 2 Population: 1.70 mill GDP: RM 69,825 mill GDP per Capita: RM 44,839 Area: 15,105 KM 2 Population: 1.76 mill GDP: RM 19,718 mill GDP per Capita: RM 12,087 Source: DOSM (2017) Area: 243 KM 2 Population: 1.78 mill GDP: RM 160,490 mill GDP per Capita: RM 94,856 Area: 21,038 KM 2 Population: 2.47 mill GDP: RM 58,044 mill GDP per Capita: RM 25,451 Area: 7,931 KM 2 Population: 6.18 mill GDP: RM 240,048 mill GDP per Capita: RM 42,619 Area: 49 KM 2 Population: 0.08 mill GDP: N.A GDP per Capita: N.A Area: 1,652 KM 2 Population: 0.89 mill GDP: RM 31,712 mill GDP per Capita: RM 39,848 Area: 12,974 KM 2 Population: 1.16 mill GDP: RM 27,742 mill GDP per Capita: RM 26,539 Area: 35,965 KM 2 Population: 1.63 mill GDP: RM 45,900 mill GDP per Capita: RM 30,357 Area: 6,657 KM 2 Population: 1.09 mill GDP: RM 37,518 mill GDP per Capita: RM 36,691 Area: 19,016 KM 2 Population: 3.61 mill GDP: RM 98, 889 mill GDP per Capita: RM 29,558 3

PROFILE ALL STATES 2015 Area: 92 KM 2 Population: 0.10 mill GDP: RM 5,119 mill GDP per Capita: RM 58,555 Area: 73,902 KM 2 Population: 3.72 mill GDP: RM 70,467 mill GDP per Capita: RM 19,761 Area: 124,450 KM 2 Population: 2.70 mill GDP: RM 106,307 mill GDP per Capita: RM 44,089 Source: DOSM (2017) 4

SUMMARY OF STATES PROFILE 2015 No. State Area (KM2) Population (Million) GDP (RM Million) GDP per Capita (RM) 1 Johor 19,016 3.61 98,889 29,558 2 Kedah 9,425 2.10 36,008 18,253 3 Kelantan 15,105 1.76 19,718 12,087 4 Melaka 1,652 0.89 31,712 39,848 5 Negeri Sembilan 6,657 1.09 37,518 36,691 6 Pahang 35,965 1.63 45,900 30,357 7 Pulau Pinang 1,031 1.70 69,825 44,839 8 Perak 21,038 2.47 58,044 25,451 9 Perlis 795 0.25 4,917 21,413 10 Selangor 7,930 6.18 240,048 42,619 11 Terengganu 12,974 1.16 27,742 26,539 12 Sabah 73,902 3.72 70,467 19,761 13 Sarawak 124,450 2.70 106,307 44,089 Subtotal 329,940 29.26 847,095 391,505 14 W.P. Kuala Lumpur 243 1.78 160,490 94,856 15 W.P. Labuan 92 0.10 5,119 58,555 16 W.P. Putrajaya 49 0.08 N.A N.A Subtotal 384 1.96 165,609 153,411 Source: DOSM (2017) 5

ANALYSIS CRITERIA TO ACHIEVES HIGH INCOME ECONOMY World Bank Data (WB) National Threshold data GNI/capita at nominal price in USD. The data has been converted to GDP and RM at 2010 constant price. Rancangan Malaysia Ke-11 (RMK11) Data from Economic Planning Unit (EPU) in GDP/capita at 2010 constant price. New Economic Model (NEM) Data from National Economic Advisory Council (NEAC) in GNP/capita USD at 2000 constant price. The data has been converted to GDP and RM at 2010 constant price. Econometric forecasting model has been employed for this study. 6

HIGH INCOME ECONOMY TARGET BY 2020 (PER CAPITA, CONSTANT PRICE 2010) Note: Exchange Rate: 1USD = RM4.29; Source: World Bank, RMK 11 and New Economic Model. 7

