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Chapter 1:Introduction to

Malaysian Economy

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The word economy comes form the Greekword oikonomos, which means ‘one who

manages a household’ (Mankiw, 2008)

!e"nition of #conomics

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Microeconomics $ dealing with indi%idual human&eha%ior in making rationale decisions

Macroeconomics $ looking at the economy as awhole (aggregate) and &ringing in go%ernment as amain 'layer in making economic 'olicies to de%elo'the economy of a nation

u& ections of #conomics

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ey *ords

Balance of Payments(BOP)

Unemployment

Demand / Supply

Inflation

Exchange Rate

!oss Domestic P!oduct( DP)

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Mankiw on the ‘+0 lessons’ of economics

eo'le face trade$o-s

The costs of something is whatyou gi%e u' to get

.ational 'eo'le think at themargin

eo'le res'ond to incenti%es

Trade can make e%eryone&etter o-

Markets are a good way toorgani/e economic acti%ity

Go%ernments cansometimes im'ro%e marketoutcomes

country’s standard ofli%ing de'ends on its a&ilityto 'roduce goods andser%ices

rices rise when thego%ernment 'rints too muchmoney

ociety faces short trade$o-s &etween in1ation and

unem'loyment

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34 56# T37

+ *hat to 'roduce92 :ow to 'roduce9; :ow much to 'roduce9< *here to 'roduce9= *hen to 'roduce9> To whom to 'roduce9

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?s

ECONOMICSProduction, distribution and

consumption of goods and services

ECONOMYDe"elopment of a count!y in achie"ing g!o#th$economic de"elopment

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#conomic !e%elo'ment @#conomic Growth

oth are di-erent &ut related conce'ts

#conomic growth is the increase in a country’snational income

#conomic de%elo'ment is a&out im'ro%ing theli%ing condition of the 'eo'le

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ECONOMIC

DEVELOPMENTG! is the main factor, which is contri&uting tothe economic de%elo'mentAor #Bam'leC Malaysia’s G! for C

+DD= E 8 F2000 E 0 F200= E = FMid 200D E $; > F20+0 E F

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#conomic !e%elo'ment ers'ecti%e

4on%entional 'ers'ecti%eCgrowth (Huantitati%e) Ichange (socio$economic,technological)

3slamic 'ers'ecti%eC

growth (Huantitati%e,Hualitati%e) I change (socio$economic, technological)

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ECONOMIC ST !CT! E!e"nitionC

#%ery acti%ity that leads to the 'roduction ofgoods and ser%ices is an economic acti%ity4om'osition of %arious economic acti%itiesC

rimary sector, secondary sector, tertiarysector

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:istory of Malaysian #conomy

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:istory of Malaysian #conomyPre Colonial Period Early Economic

De"elopmentPresent Economy

lanting, li%estock, tin, iron,gold, 'addy, %egeta&le

Trading center at Guare'ah and engkalan uJangedah, Kenderam :ilirelangor, uala elinsing

erak The eBistence of 7ld MalayGo%ernment eg eraJaan

edah Tua

The o'ening of Malacca &yarameswara or 3skandarhah as center of entre'ort

&etween the #ast and *est

ational income usually will&e taBed as 'racticed inMalacca

+D<8 $ Tin mining inelangor acti%ely

&eing im'lemented

4a'ital came from4hinese immigrantand foreignin%estors and at the

end of +Dth4entury, Malaya&ecame among themain contri&ution ofworld tin

+8D> $.u&&er'lantation &eingcommerciali/ed.e'lacing co-eewith ru&&er &ecauseru&&er no longerim'ortant in theinternational trade

+D20 $ Tin, ru&&ereB'orted

Economic structure:rimary sectorC agricultural

sector (industrial and foodcommodities), mining andHuarrying

econdary sectorC

manufacturing andconstruction

TertiaryLser%ices sectorCgo%ernment administrationand trade ser%icesgo%ernment sectorser%ices sectorC wholesale,retail trade, hotel andrestaurant, "nance,insurance, real estate and&usiness ser%ice, trans'ort,storage, communication

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asic ocioeconomic ro&lem

+ 7%erde'endence on the foreign sectorC eB'ort

ru&&er and tin and im'ort ca'ital goods2 o%erty; 3ncome distri&utionC &etween races, rural and

ur&an area< 6nem'loyment= !ualism in the economy> 3m&alance in de%elo'ment

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Economic De"elopmentPlansThe Plan #e$ore Independence The Plan %$ter Independence

