ecob - chapter 1

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Economic Theory and Concept

Chapter 1 Economic Growth & EconomicDevelopment

Chapter 2 Social and Economic Reform/Evolution

Chapter 3 Economic Factors

Chapter 4 Economic Strategies

Chapter 5 Financial Economic Managing Economyand Financial Policy

Chapter 6 Financial Economic Cause, Implication

and Application

Chapter 7 Economic Globalisation

ECOB 313

ECMB 313

MALAYSIAN ECONOMY

CHAPTER 1:

INTRODUCTION


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CONTENTS

Economic Fundamentals

Economic growth

Development

Social and Political

Macro Economic and Sector Analysis

Primary Sector

Secondary Sector

Tertiary Sector

Malaysian Economy Performance for the PastDecade


What is Economics?

Refer to studying the way scarce resources are

allocated among competing wants; or

Examining the questions of how much of which goods

and services produce at what prices and for whom.


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Macroeconomics

Refer to studying of economy as a whole and involves

looking at aggregates: total output, the general price

level, employment, and the balance of payments

Microeconomic

Refer to study of an economys component parts:

individual firm and industry output, individual prices,particular exports and imports, and so on


Economics is concerned with interrelated andinterdependent economy changes and events tomake sense that the important of economicinformation and its relationships

Malaysian economy reasoning has a logicalstructure which it builds on its self and It is

important to understand the cause-and-effectlinkages that run through economy theory andfinancial markets

This course concentrate on the development,issues, impact (effects), factors (causes) toMalaysian Economy and its financial markets


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The Malaysian economy, like all othereconomies, must perform certain functions atall the way those Government decisions aremade that determine a societys wealth and

prosperity increases strongly.

The functions of an economy refer to thegeneral decisions that every economic systemmust facilitate for the production anddistribution of goods and services


The Economic Problem What to produce? Which goods and services will be produced and

which will not

How much to produce? How much of each goods and services will

be produces

How to produce? How will resources be combined to most

efficiently produce the goods and services wanted by society

How to maintain present production and expand future

production? What proportion of current output will be devoted to

consumer goods and what proportion will devoted of capital goods

How will total production be distributed among members of

society? Who is to receive the goods and services which society has

produced


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Profound problems to solve;

Economic system should be flexible and

responsive enough to keep on solving the

economic problem as economic, political and

cultural dimensions of nations evolve over time


Key Economic Player

The Private sector

Household

Activities of household in earning and spending/saving

Company/firm

Engaged in the production and distribution of good andservices

Financial

Participate in borrowing and lending money and other

related financial services


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Key Economic Player

Government/Public sector

Things that cannot be adequately provided by private

sector

E.g defence, pension, roads, etc

Overseas sector

Involves 3 kind transaction

Exports of goods and services

Import of goods and services

International capital flow

Social and Political Setting

Why Government set the social and political

policies for country?

Government set the social and political policies

for country is to:

manage and drive economy to growth; and

Build and develop the country economy


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Economic Growth

Economic Growth refer to the increase of a countrysnational income, or sometime isper capita nationalincome

Normally its refer to growth ofGross DomesticProducts (GDP)

Economic Growth is the process by which theproductive capacity of the economic is increase overtime to raising level of national income

By maintaining the economy growth (e.g 5% - 7%),the country can achieve the economic development

Economic Development

Economic development refer to the changes in thesocial and economic equalisation, employment,education and current need of society.

Measurement of development involves in thequantitative and qualitative dimensions

Economic development also refers to social andtechnological progress

Economic development typically involvesimprovements in a variety of indicators such asliteracy rates, life expectancy, and poverty rates.


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Conventional Perspective

Development = Growth + change

Quantitative*Physical

*Environmental

*Socioeconomic

*technological


Conventional perspective

The growth in:-

the physical development in term of the increase

output and services

the environment that been utilised efficiently to

ensure that improvement in living standards withoutcompromising the need, interest and welfare of

future generation


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Economic Development also refer to:-

Socio-economic changes means society have

equally opportunities in education, goods and

social amenities such as health, water,

electricity.

