Assessment of Government policy in economic growth

Md Firdaus Bin Hamzah 1. Introduction After 1957, Malaysia was progressively struggles for economic development until listed as fast upgrading developing country. With the various natural resources, it seems possible for Malaysia move ahead by enhancing their economy structural also diversify it appropriately. Malaysia is generally regarded as one of the most successful non-western countries to have achieved a relatively smooth transition to modern economic growth over the last century or so. Since the late nineteenth century it has been a major supplier of primary products to the industrialized countries; tin, rubber, palm oil, timber, oil, liquefied natural gas, etc. However, according to John H. Drabble (2010), since about 1970 the leading sector in development has been a range of export-oriented manufacturing industries such as textiles, electrical and electronic goods, rubber products etc. Government policy has generally accorded a central role to foreign capital, while at the same time working towards more substantial participation for domestic, especially bumiputera, capital and enterprise. By 1990 the country had largely met the criteria for a Newly-Industrialized Country (NIC) status (30 percent of exports to consist of manufactured goods). While the Asian economic crisis of 1997-98 slowed growth temporarily, the current plan, titled Vision 2020, aims to achieve "a fully developed industrialized economy by that date. Malaysia is perhaps the best example of a country in which the economic roles and interests of various racial groups have been pragmatically managed in the long-term without significant
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loss of growth momentum, despite the ongoing presence of inter-ethnic tensions which have occasionally manifested in violence. The quality of Malaysia leadership also becomes a crucial factor for Malaysia economics development. It can be seen by important economy policy by different administration, for instance, Tun Abdul Razak was introduced New Economic Policy, Then, Tun Dr. Mahathir was established many economic generator, such as 2020 vision, privatization, ringgit-pegging and many more. While under Tun Abdullah, he was becoming aggressively concentrated on agriculture and biotechnology. Nowadays, under Dato Seri Najib bin Tun Abdul Razak, he was concerns more on economic transformation programs. The purpose of this assignment is to examine the governments policy in economy growth. The significant policy will be emphasizing and stressing more and it will differentiate into monetary and fiscal policy.

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2. New Economic Policy

2.2) Overview The Malaysian New Economic Policy (NEP) was created and started by Tun abdul Razak through Rancangan Malaysia ke-2 with the 20 years implementation starting from 1971 until 1990. Purpose of this policy is to bring economic equality between Bumiputeras and Chinese minority who are dominantly in economy. These NEPs targeted to bring 30% Bumiputeras equity, 40% non-Bumiputera and the remains 30% from foreign investors before 1990. These NEPs constituted from preceding administration which of Rancangan Malaysia ke-1 that is executed after Malaysia established. These economic planning developments conducted in 5 years period, starting in 1966 until 1970, involving entire Malaysia. The aim from this planning is to enhancing standard of life peoples in rural area specifically for lower incomes. The NEPs objective is superiority on unity between different races through disparity eradicates between races. Developments planning under NEPs were arranged by two prominent strategies which is, abolishment of poverty through jobs opportunities for all citizens no matter races or religions also rearrangement of society in order to reduces and eliminates races recognition through economic functions. 2.3) Income disparity and poverty rates between races Research from 1970 census had shown 49.3 percent each family in peninsula lived under poverty line and from that poverty family, 86 percent from rural areas, while 14 percent remaining in city areas. Then, the rates of poverty between races shown Malay ethnic in first which is 64.8 percent, while Chinese and Indian ethnic consists of 26 and 39.2 percent (economic planning unit, RMK10).
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These destitution situations is related to British colonial which of differ attentions to certain races, in keeping with few stock holder for Malays ethnic which is 2.4 percent. These possessions are fewer than non-Bumiputeras which is 34 percent possessed. The figure below shows the poverty rate in 1970. It obviously showing the gap between Malay compare to Chinese and Indian. Figure 1: Malaysia peninsula: Poverty and household incomes rates, 1970. Ethnicity Poverty rates (%) Household income Income ratio

