Regime Changes, State-Business Ties and Remaining in the Middle-Income Trap: The Case of Malaysia

Abstract

ABSTRACT While Malaysia’s economy is widely acknowledged as having the capacity to escape the middle-income trap and achieve highly-industrialised status, this potential has not been realised. One theoretical proposition why an economy remains mired in the middle-income trap is that the introduction of mechanisms to overcome this problem is hampered by political, not economic, matters. Malaysia serves as an interesting case to test this proposition because, after the 14th General Election (GE14) in 2018, it had a new government – the first time such a change had occurred in its history – that had pledged to institute the requisite economic restructurings and reform state–business relations in a highly mixed economy. This article traces the sources of Malaysia’s middle-income trap leading up to GE14, reviews the reform debates that occurred following this election, and assesses why the promised reforms were not considered before this new government unexpectedly fell in 2020.