What Are The Current Business Threats Facing The Malaysian Economy?

850 words - 3 pages

THREATS FACING MALAYSIAMalaysia, being a trading nation that highly dependent on international trade, our economic performance is very vulnerable to the performance of our major international trading partners. For decades, our economic growth has been overly reliant on external sector developments, foreign direct investment (FDI) and international trade. Domestic investment decisions are not base on economic fundamentals but rather these decisions are very much influenced by the market behavior of foreign investors.In view of the challenges arise from the globalization effects, it is important for the Government to sustain growth and strengthen the macro-economic fundamentals within the country. This is done by focusing on domestic business and industrial activities and increasing the purchasing power of our population. The government's fiscal policies and corporate reforms have to be continued to create a condition suitable for a speedy recovery and sustainable growth. It is also important to ensure that the restructured loans remain performing. Emphasis must be placed on continuing improvements on corporate governance, transparency, accountability and strict enforcement of powers by the market regulators. There is also a need for the country to maintain its peaceful environment and security in order to secure the investors' confidence.Currently, the final destination for most of Malaysian exports is the United States. Therefore, the successful recovery of the US economy is pivotal to Malaysia's continuing recovery. The current stagnation in the US economy, especially in the electronic chip industry, is a damper on economic recovery in Malaysia where electronics related exports make up more than 30% of the gross domestic product. With the American demand looking weak, we must look for alternative areas of growth and demand to increase the economic resilience.The emergence of ChinaWith China rising at such rapid rate, this means that the mid-sized economies of Asean (such as Malaysia) will have to run faster! Data has shown that China is taking away global market share, employment and foreign direct investment from Asean, with no exception to Malaysia:"h Between 1995 ¡V 2001, China's share of world clothing exports rose to 18.3% from 15.3%. Shares of Malaysia, Indonesia and Philippines have all shrank."h In the last four years, China has overtaken Malaysia and Singapore in electronics exports to the world's largest consumer, the United States."h A report from Japan's Research's Institute of Economics Trade and Industry shows that China competes with Asean for 100% of exports from Southeast Asia."h In 2000, China captured 89% of FDI entering the Asean-China region compared with 63% between 1989 and 1994."h Southeast Asia received $57million from China,...

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