REGIONAL DISPARITY 8

GDP PER CAPITA 2012 & 2014 (2010 CONSTANT PRICE) 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000-10,818 Kelantan 16,388 Kedah 18,262 Sabah 19,496 Perlis GDP per Capita 2012 & 2014 at Constant 2010 (RM Million) 22,547 Perak 23,672 Terengganu 26,399 Johor 27,798 Pahang State 33,848 Negeri Sembilan 33,621 Melaka 39,333 Selangor 39,102 Sarawak 40,305 Pulau Pinang 43,856 W.P. Labuan 85,865 W.P. Kuala Lumpur 2012 2014 Malaysia:[VALUE] (2014) Malaysia:[VALUE] (2012) Source: DOSM (2015) 9

TREND GDP PER CAPITA GDP per Capita for each state remain the same for both years, 2012 and 2014. Income level for each state increase from year 2012 to 2014. 10

HOUSEHOLD INCOME INDEX 2.00 Household Income Index 1.80 1.66 1.64 Malaysia 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 1.13 0.75 0.59 1.10 0.90 0.74 1.03 0.75 0.76 1.36 0.82 0.82 0.82 1.24 2009: 1.00=RM4,025 2012: 1.00=RM3,626 2014: 1.00=RM4,585 0.00 Source: DOSM (2015) Johor Kedah Kelantan Melaka Negeri Sembilan Pahang Pulau Pinang Perak Perlis State Selangor Terengganu Sabah Sarawak W.P. Kuala Lumpur W.P. Labuan W.P. Putrajaya 11

INCIDENCE OF POVERTY 9.0 Incidence of Poverty 8.1 8.0 7.0 PERCENTAGE 6.0 5.0 4.0 3.0 2.0 1.0 1.7 0.6 0.1 0.1 0.4 0.2 0.5 0.4 0.6 0.3 0.8 0.1 0.9-1.1 1.1 1.3 0.7 1.5 0.7 1.7 0.3 1.7 0.6 1.9 0.2 2.4 0.9 2.7 0.9 4.0 2012 2014 - Source: DOSM (2015) Malaysia Melaka Selangor Negeri Sembilan Pulau Pinang W.P. Kuala Lumpur Johor W.P. Labuan Pahang STATE Perak Kedah Terengganu Perlis Sarawak Kelantan Sabah 12

MALAYSIA: MEAN MONTHLY GROSS HOUSEHOLD INCOME OF TOP 20%, MIDDLE 40% AND BOTTOM 40% 30,000 25,000 Mean Monthly Gross Household Income of Top 20%, Middle 40% and Bottom 40% y = -0.3721x 4 + 32.985x 3-403.99x 2 + 2342.1x + 2041.7 R² = 0.9981 T20 [VALUE] Mean 20,000 15,000 10,000 y = 1290.6e 0.14x R² = 0.98731 M40 [VALUE] 5,000 y = 485.26e 0.1504x R² = 0.9839 B40 [VALUE] Source: EPU (2015) - 1992 1995 1997 1999 2002 2004 2007 2009 2012 2014 2017 2019 2022 Year 13

GROWTH RATE MEAN GROSS HOUSEHOLD INCOME FOR T20, M40 AND B40 Top 20(T20) is growing at faster rate than Middle 40(M40) and Bottom 40(B40) Disparity will become more wide between levels if action is not taken. Year T20 (RM) M40 (RM) % Different 1992 4,022 1,362 1.95 2014 14,305 5,662 1.53 2022 26,058 7,964 2.27 Source: EPU (2015) 14

HIGH INCOME ECONOMIES GNI per Capita US $ 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 y = 231.78x + 6402.2 R² = 0.9469 y = 13.922x 2-105.04x + 2754.2 R² = 0.97733 Q1 2018; 13,888 15,279 14,284 Malaysia Threshold Poly. (Malaysia) Linear (Threshold) 0 19871989199119931995199719992001200320052007200920112013201520172019 Source: World Bank (2016) Year 15

WORLD BANK APPROACH 140,000 WORLD BANK TARGET: HIGH INCOME ECONOMY 2020 127,710 GDP/Capita at Constant Price (RM Million) 120,000 100,000 80,000 60,000 40,000 20,000-62,696 Malaysia (Constant RM) 35,872 Johor 22,157 Kedah 13,881 Kelantan 44,883 Melaka 44,159 Negeri Sembilan 37,537 Pahang 56,244 Pulau Pinang 30,648 Perak State 23,787 Perlis 57,035 Selangor 29,376 Terengganu 23,056 Sabah 49,762 Sarawak W.P. Kuala Lumpur 60,434 World Bank Threshold: RM [VALUE] W.P. Labuan 16 GDP/Capita 2020

