The Strategic issues that the Malaysian government are pursuing to further their economic dynamism.

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The Strategic issues that the Malaysian government are pursuing to further their economic dynamism


  1. Introduction

The global environment is experiencing unprecedented events that had widespread implications to the world’s economic situation. Despite this challenging environment, Malaysia has managed to avoid the major economic downturn. Bank Negara’s report shows that growth rate for 2001 remained in positive at 0.4%, unemployment rate was contained below 4% and inflation rate was low at 1.4%.


In relation to that, strategies imposed will be very important to sustain the economic growth in the country. In the next section we will look into the strategies which the government is pursuing to further strengthen their position in the region.

  1. Strategies

The government takes planning for national development very seriously, thus plans are important to set out the course for the nation to take in its development. The section below discusses the strategic issues that the Malaysian government is pursuing to further the country’s economic dynamism.

  1. Monetary Policy

In 2001, the government has introduced the monetary measures to stimulate domestic demand to mitigate the effects of the global economic slowdown. The monetary condition in the country has remained conducive to support domestic economic activities amidst low inflation. The low interest rate environment, ample liquidity conditions and strengthens banking system have contributed to higher financing expansion in monetary aggregates. The stability provided by the pegged exchange regime has continued to benefit the economy as well.

  1. Low Interest Rate

The low interest rate has led to strong growth in financing activities. For e.g.: the interest rate for purchasing a Proton Iswara car has now dropped to 4.1% instead of 4.5% a few months back, thus has helped to increase car sales which helps in the economic dynamism. The low BLR has encouraged growth in credit consumption and property sector. The reduction in lending rates has contributed to providing a positive environment for the private sector as well. It has given advantages to many firms to float bonds and to pay back some of their loans.

  1. Exchange Rate

The government’s action in imposing the exchange rate to remain pegged to the US dollar at the rate of US$1=RM3.80 has helped the economic growth in the nation. The Ringgit peg has continued to provide stability to the domestic foreign exchange market in an environment of volatile international and regional foreign exchange market. This stability accorded has reduced the element of uncertainty in the decision making process of domestic manufacturers and service providers.

  1. Fiscal Policy

Fiscal measures are aimed at enhancing disposable income to boost consumption and implementing projects with high spillover efforts, low import content and short gestation period. In respect of fiscal policy, the Government has reduced its expenditure and deferred implementation of selected infrastructure projects. It has reduced imports as well as address the issue of excessive credit growth and the high leverage of some corporations. The Government, however, ensured that budget allocations related to the quality of life, particularly with respect to health, education and the provision of other basic amenities, were maintained.

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The government has adopted 2 pronged approach in Budget 2001 to strengthen Malaysia’s productivity over long term which are:

  1. To stimulate domestic growth through allocation for projects which had strong domestic linkages and low import content.

Government is focused on projects that could be implemented quickly for maximum impact on domestic demand. Some projects identified by the government were small development projects in rural and selected urban areas, upgrading government buildings and facilities, training of retrenched workers and unemployed graduates and tourism promotion. For e.g. : Promoting training of IT skills courses to the retrenched workers ...

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