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The Economic Success Story Of Malaysia

Malaysia is greatly considered a growing country that's on the brink of becoming a fully developed country. Malaysia is largely considered successful story as it pertains to economic growth during the last hundred years. In the past due nineteenth century it turned out a major provider of principal products to the industrialized countries, Malaysia's main export items were plastic, contributing almost 60 percent to the full total export value, and tin, contributing about 12 percent. However, Malaysia has long reduced its dependence on agricultural exports and have flipped their attentions to international earnings. Processing products have overtaken agricultural products as the main forex earner. This is exemplified by the actual fact that Malaysia is currently one of the biggest producers of semi-conductors on earth. Foreign immediate investment (FDI) has been an important source of economic growth for a expanding country like ours, having with it much needed capital investment, technology and management knowledge for economical progress. FDI has been seen as a factor root the strong expansion performance experienced by the Malaysian current economic climate. Policy reforms, such asthe benefits of the Investment Incentives Action 1968, the establishment of free tradezones in the early 1970s, and the provision of export, resulted in a huge inflow of FDI in the late 1980s. Foreign immediate investment, of FDI will involve a foreign country pumping money into another country with the purpose of acquiring or building tangible assets in that country. Tangible investments include land, factories, machines, structures and corporations. FDI in Malaysia is established following acquisition of at least 10% of the full total equity in an area company with a foreign trader.

According to the Unctad World Investment Statement 2010 released in past due July, FDI dropped 81% to US$1. 4bil from US$7. 3bil in 2008. In light of these figures, it is vital that Malaysia needs steps to catch the attention of new investors into the country. The best option foreign buyers Malaysia should be looking at are emerging economies like China, India, and the center East.

Importance of FDI

FDI is an vitally important aspect for economic growth in producing countries such as Malaysia. FDI brings with it several benefits which can't be forgotten. Countries that are producing are needs to see the value of FDI and are beginning to relieve up their plans on FDI to attract more investment. The factors that make FDI this essential part of financial growth in expanding countries is the fact which it brings with it technical growth and knowledge transfer, increased job and development in individual capital, development in infrastructure, and increase in amount of local capital.

Technology and information transfer

This is undoubtedly arguably the most crucial benefit that number countries reap from foreign direct ventures. MNE's spend lots of time and money on research and development, and generally have a level of technology that is superior to the developing sponsor nation, which means there is great prospect of a scientific and information spillover from the developed region into the growing nation. It should be noted though that the level of this spillover varies depending on contexts.

Human capital enhancement

One more factor which makes FDI very very important to the economic growth of a growing country is the augmentation of the coordinator country's labor force. This works in two ways, directly and indirectly. International direct investment creates some kind of circuit that results in human being capital enhancement. Firstly, the Multi Country wide Enterprise's that come into Malaysia will of course provide intensive training to the labor force of the sponsor country that they use. This is the direct impact that FDI has on human capital augmentation. At the same time, Malaysia's federal government will create various training programmes and human resource development centres to enhance the skills of the neighborhood workforce which will lure MNE's to invest in Malaysia.

Strengths

Malaysia has molded their infrastructure good needs of the business enterprise community. You will find five airfields, digital and fibre optic technology are deployed by telecommunication networks, the government is constantly making efforts to make highways and railway paths connecting a lot more rural areas to the city. Malaysia also has seven international seaports that make it an excellent place for overseas investors.

Another strength Malaysia has is a, industrious, educated, and productive workforce, arguably one of the better in your community. As mentioned before, the government calls for massive efforts in ensuring that the Malaysian labor force is well trained and educated to meet up with the needs of the overseas buyers who seek to employ them. The federal government has lay out various programmes workshops to change the already effective Malaysian labor force into a global standard workforce ready to undertake anything. Moreover, the relatively affordable cost of residing in Malaysia make labour costs very competitive in Malaysia in relation to an educated skilled labor force. While India China and the Middle East do have an abundance of labour at their disposal at very low costs, skilled and educated labour would cost considerably more there than it would in Malaysia. The Malaysian federal places a lot of importance on education. Additionally the Human Resource Development Account (HRDF) was launched by the government to encourage training, retraining and skills upgrading in the private sector. Also, as Malaysian work laws protect the rights and interests of its employees, and incredibly descriptively lay out the associations between employers and employees, there are extremely minimal trade disputes and strikes.

Economic power is another huge feature for Malaysia as a aim for for investment by investors from China India and the center East. We before saw the annals of Malaysia's monetary progress. The impressive thing about Malaysia is the fact that it includes seen continuous economical growth over time. In 2008 the world's current economic climate took a hit consequently of USA's subprime mortgage loan crisis. The American market faced a remarkable slowdown and this had an adverse spill over effect on all of those other world, with Asia and Europe in particular being affected terribly. Malaysia however, weathered the financial storm and documented a gross local product (GDP) expansion rate of 4. 6 per cent for that 12 months. This was mainly due to strong home demand and a continuing progress in private and open public consumption.

Another durability Malaysia possesses is assisting government policies. A major sketch for India China and the center East to invest in Malaysia is the fact that it has a business environment that is conducive for growth and profits that has been cultivated by the Malaysian federal.

Challenges

Rising Costs Of Living

As attractive as Malaysia is good for foreign buyers, there are several issues facing Malaysia which might deter foreign buyers. Among the challenges experienced by region is bringing up labour costs. I talked about earlier that a person of Malaysia's strengths in attracting international investment is our very skilled and educated workforce. That can also relatively have an adverse effect as it means people are expecting bigger paychecks as well as becoming more selective about careers. This is hardly a delight as the expense of living in Malaysia is on the rise and it wouldn't make much sense if a highly educated and skilled specific is barely making enough money to have comfortably. Furthermore, increasingly more developing countries around us have become attractive goals for foreign traders as they are starting to provide skilled workforces for relatively lower costs. Indonesia, Thailand, Vietnam, Cambodia, Laos and Myanmar are types of countries who offer cheap labour, and above of this a good amount of land and huge domestic markets.

Lack of Drive

Another task facing Malaysia is one that it has brought upon itself. It really is no exaggeration to say that Malaysia's economic development has been fantastic, however it has been accompanied by us getting a little too comfortable and content with our success. We have been nowhere next to as famished or driven as we used to be in the 70's and 80's. Also our current economic climate has been struck by the downturn twice in the last fifteen years, once in 98 and once in 20008. You can argue that a lot of nations were strike of these two durations, but it do nevertheless expose the frailties in our economic system such as the insufficient regulatory actions.

Infrastructure

While Malaysia has good infrastructure, it can't be denied our public carry system and amenities pale compared to our neighbours Singapore. Foreign shareholders from China, India and the Middle East may elect to pay higher costs and invest in Singapore instead.

Recommendations

With mention of the first problem Malaysia encounters in getting FDI, the federal government should do something to increase pay so more skilled workers are willing to work locally rather than looking for greener pastures abroad. Improved working surroundings and culture will also help as people will be less selective about the work they take.

Malaysia also needs to take steps to put into place better regulatory systems to avoid experiencing another economic downturn as bad even as we do in 1998 and again in 2008.

On top of this, Malaysia should make investments money into bettering our infrastructure. Our public travel system and amenities are in need of a revamping which is really as good a time as any to do it.

Conclusion

In finish, it is without doubt that Malaysia with our impressive workforce and strong current economic climate is already a wonderful destination for shareholders from China India and the Middle East, but we still do have shortcomings which may put them off. It is in my opinion that the Malaysian government with some work can rectify this shortcoming and make Malaysia an undisputed goal for foreign buyers.

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