discuss the role of government policy in promoting or retarding economic growth in Malaysia
students are asked to write a paper, consisting of between 1200 and 1500 type written words, with lines double spaced. The paper should contain the following: – Title page. This should show the paper’s title, your name and student number, and my name.v -Footnotes (or endnotes). It is essential to reference all direct quotations and even when paraphrasing you should acknowledge your sources.-Bibliography. You should include at least three sources which are books or articlesfrom scholarly journals. Websites (other than online scholarly journals) and newspaper articles may be used to supplement these three major sources but should not be relied upon exclusively. You should never cite Wikipedia or my lectures as a source, though you may make use of them to find published sources. The following factors will be taken into account in grading the assignment:1. Presentation -style, grammar.2. Quality of research.3. Logical development of the material.4. Quality of analysis (no worry about the title page, I will do it myself)
ANSWER
The Role of Government Policy in Promoting or Retarding Economic growth in Malaysia
Introduction
Economic growth and productivity remain a major element for global economies. It provides a nation with an opportunity to build and cultivate a quality image worldwide. Other nations emulate its approaches as the world strives to achieve significant milestones, especially in the business setting. Economic growth or retardation determines a country’s stand in the international trade and business environment. Malaysia is one of the notable nations that have achieved significant economic milestones due to the development and implementation of distinct policy frameworks. It has implemented frameworks such as the open economy, macroeconomic management, and economic growth policies with the key target of boosting its productivity. Each of these policies has supported the local economy to grow over time due to the establishment of suitable structures and systems supporting business and trading activities. The current and future performance of the economy depends on these policies and appropriate adjustments when necessary. It has managed to develop significant sectors such as manufacturing, agriculture, and telecommunications. The systems and structures put in place will also guarantee its future performance. Malaysian economic growth comprehensively relies on the open economy, macroeconomic management, and economic growth model policies.
Open-Economy Policy
Malaysia has one of the best open economy globally. It offers an environment of less-restrictive for business activities. It has continued to experience high growth over the decades. Its openness to business is a factor that has enabled the country to grow and advance progressively. Research shows Malaysia’s labor market is one of the most open in the developing world (Hill, 2010). In the year 2009, the country had 1.9 million foreign employees and 0.6 million illegal migrants providing services to distinct organizations. (Hill, 2010). These statistics show the high-level of economic openness, which paves the way for growth. Few trade barriers and open foreign investments are some of the policy frameworks put forth by the Malaysian government to control business activities. Reduced trade barriers translate into numerous activities where the country is better positioned to interact and transact with other global communities. For example, Malaysia is a key player in the tropical timber trade. It has developed and implemented limited trade policies to engage in viable business relationships with other countries (Zakaria, 2011). Exports of natural and forest-related products have paved the way for economic growth and industrialization. The excellent and sustainable trading relationships translate into increased revenue utilized in growing and expanding the local economy. Besides the limited trade barriers, Malaysia has open foreign investments that attract businesses to commence operations.
Foreign direct investment (FDI) is a major foundation behind an advancing economy. FDI exist as a key factor in growth because it accelerates business and trading activities by attracting numerous investors to develop start-up initiatives in an economy. A study by Sharma, Nayagam and Chung (2012) showed that Malaysia ranked third after Singapore and Hong Kong in attracting foreign direct investments (FDIs) in the 1990s. The labor force’s openness and quality are imperative factors that continue to position Malaysia as a hub for FDIs. Malaysia’s open economy policy attracts potential individuals and establishments to start initiatives in the nation. Over time, the government evaluates the policy to accelerate its capacity to attract more investments. Overall, the open economy policy framework has played a vital role in the nation’s economic growth and productivity. In the future, there is a high chance that Malaysia will become the most attractive segment globally due to the policies put in place to control and manage international trading activities. Besides an open economy, quality macroeconomic management practices boost the growth of the Malaysian economy.
Macroeconomic Management Policy
Malaysia has a robust macroeconomic policy that provides sustainable growth. Some of the key areas that it concentrates on include viable exchange rates, price stability, control of inflationary trends, and improvement of external balances (Piei & Tan, n.d). These elements provide a possible chance to control and manage internal and external affairs revolving around trade and business. Malaysia has had its fair share of weaknesses that emerged from a financial crisis. In efforts to contain the occurrence and prevent future events, it developed distinct macroeconomic reforms. One of these was exchange rate stability, which continues to offer support in economic growth. However, there is a concern about the long-term effect of exchange rate stability on productivity. Pier and Tan (n.d) reveal that if the foreign exchange controls remain in place for a long time, it creates a risk since investors are less likely to operate in the country. However, the government can always monitor the situation and adjust the policy when necessary to meet emerging market changes.
