Why is Malaysia's economy small

Successful in the background

Malaysia is usually only marginally featured in global headlines. Last year it was basically only the crashes of three Malaysian airlines that brought the country into the media focus. With these tragedies, the general information deficit has actually increased. That is regrettable, because in Malaysia astonishing things are happening, especially from an economic point of view.

Three world-class German and one Swiss companies:
l.o .: Endress + Hauser (M) Sdn Bhd; r.o .: Mercedes-Benz at the Formula 1 race at the Sepang International Circuit; l.u .: Siemens Pulau Seraya power plant; r.u .: B. Braun Medical Industries Sdn Bhd.
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The cautious view of the country has a comprehensible reason: All in all, Malaysia is a somewhat strange state that does not really want to fit into any category. With around 30 million inhabitants, it is neither particularly large nor manageably small; the per capita income of around US $ 10,500 is exactly on the border between that of an up-and-coming emerging market and that of an advanced industrialized country. As a holiday destination, it is still clearly behind its northern neighbor Thailand and the capital Kuala Lumpur makes a somewhat sterile and sleepy impression compared to the other metropolises of Asia. A globally unique feature is the strong presence of immigrant communities: As a result of British colonial rule, the country is home to Malaysians and indigenous peoples as well as large communities of Chinese and Indian-born Malaysians. This ethnic and religious multiculturalism may reinforce the somewhat diffuse external impression, but it is crucial for the special charm and character of Malaysia.

Majority privileges weigh on national unity However, coexistence is anything but conflict-free and it sometimes seems as if Malaysians live more next to each other than with one another.

The Muslim-Malay majority of the population felt compelled to do so a long time ago, with the so-called Bumiputra rules? which ensures these minimum quotas in educational institutions and public offices? to counter the Chinese dominance in economic life. Such funding programs are perfectly understandable, but they are generally problematic from an economic point of view as well as a source of continued dispute between the population groups. There have been some cuts in the quota network in recent years, but for reasons of electoral tactics, people shy away from abolishing it, as the Bumiputras are the main constituency of the Barisan Nasional coalition, the main force of the Barisan Nasional coalition, which has ruled continuously since independence. Objectively speaking, the privileged status of the Malays has long outlived itself: Even during the long reign of Prime Minister Mahathir Mohamad (1981-2003), who prescribed Malaysia a consistent course of modernization, the previous strict allocation of ethnic groups to certain professions and business areas was largely overcome . In this respect, too, Malaysia has achieved a lot. Nonetheless, the Islamization of the country has been systematically promoted in recent years, which has meanwhile led to a religious reshaping of the state apparatus. How great the animosity between the individual groups in the background still is, shows for example the fact that with the "1 Malaysia" program launched in April 2009, a folkloric campaign was launched to promote the apparently fragile national unity. The central means to the social

Maintaining peace should, however, be sustainable economic success. To guarantee this, in Malaysia one prefers to fall back on large-scale master plans.

Jalan Petaling, Chinese part of Kuala Lumpur
Photo: Ralph Rieth

With a plan for success
The Government Transformation Program (GTP) and the Economic Transformation Program (ETP) have been running since the beginning of 2010. The former is intended to further improve the administrative framework, fight corruption and increase the effectiveness of the authorities. The latter is used to support twelve selected key industries, which in turn are intended to provide decisive impetus for the economy as a whole. These include the tourism industry, financial services and retail. In addition, the 10th five-year plan, which regulates the allocation of funds for the individual branches of the economy, runs until the end of the year. All four initiatives mentioned form the Vision 2020, which is intended to help Malaysia develop into an industrialized country by this year. In any case, the ambitions are great. The aim is to establish a modern economy based primarily on services and knowledge-intensive industries.

Everywhere one can see the attempt to emulate Singapore, which has been part of the world's elite for decades, at whose gates one of five development corridors has been created in the state of Johor with the Iskandar Malaysia (IM). Particularly in the institutions that promote investment and foreign trade such as MIDA and MATRADE, a professionalism can be found that no longer needs to hide behind the counterparts of the city-state. Overall, it can be said that the mixture of private sector and strong planning elements has been good for the country so far. The rest of the world (see above) is just not really aware of the successes.

