Economy of Malaysia (SOURCE: WIKIPEDIA)

Malaysia is a growing and relatively open state-oriented market economy. The state plays a
significant but declining role in guiding economic activity through macroeconomic plans. In 2007,
the economy of Malaysia was the 3rd largest economy in South East Asia and 29th largest
economy in the world by purchasing power parity with gross domestic product for 2007 estimated to
be $357.9 billion with a growth rate of 5% to 7% since 2007. In 2009, the nominal GDP was
US$207,400 billion, and the nominal per capital GDP was US$8,100.

The Southeast Asian nation experienced an economic boom and underwent rapid development
during the late 20th century and has a GDP per capita of $14,800, being considered a newly
industrialized country. On the income distribution, there are 5.8 million households in 2007. Of that,
8.6% have an monthly income below RM1,000, 29.4% had between RM1,000 and RM2,000, while
19.8% earned between RM2,001 and RM3,000; 12.9% of the households earned between RM3,001
and RM4,000 and 8.6% between RM4,001 and RM5,000. Finally, around 15.8% of the households
have an income of between RM 5,001 and RM10,000 and 4.9% have an income of RM10,000 and
above.

As one of three countries that control the Strait of Malacca, international trade plays a large role in its
economy. At one time, it was the largest producer of tin, rubber and palm oil in the world.
Manufacturing has a large influence in the country's economy.

Statistics of Malaysian Economy

GDP $381.1 Billion (2009)
GDP GROWTH -2.2% (2009)
GDP PER CAPITA $14,800 (2009)
GDP BY SECTOR Agriculture (10.1%); Industry (42.3%); Services
(47.6%) (2009)
INFLATION (CPI) 0.4% (2009)
POPULATION BELOW 3.5% (2007)
POVERTY LINE
LABOR FORCE BY Agriculture (13%); Industry (36%); Services (51%)
OCCUPATION (2007)
UNEMPLOYMENT RATE 5% (2009)
INDUSTRIES Rubber and palm oil processing and
manufacturing, light manufacturing industry,
electronics, tin mining and smelting, logging and
processing timber, tourism, petroleum production
and refining, logging
EXPORTS IN VALUE $156.4 Billion (2009)
MAJOR EXPORTS electronic equipment, petroleum and liquefied natural gas, wood and wood
products, palm oil, rubber, textiles, chemicals
MAJOR EXPORT Singapore 13.9%, China 12.2%, United
States 10.9%, Japan 9.8%, Thailand5.4%, Hong Kong 5.2% (2009 est.)
PARTNERS
IMPORTS IN VALUE $119.5 billion (2009 est.)
MAJOR IMPORTS electronics, machinery, petroleum products, plastics, vehicles, iron and steel
products, chemicals
MAJOR IMPORT China 13.9%, Japan 12.5%, Singapore11.1%, Thailand 6%, Indonesia 5.3%,South
Korea 4.6%, Tawian4.2%,Germany 4.2% (2009 est.)
PARTNERS

Tiger economy
[edit]Macro-economic trend

This is a chart of trend of gross domestic product of Malaysia at market prices[17] estimated by the
International Monetary Fund with figures in millions of Malaysian Ringgit.

GDP Exchange Inflation Index Per Capita Income

Year
(in millions) (1 USD to MYR) (2000=100) (as % of USA)

1980 54,285 2.17 51 14.78

1985 78,890 2.48 64 11.44

1990 119,082 2.70 70 10.47

1995 222,473 2.50 85 15.69

2000 343,216 3.80 100 11.47

2005 494,544 3.78 109 12.67

For purchasing power parity comparisons, the US Dollar is exchanged at 1.70 Ringgit only. Average
wages in 2007 hover around $30–37 per day.

From 1988 to 1997, the economy experienced a period of broad diversification and sustained rapid
growth averaging 9% annually.

