nor shamsiah mohd yunus : aiming high - navigating the next stage of malaysia's development keynote address by ms nor shamsiah mohd yunus, governor of the central bank of malaysia ( bank negara malaysia ), at the world bank's aiming high webinar series, 27 may 2021. * * * the economist magazine recently published an article comparing the welfare of citizens across countries, based on a survey of various aspects of well - being. the title of the article was “ money really can buy happiness and recessions can take it away. ” it maintained that citizens in highincome countries felt better off about their current life situation, have money for food, and access to good and affordable housing nearby. quality of life is also better due to less tangible factors such as corruption not being widespread, feeling safe when walking alone at night, feeling well rested and having helped a stranger in the past month. implicit in these findings is the idea that economic growth should go hand in hand with greater welfare. more than the dollars and cents of becoming wealthier, it is the improvements in the quality of life that countries aspire to achieve. and so, i was heartened to read in the world bank ’ s aiming high report that malaysia is likely to transition to a high - income economy between 2024 and 2028. this panel discussion is thus very relevant to our situation, now more than ever. for malaysia, the journey to become a high - income economy will not be easy. in the past three decades, only a handful of countries have managed to achieve that status, and importantly, to sustain their position. in fact, the road to becoming a high - income economy is more difficult today, as countries are confronted with challenges and uncertainties like never before. according to the oecd1, the present landscape has “ new rules, new environmental constraints, new technologies and more competition ”. we will need to adapt to these changes, while managing other shocks that may come our way. what we don ’ t want is for the economy to take one step forward, only to be pulled two steps back. along these lines, allow me to share four points on how malaysia can more confidently transition towards a high - income economy. an economy centred on innovation my first point is on putting innovation at the centre of our economic development. malaysia has come a long way. from being a commodities - based economy, we have diversified into high - end manufacturing and

, the whole country has a part to play in this mission. even the bank, where we ’ ve put the management of climate risk, as a top priority. government that is agile and forward - looking my final point is on changes to the state ’ s capacity. in the time of change and modernisation, how we approach the government ’ s role in innovation must also evolve. let me be clear. it is not that the government should play no role in the economy, but rather, it might be timely for some new thinking about the role of government in the economy, and how it works with the private sector. 3 / 4 bis central bankers'speeches after all, as moving forward requires the economy to consider not just cutting edge, but also bleeding edge ideas and technologies, we need to start thinking about novel and unconventional approaches. several questions spring to mind. first, how should the government take calculated policy risks, while managing policy failures? in building pathways to high income, ambitious industrial policies, or “ moonshot strategies ”, will play a key role. with any policy however, there would be uncertainty and possibility of failure. development economist, dani rodrick, called for effective industrial policy to be less on the ability to pick winners, but on knowing when to cut losses. too low a failure rate could also mean that we are playing it too safe. the objective, hence, should not be to avoid mistakes, but to minimise the cost of mistakes. this will require the government to build its capacity to account for and quantify the associated risk within the decision framework. only then can we make smarter, more intelligent bets to get the most bang for the buck. second, how can the government learn and execute better? focus should be as much on process and governance, as it is on the outcomes. while we have achieved leaps and bounds in economic development since our independence, past reforms also provide important lessons in areas where we must strive to do better. we have had roughly 60 - 70 blueprints and masterplans over the years ; not all have been executed to their maximum potential. let us identify the gaps and shortfalls and move forward from there. we must also hone the public sector ’ s ability to make incremental improvements and course corrections, as much as sweeping reforms. after all, correction mechanisms are what make governments smarter. third, a strong and sustained focus on protecting and promoting the qualities of efficient and effective public institutions must define our path to becoming