Elementary challenges such as health, poverty and basic education have been under control for a long time. Now Malaysia's economy is preparing to climb the next steps up the value chain. In addition to the traditional production of palm oil and natural rubber and the extraction of petroleum and natural gas, Malaysia had established a leading position in the assembly of electronic products and the manufacture of semiconductors and integrated circuits. The fields in which one now wants to advance include specialty industries such as bio- and nanotechnology, advanced materials, specialty chemicals and environmental technologies. It is also a matter of maintaining the growth level of 5 to 6% in recent years. According to analysts, the country has a good chance of making it (see table). In the relevant international competitive rankings, Malaysia has moved up into the extended top group and is in 20th place worldwide in the Global Competitiveness Index, for example. A condition for further advancement is in any case an increase in R&D activities. So far, the government spends only 1.1% of GDP on education and research, which is why Malaysia has not yet caught up with Asian high-tech nations such as South Korea or Taiwan.

Unbroken desire to buy
As far as the current economic trend is concerned, it will continue to be supported by robust consumption and stable exports. In addition, there is the continued expansion of the infrastructure, which is already excellent in regional comparison. Domestic consumption is supported by a strong labor market with a low official unemployment rate of 2.7%. Most of all, packaged foods are consumed with devotion. The high demand means that the volume of imported food is continuously increasing. Swiss and Italian companies in particular are benefiting from the trend towards higher-quality luxury foods (chocolate, pasta products) that correspond to western lifestyles.

In 2013, sales in the 28 EU countries in the food, beverages and tobacco sector totaled around 694 million euros. The demand for food should remain constant. But automobiles have also increased significantly in terms of sales? SUVs and four-wheel drive cars are being bought first. In this environment, manufacturers of luxury vehicles in particular were able to achieve double-digit sales growth.

Sales in the communications sector are also particularly high. Popular retailers like Maxis attract customers with a variety of communication devices like the latest smartphones and tablets. Middle-class consumers up to 35 years of age in particular happily accept the new communication options. The market penetration for mobile phones is now 146%. If one observes a large part of the population in the capital Kuala Lumpur, growth could still continue. In Malaysia, too, Facebook, WhatsApp and selfies with a selfie stick are booming on the streets and in public transport. The somewhat leisurely public life in Malaysia is apparently compensated for with an extra portion of consumption. Consumer spending will probably experience a certain dampening from the planned introduction of a general sales tax in April 2015.

Foreign trade and services as supports
Malaysia is an export country. From January to November 2014 exports amounted to 698.44 billion ringgit). The most important export markets are the neighboring Asian countries China (14.5%), Singapore (14.2%), Japan (11.2%), Thailand (5.5%) and the USA (8.4%). Malaysia's supplier countries are similarly distributed. Specifically, that means that Malaysia depends on the import of some intermediate products for the export of goods. Malaysian imports from January to November 2014 were around 624.52 billion ringgits. This corresponds to an increase of 5.3 percent compared to the same period last year. The most important sector is the service industry, which already accounts for 53 percent of Malaysia's added value. This year, sales of services are expected to grow by 6.2%. The sector receives impulses primarily from wholesalers and the hotel and catering industry. Government initiatives to attract more tourists to the country also come into play here. In 2014, around 169 billion ringgit were generated in the travel and tourism market. From January to October 2014, 22.8 million foreign tourists visited the country, most of them from Singapore (with around 11 million tourists), Indonesia (2.3 million), China (1.4 million) and Thailand ( 1.1 million). The most recent accidents in the aviation industry do not seem to have had a lasting negative impact on the willingness of tourists to travel to Malaysia. If the many plans of the Malaysian government all work as intended, Malaysia will manage to stay on course in terms of growth. Maybe then the country will get the attention it deserves.

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