The lans &etween +D=>$+D 0 ( re$ # ) The lans &etween +D +$+DD0 ( # ) The lans &etween +DD+$2000 ( ! ) The lans &etween 200+$20+0 ( ? ) The lans &etween 20++$2020 ( ? )

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#conomic !e%elo'ment

The standard of li%ing hasim'ro%ed immensely for thea%erage 'erson since +D=Arom close to ero, access to 'i'ed

water, electricity and T? are all+00F The Malay 'o%erty le%el is N+ F

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The ew #conomic lan ( # ) of+D + was a 20 year 'lan to eliminate

'ros'erity as a function of race 3tsought ra'id growth in the Malaysector without weakening 4hineseenter'rise

# has twin 'rongs of 'o%erty eradication @restructuring of society

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The # also reHuired to increase theMalay share of ca'ital ownershi' to

;0F, reduce foreign share to ;0Ffrom >;F and allow a <0F 4hineseshare

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#conomic !e%elo'ment

(4ont’d)Malaysia’s economy is a market oriented,eB'ort economy with state ownershi' ofhea%y industry, only Growth rate of Ghas &een a&out 8F in the +D80s @ D0sMalaysia is the world’s largest eB'orter ofsemiconductors, one of the world’s largesteB'orters of single$unit air conditioners,teBtiles and footwear

Malaysia is considered &oth a Tiger and a34 The Malaysians must im'ort 'lantationla&or from 3ndonesia and ri Oanka

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&I'& PE (O MIN' %SI%N

ECONOMIES+ K ; T:# #*OP

3 !6 T.3 O3 3 G#47 7M3# ( 3#s)

2 A76. T3G#. 3ndonesia

:ong ong Malaysiainga'ore Thailandouth orea $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

The .e'u&lic of 4hina #$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

The eo'le’s .e'u&lic of 4hina,es'ecially the outhern ro%inces

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ECONOM)

%*ricultural products: ru&&er, 'alm oil, cocoa, rice,grain, coconuts and tim&er

Industrial sectors: semiconductors and electronicsradio and t% eHui'mentoil re"ning (#ast Malaysia)

refrigerating engineering, air conditioning,'lywood, hard&oard motor%ehicles ( roton and erodua)iron and steel ru&&er andlateB industrial gas (world’s + th&iggest gas resources) 'lastic 'roducts

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ECONOM)

E+port products: electronical eHui'ment, 'etroleumand liHue"ed natural gas, wood and wood'roducts, 'alm oil, ru&&er, teBtiles,chemicals

Import products: electronics, machinery,'etroleum 'roducts, 'lastics, %ehicles, iron andsteel 'roducts, chemicals

E+ports: more than M ,-- million (200 )

Imports: more than M ,-- million (200 )

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ECONOM)

The most important trade partners:

E+ports 6 (+D >F), inga'ore (+= F), Ka'an

(+0 F), 4hina (> =F), :ong ong(> =F), Thailand (< <F) (200;)

Imports Ka'an (+ ;F), 6 (+= =F), inga'ore(++ DF), 4hina (8 8F), outh orea

(= =F), Taiwan (=F), Germany (< F), Thailand (< >F)

ourceC 200;

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DEVELOPED

IN( %ST !CT! Emong others motorway (8>D km) from orth to outhern

Kohor ahruuala Oum'ur’s O.T$'roJect (Oight .ail Transit)

#astern and 7riental #B'ress ( inga'ore Q uala Oum'ur Qangkok QrailwayM and = international air'ortsR newest in e'ang

O Tower, <2+ metronas Twin Towers, =08 m

utraJaya Q new modern go%ernmental cityMultimedia u'er 4orridor (M 4)

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#!SINESS ENVI ONMENT IN

M%L%)SI%P!#LIC SECTOslow and &ureaucraticlong 're'aration times

for 'roJectsdecisions concerningo-ers are sometimesmade in ad%ance

P IV%TE SECTOfast and dynamiccontrolled &y the

4hinese(family E com'any)minimum ca'italin%estments

'roJects are carriedout Huickly

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Vision .-.- the %ision for total de%elo'ment

united nation, with a con"dent Malaysian society(strong moral and ethical %alues)

society that is democratic li&eral and tolerant,

caring, Just and eHuita&le, 'rogressi%e and'ros'erous and in full 'ossession of an economythat is com'etiti%e, dynamic, ro&ust andresilient (The D challenges)

