Name

: Lim Foong Yee : Aaron Wong Yoong Keong

Student ID Student ID

: 08027005 : 10019396

Programme Course Course Code Instructor Title of Essay

: Bachelor of Science (Hons) Accounting and Finance : English for Business and Management : UCS 1001 : Ms. Tan Siew Imm : 1.With 2020 a decade away, Malaysia has a long journey ahead and catching up to do. Its Gross National Product (GNP) per capita stood at US$6,686 in 2007 and is projected to reach US$15,340 in 2020, only marginally above the minimum GNP benchmark of US$14,818 for high-income countries. Malaysia has not caught up with the high-income economies and if the trend continues, she will be overtaken by other rapidly developing economies. What are the steps and measures the Malaysian government has to take to make sure that the country reaches or surpasses its target in 2020? Discuss.

To transform the nation into a high income economy and to place the nation on the right path towards achieving developed nation status by 2020, the Prime Minister disclosed a New Economic Model (NEM). He believed that the NEM would make Malaysia more competitive regionally and globally and raise all Malaysians per capita income from US$7,000(RM22, 820) currently to US$15,000 (RM48, 900) by the end of the decade (Amir Azree, 2010). The NEM have several measures to promote economic growth. In economic terms, economic growth occurs when an economy attains an increase in its national income, product or expenditure, measured by Gross National Product (GNP), in excess of its rate of population growth. In other words, economic growth occurs when there is an increase in GNP per capita. The NEM highlights that there is a need to promote private investment (Amir Azree, 2010). To develop private investment, the government has to implement the capital market policies. First, the government should try to reduce the amount of formality such as planning permissions to shorten the planning time of private sectors and therefore help to reduce the costs (Gillespie. A, 2002:82). As a result, profitability of the business will increase and new firms will be attracted to enter the market. Second, the government ought to increase the range of sources of capital available to firms (Anderton .A, 2000:251). If firms are incapable to access to financial like bank loans or share capital, they may constrain in their growth. Government should therefore persuade the private sector to offer financial capital, particularly to small and new businesses. Consequently, there will be a wide range of private business in the market. Overall, both methods may help boosting the private investment, promoting employment and therefore increasing GNP per capita.

Besides, the government can perform labour market policies to bring the country towards high income status. First, the government should encourage private sectors improve and provide education and training to employees, which is also highlighted in the NEM (Amir Azree, 2010). This is because it is able to improve the employees work productivity since they are becoming more skilful. Then, the potential output of goods and services will increase and lead to higher GNP per capita. Second, there should be a reduction in unemployment benefits (Gillespie. A, 2002:82). If government decreases the amount of unemployment benefits, being out of job will become less attractive and thus people will have the incentive to find a job. As a consequence, employment will rise and result in higher GNP per capita. Furthermore, the goods market policies can be implemented by the government to transform the nation into a high income economy. Deregulation is needed to remove artificial and legal barriers to entry into an industry and to create contestable markets (Gillespie. A, 2002:82). Therefore, new and innovate firms are enable to enter markets and to compete with existing firms which tend to restrict output and to keep their prices high. If successful, it will raise output, force firms to improve efficiency and finally increase GNP per capita. To raise GNP per capita, the government should increase the range of sources of capital available to firms, reduce the amount of formality and deregulate the legal and artificial barriers to entry. However, those measures will reduce the barriers of entry. The lower the barriers of entry, the more the new firms are attracting to enter the market (ACCA PAPER F1, 2009:170). Therefore, the number of competitors in the market will increase and thus create a competitive industry. Small

firms may collapse due to inability to compete with the large company in same industry in the term of costs of production. The result is the larger firms will monopolise the industry and tend to keep their prices high in order to increase the profits. Besides, if the government lessen the amount of formality, organisations that produce goods and services, which do not enhance the future benefit for the social and environment, will able to enter the market. As the number of those organisation increases, the amount of those goods and services will rise and finally environment, health and social problems such as polluted air and water, toxic waste, congestion and noise will also increase. Hence, GNP may overstate because those expenses that spent by the government to clean up pollutions and to reduce congestion are not being deducted from the total amount of GNP (McConnell. R et al, .2009:495). Opponents of the labour market policies say that when the employees become more specialise and skilful in their careers, there is a high tendency of migration of skilled workers. This is due to most of the workers are being attracted to higher salary, better fringe benefits and more desirable working environment that are offered by the foreign countries. Therefore, other countries are able to take advantage on our nation by reducing their costs of training the workers. Furthermore, if the government decides to reduce the amount of unemployment benefits, it may worsen the lives of those people who really cannot look for jobs. In conclusion, GNP per capita can be improved in many ways but an increase in GNP per capita is not the only but the first criterion to become a developed country. Therefore, the government should not only concentrate on the growth of GNP per capita but also the standard of living and the development in others aspects.

References Anderton, A. 2000. Economics, 3rd edition, United Kingdom: Causeway Press Limited. Gillespie, A. 2002. AS & A Level Economics, 2nd edition, United Kingdom: Oxford University Press Amir Azree. 2010. NEM to make Malaysia more competitive globally, The Malay Mail (30 March 2010). McConnell, R. et al., 2009. Introductory to Economics: Economic Growth, 18th edition, American, New York: McGraw-Hill /Irwin ACCA Paper F1 Accountant in Business (2009), London: BPP Learning Media Ltd