Economic Activities in Malaysia

The economy of Malaysia has experienced significant changes since the colonial days. These changes have been reflected in the country’s GDP. Before the country gained its independence from the British in the 1950sthe economy was oddly distributed with much of the economic activities concentrated on the western regions of the country. Most of the economic activates the include agriculture trading as well as rubber tapping.

Tin mining was also a significant economic activity in colonial Malaysia. However, the colonial government wanted to improve the economic outlook and as such expanded the countries infrastructure to open up much of the country to economic exploitation. At independence about 40% of the countries GDP consisted of only three main activities; fishing, agriculture and forestry.

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The post colonial Malaysian government thus made several attempt to diversify the country economic activities and pay closer attention to the manufacturing industry which was poorly developed. Furthermore the government aimed at modernizing agriculture in efforts to boost output from this sector. These economic boosters have a direct effect on the country’s GDP with sharp fluctuations being recoded after independence.

Malaysia has experienced dramatic economic growth since the 1970s due to the government’s successful efforts to turn the county’s economy into a multi sectoral economy with a variety of peripheral economic activities being revived to stimulate the country’s economic growth.

Other than agriculture, forestry and mining which contributed at least 40% of the Malaysian GDP the country has developed its manufacturing industry as well as international trading activities boosted by the country’s prime location along the Strait of Malacca a vital sea trade root.

Furthermore the Malaysian government has successfully implemented economic stimulus policies such as the National Economic Policy in the 1970s. There were also efforts to add value to its products thus attracting lot of international business interest for manufactured its products. Some of Malaysia’s added values product that are competing in the world market include light electrical products, processed food products, simple electronic such as radios and mobile phones as well as chemicals.

The effect of such diversification of the country economy ha had an effect on the GGDP with a measured growth of about 7% in the last 20 year as well as lowering the rate of inflation significantly. The country’s GDP per capital was established at US$6,761, while the nominal GDP was established at US$191.4 billion (Economy Watch, 2011).

A cross economy analysis shows that various sectors had varying but significantly positive impact on the GDP. Malaysia’s GDP is largely dependent on the utilization of rich natural resources base. This is its primary economic sector. Due to diversification efforts, this sector has lost significantly to manufacturing as the main contributor to the GDP.

The agricultural industry has been modernized and commercialized with rice, rubber and rubber being some of the main agriculture goods cultivate for commercial purposes. Other agricultural products include Palm Oil, Coconuts, Timber and Pepper. In the years 2009 thus sector contribute 10% of the GDP. The manufacturing industry has grown significantly from the mere 13% contributor in the 1970s to input a massive 42% into the GDP in the year 2009.

Some of the countries manufactured products include natural gas, oil and chemical. Currently Malaysia is one of the leading manufactures of electrical globally. The country’s business cycle is completed by the tertiary sector that constitutes 45% of the county’s GDP. This industry include sectors such sectors as financial, banking especially Islamic banking, telecommunication as well as information technology. Malaysia is also a major tourist destination in Asia (Economy Watch, 2011).

The impressive GDP outlook was however affected towards the end of 2008 and much of 2009 due to a combination of factors. Top begin with the global recession experienced then slowed down the country’s GDP as it affected the manufacturing industry as well as the country international as well as local trade.

The rates of unemployment rose significantly in the late 2008 to 2009. This was occasioned by massive job lay offs resulting from the global economic crisis. The rate of unemployment rate rose by 5% in 2009 as compared to 3.3% in the year 2008. This means that the personal consumption expenditure was reduced. The consumption of such national goods as electronic, motor vehicle and computers reduced significantly.

This reduction of the personal consumption rate has a direct significant on the economy contributing to about 1.5% GDP decline (Ministry of Finance Malaysia, 2009; Economy Watch, 2011). The effects of the Asian financial crisis of the 1990s had a big hand in the decline of the Malaysian economy. Since the crisis bit, the Malaysian manufacturing industry was affected due to the reduced level of private investment.

This reduction in private investment mean that the country’s GDP growth rate had reduces by an average of 4% for the period beginning 2001 to 2009. This was a stark contrast to the GDP growth rate of about 8.1% in the 1990s. Overall gross private investment plummeted from the pre Asia crisis level of above 40 % to 20% in 2009 (Yin, 2011).

Before the effects of the global recession as well as the Asians financial crisis of the 1990s began to affect Malaysia economy, the government percentage expenditure compared to the county’s GDP was held at a constant 12% up to the years 2008.

However due to these negative impacts the government had to increase its spending especially in procurement of goods and service, reimbursement to retrenched employees as well as national society by a 2 percentage point to 14% (World Bank 2011). This was intended to prevent the economy sliding further into crisis as well as moderate the economic growth.

The effect of the crises on the Malaysia manufacturing industry as well as trading activities were seen in the reduced exports especially in chemical electronic and motor vehicles. This was also influenced by a slightly increasing domestic demand for such commodities. In the last quarter of the year 2010, the demand for good and services contributed about 5% of the total GDP. This was a significant indicator that the economy was stabilizing.

The increase in domestic appetite for manufactured goods means that the Malaysian government had to increase its imports. Total imports for the year 2010 outstripped the exports contribution to the GDP by 1.5%. This was reflected in the reduction of total exports by 18.5% which meant that the contribution of exports to the GDP reduced by 1.6% for the same period (Suhamie, 2011).

The reduced exports had a negative effect of the GDP growth rate about this was as expected by the Malaysians Institute of Economic Research to grow to an average of 5.2% in 2011 from the previous 7.2% realized in the years 2010. The Malaysian economic research institute expected that this decline would have an effect on the consumer price index.

With the stabilizing economy in the year 2010 the consumer price index was recorded at 1.7%. But due to the effects of the reduced exports as well as the rise of the prices of crude as well as the increase in the cost of living the index is expected to rise to 2.8% in the year 2011. If the conditions remain the same the index is expected to hit 3.25% in the year 2012 (World Bank 2011).

As seen from the statistics above the Malaysia GDP has experienced sharp fluctuation within the last 20 years with extremes seen in the last three years. This has ad an effect in the employees with fluctuation rates experienced in the rates of employments.

In 2008 and due to the effects of the global recession the number of unemployed worker rose by 67% from about a percentage rise of 40% in 2007. Fluctuation in the rate of employment was reflected in the number of jobseeker who increased by 20% by the end of December 2008. Currently the overall unemployment rate stands at 3.50 % (World Bank 2011).

All factors held constant the Malaysian economy has performed well. The government’s efforts to implement economic stimulus programs have had significant positive effects on the country’s economy. The country’s GDP has responded well to such stimulus programs registering a consistent growth rate of 7% in the last 20 years.

However, due to eternal factors such as global recession and the Asian crisis in the 1990s, the economy has gone through a period of turbulence. However the future prospect is bright and statistics show that the economy is in its paths to recovery.

Reference list

Economy Watch 2011. Malaysia economic structure. Retrieved May 13, 2011

Ministry of Finance Malaysia. (2009). Quarterly update on the Malaysian economy – 4th quarter 2008. Retrieved May 13, 2011

Suhaimie, W. (2010). Malaysian 4Q of 2010 GDP. Retrieved May 13, 2011

World Bank 2011. General government final consumption expenditure (% of GDP). Retrieved May 13, 2011

Yin, L. (2011). Modeling the determinants of private domestic investment in Malaysian economy. Retrieved May 13, 2011


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