Analysing Issues Related To Economic Growth In Malaysia

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Malaysia is a turning and comparatively unfastened economic system. Three old ages ago, harmonizing to the World Bank ( 2007 ) , the economic system of Malaysia was the 29th largest economic system in the universe by buying power para with gross domestic merchandise estimated to be $ 357.9 billion for the peculiar twelvemonth.

By mentioning to the economic system of the state, we can arouse that during the undermentioned long and terrible period of recession, the Malayan economic system has started to turn through the intervention of a relaxed pecuniary and financial policies and a high export demand in the electronics sector in peculiar. Despite the fact that the universe economic lag was more accentuated than expected and the unprecedented events of September 11 in the US had affected all economic systems, Malaysia on the other manus was able to steer itself in a peculiar manner from a major economic contraction and GDP growing for the twelvemonth remained in positive district.

Nonethless, Rani ( 2007 ) stated that Malaysia has a consistent economic growing record in GDP over the period 1970-2005. The writer added that the economic growing record in GDP was in mean 7 per cent at an one-year rate. Such rate is characterized by the outwardnesss which influence from clip to clip such as the oil crises of the 1970s, the downswing in the electronics industry in the mid 1980s, and decidedly the Asiatic fiscal crisis of 1997.

In add-on, though given the openness of its economic system, Malaysia was non spared from the negative effects of the United States economic lag. These effects were in the signifier of worsening fabrication production and negative export growing. In order to rectify the state of affairs, the Malayan authorities ‘s induction of strong pecuniary and financial policies to excite economic growing through increasing activities related to domestic economic system and diminishing the over-dependence on exports helped the state to prolong a positive existent GDP growing.

Despite this, the MMoF ( Malayan Ministry of Finance ) ( 2006 ) revealed that the criterions of life of the bulk of the population were transformed over the 30-year period with the degree of GDP per capita in 2000 being about four times that of 1970. In other words, it can be quoted from the ministry that the roar in the economic system went uninterrupted for about a decennary ( 1988-1996 with several growings of 7 and 10 per centum per annum ) . The ministry added that the chief beginning of growing was the fabrication sector whose portion of GDP increased to 31.4 per centum in 2005.

One emmerging point highlighted Barlow ( 2001 ) is that Foreign Direct Investment ( FDI ) has been a cardinal driver underlying the strong growing public presentation experienced by the Malayan economic system.

Overview of the Malayan Economic Growth and Developemnt

Malasyia four about 40 old ages and through the World Bank ‘s countryaˆ?classification system was as a middleaˆ?income state. From so, the state had carried oenjoying a comparative prosperity translated ab initio as a trade good exporter of gum elastic, Sn, so handle oil and crude oil which generated a entire income of between 6 to 7 per centum each twelvemonth from 1970 until 2000.

Athukorala, ( 2001 ) portrayed that the figure of hapless individuals known as those devouring less than the buying power para US $ 1 per twenty-four hours metric has fallen to fewer than a million, or 3.9 per centum of the population of 26.2 million people ( compared to about half of the population in 1970 ) .

However, Yusof ( 1997 ) reviewed that Malaysia with a per capita of annual income achieving US $ 5,300 in 2007, the state has trancsended from low-income state to an upperaˆ?middleaˆ?income state. Such passage pushed the state to travel through several structural alterations in respects to income comparators experience and stayed extremely dependent on favourable external footings of trade to better the domestic economic growing.

Another emerging point highlighted by Yusof is that the portion of agribusiness droped from more than 30 per centum of GDP to less than 10 per centum, whereas the portion of of industry ( particularly fabricating ) grew from 27 ( antecedently 12 ) to about 50 ( antecedently 31 ) per centum. Therefore, the get downing growing reaction to the purposeful and high industrialisation of the economic system from the midaˆ?1970s was satisfactory, with decreased volatility and the overall rate of growing increased up to 10 per centum per twelvemonth in the late eightiess

In mention to history, since its independency, the population of Malaysia was merely 7.4 million and had quickly grown to 26.8 million people in 2005 and current estimations exepect the Malaysian population to make about 29 million by 2010. As such, Yusof ( 1997 ) revealed that the population portions reflect major alterations over clip mostly for the Bumiputera due to their higher birthrate degrees.

Despite such natural addition, the Malaysian population growing demonstrates a steady inflow of immigrant workers to Malaysia from states like Indonesia, the Philippines, Bangladesh, and Nepal.

