Malaysia
A backsliding economy
Will Malaysia be marginalised, asks Dr Hsu Dar Ren in his Forum.
Nov 28, 2006

Today, I am going to show 2 tables which are compiled by myself using data from several sources including UNCTAD and citigroup.

First of all, we look at the stock market capitalisation of Malaysia compared with several other countries.

Table 1. (source: Citigroup)
Stock market capitalisation in US-dollars (at year-end)

Countries 1996-2005
1. Hong Kong 449-1,047
2. Malaysia 295-178
3. Taiwan 274-470
4. Singapore 183-313
5. Korea 140-640
6. China 66-286

In 1996 we were second in Asia (outside of Japan). Our market capitalisation was twice as big as South Korea, and was even bigger than Singapore.

However, by end of 2005, we are no 6 in Asia (ex-Japan). S. Korea is now 4 times bigger than us. Singapore is almost twice as big as us.

Another table which are compiled using UNCTAD data shows that in term of FDI (foreign direct investment) inflow, we are no 62 in 2005, whereas once, in 1990 we were anked 4th in the world.

Table 2
(source: UNCTAD World Investments report)
Inward FDI performance index 1990-2005
Countries 1990-1995-2000-2005
Hong Kong 3-13-2-3
Singapore 1- 2- 5- 5
China 52-12-54-55
Malaysia 4-6-53-62
Thailand 17-72-46-96

Recently, Citigroup in its report titled " Avoiding marginalisation and regaining investor confidence" mentioned the following points:

* Malaysia is a pale shadow of itself compared to 10 years ago.
* It is not because Malaysia is moving backward but rather other countries are moving faster forward.
* While accepting the NEP objectives, the debate should shift to how best to achieve these objectives with minimal market distortion.

The Phillipines was the richest nation in South East Asia in the fifties. It is now among the poorest in the region now. Why? Poor governance, corruption, leakages, wastage, cronyism, nepotism all contribute to the present state.

Will Malaysia be like the Phillipines? I don't think so.

In Malaysia, we are much better. We have very healthy reserves, comfortable current account surpluses and an intelligent workforce which understands English. What we need is to do away with all the wastages and leakages.

In this context, the NEP must be reviewed and streamlined to make the economy more competitive. We must further open up our economy.

The recent news that ANZ Bank may be allowed to acquire a sizeable holdings on AMMB is welcomed. It signals that our authority is in fact willing to further liberalise the financial sector.

If acquiring a foreign partner can make our local company more competitve and enable it to move overseas to compete, I don't see any reason to stop foreign companies from coming in and team up with local companies.

This type of partnership may help our local brand to grow, be more efficient and be more technologically advanced. Ultimately, it may enable the company to move outwards to acquire a share of the world market and become a global company.

One example of a global company is computer giant HP. The Hewlett Packard group may have originated from the States. It has now offices in more than 100 countries and its revenue outside the States is bigger than what it earns inside.

It employs more people outside of the States than inside. This means that it is in actual fact a global company. It sources components of its products not only from the States but all over the world. It outsources everywhere and anywhere it can find good, reliable and cheap products and services.

The national divide among big, multinationals (or global companies) is in fact getting blurred.

Sony may be a Japanese brand but it has so many factories all over the world that it is in fact a global company, contributing technological knowhow and economic benefits to all those countries in which Sony has a presence.

If by teaming up with a foreign partners can make our Proton a world brand, I don't see any reason why there should be any objections. We should look ahead and be far sighted. We should not be too emotional when it comes to opening of our economy.

It is either that or stand the risk of other countries overtaking us and stand the risk of marginalisation in the world market.

http://hsudarren.wordpress.com/