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Malaysia Country Forecast By EIU



There are research units, even highly respected ones, that actually makes "big picture" business environment forecast on Malaysia and other emerging markets. I guess its to help foreign companies to better plan their long term investment plans. Some of the forecasts are quite "in your face" and matter of fact, not so sure if you ask me. My comments in colour.


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Malaysia: Business environment at a glance

FROM THE ECONOMIST INTELLIGENCE UNIT

Policy towards private enterprise and competition

2010-11: The government gradually reverses the decades-old policy of discrimination in favour of bumiputera (ethnic Malays and other indigenous peoples). Protection of intellectual property rights continues to improve. (Yes, there have been some deliberate action towards that. For Najib to make the biggest impact prior to the next election, I think giving bumiputera status to all Malaysians born on and after 1957 would be the simplest and most effective reversal of said policy, without actually having to remove the policy, which might be politically insurmountable).

2012-14: Scope for the government to protect domestic industries and bumiputera groups dwindles as South-east Asian economic integration proceeds. (I totally agree and Malaysia better remove the subsidies and indirect duties that protect these domestic industries in order for them to better compete, or be decimated).

Policy towards foreign investment

2010-11: Competition with China guides investment incentives; Malaysia emphasises its advantages in labour skills (such as English-language proficiency), natural resources and infrastructure.

2012-14: Malaysia expands incentives in order to establish itself as a regional services centre.

Foreign trade and exchange controls

2010-11: The ringgit appreciates against the US dollar, but the exchange-rate regime of a managed float against a trade-weighted basket of currencies is maintained.

2012-14: Further bilateral trade agreements and progress towards regional economic integration prompt Bank Negara Malaysia (the central bank) to allow offshore trading of the ringgit. (Bank Negara is treading very cautiously on this, and they have their reasons. International convertability and free flow of the ringgit should be promoted, albeit gradually).

Taxes

2010-11: The government continues to subsidise fuel and food. It also makes minor changes to personal tax rates, as part of a package of measures aimed at supporting domestic demand.

2012-14: Macroeconomic fundamentals improve, allowing the government to introduce a goods and services tax.

Financing

2010-11: Keeping financial markets liquid remains a priority for the government.

2012-14: Competition for corporate finance intensifies as the economy recovers fully from the global economic downturn. Malaysia continues to play a leading role in the development of Islamic banking and finance.

The labour market

2010-11: Despite government efforts to trim the size of the foreign workforce, illegal immigration remains a problem.

2012-14: A shortage of highly skilled labour impedes progress at the upper end of the value chain. Positive discrimination in favour of bumiputera continues to harm labour market efficiency.

Infrastructure

2010-11: The government implements projects aimed at supporting activity in the construction sector. Public transport improves as a result of increased government investment.

2012-14: Major infrastructure projects are delayed, owing to a lack of private-sector involvement. Energy policy focuses on improving distribution rather than increasing generating capacity.

The Economist Intelligence Unit


p/s photos: Janine Zhang

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