Malaysia strives to boost economy through overhauling growth mode

KUALA LUMPUR, -- Malaysia is striving to take various measures to accelerate economic growth and tide over the current financial crisis by giving high priority to the reform of its economic growth mode.

DECADE-LOW GDP IN Q1

Malaysia's gross domestic product (GDP) shrank by 6.2 percent in the first quarter of 2009 compared with the same period last year, the biggest fall since the fourth quarter of 1998, indicated by statistics from Bank Negara, the central bank. The decline was far beyond market predictions.

Malaysia, an export-driven economy, "suffered on average 20 percent drop from January to April. So, this has triggered the shrinkage of our economy," Second Finance Minister Ahmad Husni Hanadzlah was quoted as saying by Malaysia official news agency Bernama.

To combat recession and revive home economy, the Malaysian authorities have launched two stimulus packages with a total government injection of 67 billion ringgit (about 18.76 billion U.S. dollars), or nearly 9 percent of the country's GDP.

Akhtar Aziz, central bank governor, forecast earlier that despite early signs of recovery, the economic slowdown will remain in the first quarter. Some experts, however, believed that the economy will gradually turn for the better in the second half as the global economy is expected to touch bottom.

Malaysian Prime Minister Datuk Seri Najib Tun Razak predicted earlier the country's economic growth would contract by 4-5 percent this year, worse than a 3.5 percent decline predicted by the International Monetary Fund in early May.

ECONOMIC MODE REFORM UNDER WAY

The Malaysian government is considering restructuring the country's export-dominated economy by adopting a new economic growth mode centered on innovation, creativity and high value additions.

"We need a model which is more relevant to current times. To move to a higher income-based economy, we have to move towards a knowledge- and innovation-based economy where skilled labor is needed," Nor Mohamed, minister in the Prime Minister's Department, was quoted as saying on a brainstorming session with a World Bank experts' team on May 7.

In Prime Minister Najib's words, the new mode will emphasize raising the productivity of workers by innovation and creativity to help them earn higher incomes, Bernama reported, noting that the country's the per capita income has lingered below 10,000 U.S. dollars for long.

This new mode will help Malaysia further improve its economy, elevating the country from its current high-middle income level to high-income level, said Najib.

Nor Mohamed also suggested the new economic model should count on increasing domestic consumption rather than depending on exports.

Azrul Azwar Ahmad Tajudin, an economist at Bank Islam in Kuala Lumpur, also stressed the urgent need for Malaysia to overhaul its economic growth mode by easing dependence on exports and foreign investment.

The new mode, which will be drawn up by an advisory economic council composed of local and foreign experts, is to be issued later this year.

The pending Tenth Malaysia Plan for the period 2011-2015 will be drafted on the basis of the new economic growth mode so as to ensure a smooth and quick economic recovery from the current recession.

REFORM CRUCIAL FOR ECONOMIC RECOVERY

Malaysia's economic growth has fallen short of expectation for a long time. The average GDP growth is expected to reach 6 percent during 2006-2010 but that goal was met only in 2007. The global economic downturn is expected to raise the country's unemployment rate from 3.1 percent last year to 4 percent this year, and dragged down its foreign investment by 50 percent to 26 billion ringgit (some 7.28 billion dollars).

"We will not allow the country to remain as it is but find ways to achieve a quantum leap so that we can be in the high income bracket, " Najib said in an address on May 1.

Yet, Malaysia is trying to take the global economic downturn as an opportunity to revive its sagging economy. The government hopes the economic reform will enable Malaysia to make the most out of the global economic recovery and help it gain the status of a developed nation by 2020.

Once the global demand recovers, Malaysia's exports of electronics, oil and other commodities will pick up. But the country has to overhaul its export-oriented economic mode and give priority to developing service sectors if it wants to reduce dependence on low added value products and ensure long-term stable benefit.