However, before its independency, Malaysia was known as a lowaˆ?income agricultural economic system with a high monopoly in gum elastic and Sn production and other entrepot trades centered on both locations ( Penang and Malacca ) . At first concern endeavors all around the state were smallaˆ?scale, mostly localized, and preponderantly familyaˆ?based. However, over clip, the Malayan economic system has diversified beyond agricultural concerns and primary trade goods, such that manufactured goods now account for a larger portion of GDP and entire exports. Therefore, in 2005, harmonizing to Yusof, ( 1989 ) the urbanisation inside Malaysia has been rapid with efficaciously 63 per centum of its population life in urban countries, compared with merely about a one-fourth in 1957. However, since the 1970s, Malaysia has condensed its economic development scheme on three long-run policies viz. the New Economic Policy ( NEP ) , 1970-90, the National Development Policy ( NDP ) , 1990-2000, and the National Vision Policy ( NVP ) , 2001aˆ?2010 ( Yusof, 1989 ) .

For case, the growing and distribution issues are within the range of centre phase during the leading of Dr. Mahathir, with displacements in understanding over the old ages. As this said, the history of the economic growing of Malaysian for the past 35 old ages can be translated through a changeless hassle between concerns with distribution which are cultural dimensions, and concerns with the growing of the economic system.

For this ground, it would be necessary to remember that Mahathir ‘s intercessions in the Malayan economic growing were neither uniformly impressive nor merely capricious. In other words, this leader left behind him a checked record of bold experiments, false starts, partial successes, and narrow flights. Furthermore, it would be gleaned from his analysis of economic direction to subdivide over three different stages ( 1981-85, 1986-97, and 1998-2003 ) . As a consequence, each stage can be viewed as to affect in policy responses to a predating crisis, but besides as to visualize a new phase and type of development.

Under the leading of Dr. Mahathir, Malaysia ‘s strong economic recovery did non rather travel frontward the banking crisis constructing up from the 1980s ‘ recession, trade good monetary value autumn down, and the desintegration of belongings and stock market effervesce. With specific figures, in 1987-88, about 30 per centum of commercial bank loans were “ non-performing. ” This is due to the fact that the authorities was compelled to supervise and modulate more purely the fiscal system, through the acceptance of the Banking and Financial Institutions Act 1989 and other ordinances. Furtheremore, more prudent and really rigorous banking supervisings have limited the Malayan exposure to ( private ) foreign adoption.

However, the economic recovery was non merely centered to the banking system, instead it was followed by fiscal liberalisation to be emphasized in stock market development. Despite the banking failures and stock market diminution of the late eightiess, Mahathir and other economic experts like Daim did non desire Lashkar-e-Taiba travel the stock market publicity even though it is constrained with serious banking ordinances. However, when the jobs from the 1980s banking crisis were deliberately assumed forgotten, most of the commercial Bankss still lent liberally and induced belongings and stock market bubbles. This can be explained by the fact that many Malayan corporations were really extremely leveraged. Therefore, the effects of these economic and fiscal developments were assorted and, as it turned out in 1997, black.

Although the amplification in these long-run development policies has ever been on economic growing, Malaysian development is determined to help all groups or communities within the society in an just mode. Get downing in the late sixtiess, specifically following racial public violences across the state, distribution issues became more of import and moved to the head. The overruling aim of the NEP, maintained in the NDP and the NVP, was to continue national integrity by eliminating poverty irrespective of race, and by reconstituting Malayan society to cut down the designation of race with economic map and geographical location. Direct policies to help the Bumiputera obtain equality with the non-Bumiputera in income and wealth ballad at the bosom of the distributive scheme. Growth with equity continues to be the guiding development scheme 2010 ( Yusof, 1989 ) .


In add-on to the focal point on the industries, it is utile to exemplify two other contexts in which economic policy devising and leading played out during Malaysia ‘s economic development.

The first is the early clinch ( 1983 ) of a “ denationalization ” policy in Malaysia. This policy enterprise

Curcial concerns were about the rapid growing of Malaysia ‘s public sector during the early phases of the NEP, and its comparatively weak industrial public presentation. In add-on, Malaysia ‘s denationalization enterprise was besides based on the “ Japan Inc. ” theoretical account that viewed the state as a individual corporation, with the authorities supplying and assisting keep an enabling environment for concern and the private sector operating as the engine of growing. This anticipated, by several old ages, the formalisation of such an attack by the broader development community ( Yusof, 1989 ) .

A 2nd set of schemes is every bit of import, because it illustrates the policy shapers ‘ return to some of the deliberate risk-taking behaviours which were prior to the 1970s industrialisation publicity. However, these schemes were the first conjunct effort at the national policy degree to originate a passage from development based on resources and traditional engineering toward a knowledge-based economic system, and thereby sit the moving ridge of industrial alteration and globalisation that was brushing the universe. The launch of the Multimedia Super Corridor ( MSC ) in 1996, although affected strongly by radioactive dust from the Asiatic fiscal crisis of 1996-98, is intended to construct on Malaysia ‘s current strengths in electronics, skilled labour, and high-quality substructure to go a more seeable regional and planetary participant in the development and application of information and communications engineering ( ICT ) ( Ariff, & A ; Goh Chen, 1998 ) .