By 1999, nominal per capita GDP had reached $3,238. New foreign and domestic investment played
a significant role in the transformation of Malaysia's economy. Manufacturing grew from 13.9% of
GDP in 1970 to 30% in 1999, while agriculture and mining which together had accounted for 42.7% of
GDP in 1970, dropped to 9.3% and 7.3%, respectively, in 1999. Manufacturing accounted for 30% of
GDP (1999). Major products include electronic components – Malaysia is one of the world's largest
exporters of semiconductor devices – electrical goods and appliances.

Foreign funds were attracted to invest making the local money market and bourse liquid. This created
opportunity for local businesses to raise capital on the KLSE, and carry out infrastructure development
in areas like telecommunications, highways and power generation to meet bottlenecks caused by
rapid industrialisation. An intense labor shortage created employment for millions of foreign workers.
Subsequent events show that more than 50% were illegal.

The influx of foreign investment led to the KLSE Composite index trading above 1,300 in 1994 and the
Ringgit trading above 2.5 in 1997. At various times the KLSE was the most active exchange in the
world, with trading volume exceeding even the NYSE. The stock market capitalisation of listed
companies in Malaysia was valued at $181,236 million in 2005 by the World Bank.[18]

Concerns were raised during the time about the sustainability of the rapid growth and the ballooning
current account. The mainstream opinion prevalent at that time was that the deficit was temporary and
would reverse once imported equipment started producing for export. In spite of that, measures were
taken to moderate growth especially when it threatened to overheat into the double digits. The main
target was asset prices, and restrictions were further tightened on foreign ownership of local assets.
Exposure of local banks to real estate loans were also capped at 20%.

As was widely expected, the current account deficit did narrow steadily, year to year, from 9% to 5%
of GDP.

Malaysia has the largest operational stock of industrial robots in the Muslim world.[19]

External trade

Malaysian exports in 2006

Malaysia is an important trading partner for the United States. In 1999, two-way bilateral trade
between the U.S. and Malaysia totaled U.S. $30.5 billion, with U.S. exports to Malaysia totaling U.S.
$9.1 billion and U.S. imports from Malaysia increasing to U.S.$21.4 billion. Malaysia was the United
States' 10th-largest trading partner and its 12th-largest export market. During the first half of 2000,
U.S. exports totaled U.S.$5 billion, while U.S. imports from Malaysia reached U.S.$11.6 billion.

The Malaysian Government encourages Foreign Direct Investment (FDI). According to Malaysian
statistics, in 1999, the U.S. ranked first among all countries in approved FDI in Malaysia's
manufacturing sector with approved new manufacturing investments totaling RM5.2 billion (US$1.37
billion). Principal U.S. investment approved by the Malaysian Investment Development
Authority (MIDA) was concentrated in the chemicals, electronics, and electrical sectors. The
cumulative value of U.S. private investment in Malaysia exceeded $10 billion, 60% of which is in the
oil and gas and petrochemical sectors with the rest in manufacturing, especially semiconductors and
other electronic products.

Free trade efforts

Malaysia is the founding member of the ASEAN Free Trade Area which was established in 1992 to
promote trade among ASEAN members. Most tariffs among the first generation member states were
scrapped in 2007. ASEAN itself is increasingly playing a large role in free trade negotiation on behalf
of its members. ASEAN as a group hopes to establish a free trade agreement with the European
Union by 2009.[76]
The Malaysian Government is negotiating free trade deals with Australia, Chile and India,[77] but has
suspended negotiation of free trade deal with United States indefinitely after eight rounds of
negotiation. Officials have expressed desire for free trade agreements their ASEAN
members Singapore and Thailand. The Malaysian Trade Ministry released a statement
in Vietnam saying that the FTA "has the potential to increase trade, investment cross flows and
economic cooperation between the two countries. The agreement would also serve to make Chile a
gateway for Malaysia's exports to the Latin American market."[78]

Malaysia signed a Japan-Malaysia Economic Partnership Agreement with Japan on 13 December

2005.[79] This leads to a Free trade agreement which was in effect from 13 July 2006 and expected to
be fully realized in 2016.[80] The agreement itself is an extension of an FTA between ASEAN and
Japan, which is called Asean-Japan Comprehensive Economic Partnership.[81]