NEM APPROACH GDP/Capita at Constant Price (RM Million) 140,000 120,000 100,000 80,000 60,000 40,000 20,000-50,164 Malaysia 35,955 Johor 22,176 Kedah 13,879 Kelantan 44,904 Melaka 44,092 NEM TARGET: HIGH INCOME ECONOMY 2020 Negeri Sembilan 37,501 Pahang 56,287 Pulau Pinang 30,699 Perak State 23,775 Perlis 57,087 Selangor 29,401 Terengganu 23,038 Sabah 49,801 Sarawak 127,987 W.P. Kuala Lumpur 60,570 W.P. Labuan 17 NEM Threshold: [VALUE] GDP/Capita 2020

RMK11 APPROACH GDP/Capita at Constant Price (RM Million) 140,000 120,000 100,000 80,000 60,000 40,000 20,000-43,894 Malaysia 35,955 Johor 22,176 Kedah 13,879 Kelantan 44,904 Melaka RMK11 TARGET: HIGH INCOME ECONOMY 2020 44,092 Negeri Sembilan 37,501 Pahang 56,287 Pulau Pinang 30,699 Perak State 23,775 Perlis 57,087 Selangor 29,401 Terengganu 23,038 Sabah 49,801 Sarawak 127,987 W.P. Kuala Lumpur 60,570 W.P. Labuan 18 RMK 11 Threshold: RM[VALUE] GDP/Capita 2020

SCENARIO A B C Historical economic growth rate for the state (2005-2015). Expected economic growth rate for the state according to RMK11 (2016-2020). Economic growth rate according to high income economy for the state. 19

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METHODOLOGY Compounded Annual Growth Rate (CAGR) CAGR= ( Ending Value/Beginning Value ) ( 1/No. of years ) 1 Where: Ending value = GDP 2020 Beginning value = GDP 2015 No. of years = 5 years 21

JOHOR GDP per Capita (RM Million) 45,000 40,000 35,000 30,000 25,000 43,559 35,955 32,806 20,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Year A B C Target A: 4.8% (Historical State) B: 5.9% (RMK11 State Target) C: 10.0% (Enforcement) 22

KEDAH GDP per Capita (RM Million) 45,000 40,000 35,000 30,000 25,000 20,000 15,000 43,559 22,176 20,780 10,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Year A B C Target A: 5.0% (Historical State) B: 5.8% (RMK11 State Target) C: 21.1% (Enforcement) 23

KELANTAN GDP per Capita (RM Million) 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 43,559 14,593 13,879 5,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Year A B C Target A: 5.3% (Historical State) B: 4.8% (RMK11 State Target) C: 31.7% (Enforcement) 24

MELAKA GDP per Capita (RM Million) 50,000 45,000 40,000 35,000 30,000 45,014 44,904 43,559 25,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Year A B Target A: 5.2% (Historical State) B: 5.5% (RMK11 State Target) 25

NEGERI SEMBILAN GDP per Capita (RM Million) 45,000 40,000 35,000 30,000 25,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 43,715 44,092 43,559 Year A B Target A: 4.7% (Historical State) B: 5.1% (RMK11 State Target) 26

PAHANG GDP per Capita (RM Million) 45,000 40,000 35,000 30,000 25,000 43,559 37,501 34,140 20,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Year A B C Target A: 4.6% (Historical State) B: 5.7% (RMK11 State Target) C: 8.9% (Enforcement) 27

PULAU PINANG GDP per Capita (RM Million) 60,000 55,000 50,000 45,000 40,000 35,000 56,287 50,991 43,559 30,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Year A B Target A: 4.8% (Historical State) B: 6.1% (RMK11 State Target) 28

PERAK GDP per Capita (RM Million) 45,000 40,000 35,000 30,000 25,000 20,000 43,559 30,699 28,916 15,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Year A: 5.2% (Historical State) A B C Target B: 5.9% (RMK11 State Target) C: 13.6% (Enforcement) 29

