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Video #17 - Malaysia: Foreign Investment Returns

Tuesday, January 10, 2006

sources | lesson plan


BACKGROUND INFORMATION

The Malaysian economy grew by 4.1 % in 2002--a great improvement from 0.3 % growth in 2001. This growth was driven by healthy domestic demand and improvement in export performance. According to TradeWatch, "...The 4.4 per cent increase in private consumption expenditure was supported by low interest rates and improved access to financing ... Manufacturing production also expanded 4.5 per cent (after falling 6.6 per cent in 2001), due mainly to higher external demand, particularly for electronics."

Despite the outbreak of Severe Acute Respiratory Syndrome (SARS) and diminished global demand, the Malaysian economy performed better than expected in the first half of 2003, as private consumption and manufacturing output expanded. Experts estimate that the Malaysian economy will expand by 4.6 percent in 2003 and 5.4 per cent in 2004.

Slower than expected recoveries in the U.S. and Japan, Malaysia's largest export markets and its most important direct investors, are making economists revise their previous growth prospects. TradeWatch reported in September of 2003 that the Malaysian government's 2004 budget strategy is to "transform the economy from being FDI-driven" to one in which private sector domestic investment and expenditure renews growth momentum." Columbia University Economics Professor Joseph Stiglitz credits Malaysia's open-door policy to technology industries for keeping the nation from becoming overdependent on its natural resources.

The National Economic Action Council executive director Mustapa Mohamed said the government believes that the "worst is over" for Malaysia. Supporting this claim, the Malaysian Institute of Economic Research (MIER) has raised the growth forecast to 4.3% on expectations of an upturn in economic activity but maintained its 2004 estimate at 5.4 %. MIER claimed that the end of the Iraqi war, the SARS epidemic impact on tourism (but not the rest of the economy) and the $1.92 billion stimulus package unveiled by the government in May of 2003 improved Malaysia's prospects. During the first quarter of this year, manufacturing sales reportedly surged 10.4 percent over year-earlier levels to 134.3 billion ringgit, with total salaries and wages rising 6.8 percent.

However, MIER also warned that external risks such as a possible terrorist backlash, new tensions in the Middle East, a depreciation in the U.S dollar and an economic slowdown in the US, Japan and Europe could still threaten Malaysia's fragile economic growth. According to The New York Times, Malaysia's new Prime Minister, Abdullah Badawi, is expected to continue his predecessor's formula of "encouraging direct foreign investment and keeping the natural resource industries rolling."

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SOURCES

SOURCES Perlez, Jane "Mahathir, Malaysia's Autocratic Modernizer, Steps Down." New York Times, November 1, 2003

"Malaysia: Economic Outlook." TradeWatch, September, 2003

"Malaysian Economy." Federation of Malaysian Manufacturers, September 8,2003. FMM.Net Anonymous, "Malaysian economy out of the woods after SARS, Iraq war." Agence France- Presse (via ClariNet), July 16, 2003.

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LESSON PLAN

GRADE LEVEL/SUBJECT: 10-12/Economics, International Relations, World History, International Baccalaureate Programs (IB), Current Events.

PURPOSE: To present activities to be used in a variety of classroom situations in order to enhance student understanding of the Asian economy and its significance globally.

OBJECTIVES:

Students will be able to:

  1. Describe the state of the Malaysian economy.
  2. Evaluate the effect of the SARS epidemic on the Malaysian economy.
  3. Analyze Malaysia's role in the ASEAN free trade agreements.
  4. Forecast the effect of struggling western economies on Malaysia's economic growth.

MATERIALS:

  1. Background information provided.
  2. Resources on Malaysia available at your school's Media Center and the Public Library System in your area.
  3. Background information available through Internet "search engines.

ACTIVITIES:

May be assigned as group activities or as individual tasks. They may also be designed as preparation for related presentations either by individuals or groups.

  1. Use charts and graphs to illustrate the state of the Malaysian economy in the last three years.
  2. Write an editorial evaluating the Malaysian government's proposed budget for 2004.
  3. Develop an advertising campaign to promote business in Malaysia.
  4. Write a position paper expressing Malaysia's role in the ASEAN initiative.

EVALUATION:

Individual assignments should be graded by the teacher using established criteria.

Group activities, presentations and projects may be evaluated by teachers and students using the following criteria and scale: Content 1 = Superior (A) Creativity 2 = Excellent (B) Clarity 3 = Good (C) 4 = Fair (D) 5 = Poor (F)

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