Malaysia's stability lures investors

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.