(monthly RM) Malay Chinese Indian 56.4 19.2 28.5 162 399 310 Chinese/Malay = 2.32 Indian/Malay = 1.76

Source: Kajian separuh penggal RM ke-2 (1971-1975). (Ishak and Rogayah, 1996, [p.3]) 2.4) Poverty eradicate Poor can be defined as having little or no wealth and few or no possessions. According to Lorenzo (2005), poverty is the lack of, or the inability to achieve, a socially acceptable standard of living. In NEPs, it is mission to vanishing poor in Malaysia and bring prosperity for all citizens, even it more stressed on Bumiputera. To avoid economic disparity between ethnic happen again, governments had developed Federal Land Development Authority (FELDA). It was established in 1 July 1956 when akta kemajuan tanah were enforced. Felda spotted at peninsula, while others agency was ordered for
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development in Sabah and Sarawak. Government also stressed on significant of education for Bumiputera. The establishment of FELDA, successfully to reduce poverty of Bumiputeras, which is every applicants becoming smallholder farms, and getting dividend for their harvest. Nowadays, the stability of oil palm has made FELDA being a successful key player oil palm industry in international level. Even the NEPs still not fully achieving their objectives, however, in process of society arrangement, its work to fixing economic imbalance. The poor peoples who had moved to FELDA for the purposes to get job and land, nowadays has become the productive and innovative society for the Malaysias sake. Bumiputera are now slightly over-represented in professional and technical and in service occupations, no doubt, the NEPs policy has worked and effectively done, and almost proportionately represented in clerical work. They are coming up fast in production jobs and remain seriously underrepresented only in administrative and managerial positions and in sales work. These broad occupational groups do not fully reflect the breakdown into high-, middleand low-level employment. Based on Donald R. Snodgrass (2000) Bumiputera are still significantly under-represented at the higher levels of the private sector. Perhaps, the private sectors may majority owned by non-Bumiputera, and they just hired employees from their ethnic based and neglecting Bumiputera.

2.5) Strategy To achieves an arrangement objective of NEPs, the following strategy was drafted Enhancing the production capacity and helping poor group through modernization noncity areas
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Reduces imbalance within workforce structure through progressive manner Fastest increasing the Malaysia citizen share and stock and economic growth Shaping the trade and industrialize Malay society to get 30% equity also establishment of agencies; MARA, Bank Pembangunan, Bank Bumiputera and Amanah Saham Nasional.

Forward looking for less-advance areas through wilayah development; DARA, KEJORA etc.

2.6) NEPs effect NEPs was success to reduce poverty and increasing of Bumiputeras education level. Nowadays, many Bumiputera experts served in public also private sector, specifically in health sector. A studied by Shahid Yusuf and Kaoru Nabeshima (2009) suggested that the introduction of the New Economic Policy in 1991 led to the emergence of a Malay business elite owning large enterprises. Moreover, many large companies in Malaysia conducted by Bumiputeras, and some of them working abroad. For example, The Malaysian richest Bumiputera, Syed Mokhtar quoted Saya menikmati jasa dasar itu semasa memulakan perniagaan dulu, daripada pinjaman Mara sehinggalah kepada bangunan kedai UDA. Saya produk DEB tetapi semua ini melalui proses selama 34 tahun. (Mingguan Malaysia, 2004). These statement shown, the NEPs had succeed to help Bumiputera in economy. These denied argument that NEPs policy is a liability for government (Donald R, 2000, p.22), because of government need to concern the impact of their economy decision splashing to Bumiputera. For instance, if government open the scholarship based on merit, it probably limit the opportunity to Bumiputera students, because of other students from different races would get the same thing.

