Managerial Economics - II

By group 2

Group Members

• Shashank Agarwal (2)

• Dhawal Bhanderi (10)

• Vanshika Dangayach (21)

• Jash Gada (29)

• Abbas Haider (33)

Overview of the Country

• Location – South East Asia

• Capital – Kuala Lumpur

• Language – Malaysian

• Population - 29,495,147 (2012 Census)

• Consists of 13 states and 3 federal territories

• Shares borders with Thailand, Singapore, Brunei and Singapore

Continued.. • A Federal constitutional monarch

• Prime Minister – Najib Razak

• King – Tuanku Abdul Halim

• Multi ethnic and multi cultural

• State religion is Islam

History in Brief• Malaysia has its origins in the Malay Kingdoms

• British straits settlements

• Formation of Malayan Union in 1946

• Independence from the British and formation of The Malayan Federation

• Formation of Malaysia

• Expulsion of Singapore

The Malaysian Economy

• Phase 1 (Till 1965)

• Phase 2 (1965 – 1969)

• Phase 3 (1970 – 1987)

• Phase 4 (1987 – 1997)

• Phase 5 (1997- Present)

Phase 1 (Till 1965)• Malayan Peninsula during the British reign

• The Malayan Plans

a) First Malayan Plan

b) Second Malayan Plan

The British Influence

• Center of Trade for Porcelain and Spice

• Introduction of Rubber, Tin and Palm oil trees

• Immigration of Indians and Chinese

First Malayan Plan (1956 – 1960)

• First plan by the government

• Changing the mentality

• Agriculture and rural development

• Public expenditure by the government

Second Malayan Plan (1961 – 1965)

• Increase public expenditure

• Main objective was development of rural areas

• Reason for the increased expenditure

Phase 2 (1965 - 1970)

• Singapore expulsion and formation of Malaysia

• First Malaysia plan

• May 13 Incident

First Malaysia Plan (1965 – 1970)

• First plan by government of Malaysia

• Objective was to provide medical facilities in rural areas and improve literacy rate

• Complete withdrawal of British

• Problem of unemployment

• Expenditure on rubber , rice and other crops

Continued..

• Literacy rate increased

• Unemployment continued

• Ethnic problems

• Government policies relating to industries

May 13 Incident• Malay affirmative policies

• Led to riots and emphasis on ethnic groups

• Led to the NEP

Phase 3 (1970 - 1987)

• Transition phase

• Introduction of the Second, Third and Fourth Malaysia Plans

• Introduction of NEP

Transition Phase• Imitation of the Asian Tigers

• Shift to a multi sector economy

• Role of the Reid Commission

• Policy changes

New Economic Policy• Objectives of the NEP

• Enactment of the Industrial Coordination Act ( ICA)

• Establishment of HICOM

• Economy opened to foreign companies

Floating of the Ringgit • Ringgit was floated in 1973

• Liberalization of the capital account

• Conservative monetary stance

• Strengthening of private sector and export oriented industrialization

Problems during the phase

• Industries under the HICOM were born losers

• Low productivity of Manufacturing industries

• High current account deficit and public sector deficit

• Race related tensions increased

Source: tradingeconomics.com

Source: tradingeconomics.com

Phase 4 (1987-1997)• National Development Policy

• Fifth and Sixth Malaysia Plans

• Infrastructure Projects

• Achievement of a balanced budget

• Vision 2020

Vision 2020

• Introduced by Prime Minister Mahatir in 1991

• Objective was to be self – reliant

• 9 Strategic challenges

National Development Policy

• With the aim to fulfill the objectives of Vision 2020.

• NDP was accomplished through the policies, strategies, and programs implemented in

-The sixth Malaysia Plan (1991-1995)-The Seventh Malaysia Plan (1996-2000)

Infrastructure and the Proton

• Proton – Malaysian Car Project

• Proton was a drain on resources

• Infrastructure projects – Putrajaya, Petronas Tower, KLIA, F1 circuit

Balanced Budget• Changed attitude of the government towards

Malays

• Low tariff restrictions

• Relaxed regulations on foreign equity

• Role of BNM

Phase 5 (1997 – Present)

• Asian Financial Crisis

• National Vision Policy

• Recession 2008

• Current scenario

Asian Financial Crisis, 1997(Causes)

• Financial collapse of the Thai baht

• Large Foreign Debt Of most Asian countries

• Depreciation Of Various Currencies

Effects of Asian Financial Crisis

• Depreciation Of Ringgit

• Foreign direct investment fell at an alarming rate

• Stock Markets also fell to a new low

• A sharp contraction of the GDP

Policies to Overcome the Crisis

• Refused economic aid packages from the International Monetary Fund (IMF) and the World Bank.

• Massive government spending was made on the Public Sector

• Continuously recording of budget deficits in the following years after the Asian financial crisis.

• Concept of V-shaped recovery was noticed.

NVP(National Vision

Policy)• National Vision Policy (NVP) was an extension of the

NDP (1991-2000) and covers the 8th and 9th MP.

• Income maximization through optimal utilization of the sector’s resources.

• Emphasis and priority given to the development of agriculture sector and good prices of main commodities

Recession 2008(Effects)

• Exports and industrial output Deteriorated

• Investment basically FDI Started to fall

• GDP Started to Decline but at a much lesser rate compared to other countries.

• Decline in the value of ringgit as exports saw a huge decline

Policies of the Government

• Introduction of stimulus packages in order to revive the economy.

1) Rm 7 billion In the year 2008 2) Rm 60billion In the year 2009

• To support private consumption government reduce EPF contribution to 8% from 11%.

• It also Started Giving tax Incentives To the people

Current Scenario

• Liberal Equity Policy

• Employment of Expatriates

• Attractive Tax Incentives

• Private Higher Education Sector

Current Statistics• GDP (PPP) – $492 Billion

• GDP Per Capita - $16,900

• Imports - $197 Billion

• Exports - $239.8 Billion

• Population below poverty line - 3.8%

Continued..

• GDP Composition :a) Agriculture - 11.9%b) Industry – 41.2 %c) Services – 46.8%

• Ringgits per USD – 3.07

• Inflation rate – 1.9%

Conclusion• Impressive economic performance

• Role of the NEP

• Stable economy

• Declining role of government

Bibliography• http://www.undp.org.my/page.php?pid=53&menu

=sub&title=Malaysia.. • http://www.bbc.co.uk/news/world-asia-pacific-153

67882

• http://www.adbi.org/discussion-paper/2008/04/02/2517.macroeconomic.management.malaysia/phase.ii.the.new.economic.policy.period.1970.to.1987/

 • http://en.wikipedia.org/wiki/Economy_of_Malaysia • http://www.worldbank.org/en/country/malaysia

Thank you.