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New Era College

Subject: macroeconomic econ 102d

(august 2012)

Lecturer’s name:

ms.yogambigai rajamoorthy

Students Name: Id number:

Teoh su hua 1230139-dba

Ng chai chin 1250106=dba

Kong siew jing 1230104-dba

Cheong wei xiang 1230131=dba

Chai jian heng 1230140-dba



Content Page

Introduction



Introduction

Malaysia is a middle-income country. Malaysia is attempting to achieve

high-income status by 2020 and to move farther up the value-added production chain

by attracting investments in Islamic finance, high technology industries,

biotechnology, and services. Malaysia exports particularly of electronics, oil and gas,

palm oil and rubber to other countries. As an oil and gas exporter, Malaysia has

profited from higher world energy prices, although the rising cost of domestic

gasoline and diesel fuel, combined with strained government finances, has forced

Kuala Lumpur to begin to reduce government subsidies. Malaysia could be vulnerable

to a fall in commodity prices or a general slowdown in global economic activity

because exports are a major component of GDP. Malaysia also has run business with

some countries such as TOYOTA(cars),mobile device and electrical etc.

The Malaysian economy has made an enormous leap since 1957. The

transformation of the country's economy from one based on primary commodities like

tin, rubber and palm oil to a dynamic and vibrant industrializing nation is attributed to

a variety of pull factors. Malaysia's political and economic stability, prudent and

pragmatic investor friendly business policies, cost productive workforce, developed

infrastructure comparable to that of any western country and a host of other amenities

make this country an enticing place for investors.

We will compare with other countries economic growth to explain Malaysia

economic conditions.



Unemployment

The unemployment rate can be defined as the number of people actively looking

for a job divided by the labor force. Changes in unemployment depend mostly on

inflows made up of non-employed people starting to look for jobs, of employed

people who lose their jobs and look for new ones and of people who stop looking for

employment. Related terms are the labor force, the participation rate and the

employment rate. The labor force is defined as the number of people employed plus

the number unemployed but seeking work. The non-labor force includes those who

are not looking for work, those who are institutionalized such as in prisons or

psychiatric wards, stay-at home spouses, children, and those serving in the military.

The participation rate is the number of people in the labor force divided by the

population of working age that is not institutionalized. The employment rate is

defined as the number of people currently employed divided by the population of

working age.

In Malaysia at low levels of income, it’s easy to take advantage of cheap labor

for low-skilled manufacturing exports that facilitate the transition from low to middle

income. However, making the leap from middle to high income is much more difficult.

As incomes increase, so do costs, which means countries like Malaysia must “move

up the value chain,” by exporting more technologically advanced products. In

addition, they must innovate and use capital and labor more productively. This means

having a better-educated workforce and an innovative domestic private sector that

invests in research and development. However, the cheap labor looking for jobs in

Malaysia, so that the people of our country to reduce employment opportunities.



Monetary Policy

Monetary policy is the process by which the monetary authority of a country

controls the supply of money, often targeting a rate of interest for the purpose of

promoting economic growth and stability. The official goals usually include relatively

stable prices and low unemployment. Monetary theory provides insight into how to

craft optimal monetary policy. It is referred to as either

being expansionary or contractionary, where an expansionary policy increases the

total supply of money in the economy more rapidly than usual, and contractionary

policy expands the money supply more slowly than usual or even shrinks it.

Expansionary policy is traditionally used to try to combat unemployment in

a recession by lowering interest rates in the hope that easy credit will entice

businesses into expanding.

Economic activity in several of the advanced economies continues to be

affected by ongoing fiscal consolidation, impaired financial intermediation and weak

labor market conditions. In emerging economies, while domestic demand remains an

important source of growth, exports are affected by weak external demand.

In the domestic economy, recent data and surveys of business conditions

suggest that consumption and investment activity remains resilient. Looking ahead,

domestic demand will continue to be the anchor of growth. Household spending

continues to be supported by stable employment conditions and income growth. The

strong investment activity is mainly led by the domestic-oriented industries, the oil

and gas sector and the steady progress in the construction of infrastructure projects.



New 3th series of Malaysian banknotes:

RM100-Natural wonders RM50-Agricultureand Technology

RM20-Marine Life RM10-Flora

RM5-Wildlife RM1-Traditional Sport

As Malaysia's Central Bank, Bank Negara Malaysia promotes monetary stability and

financial stability conducive to the sustainable growth of the Malaysian economy.



Key policies

Vision 2010

In 1991, the government declared that it was the objective of the nation to

become a developed nation in its own mould by 2020. It visions Malaysia to achieve

an industrialized and a fully developed nation status by sustaining growth at 7 per cent

per annum and initiating structural changes in the economy as well as within the

manufacturing sectors. The key to the attainment of a fully developed nation is

overcoming the nine strategic challenges.

New Economic Policies

Start New Economic Policy (NEP) in 1971 was a watershed in the Malaysian

economic policy history. The NEP underscored the importance of achieving

socio-economic goals alongside pursuing economic growth objectives as a way of

creating harmony and unity in a nation with many ethnic and religious groups. The

overriding goal was national unity. To achieve this goal, two major strategies were

adopted:

To reduce absolute poverty irrespective of race through raising income levels

and increasing employment opportunities for all Malaysians; and

To restructure society to correct economic imbalances so as to reduce and

eventually eliminate the identification of race with economic function.