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ources of economic growth rise in the 'roducti%ity of eBisting factorsn increase in the a%aila&le stock of factors of

'roduction Technological ad%ancesGlo&ali/ation Q encourage com'etition

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Aactors contri&uting to ra'id

economic growth in Malaysia%aila&ility of natural resources like 'alm oil,

ru&&er, oil etcOa&our force Q young and dynamic

ta&ility of 'olitical en%ironment The ?ision 2020 as a moti%ation to Malaysians tomo%e forward

olicies Q # , ! and ?#ducation system QGrowth of industrial sectors

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aJi&’s !e%elo'ment@#conomic olicies

GT#T

#M+Malaysia+0 th Malaysia lan

udget 20++, 20+2, 20+;, 20+<

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Go%ernment Transformationrogram

GT is an am&itious, &road &ased initiati%e aimedat addressing key areas of concern to the rakyat while su''orting Malaysia’s transformation into a

de%elo'ed and high$income nation as 'er ?ision2020 3n line with +Malaysia $ eo'le Airst,

erformance ow ( emandu, 20++)

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The GT ’s structure is intuiti%eC identify theareas that need the most attention, andfocus said attention on those areas

Through eBtensi%e consultation with keystakeholders, from the Ministries to therakyat, the Go%ernment has come u' withse%en 'ressure 'oints that it has designated

ational ey .esults reas ( . s)Moreo%er, the GT also contains aMinisterial ey .esults rea (M . )com'onent, which addresses de%elo'mentalgoals not co%ered &y the . s

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The GT is focused onC+ .educing crime2 Aighting corru'tion

; 3m'ro%ing students outcomes< .aising li%ing standards of low

income households

= 3m'ro%ing rural &asic infrastructure> 3m'ro%ing ur&an 'u&lic trans'ort

ddressing cost of li%ing

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#conomic TransformationrogrammeOaunched on 2= e'tem&er, 20+0, the #conomic

Transformation rogramme (#T ) was

formulated as 'art of MalaysiaSs ational Transformation rogramme 3ts goal is to ele%atethe country to de%elo'ed$nation status &y 2020,targeting G 3 'er ca'ita of 6 +=,000 This will&e achie%ed &y attracting 6 <<< &illion inin%estments which will, in turn, create ; ;million new Jo&s

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The #T Ss targets for 2020 will &e achie%edthrough the im'lementation of +2 ationaley #conomic reas ( # s), re'resenting

economic sectors which account forsigni"cant contri&utions to G 3

The 'rogramme is also centred on raisingMalaysiaSs com'etiti%eness through theim'lementation of siB trategic .eform3nitiati%es ( .3s) The .3s com'rise 'olicieswhich strengthen the countrySs commercialen%ironment to ensure Malaysiancom'anies are glo&ally com'etiti%e

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# s+2 ational ey #conomic reas ( # s), re'resenting sectors where growthwill &e focused on

These sectors were identi"ed &ased on their 'otential to contri&ute to G 3 andcreate multi'lier e-ects across the economy

The Go%ernment also factored in MalaysiaSs com'etiti%e ad%antages such as itsskilled workforce, a&undance of natural resources, eB'ertise in manufacturing

and its 'otential to create a niche for itself in the selected sector7il, Gas and #nergyalm 7il @ .u&&er

Ainancial er%ices Tourism

usiness er%ices#lectronics @ #lectrical

*holesale @ .etail#ducation:ealthcare4ommunications 4ontent and 3nfrastructure

gricultureGreater uala Oum'urL lang ?alley

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.3s The 'rogramme also identi"ed siB trategic .eform 3nitiati%es( .3s) made u' of su''orti%e 'olicies that will dri%e Malaysia’sglo&al com'etiti%eness The main thrust of the .3s is tocreate an eUcient, com'etiti%e and &usiness$friendlyen%ironment in Malaysia that will allow world$class, localcham'ions to thri%e and attract %alua&le foreign in%estment

4om'etition, tandards @ Oi&erali/ationu&lic Ainance .eformu&lic er%ice !eli%ery

arrowing !is'aritiesGo%ernmentSs .ole in usiness:uman 4a'ital !e%elo'ment

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#M

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+ Malaysia+Malaysia conce't is a Huiet sim'licityC a&elief in the im'ortance of national unityirres'ecti%e of race or religious &elief

Malaysia’s di%ersity is what makes usuniHue, &ut in order to fully &ene"t fromwhat is undou&tedly a source of strengthwe need to come together and &uild u'onour common %alues

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