With the rest of the world economy experiencing a weak growth, Malaysia’s Prime Minister, Datuk Seri Najib Razak recently snipped a ribbon to inaugurate construction of a 28ha financial centre called the Tun Razak Exchange. The Tun Razak Exchange is being developed by a state-owned investment agency, the 1Malaysia Development.
An article by Jeremy Grant in the Financial Times says that although most of the world’s economy is experiencing a weak economic growth, Malaysia’s economy is experiencing an exceptional growth.
According to Grant’s article, “Second-quarter gross domestic product figures out this week showed the economy grew by 5.4 per cent, way above consensus expectations of 4.6 per cent, and the 4.9 per cent recorded – after an upward revision – for the previous quarter.”
Grant attributed this development to big-ticket government spending, lending to business by well-capitalised banks, and robust consumer demand, fuelled by pay rises for civil servants and cash hand-outs that have even seen taxi drivers receive vouchers for free replacement tyres.
“Malaysia’s stock market has been among the best performers in the world,” he says. This he says, is “buoyed by big flotation’s including Felda, a state-controlled palm oil producer, which was the second-largest initial public offering after Facebook when it raised over $2bn last month.”
“Much of the impetus behind the growth comes from the “economic transformation programme” initiated by Prime Minister Datuk Seri Najib Tun Razak when he came to power in 2009. This involves dozens of government-backed projects designed to boost per capita income to USD15, 500 by 2020, from USD9, 600 last year and lift Malaysia out of its middle-income trap”, he wrote.
Grant’s article in the Financial Times also quoted Christian de Guzman, an analyst at Moody’s, a rating agency, who admits that at first he was sceptical about the programme’s ability to spur private sector development when it was launched, but he more than convinced now.
According to Grant, “not only has Malaysia experienced strong domestic demand offsetting its vulnerability to weakening demand for its exports – much of them electronics destined for Europe; it has also benefited from deeper ties with economies in Asia.”
Rating agency, Moody’s, says “in 2006 the US was Malaysia’s largest trading partner, absorbing 18.8 per cent of its exports, while Asia Pacific accounted for 60 per cent. By last year the US share had dwindled to 8.3 per cent while Asia Pacific jumped to 69 per cent.”
Malaysia’s healthy economy – and the resulting “feel good” factor – stands in contrast to growing anxiety among Malaysia’s neighbours in south-east Asia as the global downturn has tarnished their economies.
Grant says that according to analysts, there is one nagging concern for Malaysia, which is the rise of household debt caused by rapid growth in credit card usage. Once the transformation programme takes root, Grant wrote that Bank Negara Malaysia is forecasting a full-year growth at the upper end of its 4-5 per cent.
In the middle of this situation, the Financial Times also quoted Rahul Bajoria, an anaylst at Barclays, as saying that: “We expect momentum to remain underpinned as the project-based nature of these investments means that it is unlikely to be halted abruptly.”
The Tun Razak Exchange will be located within walking distance of the Petronas Twin Towers.
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