Country Analysis: Malaysia Essay, Research Paper

Malaysia

A. Brief History

? In the first century AD, the Malayan peninsula was prominent in int’l trade.

? Conquered by the Portuguese in 1511, then the Dutch in 1641.

? The British, who replaced the Dutch in 1795, developed large-scale productions of tin and rubber.

? The Japanese invaded Malaysia during WWII.

? Malaysia was formed after negotiating for independence from the British in September 16, 1963.

B. Comparative Advantage (Early years up to pre-1980’s)

? Natural Resources/Land

- Malaysia has a total land area of 127,320 sq. mi.

- abundance of sedimentary rocks such as limestone, shale, sandstone, and conglomerate.

- Tin ore was Malaysia’s most important resource pre 1980’s.

- exported raw commodities such as timber, rubber, tin, and palm oil.

? Human Resources

? Access to Capital

- Government invested on more capital goods

- Sources of finances were increasing due to the investment on capital, domestic saving, and foreign investments.

- In the 1970’s, the Investment Incentive Act aimed to gain more investments to spend on its programs. It also aimed to get more participation from the Malays.

? Initial Success in some industries

- Production of raw materials like tin and rubber

- Mining, Petroleum production, Agricultural Sector, Forestry and Fishing.

C. Role of Government

? The head of state is the Yang di-Pertuan Agong (paramount ruler) The Conference of Rulers is formed by the hereditary rulers and appointed heads of the four other states. The Cabinet headed by the Prime Minister exercises executive power.

? The government finds ways to attract foreign investors, and is active in the development of industries.

D. Competitive Advantage

? In the Second Industrial Master Plan (IMP2), palm oil, rubber, cocoa, and timber were identified as primary commodities.

? The Third National Agricultural Policy (NAP3), palm oil, rubber, cocoa, and timber have also been identified as the major contributor to agricultural value-added activities.

? Infrastructure Development- in the form of roads, ports, railways, telecommunications, electricity, and water supply- is crucial for profitable private investment.

? More emphasis has been given to the development of commercial agriculture since the 19080’s.

? Petroleum Development Act of 1974 enabled the federal government to get much of the resource rents from petroleum and natural gas resources.

? Logging

? Malaysia has the second highest household savings rate.

? Import Substitution and Export Orientation

E. Economic Indicators (1991-2000)

GNP $67 billion

GDP 6%

Inflation 5.3%

Unemployment 2.6%

National Debt $39.8 billion

Budget Deficit/ Surplus revenues: $22.6 billionexpenditures: $22 billion

Population 22.2 Million

F. Survival Strategy during the Asean Crisis (1997 – 2000)

? Political Problems

- On September 1998, Prime Minister Mahathir Mohammad fired Anwar Ibrahim from his post as Deputy Prime Minister, after being convicted of corruption and other illegal activities.

- Daim Zainuddin, the Special Functions Minister, succeeded Anwar’s position.

- The coalition of Mahathir and Daim went against the International Monetary Fund (IMF).

? Economic Problems

- Currency depreciation, causing a fall of the financial situations, the stock market, and exchange rate.

- The corporate sector became vulnerable, and the financial system was exposed to external borrowing, property, stock, and shares.

- Weak supervision in the financial system.

? Strategy for Recovery

- Stabilizing the Ringgit

- Reduce an Over-Dependence on the US Dollar

- Increase External Reserves

- Adopt a Balanced Interest Rate Policy

G. Most Likely Country Scenario

? Invest more on its resources.

? Will develop competitive industries.

? Must become politically and socially stable.