It is necessary to observe that even at the beginning, when the NEP was launched in 1971, the perceived trade-off between both growing and distribution in Malaysia filled the heads of the policy shapers. Therefore, the Malayan growing of public corporations and other establishments register under the authorities generated the other distributional attacks. Hence, two wide attacks were adopted whereby the First, emphasizes that public endeavors expanded in new growing countries, particularly through the Urban Development Authority and the State Economic Development Corporations ( SEDCs ) . These new growing countries provided chances for Bumiputera concerns and enterprisers. The 2nd wide attack provinces that institutional investors such as PNB provided the channel for single Bumiputera to put in unit trusts. These enterprises harmonizing to Yusof, ( 1989 ) generated assorted consequences but, overall, they were let downing.

To add, the public investing in specific-renewed urban countries and in new countries owned by the province authorities to supply growing chances in commercialism and industry were analyzed on the conceptualisation that it would be complex and riotous to reconstitute those urban assets owned by non-Bumiputera. Not merely such concern but the coup d’etats of British-owned excavation and plantation companies in the 1970s and 1980s besides exemplified the attempts in cut downing all types of invasions on the bing wealth of the Chinese. On this chance, Rasiah ( 1992 ) argued that though the Malayan economic system grew at 7 per centum per twelvemonth over the 1971-85 period, there was a lag in the 1981-85 period. This is due to the fact that Mahathir utilized greater province intercession to advance heavy industrialisation and domestic imitations of foreing prouction and besides imposed an “ asceticism thrust ” that reduced authorities disbursement and placed state-owned endeavors under closer examination.

Issues related to Economic Growth in Malaysia

Policy Design and Implementation Issues

The Malayan growing construct compared to any other developing state can be divided into two transformational phases. The first is a structural transmutation of a prevailing agricultural economic system to a more industrialised economic system, whereas the 2nd from a more industrialised economic system towards a knowledge-based economic system in the late ninetiess ( Yusof, 1989 ) .

At the initial start up, the Malayan economic system was dominated by primary trade goods like gum elastic, Sn and, subsequently, and palm oil. Consequently, the exportaˆ?led growing of labour-intensive manufactured merchandises has made it possible for the economic growing to be sustained. However, with a high competition in the market economic system with China, the chances for longaˆ?term growing of the Malaysain economic system seemed really cheerless, and the force per unit areas for farther structural transmutation have gone high. Another form to be considered in respects to the economic development policies in Malaysia would be the causal apprehensiveness within the economic variegation, with the out traveling tides and tally of official involvement in the stage of the concern rhythm promoted through strong variegation. Furthermore, keep ups and recessions have provided influential impulse to official policies for economic growing through variegation. Yusof ( 2005 ) evoked that at the current phase of Malayan growing and peculiarly the post-Asian crisis lag that has mostly persevered, a renewed hunt for structural transmutation to make a higher, sustainable growing plane is needed.

However, to place the beginnings of policies and alterations to those policies, it is indispensable to project a expression at the institutional machinery. Initially, it is helpful to do a differentiation between the federal authorities, province authorities, the nonfinancial public endeavors, the governmentaˆ?linked companies ( GLCs ) , and the private sector because they are the chief beginnings of policy abetment. In short, the federal authorities has the authorization and is, hence, the beginning of macroeconomic policies. The three centres for macroeconomic policy enterprises are the EPU in the Prime Minister ‘s Department, the Ministry of Finance ( MOF ) or the Treasury, and Bank Negara Malaysia or cardinal bank.

Concretely, EPU is in charge of the preparation of the fiveaˆ?year development programs and the midaˆ?term reappraisals of the fiveaˆ?year programs. EPU is besides concerned with the readying of the longaˆ?term development programs known as the lineation position programs that cover a time-frame of 15 or 20 old ages. EPU besides initiates specific surveies or maestro programs such as the Privatization Master Plan ( EPU, 1991a ) .

On the other manus, international bureaus were besides qualified as the beginning of important policy thoughts. This includes bureaus like the World Bank, International Monetary Fund ( IMF ) , and the Asian Development Bank ( ADB ) which have been the three taking 1s engaged on authorities on policy affairs. World Bank, IMF, and ADB have for missions to Malaysia as the reappraisal of policies and for the deliberation of new policies. The World Bank ‘s work on poorness in Malaysia, for illustration, has been an of import beginning of policy thoughts on poorness relief.

