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KUALA LUMPUR, Nov 24 -- Malaysia needs a new social contract involving the population to realise its high-income and developed-nation status ambition as persistent inequality is a serious issue in the country, said Dr Kenneth Simler.
The former senior economist at the World Bank's Global Knowledge and Research Hub said greater resources would need to be invested to build high-quality human capital and facilitate greater economic opportunities, especially for women.
"The new social contract should ensure equal opportunities for all Malaysians, providing upward mobility and incentives to remain and invest in Malaysia," he said at the International Social Wellbeing Conference 2021 (ISWC 2021) held virtually today.
He noted that the inequality has hindered Malaysia's development progress and has adverse consequences for those at the bottom of the socio-economic ladder.
He said there are concerns about rising absolute income inequality in Malaysia which has been increasing rapidly for decades.
"However, this is normal in a growing economy, and need not be a big concern if relative inequality is decreasing.
"The relative income inequality is declining, albeit unevenly. This means that lower income group from Bottom 40 per cent household income (B40) are gaining an increasing proportion of the total income in a growing economy," he said, adding rising relative income inequality is a serious threat to Malaysians' wellbeing and the country's development.
Simler said social contract is two-way street, which it is not only what government provides to the people but equally what the people contribute to make the system work.
The second-generation reforms to increase productivity and innovation-led private sector growth would also be required, along with policies to promote the development of skills and talents, he added.
He also stressed that Malaysia's public sector will need to operate at a higher level of openness and transparency.
"The government will also need to generate increased public revenues and used it more effectively and more progressively, and use these resources more efficiently especially to meet the needs of the most deprived."
Simler said under the social contract, the government acts to meet the needs of the population in a credible and accountable manner by investing in human capital, regulating intelligently, and enforcing rules and regulations in a more uniform way, while at the same time maintaining macroeconomic stability.
In exchange, he said the citizens must be enabled to exercise their rights to hold the government accountable and at the same time, accept the principle that all citizens should be treated equally and pay more taxes in return for the greater benefits that they receive.
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