PERLIS GDP per Capita (RM Million) 45,000 40,000 35,000 30,000 25,000 20,000 43,559 23,775 22,836 15,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Year A: 3.1% (Historical State) A B C Target B: 4.0% (RMK11 State Target) C: 17.4% (Enforcement) 30

SELANGOR GDP per Capita (RM Million) 60,000 55,000 50,000 45,000 40,000 35,000 30,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Year A B Target 57,087 55,990 43,559 A: 6.5% (Historical State) B: 6.9% (RMK11 State Target) 31

TERENGGANU GDP per Capita (RM Million) 45,000 40,000 35,000 30,000 25,000 43,559 29,401 28,714 20,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Year A: 3.6% (Historical State) A B C Target B: 4.2% (RMK11 State Target) C: 12.7% (Enforcement) 32

SABAH GDP per Capita (RM Million) 45,000 40,000 35,000 30,000 25,000 20,000 43,559 23,885 23,038 15,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Year A B C Target A: 4.2% (Historical State) B: 4.6% (RMK11 State Target) C: 18.8% (Enforcement) 33

SARAWAK GDP per Capita (RM Million) 49,000 47,000 45,000 43,000 41,000 39,000 37,000 49,801 45,602 43,559 35,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Year A B Target A: 3.5% (Historical State) B: 4.7% (RMK11 State Target) 34

WP KUALA LUMPUR GDP per Capita (RM Million) 140,000 120,000 100,000 80,000 60,000 66,357 129,924 127,987 40,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Year A B Target 43,559 A: 7.6% (Historical State) B: 7.5% (RMK11 State Target) 35

WP LABUAN GDP per Capita (RM Million) 65,000 60,000 55,000 50,000 45,000 40,000 35,000 60,570 56,000 43,559 30,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Year A B Target A: 6.1% (Historical State) B: 6.1% (RMK11 State Target) 36

SUMMARY STATE PER CAPITA INCOME IN 2020 (RM) RANK W.P. Kuala Lumpur 127,987 1 W.P. Labuan 60,570 2 Selangor 57,087 3 Pulau Pinang 56,287 4 Sarawak 49,801 5 Melaka 44,904 6 Negeri Sembilan 44,092 7 Pahang 37,501 8 Johor 35,955 9 Perak 30,699 10 Terengganu 29,401 11 Perlis 23,775 12 Sabah 23,038 13 Kedah 22,176 14 Kelantan 13,879 15 37

STATES EXPECTED TO ACHIVED HIGH INCOME ECONOMY BY 2020 No STATES WB RMK 11 NEM 1 W.P. Persekutuan 2 W.P Labuan 3 Selangor 4 Pulau Pinang 5 Sarawak 6 Melaka 7 Negeri Sembilan 8 Pahang 9 Johor 10 Perak 11 Terengganu 12 Perlis 13 Sabah 14 Kedah 15 Kelantan 38

CONCLUSION The study has found out that: Two (2) states are expected to archive High Income Economy Status using World Bank Target (W.P. Kuala Lumpur and W.P. Labuan) Seven (7) states are expected to archive High Income Economy Status using RMK11 target (W.P. Persekutuan, W.P Labuan, Selangor, Pulau Pinang, Sarawak, Melaka, Negeri Sembilan) Seven (7) states are expected to archive High Income Economy Status using NEM target (W.P. Persekutuan, W.P Labuan, Selangor, Pulau Pinang, Sarawak, Melaka, Negeri Sembilan) Eight (8) states are expected not to archive High Income Economy Status by 2020 (Pahang, Johor, Perak, Terengganu, Perlis, Sabah, Kedah, Kelantan) 39

CONCLUSION Possible reasons: The state economic fundamentals start at a different base. Each state has different size and population. Locational advantage and disadvantage. The state endowment resource are varies. Different level of infrastructure and technology. Different strength of the institutions bodies. 40

CONCLUSION Possible reasons: Malaysia is expected to become high income economy in 2018 (Q1) but the disparity will still exist among states. Appropriate strategies need to be establish to ensure the achievement of regional policy objectives as stated in RMK3 and NEM. We need to create income generating factors for unfortunate states to raise their income level. 41

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