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In 1970, Bumiputeras equity only 2.4%, nevertheless, in 2000 it was hike into 19% (ISIS). In past year, doesnt have banking institutions owned by Bumiputeras, but todays, the prominent banking institutions in Malaysia has owned and managed by Bumiputera. The group of Bumiputera businessman also has emerged, even though they just small and medium status. Figure 2: company ownership 1971 Ownership 1) Single ownership trusteeship agency a) Single Bumiputera b) Trusteeship agency
Total ownership (million, RM)

% 4.3

and 279.6

168.7 110.9

2.6 1.7

2) Non-Bumiputera 3) Foreign TOTAL

2, 232.2 4, 051.3 6, 564.1

34.0 61.7 100.0

Source: Office of Prime Minister (PMO) The figure above showing that Bumiputeras ownership is a little rather than others ownership that consist only RM279.6 mil, while, non-Bumiputera got theres RM2, 232.2 mil and the foreigns on the top, which of RM 4,051.3 mil. 2.7) Rebranding of NEP Technically, NEPs was ended in 1990. But, the next administration starting from Tun Mahathir, Tun Abdullah, and nowadays, Dato Seri Najib Tun Razak still bringing the spirits of NEP with a new implementation. For instance, Tun Mahathir with their New Development Policy (NDP) which emphasized general economic growth and the elimination of poverty. John Lee (2011)
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suggested that NDPs continued the NEPs affirmative action legacy, and many of Malaysias race-based policies and objectives still remain in place today. After Mahathir, Abdullah emerged with progressive agriculture policy which is Agriculture is trade concept. This policy is more to vanishing poverty at village or rural areas by encourage this group to enter agriculture sector as career. Through Federal Agriculture Marketing Authorities (FAMA), it was introduced contract farming program as a mechanism that would assist the farmer entrepreneurs in small scale farming and marketing system (Ratnawati, Amriah, 2009, p.1). To continuous NEPs legacy, Dato Seri Najib Tun Razak has announced a New Economic Model (NEM), designed to propel Malaysia from a middle-income country into high-income country. According to John Lee (2011), he claimed as part to shift Malaysia economy, Najibs also signaled the revision of Malaysias controversial affirmative action policies favouring the indigenous Bumiputras. Figure 3: Top 8, richest Malays in Malaysia Name 1. Syed Mokhtar AlBukhary 2. Azman Hashim 3. Mokhzani Mahathir 4. Kamarudin Meranun 5. Abdul Hamed Sepawi $180 6. Ahmayuddin bin Ahmad Asset value $1.8 bilion $700 juta $285 juta $280 juta $180 juta $155 juta Business source MMC, Johor Port, Malakoff AmCorp Group Kencana (Porche importer) AirAsia, Tune Hotels Ta Ann Group Westport Malaysia

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7. Eleena Azlan Shah

8.Datuk Mohamed Nazir Abdul Razak

$150 juta
$100 juta

Gamuda
CIMB Group

Source: Wikipedia 2.7) Conclusion of NEPs It was 21 years NEPs had gone and Malaysias citizen obviously getting the benefits from that significant policy. Many projects that was executed had the succeed output and it can be seen by the economic gap between ethnic has been reduce and many Malaysian able to further their studying resulted by government support. The NEPs weaknesses are lack of detailed and comprehensive data. Moreover, the weakness of NEPs derives by un-honest guardian in completing their task for NEPs sake and incapable of planning system, execution and acceleration in public enterprise activity. These weaknesses could be handle by explicit administration in execute some policy and everybodys should galvanizing their efforts in order to achieve 30% equity for bumiputera success.

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3. Ringgit Pegging
Definition from Wikipedia said, pegging is a method of fixing a country's currency to stay at a certain rate below or above another country's currency. Pegging is characterized by having a fixed exchange rate. When a country pegs their money to a commodity - gold, silver, uranium The value of the currency would then be in direct proportion to the value of the commodity. Currency pegging involves a country not allowing the value of its currency to change significantly versus another currency. Often, the countrys central bank will intervene as necessary to sustain the fixed rate and to take up any excessive supply and demand so that the exchange rate maintains a narrow range. In our case, our country peg to the US currency.

