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  • Nisfi Mubarokah

CE in Malaysia - Preparing the Planet for Future Generations through the Circular Economy

When a country is built, it is not only built for the current generation but for many generations after us. Therefore, we need economic growth that can not only be enjoyed by us but also the future generations.

Malaysia is among the most open economies in the world. With an average trade-to-GDP ratio of over 130% since 2020, trade and investment have created a trickle-down effect in Malaysian economics and created many employment opportunities. According to the World Competitiveness Index, in 2022 Malaysia ranked 32nd in global competitiveness and 2nd in the ASEAN category, just behind Singapore. With its strategic location across the Straits of Malacca, Malaysia has the potential for greater economic growth. When capital to achieve economic growth is already available, the question is how to use this capital effectively to achieve sustainable economic growth.

The Covid-19 pandemic that started in early 2020 has impacted every country on Earth. It changed every aspect of life and forced everyone to adapt. Malaysia is no exception. In 2020, the unemployment rate grew to 4.5% compared to 3.3% in 2019. Covid-19 resulted in many companies shutting down their business as well as streamlining and reorganizing themselves. It also led to people being laid off and, therefore, increasing the unemployment rate. The unemployment rate in 2020 was the highest since 1993, higher than during the Asian financial crisis.

Interestingly, however, according to a McKinsey report, Malaysia’s job outlook is quite promising. Amid job loss due to Covid-19, automation will create more jobs than it eliminates in the future. This is caused by at least 3 factors: rising consumer income, increased education spending, and an ageing population. As the economy improves, so does income. When income increases, the amount of money spent ideally creates other job opportunities. At the same time, as the government spends more on the education sector, it will increase the skilled labour force and the general education level of its citizens, and, therefore, attract more investors to Malaysia.

As a tropical country, Malaysia is undoubtedly rich in natural resources. Over the past two decades, it has been transitioning from an agricultural economy to a manufacturing economy. Palm oil has been the main export commodity for the past 30 years. Up to now, Malaysian economic growth has mostly been fuelled by natural resources. However, as can be seen in many other countries, maintaining a more sustainable economic model requires less dependence on natural resources as well as strategies to incorporate economic growth while respecting and protecting the planet.

Malaysia ratified the Kyoto Protocol and pledged to Net Zero by 2050. It also developed a Green Technology Master Plan 2017-2020 which outlined plans for technological development that aimed at carbon reduction. The master plan included not only technical details but also the crucial role that citizens play by positively shifting their lifestyles and behaviours. Furthermore, the circular economy has emerged as one of the solutions to improve economic growth and address climate issues.

Here are some of the reasons why the circular economy can be a solution:

  • An answer to environmental problems

The circular economy can be one of the answers to environmental issues as it seeks to reintroduce waste into product life cycles. The extended producer responsibility policy is an example of how governments are making efforts to hold companies accountable for their generated waste. Each company is responsible for managing the entire lifecycle of its product from its release to the market and up to the recycling process. A conscious consumer takes into account how each company manages its waste.

Private sectors are now also aware of their crucial role in reducing waste. Through Environmental, Social, and Corporate Governance (ESG), private sectors seek to show consumers how they are taking responsibility for their environmental impact. McKinsey reports that across industries, geographies, and company sizes, organizations are allocating more and more of their resources to improve their ESG practice.

Moreover, governments hold an important role in setting the policy framework that governs how economic activity moves towards more sustainable practices. Therefore, governments, the private sector, and citizens must work together to increase global sustainability.

  • The current linear economic model is no longer sustainable

The most important reason why we must take action now is the fact that we cannot wait much longer. The current economic model where we use and dispose of resources is no longer sustainable. If we continue our current consumption patterns, we will only increase the risk of a climate crisis.

Despite having a vast amount of forests and a higher vulnerability to the climate crisis, countries in Southeast Asia are still reluctant to play their role in reducing their carbon footprint. One reason is that their greenhouse gas emissions are already relatively low. Malaysia’s contribution to global overall greenhouse gas emissions accounts for only 0.7%. Even though it is low, Malaysia is a leader in pro-environmental efforts within the region. Prime minister Datuk Seri Ismail pledged Malaysia’s commitment to achieving carbon neutrality by 2050 and expects ASEAN member states to do so as well.

The circular economy works with the principle of reducing, reusing, and recycling. By applying this principle, waste can be reduced significantly if not even eliminated. This model can replace the current linear economic model where we extract natural resources, make a product and then dispose of it when it is no longer used or needed. In a circular economy, waste is a resource in itself and nothing is disposed of. Reusing waste will enable a large carbon emission reduction because it uses already existing resources.

  • The need for breakthroughs to accelerate the post-Covid-19 economy

Covid-19 is a never-before-seen event that influences every aspect of life in every country around the globe. Other such crises have happened before such as the Asian financial crisis in 1997 or the great recession in 2006-2007, which also greatly impacted the economy. However, Covid-19 has represented a health crisis which has been followed by an economic crisis. At the same time, the world is facing fast technological development. Current discussions revolve around how governments are getting ready for automation and the future of work. The upcoming era is one of many uncertainties.

Taking into account such a global phenomenon, we are required to handle an uncommon challenge with an uncommon method. The circular economy can represent an answer to this challenge as it breaks away from our current economic model. Covid-19 has proven how vulnerable our global supply chains are. The circular economy stresses the importance of using local materials and resources. It can reduce the dependency on raw materials from across the globe and instead innovate by using already existing resources.

Having understood how a circular economy can be a solution for increased sustainable economic growth, the next question is how to accelerate the transition to a circular economy. Every country’s starting point toward a circular economy is different. To answer this challenge, the Ellen MacArthur Foundation has published the Universal Circular Economy Policy Goals to assist and provide guidance to countries’ transition to a circular economy. The report is built upon 5 goals: The first one consists of promoting the design of circular goods and services that create the highest value possible. The second one is managing resources to preserve their value and to avoid them from turning into waste. Thirdly, making the economy work by aligning all support systems such as laws and regulations to support a circular economy is essential. The fourth goal is to invest in innovation, infrastructure, and skills. Lastly, the fifth step is to promote collaboration for wide-ranging systems changes. By accelerating the transition to a circular economy, Malaysia can, among other aspects, achieve these five goals and disrupt the current linear economy that is no longer sustainable.

The planet is facing a crisis due to our current business approaches and lifestyle. To reduce the climate crisis risk, there must be change. Our current economic model is centred around the use and disposal of resources. This model has sustained our lifestyle up to now, but is it sustainable for future generations? When a country is built, it is not only built for the current generation but also for many generations ahead of us. Therefore, we need economic growth that can not only be enjoyed by us but also the future generations.


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