KUALA LUMPUR, May 8 — The Malaysian government should inject more funds into research and development (RnD) if it wants to become a high-value economy, senior economist for Asia at Euler Hermes-Allianz Research Mahamoud Islam said today.

As of now, the country remains trapped in a low-skilled economy and is still trailing behind countries like Taiwan and Singapore in terms of high value growth, he added.

"You need innovation,” Mahamoud said in his presentation on Malaysia’s 2017 economic outlook here.

"You have to invest more in RnD, then you can have a bigger market share because you have a more innovative-based industry,” he added.

Malaysia’s market share in the global high-skill and technology-intensive export trade stood below 1 per cent, according to data from World Bank and other official sources.

Its R&D allocation is only about 1.5 per cent of GDP, while neighbouring Singapore spent almost double of that.

The island republic currently has a market share of close to 2 per cent, or 100 per cent more than Malaysia, in the global high-tech trade.

But Mahamoud said Putrajaya has so far produced the right policies to help steer the country towards an innovative-based industry.

And although it lacked the technology or skilled workforce to compete in the blue chip market, Malaysia has other potentials to hone.

"Competitiveness doesn’t have to be about cutting prices or focusing on just hard infrastructures… improving soft infrastructures like communications can also help,” he said.

One of the areas Malaysia has done well in and should focus on is beefing up its services sector, which has steadily increased for the last decade.

More than half of the country’s revenues came from services since 2010, Allianz Research data shows.

Mahamoud said "servitisation” and "digitisation” could be the solution to help pull Malaysia out from stagnating in a low-skill economy.

The senior economist also suggested Malaysia capitalise on existing trade ties by forging stronger regional co-operation.

Exports to Asean members alone account for 28 per cent of total exports.