Malaysia's stability lures investors

Malaysia, comprising Peninsular Malaysia, Sarawak and Sabah, covers more than 330 square kilometers and lies in a strategic position for sea and air transport between Europe and the Far East.

Endowed with natural resources such as rubber, palm oil and tin as well as broad plains, spectacular limestone outcrops and caves, swamps and sandy beaches, Malaysia remains high on the agendas of prospective foreign investors and tourists.

Political stability and the absence of earthquakes, volcanoes and typhoons, has lured many holiday makers to Malaysia.

Although Malaysia's real Gross Domestic Product (GDP) growth rose only slightly to 8.7 percent last year from 8.3 percent in 1993, it nevertheless shows how the country's economy has further strengthened during the past seven years.

The growth, in terms of economic strength, has outperformed all previous cyclical upswings since the country gained independence in 1957.

The strong economic performance is attributed to the sustained output growth in the manufacturing sector -- which last year contributed 31.4 percent to GDP and 77.5 percent to total exports. Manufacturing provided the main impetus in transforming Malaysia from an agriculture-based economy into a leading exporter of manufactured goods, such as rubber gloves, catheters, air conditioners, semi conductors and audio-visual equipment.

A total of 4,300 manufacturing projects, involving proposed capital investments amounting to US$49.4 billion between 1990 and 1994, were approved. Other important sectors, like construction and services, also contributed to the country's overall growth.

Real aggregate domestic demand expanded by 13.2 percent in 1994 against 9.2 percent in 1993, reflecting an increase in spending by both the private and public sectors.

The increase in disposable income and higher corporate profits contributed to the expansion in private consumption, while private investments were buoyed by the sharp increase in capital outlays in the manufacturing, oil and gas, and service sectors.

Public sector investment expenditure rose markedly, on account of the huge outlays by the non-financial public enterprises and the federal government's investment in infrastructure and human resource development.

Public consumption also increased during the year, albeit at a more moderate pace, reflecting the increase in government expenditure to upgrade defense facilities and improved essential supplies, services and maintenance.

Malaysia continued to modernize and invest in defense, last year concluding deals to buy U.S. and Russian fighter planes. The Russian deal suggests that Kuala Lumpur wants to be independent from the West in acquiring its military equipment. The deals included 27 offshore patrol boats for the navy.

The labor market tightened further in 1994, reflected by a reduction in unemployment to 2.9 percent from 3 percent in the previous year. The economy was virtually at full employment.

Although the government allows the employment of foreign nationals, it has always been Malaysia's wish to maximize the utilization of the existing local labor force by upgrading workers' skills and promoting greater automation through more capital and technology-intensive industries.

The overall balance of payments position recorded a deficit of RM8.3 billion in 1994, the first deficit since 1988. The main contributory factors for the overall account deficit were the widening of the current account deficit arising from the reduced surplus in the merchandise account and the large net outflow of short-term capital of RM14.8 billion.

While exports recorded a strong double-digit growth, imports also increased sharply following the renewed pick up in investment activities since 1993.