3.1) Situations in Malaysia Since independence, Malaysia has experienced two different exchanges rate regimes (Latib Talib, p.13). Before crisis, the value of ringgit fluctuates around RM2.50. When the financial crisis happen, the ringgit was very volatile and this finally forced the government to peg the ringgit against the US dollar which is RM3.80=US$1. This system was used in Malaysia since 2 September 1998 and these policy reactions to eastern Asian crisis 1997-1998 that was infected Malaysia. The crisis starting in Thailand as Walden Bello (Daniel E, p.11) detailed; With too many baht chasing too few dollars, there was huge pressure for devaluation. The scent of panic attracted currency speculators. . . . The Bank of Thailand initially sought to defend the baht by dumping its dollar reserves on the market, but by July 2, after losing at least 9 billion
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USD of its 39 billion dollar reserves, it had to throw in the towel. Speculators spotted similar skittish behavior among foreign investors in Manila, Kuala Lumpur, and Jakarta, where the same conjunction of commercial bank over exposure in real estate, weak export growth, and a widening current account deficit was stoking fears of a currency devaluation that could devastate their investments. By October [of 1997], the Philippine peso, the Malaysian ringgit, and the Indonesian rupiah were still on a downspin as capital continued to exit, resulting in a catastrophic combination of skyrocketing import bills, spiraling costs of servicing the foreign debt of the private sector, heightened interest rates spiking economic activity, and a chain reaction of bankruptcies The connection for this crisis creates; Merging of mainstream Bank and financial institutions such as Bank Bumiputera. Lessening Workforce Industrial sector un-operates

Ringgit touched the lowest value in January 1998 which is RM4.92=US$1 and from that situations had generated economics performance fallen from 9.2 (KDNK) into negative 7.4 for 1998 (Azlan Ghazali,2004, p.1), that case was deteriorated our banking system and contributed to Banks merging. Refer to Ming-Yu Cheng (2002), suggested the crisis started with a sudden withdrawal of short term capital flows. From those, we know the investors in that day making the panic situation by withdraw and taking back their capital and this cause to Ringgit going dive.

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3.2) Mahathir policy The pegged-ringgit is a temporary style and it depends on situation. The governor of the peoples Bank of China, Zhou Xiouchuan claimed that the currency peg was a temporary policy for dealing with the financial crisis. By led the decision pegged ringgit in 1998, it is the appropriate and good decision in that day, because, if the ringgit was float freely, the effects may getting even worse. This pegging style also are to avoids from IMF loan assistance, because in 1997, Mahathir and his Deputy, Anwar Ibrahim had different methods. Anwar Ibrahim was insisted to request IMF loan, while Mahathir disagree that particular effort could help Malaysias economy. Mahathir also accused the famous investor, George Soros ruining Malaysias economy with massive currency speculation. In September 1997, Mahathir declared that currency trading is unnecessary, unproductive and and immoral (J.K Sundaram, 2006, p.3). Mahathir is resolutely with their pegging policy, even in 2008, after ringgit was de-pegged by Abdullah administration, he slammed We shouldnt float the currency. The country would lose money if the currency is vulnerable to external forces.(Habibu, 2008). J.K Sundaram (2006) argues that Mahathir policy which is ringgit-peg rather than IMF assist could help Malaysia exit the bad economic situations. Although, the recovery period is claiming by others are slow-moving, Malaysia still can shape their economy policy, rather than Thailand, South Korea and Indonesia who are in debt default situation as well must obey to the IMF. Based on Oxfam education, the advantages of IMF are promotes international monetary cooperation and global financial stability. Then, it provides temporary financial help to countries in debt particularly those with balance-of-payments problems and encourages economic growth,
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for examples, Greece and Argentina who plunged into bankruptcy. IMF also gives financial advice to countries about how to run their economies. Nevertheless, the IMF dark sides are; Decisions about which countries may borrow money are made by rich countries. Poor countries have little say about loans and the conditions attached to them. Besides that, The IMF will only lend money to countries if they agree to certain conditions. These conditions increase poverty because of the IMF does not give good/exact financial advice and the countries have suffered by following it. According to Frankel (2002), under a free-floating currency, a country has monetary independence. In a recession, when unemployment is temporarily high and real growth temporarily low, the central bank can respond by increasing money growth, lowering interest rates, depreciating the currency, and raising asset prices, all of which work to mitigate the downturn. Under a pegged currency, however, the central bank loses that sort of freedom. It must let recessions run their course. From my opinion, if the US dollar had strengthened significantly against other currencies, Malaysia may have had to re-peg against the US dollar to retain export competitiveness, but the trade with China perhaps looking Constance because in that crisis day, China also pegging their currency against U.S dollar.