On 8 November 2007, Malaysian and Pakistan signed a bilateral Free Trade Agreement which will
come in force on 1 January 2008. Malaysia will cut tariffs on 140 lines while Pakistan will cut 124
lines. Most tariffs and duty is expected to be eliminated by 2012.[82]
Other 'economic areas' showing an interest in establishing free-trade agreements with Malaysia are
the European Union and Hong Kong. However, before any talks can be initiated regarding new FTAs,
Joint Economic Co-operation deals need to be concluded. International Trade and Industry
Minister, Tan Sri Muhyiddin Yassin has expressed the hope that talks will be concluded by the end of
2008.

Malaysia Trade, Exports and Imports

SOURCE: http://www.economywatch.com/world_economy/malaysia/export-
import.html

Southeast Asia, particularly Malaysia, has been a trade hub for centuries.
Since the beginning of history, Malacca has served as a fundamental regional
commercial center for Chinese, Indian, Arab and Malay merchants for trade of
precious goods. Today, Malaysia shares healthy trade relations with a number
of countries, specifically the US. The country is associated with trade
organizations, such as APEC, ASEAN and WTO. The ASEAN Free Trade Area
that was established for trade promotion among ASEAN members also has
Malaysia as its founding member. Malaysia has also signed Free Trade
Agreements with countries including Japan, Pakistan, China and New Zealand.
Malaysia was once the world’s largest producer of tin, rubber and palm oil. Its
manufacturing sector has a crucial role in its economic growth. The export
industry was hit hard during the late 2000 economic recession drastically
dropping to 78% i.e. FDI to RM4.2 billion in the first two quarters of 2009. Total
exports fell down to $156.4 billion in 2009 from $198.7 billion in 2008. The
imports also reduced from 154.7 billion in 2008 to $119.5 billion 2009.

Malaysia Exports Commodities

Malaysia mainly exports the following commodities:

• Electronic equipment
• Petroleum and liquefied natural gas
• Wood and wood products
• Palm oil
• Rubber
• Textiles
• Chemicals

Malaysia Exports Partners

The following graph depicts the shares of various export partners of Malaysia:
Malaysia Imports Commodities

Malaysia mainly imports the following commodities:

• Electronics
• Machinery
• Petroleum products
• Plastics
• Vehicles
• Iron and steel products
• Chemicals

Malaysia Imports Partners

The following graph depicts the share of various import partners of Malaysia:

Malaysia's Top Imports & Exports 2008

Malaysia Leads as High-Tech Products Exporter
Computers, computer accessories and telecommunications equipment account for 52% of Malaysian exports
while semiconductors generate 47% of American sales to Malaysia.
SOURCE: http://import-
export.suite101.com/article.cfm/malaysias_top_imports_exports_2008

Malaysia’s Gross Domestic Product (GDP) was an estimated US$222.2 billion in 2008, making Malaysia the
world’s 39th richest country.

With a population of 25.7 million Malaysians who enjoyed an average GDP of $15,200 per person last year,
Malaysia placed 74th among other nations in terms of GDP per capita.

As the world’s 21st biggest exporting nation, Malaysia shipped $198.9 billion worth of exports in 2008. Malaysian
exports include electronic equipment, petroleum, liquefied natural gas, wood, rubber and textiles. Based on 2008
statistics, Malaysia’s largest export clients were Singapore (15.6%), the United States (12.9%), China (12.5%),
Japan (9.6%) and Thailand (4.1%).

According to the CIA World Factbook, Malaysia imported $154.7 billion worth of foreign goods last year. Major
commodities imported into Malaysia include machinery, petroleum products, plastics, vehicles, iron and steel
products and chemicals. Leading suppliers to Malaysia were Singapore (23%), China (12.7%), Japan (9.8%), the
United States (7.8%), Thailand (5.7%) and South Korea (4.3%).

In total, Malaysia’s international trade amounted to $353.6 billion or 159.1% in relation to its overall GDP. This
compares with roughly 25% for the U.S. and 60% for Canada.

Malaysian Trade with the U.S.

