Malaysia is a middle-income country in South East Asia with a population of 23 million people.

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Matthew Grosse: Year 12 Economics Assessment. Task 1.

Malaysia is a middle-income country in South East Asia with a population of 23 million people. Malaysia was formed in 1963 through a merging of the former British colonies of Malaya and Singapore, including the east Malaysian states on the northern coast of Borneo. However Singapore seceded from Malaysia in 1965.

Below: A Map showing the country of Malaysia, Situated in South East Asia.

Malaysia is currently an export-oriented manufacturing economy and has developed rapidly from being an agriculture-based economy only 25 years ago, to one now dominated by manufacturing. This is shown by manufacturing growing from 13.9% of GDP in 1970 to 46% in 2002, while agriculture and mining, which together had accounted for 42.7% of GDP in 1970, dropped to 12% in 2002. Manufactures now account for about 82 per cent of Malaysian exports, of which most are Electronic goods. The composition of the Malaysian economy is:

Agriculture and Mining: 12%
Manufacturing: 46%
Services: 42%

Below: A Table showing key Economic Indicators for Malaysia from 1998 - 2003

Globalisation refers to the increasing integration of economies and markets leading to the emergence of a global market place. The process of globalisation has had a big impact on the Malaysian economy and culture.

Malaysia is a country embracing globalisation and adopting strategies to further enhance the positive effects of globalisation upon their economy. Since 1969 Malaysia has undertaken drastic economic changes in its implementation of the New Economic Policy(NEP), and then again in 1991 with the implementation of the National Development Policy (NDP). With these policies the government sought to rid itself of direct ownership in industry and to deregulate the financial sector. In the early 1990s with the implementation of the NDP, Malaysia enjoyed strong inflows of foreign direct investment, further enhancing its industrialisation process.

By the adoption of policies favourable to globalisation Malaysia has undergone huge amounts of economic growth since 1969 averaging GDP growth rates of around 6%, and up to 9% in the 1990’s along with other South East Asian neighbours. The rise in GDP led to a rise in Income per Capita and along with low inflation rates, the Malaysian standard of living has significantly increased. During this time of growth, the composition of the Malaysian economy has shifted from mostly agriculturally based to a now manufacturing and service based economy. With the increase of manufactured goods being produced in Malaysia, the level of exports from Malaysia has increased also at a high rate.

 This shift in the composition of the Malaysian economy, large levels of Foreign Direct Investment an export orientated economy and the significant economic growth since the 80s are some of the reasons why Malaysia is now classified as a Newly Industrialised Economy and is close to becoming an Advanced Industrialised Economy.

Globalisation is the key reason for the Malaysian growth as it has allowed the Malaysian export orientated economy to specialise in industries such as manufacturing electronic equipment, which is an industry in which Malaysia has a large comparative advantage and absolute advantage over more advanced AIE’s. This advantage along with the lowering of import protections around the world has allowed Malaysia to now sell products to overseas markets while experiencing fewer barriers to trade.

Malaysia is a member of the trading blocs Asian Pacific Economic Co-Operation(APEC), Association of South East Asian Nations(ASEAN) and the ASEAN Free Trade Area (AFTA). These trading blocs each affect Malaysia’s economy, either by forcing them to lower there own tariffs and subsidies or by forcing other member counties to lower protection allowing Malaysia access into other markets previously protected.

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 ASEAN with the implementation of AFTA has been the bloc to most significantly affect Malaysia. The ASEAN Free Trade Area is a collective effort by ASEAN member countries to reduce/eliminate tariffs on intra-ASEAN trade in the goods sector. Their target is to achieve tariffs between 0-5% in 2003. So far this goal has been largely achieved with 99.5% of included products traded between ASEAN economies having tariffs of under 5%. Malaysian companies will be able to benefit from ASEAN by receiving: Preferential access into the large market of ASEAN with a population of 530 million people while having to pay ...

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