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3.3) what happen in crisis period? Monetary and fiscal action Early crisis, forced increased interest rate makes investor shelve their investment. According to Martin Khor (unknown years), during the first year of the Asian crisis. The interest rate hike and the reluctance of many banks to provide new loans caused serious difficulties for many firms and consumers. However, after the imposition of capital controls in September 1998, interest rates have gone down significantly, by about four percentage points. This has eased the financial position of debtors and banks. The capital controls were thus able to lay the condition for enabling interest rates to go down without affecting the exchange rate. Government has taken action by reducing interest rate, allowing firms and consumers to breathe again and then to borrow, thus improving investment and consumptions conditions. Stabilizing the exchange rate. The ringgit was fixed at 3.80 to the US dollar, thus ending the previous flexible exchange rate system. This put an end to currency fluctuations and speculation. It allowed the macroeconomic policies to be implemented, and prevented a possible debt servicing crisis, which could have occurred if the ringgit had depreciated to below a certain level, as happened for example in Indonesia. In 1999, Victor suggested stabilizing the ringgit for economic recovery and the suitable methods is pegging. Without making that, countries subjected to currency speculation face a serious dilemma. Closing down the overseas trade of the ringgit, and the trade in Singapore of Malaysian shares. This put an end to speculative activities in the currency and in local shares.

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Restructuring and recapitalizing the banking and corporate sectors to enable a recovery in the micro-economy.

Maintaining certain key economic and social policies, in particular the regulation of foreign ownership of assets, subsidies and price controls, policies relating to distribution and balance among local ethnic communities.

In order to stem the outflow of domestic funds at that time, the government also imposed a freeze on new overseas investments by Malaysian firms which in 1996 had amounted to RM 10.5 billion (Ariff & Syarisa, 1999, p.421)

Cutting back various mega projects such as Bakun dam, the express rail link and the land bridge to Thailand (Ariff and Syarisa, 1999).

Table 1: GDP growth, inflation and exchanges rates in Malaysia, 1991-2003 Year 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Exchange Rate 2.72 2.61 2.70 2.56 2.50 2.53 3.89 3.80 3.80 3.80 GDP Growth rates (%) 9.5 8.9 9.9 9.2 9.8 10.0 7.3 -7.4 6.1 8.9 Inflation Rates (%) 4.4 4.8 3.5 3.7 3.5 3.5 2.7 5.3 2.7 1.5

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2001 2002 2003 Average 91-97 Average 99-03

3.80 3.80 3.80 2.79 3.80

0.3 4.1 5.3 9.2 4.9

1.4 1.8 1.1 3.7 1.7

Source: Pegging the Ringgit against the US Dollar: An Evaluation (A. Latib)

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Graph 1: Exports and imports from Malaysia (1990-2008)

Source: The impact of the global financial crisis: the case of Malaysia (goh soo khoon and Michael lim mah hui) In 1991 and 94/95, total imports were greater than total export and in 1997 net export were barely 1% of GDP. This changed dramatically after 1997, with net exports consistently accounting for about 20% of GDP.