Malaysia Incorporated Policy

The Malaysia Incorporated concept was first announced by the Prime Minister in

1983 and it represents a new way of approaching the task of national development.

Both the public and private sectors adopt the idea that the nation is a corporate or



business entity, jointly owned by both sectors and working together in pursuit of a

common mission of the nation.

Human Resource Development

Expanding the supply of highly skilled and knowledgeable manpower to

support the development of a knowledge based economy based on

education and training.

Increasing educational facilities and quality training to enhance income

generation capabilities and quality of life.

Improving facilities for quality education and training system to ensure

that manpower supply is in line with technological changes and market

demands.

Manufacturing policies

Encouraging Exports

Enhancing Competitiveness

Strengthening the Industrial Cluster

Preparing The Industry Towards Globalization

Preparing The Industry Towards Globalization

http://www.epu.gov.my/manufacturing

http://www.epu.gov.my/manufacturing



Economic Growth

Malaysia vs China

Malaysia economic growth has been largely because of investment in real estate

sector, non-tradable sectors and capital intensive infrastructure. Malaysia is one of the

world's largest exporters of semiconductor components and devices, electrical goods,

solar panels, and information and communication technology products.

However, since opening up to foreign trade and investment and implementing free

market reforms in 1979, China has been among the world’s fastest growing

economies, with real annual gross domestic product (GDP) averaging nearly10%

through 2011. In recent years, China has emerged as a major global economic and

trade power. It is currently the world’s second largest economy. China could become

the world’s largest economy at some point in the near future, provided that the

government is able to continue and deepen economic reforms, particularly with regard

to its inefficient state owned enterprises and the state banking system. China is a very

strong country because it maintained a centrally-planned, or command, economy. A

large share of the country’s economic output was directed and controlled by the state,

which set production goals, controlled prices, and allocated resources throughout most

of the economy.

Compare that to say China or Malaysia, China is higher growth economic. In

addition,the higher the number of workers relative to the population as a whole, the

greater the potential output per capita. And the greater the number of potential

workers about to enter the workforce, the greater the potential impact on economic

growth.



Malaysia vs U.S

The Gross Domestic Product (GDP) growth rate provides an aggregated measure of

changes in value of the goods and services produced by an economy. The economy of

the United States is the largest in the world. The United States is a market-oriented

economy where private individuals and business firms make most of the decisions,.

The federal and state governments buy needed goods and services predominantly in

the private marketplace. America's high rate of population, the majority of the people

of Malaysia to the United States to find jobs because the United States on the

exchange rate is very big different compared with Malaysia. The exchange rate of

currency is higher than Malaysia.

Malaysia vs Japan

Japan's industrialized, free market economy is the second-largest in the world. Its

economy is highly efficient and competitive in areas linked to international trade, but

productivity is far lower in protected areas such as agriculture, distribution, and

services. Japan's reservoir of industrial leadership and technicians, well-educated and

industrious work force, high savings and investment rates, and intensive promotion of

industrial development and foreign trade produced a mature industrial economy.

Japan has few natural resources, and trade helps it earn the foreign exchange needed

to purchase raw materials for its economy. Malaysia has a rich deposit of natural

resources such as tin, oil palm and tobacco etc. Malaysia advanced than Japan,

because the people of Malaysia are relatively lazy. The Japanese government has been

to explore a lot of talent, but the Government of Malaysia has no action.



Economic situation

Economic situation has some current issues in relation to the Government policies and

measures, namely minimum wages, “My First Home” Scheme, One Malaysia

Housing Programme, One Malaysia Shop, 2012 Budget announcements, various

initiatives for SMEs and the impact of the Competition Act. Announced by Bank

Negara Malaysia, the Malaysian economy expanded by 5.1% for the whole year of

2011 due to unfavorable external environment. Growth prospects have become

increasingly uncertain with the policy uncertainty on the resolution of the ongoing

sovereign debt crisis in Europe amid fiscal consolidation in the advanced economies

could add further strains to the international financial system, thus affecting the

prospects for continued global growth. Going forward, the more challenging external

environment could present greater downside risks to Malaysia’s growth prospects and

domestic demand is expected to continue to be the key driver of growth.

GDP of Malaysia

MALAYSIA's full-year gross domestic product (GDP) is poised to grow by as

much five per cent. The Gross Domestic Product of Malaysia is depends on its

agricultural sector, manufacturing industries and the service sectors. In 2008, the

agricultural sector had contributed 9.7 % towards the country’s GDP. The

contributions of the manufacturing industries were estimated as 44.6% and that of

service sector was 45.7 % towards the country’s GDP. As per the GDP- PPP

(Purchasing Power Parity), Malaysia is ranked 29th in the world. A GDP growth rate

of 20 % was noticed towards the end of 20th century. The government's investment

plans for nation-building activities under the Economic Transformation Programme

will continue to support domestic demand. A thriving domestic economy and a steady



interest rate outlook in Malaysia will be positive for the ringgit even though the global

risk environment is still dependent on developments in the Eurozone.

Gross Domestic Product(GDP)

The diagram of above, the country of most high GDP is China. The country of

most lowest is Malaysia. Why makaysia is most lowest in the 3 of this countries? The

reason is



Economics

growth of

Malaysia.

Monetary

Policy

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