Last year, Malaysian exports to America fell 5.8% to $30.7 billion. Over that same period, Malaysia bought $12.9
billion worth of U.S. imports – an increase of 10.9%.

After subtracting imports from exports, one can quickly calculate Malaysia’s trade surplus with the U.S. to equal a
healthy $17.8 billion in 2008.

The lists below present the top 10 exports and imports that American and Malaysian enterprises exchanged in
2008. The fastest-growing trade product categories are also listed.

Malaysia’s Top Exports to America

Malaysia’s top 3 exports were hi-tech products that represented 51.8% of Malaysian exports to the U.S. last year.
In total, the following 10 Malaysian exports generated 77.1% of the total value of shipments from Malaysia to
America in 2008.

1. Computers … US$6.7 billion, down 17.2% from 2007 (21.9% of US imports from Malaysia)
2. Computer accessories and parts … $4.8 billion, down 14.4% (15.6%)
3. Telecommunications equipment … $4.4 billion, down 1.2% (14.3%)
4. Semiconductors … $2.9 billion, up 2% (9.6%)
5. Food oils and oilseeds … $1.2 billion, up 76.7% (3.9%)
6. Other household goods including clocks … $964.8 million, down 21.8% (3.1%)
7. Other scientific, medical and hospital equipment … $899.5 million, up 19.4% (2.9%)
8. Household items including baskets and furniture … $710.5 million, down 8.2% (2.3%)
9. Stereo equipment including radios … $566.1 million, down 6.3% (1.8%)
10. Video equipment (DVD players, VCRs, TV receivers) … $516.6 million, up 12.3% (1.7%).
Fastest-Growing Malaysian Exports to the U.S.

Malaysian exported tin had the most dramatic increase in sales to the U.S., while 7 other product categories
showed impressive triple-digit gains.

1. Tin … US$34.9 million, up 1,881% from 2007

2. Oilfield and drilling equipment … $14.1 million, up 990.4%
3. Feedstuff and food grains … $21.2 million, up 183.3%
4. Crude oil… $63.2 million, up 169.8%
5. Synthetics (cork, gums, resins, rubber, wood)… $6.8 million, up 162.4%
6. Vegetables and preparations … $6.4 million, up 153.4%
7. Paper and paper products … $9.7 million, up 137%
8. Miscellaneous non-ferrous metals … $12.6 million, up 121.6%
9. Agricultural machinery and equipment … $2.7 million, up 91.4%
10. Fertilizers and pesticides … $43.2 million, up 87.1%.

Malaysia’s Top Imports from America

Semiconductors, steelmaking and plastic materials illustrate the fact that many of America’s exports to Malaysia
are source inputs for Malaysian manufacturers. The following top 10 exports from America to Malaysia accounted
for 74.6% of Malaysia overall imports from the U.S.

1. Semiconductors … US$6.1 billion, up 21.7% from 2007 (47.3% of US exports to Malaysia)

2. Computer accessories … $586.7 million, up 7.4% (4.5%)
3. Steelmaking materials … $525.6 million, up 45.4% (4.1%)
4. Other industrial machines … $421.8 million, down 20.3% (3.3%)
5. Electric apparatus … $421 million, down 8.5% (3.3%)
6. Telecommunications equipment… $416.7 million, down 13.2% (3.2%)
7. Measuring, testing and control instruments … $369.8 million, up 29.9% (2.9%)
8. Civilian aircraft… $346.8 million, down 31.6% (2.7%)
9. Generators and accessories … $245.5 million, up 98.6% (1.9%)
10. Plastic materials … $163.5 million, up 5.7% (1.3%).

Fastest-Growing Malaysian Imports from the U.S.

The top 10 list of Malaysian growth imports were for relatively small dollar amounts. Three of these import
categories were up by triple-digits while the remaining 7 product categories had double-digit gains.