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4. U.S subprime mortgages crisis 2008

4.1) Overview The subprime mortgage was first started as lenders to lure people with exotic mortgages such as no documents loans, which dont required evidence of income or savings. The big banks buy the subprime loans, bundle it and sell them to Wall Street firms. In turn, the Wall Street banks would package subprime loans into mortgage-backed securities and collateralized debt obligations. In mid-August 2007, the subprime mortgage problems started to surface in the financial market. The mortgage lenders were unable to repay their debt since the housing price bubble busted and their mortgages became larger than the value of their houses. This problem has caused a credit crisis in the financial market, causing stocks to drops sharply around the globe. Fund managers began to withdraw from other markets to cover the shortfall. US and European central banks started to pump billions of money into their financial system to make sure that the financial system have enough liquidity in the system. (Mahani & Rajah, 2009, p.7). It was effects on Malaysias because banks and financial institutions in the United States and the west reduced their international business, and focused on their home market. 4.2) Policy responses to the crisis

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Figure 4: Stock market in 17 august 2007 Stock Market (17/8/2007) Tokyo Dow Jones FTSE Hong Kong Shang Hai Singapore Drop (points) - 327.12 - 167.45 - 202.10 - 703.33 - 104.43 - 121.09 Drop (%) - 1.99% - 1.29% - 3.31% - 3.29% - 2.14% - 3.70%

Malaysia

- 44.21

- 3.53%

Source: Institute of strategic analysis and policy research (INSAP)

GDP growth rate

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The crisis had effect on GDP rate. These also occurred the loan applications also approvals getting decline because the firm or investors doesnt have confidence about the economic situation in that day.

Fiscal policy to cover The government has frozen the hiring of foreign laborers. Except for certain sectors and offered incentives for hiring local worker

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4) PRIVATISATION
4.1) Overview In 1981, Dr. Mahathir has become Malaysias fourth prime minister. Two years after inaugurated, he launched privatization policy on 25 February 1983. This was followed by the publication of privatization guidelines by the economic planning unit (EPU) of the Prime Ministers Department in 1985. Based on Adnan Filipovic (2005) studied, he claimed, privatization is a method of reallocating assets and functions from the public sector to the private sector. In addition, privatization directly shifts from political goal to economic goal, which lead to development of economic. Privatization also reduces the government financial burden (Jomo and T.W Syn, p.10). This is when, government didnt longer manage that firm or company, and the burden will assimilate to party who took that particular firm or company from government. 4.1.1) in formulating its privatization policy, the government aimed to achieve the following objectives: To relieve the financial and administrative burden of the governments To improve efficiency and increase productivity

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To facilitate economic growth To reduce the size and presence of the public sector in the economy To assist in meeting the national development policy targets

Figure 1: Competent indicators before and after privatization Indicator Telekom Malaysia Berhad Pulangan atas aset setiap sen Hasil setiap pelanggan (RM) Pengeluaran setiap pekerja (RM) Rangkaian pertukaran langsung setiap pekerja Kelajuan capaian ke khidmat asas (setiap sen) Jawapan kepada aduan/kesilapan (setiap sen) 4.0 1, 227 34, 372 36 35 80 9.3 1, 519 71, 594 56 60 95 Before privatization After privatization

Lebuh Raya Utara Selatan Hasil setiap pekerja (RM) Tempoh masa perjalanan (jam) Purata jumlah lalu lintas harian (bilangan kenderaan) 77.69 15.4 112, 119 217.57 7.5 586, 125

Kelang container terminal Bhd

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Purata daya pemprosesan kontena (TEU) Kadar pengendalian purata setiap jam kapal (TEU) Kadar pengendalian kren setiap jam (TEU) Purata bilangan TEU setiap kapal

244, 120 19.94 19.40 219

804, 445 35.78 31.56 415

Source: Mohd Yamina From the schedule above, we can conclude that privatization can improve efficiency and effectively working. The increasing of each indicators shows that the privatization capability is so much obvious and can soaring enhance the profits for each company/firm that was privatized.

