The Malaysian economy has seen several economic cycles since the country achieved independence in August 1957. The most significant boom period came about in the mid-1980s to the early 1990s, during the Look East policy implementation period. Since then, the country has been governed by two other administrations under two different Prime Ministers. The current leadership’s policy is to ensure sustained growth of the economy, while boosting the income levels of the poor, to reduce the gap between the various demographic groups.
If one were to compare the Malaysian economic performance with that of neighbouring countries since the 1960s, it can be said that the country did benefit from some sound economic planning in the pioneering days of the nations’ economy. These systematic developmental policies enabled Malaysia to leapfrog ahead of its South East Asian neighbours such as Indonesia, Thailand and the Philippines, while maintaining close competition with the entreport nation of Singapore, down south. However, as income levels rose, neighbouring countries began to eat into the slice of Malaysia’s economic trade and investment. As a result of this, countries such as Thailand, Vietnam, Indonesia and the Philippines grew in prominence over the years and have since taken a sizeable market share of Foreign Direct Investments (FDIs) away from this country.
Over the years, the various Malaysian leaderships have responded by providing incentives and benefits for local and foreign investors to continue to place their money here. In general, the existing trend points toward increments in investments during pre- and post-election periods, due to the various administrations having to deliver on their promises to their respective constituents and businesses. The same development looks likely to continue, as the country heads towards the 13th General Elections (GE). Although no one is certain exactly when the 13th GE would be held, there have been various speculations by the media and the general public, alike. Initially it was reported that the elections would be held in June 2012, later September and quite recently, sometime early next year. Regardless about when the elections would be held, the local economy would definitely need to maintain its growth and jobs would need to be created to ensure unemployment levels are kept low, while infrastructure projects continue, with sufficient financing available to sustain economic development.
The Economy During The Pre-Election Period
Generally, the economy undergoes a boost in the month prior to the elections. There are a couple of reasons for this phenomenon. For one, as mentioned earlier, the government of the day needs to remind the public its pledges and therefore enforce its developmental projects, accordingly. Another compelling reason is familiarity. Businesses tend to focus their projects when they are familiar with the policies and regulations that are in place. Therefore, businesses generally push their financing and resources to implement developments while the existing government is in place, to ensure they are familiar with the guidelines, as policies can change when a new government is in place, whether the government is from the ruling party or the opposition.
Based on current information and statistics, the Malaysian economy is continuing on the growth plateau, albeit in a more cautious mode awaiting news on developments in the political arena.
With regard to the financial markets, the leading indicator is the performance of the local bourse, which has remained relatively stable. According to Dr Mark Mobius, the executive chairman of Templeton Emerging Markets, besides being stable, the local market is growing with a good outlook, bolstered by government policy for growth. “As the Malaysian government continues to liberalise its economy, the phase of growth is going to be booming,” he told reporters at a media briefing on investing in emerging markets.
He added that the stock market is a reflection of the country’s economy and in this regard, Malaysia is a preferred destination as a springboard into other ASEAN countries by foreign investors due to language similarity and higher per capita income.
According to Standard Chartered Bank Malaysia’s chief investment strategist, Steve Brice, the equity market is doing quite well going into the second half of the year. He added that the market has been quite defensive although other markets are moving to a more pro-risk capital environment. “There is also some political uncertainty ahead of the election but that’s not a major focus of our analysis,” he said.
His observation was reinforced by Standard and Poor’s (S&P) Ratings Services. The agency declared the A-/A-2 foreign currency and A/A-1 local currency sovereign credit ratings on Malaysia, with a stable outlook. “The sovereign credit rating on Malaysia reflects the country’s strong external liquidity position, its competitive middle-income economy and high savings rate… Malaysia’s foreign reserves rose to US$133.6 billion (RM422 billion) at the end of December last year, against US$106.5 billion (RM337 billion) in 2010, sufficient to finance 5.1 months of current account payments,” the ratings agency added in a statement.
Under a RM232 billion budget, the current administration has undertaken spending on areas such as hand outs to farmers and settlers under the Federal Land Development Authority (FELDA) scheme, civil servants and pensioners as well as incentives for taxi drivers to enable them to buy new cars and support their livelihood. All these spending is intended to assist the Malaysian economy to grow at a safe 4.2 percent this year and 4.7 percent in 2013, although much lower compared with the average 8 to 9 percent growth achieved in the 1980s and 1990s when the country experienced record FDI inflows and large scale infrastructure spending to build highways, airports and financial centres in the heart of the city.
Slowdown Factored Into The Equation
In hindsight, the positive news generated had little effect on the employment sector in Malaysia. According to Jobstreet.com, in its latest Job Outlook Report, the third quarter of 2012 will be harder for job seekers as forecasted by employers. This is despite various assurances that the Malaysian economy is doing relatively well.
Based on its survey report, 33 percent of employers felt that the general job outlook would be slightly worse or much worse, an increase from the previous quarter’s 22 percent. The report added that 11 percent of employers would not be conducting any hiring exercises in the near future. The report also said that major industries such as manufacturing, information and communication technology, retail and wholesale trade, as well as finance were likely to experience the lowest job growth in the next 12 months.
On the flip side, the latest reports from Bernama quoted Talent Corp (M) chief executive Johan Mahmood Merican as saying that the on-going financial crisis in Europe had not deterred Malaysian graduates from pursuing a career in the local banking and finance industry. He added the industry remained attractive and “sexy” for local graduates despite the meltdowns, as it had shown its resilience against the financial systems in the West.
“The industry is getting much more attractive, with Malaysia leading the global Islamic finance market, while placing a strong foothold in the regional banking industry through aggressive expansion exercise,” he believes.
With an unemployment rate of just 3 percent, the country is continuing its progression, despite the slowdown exacerbated by the weaker than expected growth in China, partly due to local policies by the Chinese government coupled with the reduced global consumption due to the sluggish European economies.
Most analysts believe the Malaysian market has already factored in the election fever and its impact on the performance of the domestic economy. It is believed that the local economy would be able to maintain its growth, albeit at a slower pace due to the scenario brought about by problems in Europe eating into the consumption patterns of Asian economies, specifically Malaysia’s. Therefore, the “negative” economic impact of the 13th GE might be less pronounced than expected by some quarters, as economic and social development still remains at the forefront of priority, to ensure the well-being of the local economy-moving forward.