Shifting Gears in Southeast Asia: How Malaysia Went from Laggard to Contender

New Straits Times

20-06-2025

IF you want to understand who's really winning in Southeast Asia today, don't just glance at GDP charts or listen to upbeat investment roadshows. Instead, look beneath the surface - at the metrics that actually move the needle: trade agility, digital depth, and the machinery of governance.
That's where the tectonic shifts are happening. And when you do, a clearer picture emerges: Singapore remains the regional oracle; Malaysia is sprinting ahead like a reformist insurgent; and Thailand, while trying to keep pace, is still caught in the weeds of structural drag.
Let's start with Malaysia, because something is finally clicking. By mid-2025, Malaysia jumped 11 spots in the IMD World Competitiveness Ranking, climbing from 34th to 23rd out of 69 economies.
That's not a statistical blip. It's Malaysia's best performance since 2020 and a clear sign that the gears of reform are beginning to turn in earnest.
Economic performance? Fourth globally. Government efficiency? Up eight places. Business efficiency? Also up eight. And trade - often the acid test for middle-income economies? Malaysia now ranks 6th in the world, up 11 spots, powered by strong exports, broader market reach, and a healthy rebound in tourism.
But this wasn't luck. According to Prime Minister Datuk Seri Anwar Ibrahim and Investment, Trade and Industry Ministry, this surge is rooted in political will and a relentless focus on bureaucratic modernisation - over 1,000 reform initiatives under the Madani Economy framework.
These include digitalisation of public services, procurement reform, accelerated investment approvals, and consolidation of regulatory functions across ministries.
It's a serious attempt to make "ease of doing business" more than just a slogan.
For a country long caught between ambition and inertia, this IMD jump is a rare data point of real traction - where trade statistics, policy clarity, and administrative muscle finally line up.
Zoom out and the regional picture gets sharper. Singapore, as always, sets the bar.
Despite slipping slightly to second place globally, it remains the gold standard in trade, digital governance, and institutional design.
For a resource-scarce city-state, this dominance is less about size and more about orchestration, a blend of tech infrastructure, regulatory
agility and long-term planning that continues to pay dividends.
Thailand, by contrast, is moving, but unevenly.
While its economic and business metrics nudged upward, its government efficiency fell by eight places, a sign that reform hasn't kept pace with
rhetoric.
Political volatility and fragmented policymaking continue to blunt the impact of what might otherwise be a promising digital and export agenda.
But here's the real twist in the Southeast Asian playbook: 2025 isn't just about ports and factories anymore. It's about chips, clouds, and code.
Digital competitiveness is now the new frontline. Singapore, predictably, leads again—ranked No. 1 globally with a fintech ecosystem plugged directly into regulatory sandboxes and digital identity rails.
Malaysia isn't there yet, but it's laying the groundwork fast. With more than RM30 billion in digital investments from Google, Microsoft and ByteDance, and a slew of policies like the National AI Roadmap and sovereign cloud frameworks, Malaysia is quietly morphing into a
regional data hub.
Thailand is pushing hard to digitize 30 per cent of its GDP by 2030, leveraging AI in agriculture and cloud infrastructure but it's still playing catch-up.
Governance, however, remains the X-factor. It's the difference between a country that moves and one that drifts. Singapore is still the masterclass its governance model is less about bureaucracy and more about choreography.
Malaysia, to its credit, is catching on fast. Its eight-rank jump in government efficiency reflects more than just cosmetic tweaks; it marks a shift in how the public sector thinks about speed, coordination, and execution.
Thailand, unfortunately, slipped in this category, held back by legacy systems and electoral churn that don't move fast enough for a digital economy.
So what's the bigger story? It's that the race to the top in Southeast Asia is no longer just a regional contest. It's a systemic one.
Competitiveness today isn't about who can export the most palm oil or assemble the cheapest smartphones. It's about who can export trust,
reduce friction, digitise their bureaucracy and make infrastructure work at the speed of capital.
Malaysia, after years of spinning its wheels, seems to have found traction. This year, it's the comeback kid. The challenge now is to maintain altitude to turn a reform moment into a reform movement.
Because in this new Southeast Asia, the scoreboard doesn't wait. It updates in real time.
And this time, Malaysia isn't just watching the scoreboard. It's finally part of the game that counts.