4.2) Advantages of privatization The effect of the private participation on the fiscal/financing sector. The private participation allows the financial burden to be transferred from the taxpayers to the private investors and the consumers. Privatization also leads to an increase in the labor productivity and creates greater incentives for the operating efficiency. The increase in the privatization leads to the decrease in the employment level. Then, privatization helps in establishing in conditions for clarifying and improving the regulatory framework. A close relationship between the operators and the policymakers helps in avoiding the conflicts and helps the government in establishing well quality regulations.

4.3) what happen in early privatization?

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- In 1986, 1.4 billion water supplies given to Antah Biwater (first privatized water supply). It became controversial because it was awarded without an open tender, also which had no relevant record in engineering. - License was issued to a newly incorporated joint venture, Syarikat Televisyen Malaysia Berhad (STMB) to operate its private third broadcasting network. According to Edmund and Jomo (1999), although it incurred a loss of RM1 million in 1984, the first year of operation, the company has not failed to record handsome profits since. It is such evidence that privatization is so much benefit in generates profit. - Because of privatization, it is derive to establishment Official secret act (OSA). The controversial of this act consist of court unchallenged whatever involving in government tender. 4.3) Risk Every single thing has advantages and disadvantages. It was facing by Malaysias literally. The most unforgettable was Malaysia airline system (MAS), which is contracted to financial disease, and recovered back after government retrieve the shares in 2000. This is proven that privatization doesnt mean the company/firm can turns from facing problem. It depends on managements thing to run the business in well manner. Another side effect of privatization is reducing employment in short run. Another argument of privatization is increased cost of living, as according to Chong and Lopez (2003), the criticisms of privatization run from corrupts deals to abuse market power and social welfare losses. Figure: The increasing of charge in early privatization Utility/Service Old New Year Increases

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Telephone unit charge (sen) Toll (sen per KM)

10 5

13 7.5

1987 1993

30% 50%

Source: Mohd Yamina

Table: The achievements of privatization in Malaysia Privatization Achievement Total Projects Privatized: Existing projects as at 31 Dec 2009 New projects as at 31 Dec 2009 Jobs eliminated from Government payroll Savings: Capital expenditure (RM bil) Proceeds from sales of Government Equity and Assets (RM bil) Market Capitalization as at 31 Dec 2009 (RM bil) % of total Bursa Malaysia Capitalization Source: Economic Planning Unit
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1983-2009 503 348 155 113,440

161.7 6.5 182.5 18.3

Graph: Sectoral Distribution of Privatized projects, (1983-2009)

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Source: Economic Planning Unit

Conclusion 1. Good governance entails both procedural and outcome measures. 2. Economic globalization poses a new challenge to state management of the national political economy, but states continue to seek ways to mitigate the negative impacts. 3. Regionalism may also substitute for eroded national economic sovereignties. Globalization can also bring about standardized and updated economic practices that help, rather than weaken, state management of the economy. 4. Growth of civil society organizations and their growing transnational networking can provide more careful scrutiny of abusive economic globalization that may hurt national economic growth and/or human development. 5. Globalization is a mixed blessing for governance of diversity, contributing to both the strengthening of parochial group identities

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and the spread of a secular economy-based global consumer culture. 6. States more than ever face a challenge of minority representation, and in the long term, this will be best done within a democratic framework. Malaysias economy rebounded considerably well from the 1997 Asian crisis without incurring in IMF loans and hence future debt. Economic forecasts are optimistic even though there was a deceleration in the economy due to a slowdown in the market for information technology. Also, macroeconomic numbers remain stable and there is a strong confidence in the country's future performance. Therefore, we find Malaysia capable of revitalizing its economy to become one of the few strong economies in Southeast Asia. This can be attributed to its wellsounded financial and monetary policies as well as the confidence the Malaysian people and surrounding country governments have in the Malaysian administration. Nonetheless, some policy changes have to be implemented to guarantee results, including: changing the exchange rate system, diversifying its export base, furthering financial and trade deregulation and continuing to reform the financial and corporate sectors.

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