Technologies changes means products

innovations, research and development in

production output and services


Generally Economic Development can be

define the process of improvement the

quality of society life.


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Economic Dualism

Dualism in the economic:-

is a two set of economic processes within the

same political or national social framework.

In the case of Malaysia its referring to the

formed by subsistence agriculture production

of basic commodities and industrial goods for

the international market

Macroeconomic and Sector Analysis

Overview

Highly trade-oriented and open economy which was

historically agriculture based

However, manufacturing sector has increasingly

become the major contributor to economy growth

Economy system of Malaysia is based on private

enterprise with the Government playing an active role

in economic planning in order to promote balanced

economic growth and social progress


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Performance 1980 2009F

-10

-5

0

5

10

15

%

Year


Economic Structure

Composition of various economic activities

In case of Malaysia the economic structure

divided into three main sector namely are

primary, secondary and tertiary.


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Primary Sector Malaysia economy primary

structure are agriculture and

mining sector

The sector contribute about

15.3% of the GDP (2008E)

Create 12.3% employment

Agriculture - Rubber cultivation,

palm oil plantation, ricecultivation, fishery and forestry

activities

Mining production crude oil

15.3%

31.9%52.8%

GDP

Agriculture & Mining

Manufacturing, Industrial &

Construction

Services


Secondary Sector Consisting of manufacturing,

building and construction

The sector contribute about

31.9% of the GDP (2008E)


Manufacture, electrical,electronic, telecommunication

equipment, machinery &

equipment, assembly, plant

and processing plant

15.3%

31.9%52.8%

GDP



Construction

Services


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Tertiary Sector Based on trading and services

Largest sector in Malaysian

economy

Export and services contribute

52.8% of the GDP (2008E)


Utility, retails, financial services,

tourism, education, health

services, real estate, port facilities,air transportation,

communication, Government

services and others

15.3%

31.9%52.8%

GDP



Construction

Services

An Overview Malaysian EconomyFor The Past Decade

Economic 1970s

A phase in Malaysia economictransformation

Shifted to export-orientedindustrialization

Agricultural diversification

apart from rubber, timber andpalm oil

export commodities theproduction of crude petroleumbegun significancecontribution to countryeconomy

Year GDP % Manufac

turing %

Services

%

1970-75 10.6 6.7 12.2

1975-79 8.5 11.4 13.9


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An Overview Malaysian Economy

For The Past Decade

Economic 1970s

export commodities the

production of crude

petroleum begun

significance contribution

to country economy

15.3%

31.9%52.8%

GDP



Construction

Services


Economic 1980s

Development plan were finance by public funds

Economic growth was accompanies by increasing

budget deficits and high level public debts

Economic structure shift from primary commodities to

modern industrial especially in high technologymanufacturing were expand country export base and

improved the balance of payment position

Other supporting infrastructures were build up

Supporting industries such Small and medium

industries given attention


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For The Past Decade

Economic 1980s, cont

Sustained growth broughtsignificant improvementsin the standard living andsocial cohesion

Economic diversificationwith deregulation andliberalisation of thefinancial system also help

transformed country into amiddle-income emergingmarket


Economic 1990 - 1997

The expansion phase

GDP growth average at

9.3% per annum

Economy growth strong

until the financial crisisin 1997


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For The Past Decade

Economic 1997 - 1999

The slowdown phase

Due to the currency

crisis

Portfolio outflow

Decline in equity and

property value


Economic 1999 - current

The recovery phase supported by

government accommodating

macro economy policies

Reduce vulnerability of financial

system

High world demand for

electronic

Build up of international reserve,

decline unemployment and

inflation low


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Summary

Theory of economic fundamentals

Economic growth and development

Dualism economic

Economic sector

Economic performance

Exercise - Notes

Evaluate Malaysias Economic Performance

based on GDP growth and its

macroeconomic components and sector,

effect on financial market and capital

market, government policies and external

factors for the period of

1990 1997

1997 1999

1999 current


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Class Participation & Activity

Collect the Malaysian Key Economy

Indicator

Period yearly 2004 2008

Source:

Jabatan Perangkaan Malaysia

Bank Negara Malaysia

Kementerian Kewangan

ecob - chapter 1

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