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FY 1999: Malaysia |
CHAPTER I: EXECUTIVE SUMMARYThis Country Commercial Guide (CCG) presents a comprehensive look at Malaysia's commercial environment using economic, political and market analysis. The CCGs were established by recommendation of the Trade Promotion Coordinating Committee (TPCC), a multi-agency task force, to consolidate various reporting documents prepared for the U.S. business community. Country Commercial Guides are prepared annually at U.S. Embassies through the combined efforts of several U.S. government agencies.
After a decade of sustained economic growth, during which real GDP increased in excess of 8% annually, Malaysia's economy at mid-year 1998 was headed for recession.
Real GDP contracted by 1.8% in the first quarter, year-on-year, the first quarterly contraction since 1985.
In July 1998, the government announced that it is expecting negative 1-2% GDP growth for 1998.
Malaysia since July 1997 has been buffeted by the economic and financial downturn that erupted with the Thai financial crisis and quickly spread throughout much of Asia. Despite stronger fundamentals relative to its neighbors, growing investor concerns over excessive commercial property investment, high levels of domestic corporate debt, government-funded megaprojects, and the lack of transparent policies regarding support for troubled firms contributed to record declines in the local stock market and value of the Malaysian currency. As of mid-July 1998, shares on the Kuala Lumpur Stock Exchange were trading at 9-year lows, with the KLSE Composite Index well below 450. The ringgit has slid from RM2.5 to roughly RM4.2 against the US dollar in the span of twelve months.
While the government has taken significant preemptive measures to strengthen the financial system, Malaysia's banking sector has come under increasing stress as nonperforming loans continue to mount. Bankruptcies are on the rise, and several major Malay- sian corporations, burdened with heavy debt loads, have recently sought court protection from creditors. Malaysia, nonetheless, remains intent on developing its own solutions to the economic and financial crisis, and has resisted further liberalization of its economy. The government recently announced plans to establish a corporation to relieve banks of their nonperforming loans. On the fiscal side, it announced two economic stimulus packages to increase government spending for infrastructure, health, education, and other areas.
Despite the current turmoil, however, Malaysia remains an important trading partner for the United States.
In 1997, two-way bilateral trade totaled US$28.8 billion, with U.S. exports totaling US$10.8 billion and imports from Malaysia totaling US$18 billion. Malaysia was the United States' 11th-largest trading partner and its 16th-largest export market. In 1997, the United States became Malaysia's largest trading partner. The U.S. has consistently been one of the leading investors in Malaysia, with over half in the oil and gas and petrochemical sectors and the remainder primarily in manufacturing, especially semiconductors and other electronic products. Malaysian government officials appreciate the willingness of U.S. firms to transfer know- how and develop human resources programs.
There are no significant barriers to export-oriented manu- facturing investment in Malaysia, although there are significant curbs on investment aimed at the domestic market. Most sectors of the economy are very open to trade, and U.S. products have been successful in practically all of them.
The dramatic braking of economic growth and depreciation of the ringgit relative to the U.S. dollar will, however, have significant effects on U.S. export opportunities. Nonetheless, opportunities will remain strong in priority areas of development, including high technology fields, industrial automation to enhance productivity, medical products and services, education/distance learning and the environment. Of particular interest is the ongoing development of the Multimedia Super Corridor (MSC), Malaysia's effort to create Asia's version of Silicon Valley. The MSC, which has full backing of the Malaysian government, should create both export and investment opportunities for U.S. firms. Likewise, some key privatized infrastructure projects will continue to be implemented and we believe that foreign investment restrictions on privatized infrastructure will be relaxed.
Malaysia's history of sound economic policy, political stability and leadership has created economic prosperity and social harmony in the country over the past three decades. While the current economic downturn will last for longer than initially anticipated, most market analysts and economists remain positive about the long-term prospects for Malaysia, especially if the government embraces reform and corporate restructuring.
Country Commercial Guides are available on the National Trade Data Bank on CD-ROM or via the Internet. Please contact STAT-USA at 1-800-Stat-USA for more information. Country Commercial Guides can be accessed via the World Wide Web at http://www.statusa.gov; http://www.state.gov; and http://www.mac.doc.gov. They can also be ordered in hard copy or on diskette from the National Technical Information Service (NTIS) at 1-800-553-NTIS. U.S. exporters seeking general export information should contact the U.S. Department of Commerce, Trade Information Center by phone at 1-800-USA-TRADE or by fax at (202) 482-4473.
[end of document]Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title 17, United States Code.