Discuss some of the pertinent characteristics of Malaysian economy. What do you think about Malaysia’s vision of becoming a developed country by 2020? Suggest some of appropriate measures that Malaysia should undertake in order to realize the vision.

Malaysia is a federal constitutional monarchy which lies in Southeast Asia. It is composed of 13 states and 3 federal territories and separated by the South China Sea into 2 regions including Peninsular Malaysia and Malaysian Borneo. In 2010, the Malaysia`s population was 28310000. Kuala Lumpur is the capital city, whilst Putrajaya is the administrative capital. Malaysia is a member of Commonwealth of Nations and The United Nations. The system of government is modeled on that of the Westminster parliamentary system, but in practice the power is on prime minister`s hands. The head of government is prime minister (The current prime minister is Najib Razak since 2009) and head of state is Yang dipertuan Agong who is elected to a five-year term. The power in Malaysia segregates into 3 parts including Executive, Legislative and Judiciary. The country became independent on 31 August 1957. Since then, it has been able to be as one of countries which have the best economic records in Asia, and it has been progressing with an average 6.5% for almost 50 years. From 1971 to 1990, the government strived to eradicate poverty by New Economy Policy (NEP) and outline perspective plan 1(OPP1). The NEP policy was replaced with another program known as National Development Program (NDP) from 1991 to 2000 which the NDP` target was development of a united and just society. From 2001 to 2010, National Vision Policy (NVP) based on its target which was sustainable development performed.

In order to achieve long-term plan`s targets should medium term plans (EPU) and short term plans (Annual planning) accurately plan and perfectly perform.

Due to 1997 Asian Financial Crisis and firing Anwar bin Ibrahim, finance minister of Malaysia, Nation council set up to analyze this financial crisis. Bank Negara Malaysia did monetary policies to fix Ringgit exchange rate (3.80rm per $1).

According to United Nations Committee of Trade and Development`s paper written by Jomo K.S. in 2005, the controls imposed by the government neither hurt nor helped recovery. The main factor of improvement was high-volume exports of electronic components because of numerous demands of them in USA. Despite the fact that today development process in Malaysia is not similar to past, but it seems stable.

The type of economic system in Malaysia is mixed economy. The characteristics of it are an opened developing economy, middle income economy, and export dependent economy. Its product`s exports are divided into main products, non-products, minor product exports. The main products include electrical and electronic products, petroleum and gas (14th biggest world gas producer), palm oil products, rubber products, timber products; the minor products are cocoa products, pepper, pineapples, fruits, vegetable, and horticulture; moreover, the non-products involve tourism, education, ICT, and consultancy.

Mahathir bin Mohammad (the former Prime Minister) introduced the Malaysian idea known as vision 2020 (wawasan 2020) in 1991. Some of the vision`s goals are reaching to self-supporting industrialized nation by the year 2020 and achieving all aspects of life from economic prosperity, social well-being, educational world class, political stability, psychological balance as well. From his point of view in order to reach the vision`s goals, the nation required a growth of 7% yearly over the thirty-year periods (1990–2020), and in 2020 the nation`s GDP would reach to RM920 billion (in 1990 Ringgit terms). As a result, nine strategic challenges were announced by Mahathir which are:

a)      Establishing a united Malaysian nation made up of one Bangsa Malaysia (Malaysian Race)

b)      Creating a psychologically liberated, secure and developed Malaysian society

c)      Developing a mature democratic society

d)     Establishing a fully moral and ethical society

e)      Establishing a matured liberal and tolerant society

f)       Establishing a scientific and progressive society

g)      Establishing a fully caring society

h)      Ensuring an economically just society, in which there is a fair and equitable distribution of the wealth of the nation

i)        Establishing a prosperous society with an economy that is fully competitive, dynamic, robust and resilient [4]

The vision plan determines long-term development strategies, the macroeconomic framework, and long-term targets. The macroeconomic framework is chased by other sector`s policies which leads to social and economic developments such as industries, energy, public services, and so on.

The vision 2020 plan was established in terms of full development, and according to this motto, the government should improve quality and standard of life like the developed countries.

The classifications of economic transformation in Malaysia are:

a)      Production Based Economy (PBE) (1957-1994)

b)      Knowledge Based Economy (KBE) (1995-2009)

c)      Innovation Based Economy (IBE) (2010- ?)

There is an absolute necessity for New Economic Method (NEM) to obtain vision`s targets.

New Economic Method (NEM) to be achieved through an Economic Transformation Program (ETP) has the significant targets such as:

  1. To achieve $15000-200000 per capita income in 2020
  2. To enable all communities to fully benefit from the wealth of the country
  3. To meet present needs without compromising future generations

ETP leads to increase Gross National Income (GNI) per Capita from $6,700(RM 23,700) in 2009 to more than $15,000(RM 48,000) in 2020.

Some vital economic statistics of Malaysia in 2010 are flowing below:

1. GDP growth rate: this item indicates percentage change of real Gross Domestic Product compared to previous year; real GDP is adjusted for inflation (Illustration E)

2. Per Capita Income: USD 6,970 (Gross National Income/Population)

3. Inflation Rate: 4.2%

Source: World Development Indicators database, World Bank

4. Position of World Trading Economy: The 16th largest of world trading economy

5. Unemployment Rate: 3.4%

6. Life Expectancy Rate(M): 69 years old

7. Life Expectancy Rate(F): 74 years old

8. Literacy Rate: 92.3%

9. Poverty Rate: 5.7% (70% in 1950s) (Japan- 15.7 %, US -17.1%, China- 15.9% )

10. World competitive:

In 2009, Malaysia could achieve 18th position in world (Illustration F), and the country could have a better position in 2010, 10th position in world (Illustration G).

Source: Institute for Management Development, Switzerland

Source: Institute for Management Development, Switzerland

11. The Knowledge-based Economy Development:

Source: Economic Planning Unit

12. Tourist Arrivals and Receipts to Malaysia:

13. Exchange rate:

Economy of Malaysia encounters some drawbacks such as high dependence on export, weakness of domestic industries, decreasing foreign direct investment (FDI), weakness of private sectors, and dependence of foreign labor. Moreover, the phenomenon of globalization and increase of global competitions increase these economic issues.

In August 2009, prime minister Najib Tun Razak delegated reconsideration of vision 2020 to the National Economic Advisory Council (NEAC), and said that in order for Malaysia to achieve a developed nation status by 2020, the country has to grow at an annual rate of 8% over the next 10 years, and a lower hypothetical growth of 6% per annum would delay Malaysia’s vision to become a developed country by 10 years to 2030 [3].

From my point of view, Malaysia is able to be a developed country but not in 2020.

To achieve this target, the government should:

a)      Reduce its dependence on export

b)      Increase GDP growth rate and reduce inflation rate

C)      Reduce corruption (Illustration K indicates percentage of corruption in Malaysia)

4)      Encourage foreign investors to direct investment

5)      Enhance educational standards to encourage foreign students to study in Malaysia

6)      Enhance hygiene standards to encourage foreign patients to treat in Malaysia

7)     Introduce more tourist attractions of Malaysia

8)      Educate domestic manpower to decrease unemployment in Malaysia and be less dependent on foreign labor

9)       Try to eradicate criminal activities by improving social awareness

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