IMPACT OF GLOBALIZATION IN MALAYSIA ECONOMY

First of all, globalization can be defined as a process of widening

economic integration. Thus globalization increases the economic openness
and growing economic interdependence between countries around the world
economy. Furthermore, the process involves the increment of people's
movement, goods, capital across the national borders and services. All of this
has been made possible by revolutions in communications, information and
other technologies as well as important political changes.
Globalization has many impacts onto the Malaysia economy for the
past few years. Globalization is one of the major factors to Malaysia's
phenomenal economic development and growth. It is said that globalization
has done us a good service and especially in the economic sector. In 1992,
Malaysia had offered to reduce the tariffs on 79 percent of imports, however,
non-tariffs has converted into tariffs, mainly for import licenses involving
approval permits (APs). With this, Malaysia has benefited from increased
manufactured exports and consumer welfare has been improved. On the
other hand, Malaysia's GDP ratio has increased, the trade liberalization
decreasing, and indicating the increase in economic liberalization year by
year. Economic liberalization has indirectly made the economy increasingly
susceptible to external shocks, and undermined the expansion of domestic
industrial capacity and capability.
After Malaysia's independence, Malaysia has been one of the most
globalized developing countries. Globalization is one of the major factors to
Malaysia's phenomenal economic development and growth. In addition,
Anwar Ibrahim had said that globalization has done us a good service and
especially in the economic sector. With this, Malaysia has benefited from
increased manufactured exports and consumer welfare has been improved.
On the other hand, Malaysia's Gross Domestic Product (GDP) ratio has
increased, the trade liberalization decreasing, and indicating the increase in
economic liberalization year by year. In facts, the globalization has directly
improving the economics of Malaysia.

Sector that contributes most to Malaysian economic development

Natural resources

Palm oil estate in Malaysia

Malaysia is well-endowed with natural resources in areas such as
agriculture, forestry and minerals. It is an exporter of natural and agricultural
resources, the most valuable exported resource being petroleum. In the
agricultural sector, Malaysia is one of the top exporters of natural rubber
and palm oil which together with timber and timber products Cocoa
pepper, pineapple and tobacco dominate the growth of the sector. As of
2011, the percentage arable land in Malaysia is 5.44%. Croplands consist of
17.49% while other land uses consists of 77.07%. As of 2009, irrigated land

covers 3,800 km. Total renewable water resource total 580 cubic km as of
2011.
Tin and petroleum are the two main mineral resources that are of
major significance in the Malaysian economy. Malaysia was once the world's
largest producer of tin until the collapse of the tin market in the early
1980s. In the 19th and 20th century, tin played a predominant role in the
Malaysian economy, with Malaysia accounting for over 31% of global output.
It was only in 1972 that petroleum and natural gas took over from tin as the
mainstay of the mineral extraction sector. Other minerals of some
importance or significance include copper, bauxite, iron-ore and coal
together with industrial minerals like clay, kaolin, silica, limestone, barite,
phosphates and dimension stones such as granite as well as marble blocks
and slabs. Small quantities of gold are produced.[59]

Energy resources
Malaysia holds energy of 4 billion barrels as of January 2014, the
fourth-highest reserves Asia-Pacific after China, India, and Vietnam. Nearly all
of Malaysia's oil comes from offshore fields. The continental shelf is divided
into three producing basins: the basin offshore Eastern Peninsular Malaysia in
the west and the sarawak and Sabah basins in the east. Most of the country's
oil reserves are located in the Peninsular basin and tend to be light and
sweet crude. Malaysia's benchmark crude oil, Tapis Blend, is a light and
sweet crude oil, with an API GRAVITY of 42.7 and a sulphur content of 0.04%
by weight.
Malaysia also holds 83 trillion cubic feet (Tcf) of proven natural gas
resources as of January 2014, and was the third-largest natural gas reserve
holder in the Asia-Pacific region after China and Indonesia More than half of
the countrys natural gas reserves is located in its eastern areas,
predominantly offshore Sarawak. Most of Malaysia's gas reserves are
associated with oil basins, although Sarawak and Sabah have an increasing
amount of non-associated gas reserves that have offset some of the declines
from mature oil and gas basins offshore Peninsular Malaysia.

Government policy towards achieving higher growth

There are two kinds of policy that the Malaysian government implies
into the Malaysian country. Both of them are monetary policy and Fiscal
policy. First of all it would be monetary policy.
Monetary Policy
Monetary policy is the most common tool for influencing economic
activity. To boost AD, the Central Bank (or government) has cut interest
rates. Lower interest rates reduce the cost of borrowing, encouraging
investment and consumer spending. Lower interest rates also reduce the
incentive to save, making spending more attractive instead. Lower interest
rates will also reduce mortgage interest payments, increasing disposable
income for consumers.
Evaluation of Monetary Policy
Lower interest rates may not always boost spending. In a liquidity
trap, lower interest rates may not boost spending because people are trying
to pay back debts. Banks were unwilling to lend because of liquidity
shortages. Therefore, although in theory, it was cheap to borrow, it was hard
to actually create credit. Therefore, this shows monetary policy can be
ineffective in boosting economic growth.
Another criticism of monetary policy, is that cutting interest rates very low
could distort future economic activity.
Fiscal Policy
The government can boost demand by cutting tax and increasing
government spending. Lower income tax will increase disposable income,
encouraging consumer spending. Higher government spending will create
jobs and provide an economic stimulus.
The problem with expansionary fiscal policy is that it leads to an
increase in government borrowing. To finance this extra spending, the
government has to borrow from the private sector. If the economy is already
growing, then higher government borrowing can crowd out the private
sector. Expansionary fiscal policy is also criticized by those who fear it is an
excuse to permanently increase the size of the government sector.
However, if the economy sees a rapid fall in private spending, and rise
in the saving ratio, expansionary fiscal policy can help provide a boost to
demand in the economy without causing crowding out.

MALAYSIAN ECONOMY CRISIS AND REASONS

Malaysias economy is now seen to be in trouble, with contracting

growth, rising inflation, continued high levels of capital flight, declining
consumer and investor confidence, and a depreciating currency.
Malaysia faces an unfavorable global environment. The slowdown of
the Chinese economy, Malaysias largest trade partner, has contributed to a
sharp decline in Malaysias GDP growth. While the US economy has begun a
recovery, it has not filled the vacuum as a driver of growth left by Chinas
slowdown.
Four regional economies are seen to be under strain Singapore,
Indonesia, Thailand and Malaysia. The broad decline of Southeast Asian
currencies to the US dollar and drops in exports has cast a pall over the
region.
Global drops in oil and gas prices (now at levels less than half of those
prevailing a year ago) have had a special impact on Malaysia; Government
revenues from petroleum had accounted for almost 40 per cent of total
revenue. The fall in other commodity prices, including those of rubber and
palm oil, have affected export earnings, all contributing to less funds in
government coffers.