1. SINDIKAT 5
M.Ridwan - 29112555
Machadi Dhana – 29112303
M. Khadafi – 29112324
Pedro Putu Wirya – 29112565
Seto Kusparyanti – 29112306
Yuliani Dewi - 29112321
Case study
Malaysia : People First ?

2. Profile
 Malaysia is divided into two main regions :
peninsular Malaysia, extending southward from
China and Thailand, and East Malaysia, across
the China Sea from the mainland on the island of
Borneo.
 In 2009, the population of Malaysia was 28.3
million people ; and there are three largest ethnic
groups, the native Malays 50.4 %, Chinese 23.7
%, and Indian 7.1 %.
 Malaysia's per capita income was $14.700
 Malaysia gained independence from Britain
colony in 1957

3.  In Malaysia’s colonial era, the economy was
dominated by the primary sector; agriculture,
forestry, fishing, tin and rubber.
 To free from erratic commodity prices set in
international market, the new Malaysian state
focused on diversifying the economy.
 The country adopted an import substitution
industrialization (ISI) strategy, promoting
domestic production to substitute for
manufactured imports.

4.  Overall, the 1960s saw moderate increases in
wages for capital-intensive industries, but
unemployment remained high and domestic demand
meager.
 However, the share of business owned by native
Malay (bumiputera)was only 24 %, while Chinese
and foreign ownership shares amounted to 27.2 %
and 63.4 %.
 Non-bumiputra groups felt that the government was
limiting their economic opportunities, while the
bumiputra were not convinced their interests were
being adequately protected.

5.  In 1971 the Free Trade Zone Act set up special
low-tariff zones to encourage companies to
manufacture for export.
 Price discrimination, quotas, fiscal incentives,
administrative support, and government-linked
corporations (GLCs) were deployed to promote
economic activity and “balance” the economy.
 The GLCs produced “bloated bureaucracy, high
costs, low productivity and limited innovation.

6. The Policy of Prime Minister Najib Razak which is presented
on March 30, 2010 :
– Raising per capital income from $ 6,634 to over $
15,000 by 2020
– Measures to improve human capital, reduce migration
and privatize inefficient government-linked corporations
(GLCs)
– The dismantling of the new economic policy (NEP)
NEP : an affirmative action program for native Malays that had
alleviated racial tensions and reduced inter-racial income
inequality over the previous 40 years.

7. ●The economy was in the midst of a deep recession
and investment had plunged from 45 % of GDP to
19 %
●The ruling political coalition, the Barisan Nasional
(BN), united three of the largest political parties –
UMNO, MCA and MIC
●The opposition coalition, PKR, DAP and PAS was a
close contender for the ruling coalition.
●In the March 2008 election BN had not won two-
thirds of the seats required to pass constitutional
amendments.

8. ● In March 1996, the Thai Government had been
forced to purchased $4 billion in real estate
developers' debt.
● In January 1997, the collapse of several major
Korean and Thai firms warned of danger.
● By November 1997, Indonesia, Korea, the
Philippines, and Thailand turned to the
International Monetary Fund (IMF).
● On July 14, 1997, the central bank, Bank Negara
Malaysia (BNM) stopped defending the currency
and helplessly watched as the ringgit depreciated
from RM 2.5 against the U.S. Dollar to a record
low of RM 4.88.

9. The Global Financial Crisis
- Between the last quarter of 2007 and the first quarter of 2009 GDP declined
7.8%
- Early November 2008, first fiscal stimulus package abou 1% of GDP
announced.
Comprised public works, education programs, pro business initiatives,
reduction in employees' contributions to the pension fund
- End of 2009, grown again leaving the yearned GDP decline at 1.7%
- The significant contributor for that situation :
* Reduction of inventories (2.5% drop in GDP)
* Overall investment contributed and additional 1.2%
* Real private investment decline by 21.8%
* Public investment increased by 12.9%
* Real exports declined by 12%
* Imports fell by 13.1%
- March 2009, second stabilization package approximately 9% of GDP
announced
Approximately 40% to loan guarantees, included infrastructure projects,
worker training programs, recruitment of public sector employees and
exemptions for interest on housing loans and income tax for laid – off workers.

10. ● In facing the crisis, Malaysia had done some
financial reform to recover the crisis :
- In July 1999, BNM announced a bank
consolidation program with the objective of
increasing the efficiency of the banking sector.
- In May 2000, Dr. Zeti, was appointed as the
seventh governor of BNM, she set out to fortify
Malaysia's battered reserves and deepen the
reform the financial system to reduce exposure
to future contagion.
● Despite Malaysia had done financial reform,
the investment collapse

11. Najibnomics – Najib's New Economic Model (NEM)
The objective :
- To make the economy more market friendly
- Ensure ethnic harmony to increase the income of poor households.
Steps :
 Eliminated subsidies on basic commodities except for low income families
 Build the sector that has comparative advantage with higher value-added
activities
 Attract and maintain foreign investment by holding majority stakes in most
enterprises exclude “strategic” industries (banking, telco, energy)
 Easing insurance regulation
 Lowering the minimum quota for Malay ownership in publicly traded
companies from 30% to 12.5%
 Liberalized 27 minor sub-sectors, exempting them from the minimum
required bumiputera equity of 30%.

12. Appendix : Islamic Banking
- Emerge since the late 1970s
- Prohibit the use of riba (usury), interpreted to proscribe all forms of interest
- Emphasize employing resources with productive intentions
- In Malaysia, the Islamic Banking Act (IBA) in April 7, 1983 provides BNM with
powers to supervise and regulate Islamic Banks.
- On July 1 1983, Bank Islam Malaysia Berhad (BIMB) the first Islamic bank
establish in the country
- By 2007, Malaysia Islamic banking assets reached $65.6 billion with average
annual growth rate of 18 – 20%.
- The difference with conventional
* Mudharabah-profit sharing, involves a capital provider (depositor), bank, and
an entrepreneur or other investment opportunity
* The capital provider through the bank provides funds for investment projects
* The returns of the projects are split between the depositor
* Bank at a pre-specified profit sharing ratio.
* All losses are borne by the capital provider
* There's a different steps to execute the same transaction.