Malaysia’s monetary policy is based on the promotion of maximum sustainable growth. The nation has stimulated its domestic spending by offering flexible interest rates. However, some stakeholders have argued that the tightening of the monetary policy has adversely affected various sectors across the economy. According to Karim, Hariff, and Adziz (2006), the monetary tightening policy has negatively impacted the manufacturing, agricultural, and mining sectors. These segments are progressively declining compared to bank lending in response to the interest rate shock. Thus, even though the monetary policy is targeted to ensure that the locals enjoy quality interest rates for loans offered by the banks, there is a continued risk of deteriorating economic sectors. Unless the government monitors and evaluates the monetary policy to assess its relevance and integrate appropriate measures, these major industries’ future and sustainability face a crucial threat.
Economic Growth Models
Malaysia has developed various economic policies that continue to offer an adequate foundation for growth and advancement. One of the economic programs adopted by the government is the New Economic Model. Launched in 2010 by the Prime Minister, the model attracts a liberalized economy and reduced government interventions (Jan & Sainful, 2012). Malaysia is a multi-ethnic community, and the model plays a vital role in boosting the Affirmative action policies already put in place. The new economic model’s concept targets to develop inclusiveness and sustainability across sectors such as manufacturing and agriculture. The model paves the way for other global communities to become a major participant in Malaysia’s growth. The model’s goal is to develop the economy and offer it a competitive advantage in the international arena. The private sector is expected to become the engine for the growth of the economy through the model. Other notable policy frameworks that have been put in place include Entrepreneurship Way and the innovative digital economy.
The government has put in place a policy framework revolving around entrepreneurship. It offers funding opportunities, physical infrastructure, and business advisory to individuals and establishments with income-generating activities in the country (Ariff & Abubakar, 2003). Entrepreneurship is the main point of focus for the Malaysian government, which has helped boost the economy. In the future, it is expected to achieve improved milestones in this domain area. Lastly, the innovative digital economy policy in Malaysia offer imperative support for businesses. The government has set up an innovative digital platform that allows businesses to access and undertake various organizational processes across private and public organizations. The Malaysian population heavily relies on these systems to enhance wealth creation, productivity and improve life quality. These elements have supported a progressively growing and expanding economy because an improved quality of life offers minimal governmental burden.
Discussion and Conclusion
Malaysia’s economic growth emerges from the policy frameworks that the government has put in place. The open economy, macroeconomic management, and economic growth models provide a viable opportunity to expand the economy. The current performance of the economy is based on the relevance that these policies deliver to different industries. Notably, the future and sustainability of the economy heavily rely on improving these policies in line with the changes and trends occurring locally and internationally. Malaysia continues advancing its image globally due to its quality economic performance. Its economy is an open and state-oriented one where the government initiates measures and strategies that pave the way for enhanced growth and productivity. Policies such as the open market, macroeconomic management, and economic growth model policies offer the foundation for economic growth. These policies are designed to promote macroeconomic stability. The Malaysian government has set the pace for other nations to emulate to achieve similar levels of development. It can continually change its economy and provide opportunities for other global communities to obtain quality growth over time.
References
Ariff, M., & Abubakar, S. Y. (2003). Strengthening entrepreneurship in Malaysia. Malaysian Institute of Economic Research, Kuala Lumpur, 1-22.
Hill, H. (2010). Working Papers in Trade and Development.
Jan, W., & Saiful, W. (2012). Malaysia’s New Economic Model: Is the Malaysian government serious about economic liberalization.
Karim, M. Z. A., Harif, A. A. M., & Adziz, A. (2006). Monetary policy and sectoral bank lending in Malaysia. Global Economic Review, 35(3), 303-326. https://doi.org/10.1080/12265080600888074
Piei, M. H., & Tan, T. An Insight into Macroeconomic Policy Management and Developments in Malaysia. ADB. Rising to the Challenge in Asia: A Study of Financial Markets, 8.
Sharma, K., Nayagam, J., & Chung, H. H. (2012). Determinants of foreign direct investment in Malaysia: New evidence from cointegration and error correction model. The journal of developing areas, 71-89. https://www.jstor.org/stable/23215424
Zakaria, N. A. (2011). Trade barriers in the forest industry between Malaysia and Europe (Doctoral dissertation).
