The winds of change are blowing in Malaysia, as the government is taking on an ambitious agenda of structural reform. The objective is to climb up the income ladder and join the league of high-income economies. This is a difficult challenge – one which not many countries have successfully met in the post-war period.
Against this backdrop, the World Bank’s launch of a new report on the Malaysian economy is timely. The Malaysia Economic Monitor, which will be published twice a year, aims to provide context to the challenges facing Malaysia and serve as a platform for discussion and the sharing of knowledge.
Knowledge-sharing is a requisite for the innovation- and knowledge-dependent economy which Malaysia aspires to develop. In this spirit, the Malaysia Economic Monitor aims to serve as a platform for discussion and is accompanied with a major outreach effort to policymakers, private sector leaders, market participants, civil society, think tanks and journalists.
What in a nutshell are some of the key findings of our report?
One finding is that the recent crisis was to some extent a distraction from Malaysia’s fundamental challenges. Yes, Malaysia was hard hit in terms of headline GDP figures and yes, the fiscal deficit rose to levels that raised investor concern. But Malaysia was spared the financial impact of the crisis that crippled advanced economies and the crisis remained very much a manufacturing-for-exports crisis with only moderate spillovers to the rest of the real economy. The fiscal deficit is also much lower when looking beyond headline numbers and including the entire public sector.
Malaysia’s fundamental challenge – simply put – is the need to revitalize the dynamism of its economy. Epitomizing this challenge is the anemic performance of private investment, which fell with the Asian crisis from 30 percent to some 10 percent of GDP and – unlike other countries in the East Asia and Pacific region – remained at that level and never recovered. The flipside of this is the large current account surplus, which indicates that the Malaysian private sector is voting with its feet.
National savings have increasingly gone to finance opportunities abroad, which by revealed preference seem to attract greater returns. Looking ahead, with the emergence of China and India on the global stage, this trend is unlikely to be reversed. In addition, as the global economy rebalances, competition for export market share and foreign direct investment will likely intensify. These external factors make it all the more necessary for Malaysia to revitalize the dynamism of its economy, so that national savings can find their way back into the country.
Click here to view the rest of the story.
CLICK HERE to download the FULL REPORT from The World Bank.
CLICK HERE to download The Executive Summary.
CLICK HERE to download Chapter 1, HERE for Chapter 2 and HERE for Chapter 3 of the report from The World Bank.
*Many thanks to my goddaughter who sent me the information for this post. She is currently doing her doctorate studies in Transportation Technology and Policy at the University of California, Davis. She was my Economics student in 1995. Earlier, she studied at UC @ Irvine and UC @ San Diego.
2 comments to THE WINDS OF CHANGE ARE BLOWING
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Unknown Dear Anonymous @ 6.11 am
Thanks again for injecting so much wisdom and insight into my blog with your fantastic analysis. I am deeply honored that you chose to grace my humble blog with your eloquent comments.
I agree that all that rhetoric from him is politically motivated. It may take beyond a lifetime to realize that aim. While the majority may be bedazzled by such attempts to mask reality, the more enlightened segment of the population know that all the cosmetic surgery in the world cannot hide the economic problems that beset this nation because the numbers just do not tally.
More credible and independent watchdog organizations have to play their roles to ensure that big brother and his lackeys behave themselves and serve the people (although that is virtually an impossible dream).
I join you in hoping that this Malaysian Economic Monitor will provide another platform to write on the subject and help keep them on their toes.
Here's wishing you and yours a great day!
Anonymous According to LKS's blog on PM's talking about Malaysia plan to become a high income economy, it will take on as a life time objective. Unless we see some economic miracle happening soon the current stagnant position brought about by the world financial crisis and lack-lustre development is strangling the country economy. PM has his pet theory only bringing the shines on BN - a very important political strategy costing heaps on PR - rather than directing efforts to solve economic problems. He is more politically motivated and has lost focus on the economy. The former PM before him was armed with plenty of development corridors in North West and South of West Malaysia. Everything came with a loud bang but left with just an echo. Where are the Middle Eastern investors, or they were just look-see visitors? No sustained efforts other than empty talks. We just finished blogging on the score board the country's ranking in corruption, which is like a silent cancer. It is correct to note that Malaysia is not directly affected by the world financial crisis, like most of Asian countries, when the embedded 1997 financial crisis still had the long term effects that saved businesses from getting involved with investments in the US. The Malaysian Economic Monitor will provide another platform to write on the subject.