Management of Growth and Distribution Issues

Distribution besides known as equity was a major concern of the postaˆ?1969 period, and the effects of the racial rebellions of that twelvemonth were decisive for the development scheme and policy devising. Besides, the NEP launched after these rebellions was a complex socio-economic policy. One point of the policy emphasized eliminating poorness irrespective of race. The other focused on affirmatory action for employment and assetaˆ?creation plans for the streamlining of society to rectify the acknowledgment of race with economic map. There has been a batch of advancement in cut downing poorness, but income unfairness remains extended.

Although it had other corollary, much attending and thought went into the effects a proactive distribution policy would hold on economic growing. In other words, the stated strategic attack to achieving the goals/targets of the NEP was a distribution through growing ( United National Development Program, 2005 ) even though the implementing of the attack was non excessively straightforward. However, the original version of the statement was tied closely to the 2nd tine of the NEP on reconstituting the society to rectify the designation of race with economic map and paying more attending narrowly on the restructuring of the ownership of portion capital. Therefore, these two cardinal execution issues had to make with the perceptual experience of growing and whether the scheme was to be implemented merely at the macro or at the micro degree excessively.

Furthermore, a constricted definition of growing would intend that the distribution/restructuring of portion capital could merely be put into pattern when the portion capital of a company had grown. In other footings, the corporation could turn through resort to loan capital instead than portion capital and that gross revenues, exports, and employment could besides be used as indexs of corporate growing. Therefore, the arguable execution issue is that during the scheme, even big companies in the economic system had to run into the footings with the status that at least 30 per centum of their portion capital was allocated to Bumiputera.

To recapitulate, the execution of the distributive scheme directed to the acceptance of a assortment of steps chiefly quotas, on occasion covering up merely the ownership of portion capital and at other times more than portion capital, at degrees that were above the brink for companies that are under the Industrial Coordination Act ( ACT ) .

However, companies holding as a characteristic concern normally had to hold at least 30 per centum of their portion capital allocated to Bumiputera, which include those that were seeking public listing on the stock exchange. However, commercial minutess through amalgamations and acquisitions, when they fall under the Guidelines of the Foreign Investment Committee ( FIC ) on Takeovers and Mergers, had to reorganise their ownership construction to follow with the NEP.

Furthremore, the The political and economic aims of the NEP is to cut down poorness by increasing income degrees for all Malaysians and to reconstitute the Malayan society in order to wipe out all racial designation in economic footings. In other words, the NEP calls for a fiscal redistribution from the minority of affluent non-Bumiputra ( native Malaysians besides known as “ Princes of the Soil ” ) racial groups to the Bumiputras ( Goldsworthy 1991: 51 ) . The end is to accomplish corporate equity of 30 per centum Bumiputra, 30 per centum foreign and 40 per centum other-Malaysians ( Onn 1988: 8 ) . This end can merely be facilitated with an spread outing economic system, so that no racial group should endure from economic or societal want. Other specific economic ends include ; keep high sustainable growing, low unemployment rates and guarantee the stableness of economic factors such as rising prices.

As a sum-up, the growing of public listed companies and other governmental establishments incremented the other distributional attacks. Therefore, two wide attacks were utilised:

First, public corporations expanded in new growing countries, particularly through the Urban Development Authority and the State Economic Development Corporations ( SEDCs ) . These new growing countries provided chances for Bumiputera concerns and enterprisers.

Second, institutional investors such as PNB provide the channel for single Bumiputera to put in unit trusts. These enterprises known as public investing in new regional growing centres produced assorted consequences but, overall, they were let downing.


The Malayan growing experience over more than 30 old ages provides a utile instance survey that touches on the cardinal subjects that are of involvement to the Growth Commission.

The planetary environment is sing unprecedented events that had widespread deductions to the universe ‘s economic state of affairs. Despite this ambitious environment, Malaysia has managed to avoid the major economic downswing. Bank Negara ‘s study shows that growing rate for 2001 remained in positive at 0.4 % , unemployment rate was contained below 4 % and rising prices rate was low at 1.4 % . The construction of economic system in Malaysia has diversified from agricultural to industrialization state since its independency in 1957.

Like other emerging economic systems, Malaysia faces a battalion of challenges in its attempts to accomplish a progressive and dynamic fiscal system. Balancing between fiscal stableness on one side and pecuniary and economic stableness on the other will go more ambitious, peculiarly as the domestic economic system becomes more interrelated and integrated with other economic systems and fiscal systems. In this environment, the duty of keeping fiscal stableness will go a corporate attempt widening beyond the national boundary, and require greater coaction among states.

Therefore, the Malayan experience is an illustration of how an economic system comparatively rich in natural resources can get away the soaˆ?called “ resource expletive ” and transform itself into a more industrialised economic system over a period of about 20 old ages. The procedure of structural transmutation through variegation, with lifting competition in the planetary export markets for manufactured merchandises, demands to be uninterrupted.