What are the current business Threats facing the Malaysian economy?

Essay by fionaphtan December 2003

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Malaysia, being a trading nation that highly dependent on international trade, our economic performance is very vulnerable to the performance of our major international trading partners. For decades, our economic growth has been overly reliant on external sector developments, foreign direct investment (FDI) and international trade. Domestic investment decisions are not base on economic fundamentals but rather these decisions are very much influenced by the market behavior of foreign investors.

In view of the challenges arise from the globalization effects, it is important for the Government to sustain growth and strengthen the macro-economic fundamentals within the country. This is done by focusing on domestic business and industrial activities and increasing the purchasing power of our population. The government's fiscal policies and corporate reforms have to be continued to create a condition suitable for a speedy recovery and sustainable growth. It is also important to ensure that the restructured loans remain performing.

Emphasis must be placed on continuing improvements on corporate governance, transparency, accountability and strict enforcement of powers by the market regulators. There is also a need for the country to maintain its peaceful environment and security in order to secure the investors' confidence.

Currently, the final destination for most of Malaysian exports is the United States. Therefore, the successful recovery of the US economy is pivotal to Malaysia's continuing recovery. The current stagnation in the US economy, especially in the electronic chip industry, is a damper on economic recovery in Malaysia where electronics related exports make up more than 30% of the gross domestic product. With the American demand looking weak, we must look for alternative areas of growth and demand to increase the economic resilience.

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