Basic food and non-alcoholic beverages. But prior to

Basic indicator to measure ‘Development’

GDP per capita is an easy way to measure development. Even
though, it is a numeric way of looking at development but other factors are
usually hard to be measured. However, GDP can’t give a clear picture as
population of every country varies and so income/population is a better
approach. Thus, GDP/Capita is the
basic indicator to measure Development.

GDP/capita of Malaysia

GDP PER CAPITA of Malaysia in 2016 was 9,502.57 USD,
following 9,643.645 USD of 2015. This is a decrease of -1.46%. However, in 2013
GDP/capita was 10,882.2 USD and in 2014 11,183.8 USD. This means it was
increasing till 2015 and then it has started falling.

This is largely due to the drastic decrease in oil prices.
We see that Malaysian economy follows usual trends as that of World. Therefore,
it got hit even in 2008 (Financial Crisis). Bank Negara Malaysia (the central bank) maintains adequate
foreign exchange reserves; a well-developed regulatory regime has limited
Malaysia’s exposure to riskier financial instruments, although it remains
vulnerable to volatile global capital flows.

 

Malaysia is an emerging economy, and if we calculate average
of emerging economies growth in terms of GDP/capita, then Malaysia is at par
with them. The following graph shows that

 

 

 

 

 

 

 

 

GDP by Composition

Malaysian economy is diversifying itself. The share of
Agriculture to GDP is decreasing. This is a normal scenario for developing
economies. It has also been discussed under “Rostow Theory”. Contribution of
agriculture was expected to decrease by 5.1% in 2016 as compared to 2015.

Other than that, Construction
is an emerging sector in Malaysia. From the stats, it can be concluded that
even though its contribution is low to GDP now, but it will increase in the
future as it is experiencing substantial growth. Construction sector is having
a growth of 7.4%, which is tremendous. However, it’s contribution today is only
4.6% to GDP.

Service ad manufacturing sector also play a great role in
Malaysian economy. This is a sign of “Development” itself. Following data shows
that over the years, how service and manufacturing sector contribution has
increased.

 

 

Inflation

Inflation is usually high in growing economies. However,
Malaysian economy had minimal inflation till Sept, 2017. Malaysia recorded an
inflation of 4.3% year-on-year (y-o-y) in September, the highest since March. This
Increase is mainly due to the rise in transportation costs and prices of food
and non-alcoholic beverages.

But prior to that, Malaysian economy had around 2 to 2.5% of
inflation, which seems to be reasonable. But one will realize after deep
analysis that food prices had inflated more than 2.5%. So, the reality is that
Malaysian economy has been facing serious inflation in food prices and other
housing etc. but fuel prices were also declining at the same time. Thus, fuel
prices deflated (globally) and thus on average Malaysian economy faced 2.09%
inflation in 2016.

This following graph
shows that inflation in Malaysia is comparatively less than emerging economies
and at par with advanced economies. This shows better development as population
of Malaysia can benefit the growth and consume more. This is a positive sign.
Malaysia also has been recording trade surplus for past 19 months.

 

 

 

 

Population Growth Rate

The population growth rate in Malaysia was only 1.5% in
2016. It is evident that as fertility rate has decreased, so has population.
But the issue to ponder here is that rural population growth is currently being
in negative, as shown below:

On the other hand, the population growth in Urban areas is
also limited and reasonable. Last year, around 2% growth has been recorded.

This brings an average of

Now, the question arises: why rural population growth is
declining? It s declining largely due to migration. Most of the young
generation is migrating towards cities, leaving their families behind. This is
causing issues as Rural Agriculture production is dependent on women aged from
16 to 45. But strong pesticides and insecticides are detrimental for their
health. It also is causing double burden of labor on women i.e. work and house
chores.

In order to combat this issue,
government has announced a programme. The programme will see 2,664 university
students from University Kuala Lumpur and University Malaya coming up with
business plans to increase the economic growth of 400 selected rural areas by
tapping into natural resources and human capital.

Tax
Policies

Taxation is usually more of direct than indirect in
Malaysia, over time. Tax policy is driven by the moderate growth
outlook and a mildly expansionary budget. The Government’s 2016 National Budget
contained strategies to balance economic demands and people’s welfare in the
drive to become a high-income nation by 2020. Corporate Income Tax was 24% in
2016 and 25% in 2015 and Top Individual Income Tax 25%

 

The share of taxation to GDP is

 

Freedom in terms of Trade:

Trade wise, Malaysian economy provides a lot of freedom,
also to foreign investors. It is 73.8% free, in terms of numeric value given as
of economic freedom score. However, the regional and world average values lie
between 60 to 65%. This according to economic theories is a positive sign. But
in reality, it varies country to country wise. Few countries had been exploited
this freedom while others have benefited.

In terms of business freedom, it is ranked 8th.
After business rights, regulatory rights must be enforced. In terms of
efficient property rights, it has been termed as 17th.

Revenue for DEVELOPMENT

•       From
2000, Malaysia is expanding its development revenue, by even incurring internal
losses. This is for the vision of 2020. In 2015, gross exports of goods and
services were equivalent to 73% of GDP. This can be helpful, if economic
conditions remain sustainable in the world. Domestic demand continues to anchor
economic growth, supported mainly by private consumption, which accounts for
53% of GDP.

Malaysia, an upper
middle-income country, has transformed itself since the 1970s from a producer
of raw materials into a multi-sector economy. This is evident from the
diversified export items.

 

The tax development
budget is shown in this graph.

One can easily understand, that Malaysia is working towards
its goal and government is also effectively taking part to increase the
development in its country. This continuous struggle will pay significantly
positive results in the near future. However, Malaysian economy is vulnerable
to world and should try to control it.