DOES THE LESS DEVELOPED STATES IN MALAYSIA CATCHING-UP TO THE RICHER STATE OF SELANGOR?

Abstract

Malaysia is targeting to becoming a develop nation by 2020. However, income disparity between the developed and less developed states in Malaysia has persisted for more than 50 years without any sign of narrowing the gap in the future. Despite the various Malaysia Development Plans for the past several decades, regional disparity between states remains. Thus, the objective of the present paper is to address the question whether the less developed states, namely; Kedah, Kelantan, Pahang, Perlis, Sabah, Sarawak and Terengganu are catching-up with the more richer state of Selangor. Using annual data for the period 1970 to 2013, by employing the error-correction model our results suggests that there is cointegration and thus, imply convergence between less developed states and Selangor. Our catch-up analyses suggest that there is narrowing of disparity between Selangor and the less developed states. In this respect, the state government has an important role to play in enhancing growth by continuously providing stable economic environment for investment and other productive economic activities. This will ensure full convergence can take place at a faster rate in the future. JEL classification: H70, O12, R12