Economics of Malaysia through Years

1. Managerial
Economics - II
By group 2

2. Group Members
• Shashank Agarwal (2)
• Dhawal Bhanderi (10)
• Vanshika Dangayach (21)
• Jash Gada (29)
• Abbas Haider (33)

3. Overview of the Country
• Location – South East Asia
• Capital – Kuala Lumpur
• Language – Malaysian
• Population - 29,495,147 (2012 Census)
• Consists of 13 states and 3 federal territories
• Shares borders with Thailand, Singapore, Brunei and
Singapore

4. Continued..
• A Federal constitutional monarch
• Prime Minister – Najib Razak
• King – Tuanku Abdul Halim
• Multi ethnic and multi cultural
• State religion is Islam

5. History in Brief
• Malaysia has its origins in the Malay Kingdoms
• British straits settlements
• Formation of Malayan Union in 1946
• Independence from the British and formation of The
Malayan Federation
• Formation of Malaysia
• Expulsion of Singapore

6. The Malaysian Economy
• Phase 1 (Till 1965)
• Phase 2 (1965 – 1969)
• Phase 3 (1970 – 1987)
• Phase 4 (1987 – 1997)
• Phase 5 (1997- Present)

7. Phase 1 (Till 1965)
•
Malayan Peninsula during the British reign
•
The Malayan Plans
a) First Malayan Plan
b) Second Malayan Plan

8. The British Influence
• Center of Trade for Porcelain and Spice
• Introduction of Rubber, Tin and Palm oil trees
• Immigration of Indians and Chinese

9. First Malayan Plan
(1956 – 1960)
• First plan by the government
• Changing the mentality
• Agriculture and rural development
• Public expenditure by the government

10. Second Malayan Plan
(1961 – 1965)
• Increase public expenditure
• Main objective was development of rural areas
• Reason for the increased expenditure

11. Phase 2 (1965 - 1970)
• Singapore expulsion and formation of Malaysia
• First Malaysia plan
• May 13 Incident

12. First Malaysia Plan
(1965 – 1970)
• First plan by government of Malaysia
• Objective was to provide medical facilities in rural
areas and improve literacy rate
• Complete withdrawal of British
• Problem of unemployment
• Expenditure on rubber , rice and other crops

13. Continued..
• Literacy rate increased
• Unemployment continued
• Ethnic problems
• Government policies relating to industries

14. May 13 Incident
• Malay affirmative policies
• Led to riots and emphasis on ethnic groups
• Led to the NEP

15. Phase 3 (1970 - 1987)
• Transition phase
• Introduction of the Second, Third and Fourth
Malaysia Plans
• Introduction of NEP

16. Transition Phase
• Imitation of the Asian Tigers
• Shift to a multi sector economy
• Role of the Reid Commission
• Policy changes

17. New Economic Policy
• Objectives of the NEP
• Enactment of the Industrial Coordination Act ( ICA)
• Establishment of HICOM
• Economy opened to foreign companies

18. Floating of the Ringgit
• Ringgit was floated in 1973
• Liberalization of the capital account
• Conservative monetary stance
• Strengthening of private sector and export oriented
industrialization

19. Problems during the
phase
• Industries under the HICOM were born losers
• Low productivity of Manufacturing industries
• High current account deficit and public sector
deficit
• Race related tensions increased

20. Source: tradingeconomics.com

21. Source: tradingeconomics.com

22. Phase 4 (1987-1997)
• National Development Policy
• Fifth and Sixth Malaysia Plans
• Infrastructure Projects
• Achievement of a balanced budget
• Vision 2020

23. Vision 2020
• Introduced by Prime Minister Mahatir in 1991
• Objective was to be self – reliant
• 9 Strategic challenges

24. National Development
Policy
• With the aim to fulfill the objectives of Vision 2020.
• NDP was accomplished through the policies, strategies, and
programs implemented in
-The sixth Malaysia Plan (1991-1995)
-The Seventh Malaysia Plan (1996-2000)

25. Infrastructure and the
Proton
•
Proton – Malaysian Car Project
• Proton was a drain on resources
• Infrastructure projects – Putrajaya, Petronas Tower,
KLIA, F1 circuit

26. Balanced Budget
• Changed attitude of the government towards
Malays
• Low tariff restrictions
• Relaxed regulations on foreign equity
• Role of BNM

27. Phase 5 (1997 – Present)
• Asian Financial Crisis
• National Vision Policy
• Recession 2008
• Current scenario

28. Asian Financial Crisis,
1997(Causes)
• Financial collapse of the Thai baht
• Large Foreign Debt Of most Asian
countries
• Depreciation Of Various Currencies

29. Effects of Asian Financial
Crisis
• Depreciation Of Ringgit
• Foreign direct investment fell at an alarming rate
• Stock Markets also fell to a new low
• A sharp contraction of the GDP

30. Policies to Overcome the
Crisis
• Refused economic aid packages from the
International Monetary Fund (IMF) and the World
Bank.
• Massive government spending was made on the
Public Sector
• Continuously recording of budget deficits in the
following years after the Asian financial crisis.
• Concept of V-shaped recovery was noticed.

31. NVP
(National Vision Policy)
• National Vision Policy (NVP) was an extension of the
NDP (1991-2000) and covers the 8th and 9th MP.
• Income maximization through optimal utilization of
the sector’s resources.
• Emphasis and priority given to the development
of agriculture sector and good prices of main
commodities

32. Recession 2008
(Effects)
• Exports and industrial output Deteriorated
• Investment basically FDI Started to fall
• GDP Started to Decline but at a much lesser rate
compared to other countries.
• Decline in the value of ringgit as exports saw a huge
decline

35. Policies of the
Government
•
Introduction of stimulus packages in order to revive
the economy.
1) Rm 7 billion In the year 2008
2) Rm 60billion In the year 2009
•
To support private consumption government
reduce EPF contribution to 8% from 11%.
•
It also Started Giving tax Incentives To the people

36. Current Scenario
• Liberal Equity Policy
• Employment of Expatriates
• Attractive Tax Incentives
• Private Higher Education Sector

37. Current Statistics
• GDP (PPP) – $492 Billion
• GDP Per Capita - $16,900
• Imports - $197 Billion
• Exports - $239.8 Billion
• Population below poverty line - 3.8%

38. Continued..
• GDP Composition :
a) Agriculture - 11.9%
b) Industry – 41.2 %
c) Services – 46.8%
• Ringgits per USD – 3.07
• Inflation rate – 1.9%

39. Conclusion
• Impressive economic performance
• Role of the NEP
• Stable economy
• Declining role of government

40. Bibliography
• http://www.undp.org.my/page.php?pid=53&menu=sub
&title=Malaysia..
• http://www.bbc.co.uk/news/world-asia-pacific15367882
• http://www.adbi.org/discussionpaper/2008/04/02/2517.macroeconomic.management.
malaysia/phase.ii.the.new.economic.policy.period.1970.
to.1987/
• http://en.wikipedia.org/wiki/Economy_of_Malaysia
• http://www.worldbank.org/en/country/malaysia

41. Thank you.