1. Artillery, guns, missiles and tanks … US$28.6 million, up 653.1% from 2007
2. Food oils and oilseeds … $8.4 million, up 553.9%
3. Other iron and steel products … $27.3 million, up 111.7%
4. Generators and accessories … $245.5 million, up 98.6%
5. Chemical fertilizers… $22 million, up 97.3%
6. Marine engines and parts … $34.1 million, up 84.7%
7. Trucks, buses and special purpose vehicles … $2.3 million, up 79.3%
8. Textile and sewing machines … $6.3 million, up 69.2%
9. Unmanufactured agriculture industry products … $27.1 million, up 67.4%
10. Unmanufactured tobacco … $20.9 million, up 66%.

Comparative Trade Advantages

During 2008, Malaysia exported $11.5 billion worth of computers and accessories to the U.S. while importing
$715 million of those same product categories from America.
These Malaysian-American trade statistics show that Malaysia has a comparative advantage over the U.S. in the
trade of computers and accessories between the 2 nations.

On the other hand, America exported $6.1 billion worth of cornputers to Malaysia in 2008 compared with $2.9
billion in Malaysian semiconductors imported into the U.S.

That the U.S. shipped to Malaysia over twice the value of imported Malaysian semiconductors clearly shows that
America has a comparative advantage in trading semiconductors with Malaysia.

Sources

This analysis is based on latest statistics from the US Census Bureau- Foreign Trade Statistics and CIA World
Factbook as of the date of article publication.

Challenges for Malaysia

Source: http://www.bernama.com/bernama/v5/newsbusiness.php?id=500392

Malaysia Should Diversify Trade Pattern And Explore China's

Sectors, Says DPM
KUALA LUMPUR, May 22 (Bernama) -- Malaysia should diversify its trade pattern and explore
emerging sectors in China which have high potential for future growth, according to Deputy Prime
Minister Tan Sri Muhyiddin Yassin.

"Currently, most of our bilateral trade comprises electronics and electrical products, palm oil and
chemicals. Clearly, we can do much more to diversify the pattern," he said.

Muhyiddin said with the move towards the Asean-China Free Trade Area, Malaysia could and
should significantly diversify and broaden opportunities for trade and investment with China.

"These include oil and gas, high-value agriculture, green technology, financial services and
information technology," he said at the 20th anniversary dinner of the Malaysia-China Chamber of
Commerce here Saturday.

Muhyiddin said one of the hottest debates among policy-makers and business leaders around the
world was how to view China, either as a threat or opportunity, and partner or competitor.

China's economy is still robust and its potential for future growth is still high and this has made the
country being viewed more as a competitor than a partner, he said.

"How then we face up to China? Do we want to see China solely as a competitor or embrace China
as our partner? To Malaysia, China is our strategic partner," he added.

Last year, Malaysia's total trade with China exceeded US$36 billion.

In the first three months of 2010, total trade between both countries was valued at US$10.63
billion, up from US$6.87 billion in the same period last year. As a result, China has become
Malaysia's largest trading partner.

Muhyiddin said with the Asean-China Free Trade Agreement, both entities combined to create the
world's largest free trade area with about 1.8 billion consumers.

He said businessmen from Asean and China should tap this larger market to create more
opportunities.

"What's more, local businessmen can learn from their China's counterparts on how China's
economy has been transformed from a hotbed of sweatshop and cheap hands, into a hub for
business and technological innovation in less than two decades," he added.

On the Malaysian economy, Muhyiddin said it was showing positive gross domestic product (GDP)
growth and on track to become a leading trading nation in 10 years' time.

Malaysia has entered the list of 10 most competitive countries in the world for the first time,
according to the 2010 World Competitive Yearbook, published by the Swiss-based Institute for
Management Development on May 19.

He called on Chinese investors to continue considering Malaysia as a major destination for

overseas investment, especially under China's "Going Global" policy and its foreign investment
fund facility.

He said that tourism and education were two emerging sectors that offered new investment
opportunities for investors in both countries.

Muhyiddin also called on Malaysian businessmen to tap on the creative and innovative resources of
China through economic collaborations and ventures.

"This will help stimulate Malaysia's business and technological innovation, increase
competitiveness and boost economic ties between the two countries," he said.

-- BERNAMA