Malaysia. being a trading state that extremely dependent on international trade. our economic public presentation is really vulnerable to the public presentation of our major international trading spouses. For decennaries. our economic growing has been excessively reliant on external sector developments. foreign direct investing ( FDI ) and international trade. Domestic investing determinations are non base on economic basicss but instead these determinations are really much influenced by the market behaviour of foreign investors.

In position of the challenges arise from the globalisation effects. it is of import for the Government to prolong growing and beef up the macro-economic basicss within the state. This is done by concentrating on domestic concern and industrial activities and increasing the buying power of our population. The government’s financial policies and corporate reforms have to be continued to make a status suitable for a rapid recovery and sustainable growing. It is besides of import to guarantee that the restructured loans remain executing. Emphasis must be placed on go oning betterments on corporate administration. transparence. answerability and rigorous enforcement of powers by the market regulators. There is besides a demand for the state to keep its peaceable environment and security in order to procure the investors’ assurance.

Presently. the concluding finish for most of Malayan exports is the United States. Therefore. the successful recovery of the US economic system is polar to Malaysia’s go oning recovery. The current stagnancy in the US economic system. particularly in the electronic bit industry. is a damper on economic recovery in Malaysia where electronics related exports make up more than 30 % of the gross domestic merchandise. With the American demand looking weak. we must look for alternate countries of growing and demand to increase the economic resiliency.

The outgrowth of China

With China lifting at such rapid rate. this means that the mid-sized economic systems of Asean ( such as Malaysia ) will hold to run quicker! Data has shown that China is taking off planetary market portion. employment and foreign direct investing from Asean. with no exclusion to Malaysia:

“h Between 1995? Five 2001. China’s portion of universe vesture exports rose to 18. 3 % from 15. 3 % . Shares of Malaysia. Indonesia and Philippines have all shrank.

“h In the last four old ages. China has overtaken Malaysia and Singapore in electronics exports to the world’s largest consumer. the United States.

“h A study from Japan’s Research’s Institute of Economics Trade and Industry shows that China competes with Asean for 100 % of exports from Southeast Asia.

“h In 2000. China captured 89 % of FDI come ining the Asean-China part compared with 63 % between 1989 and 1994.

“h Southeast Asia received $ 57million from China. whereas China received $ 600million investing from Southeast Asia in twelvemonth 2000.

“h From nowhere. China has come up as the 4th largest furniture manufacturer in the universe.

With all these facts. even developed-country. such as Japan. is taking this rousing firedrake earnestly. The Japanese are now sing how to suit China into their programs. instead than to vie against them. To the Japanese. China has double temptingness: it is a topographic point to do things and a topographic point to sell things.

China. with its huge population that supplies copiousness labour and mass-market chances. has surely poses a certain degree of menace to some Malayan companies. particularly those in the labour-intensive industries. We may get the better of this menace by pulling regional offices and retaining bing foreign direct investings. Besides. foreign transnational companies manage their investing hazard by forming their operations utilizing the “China + 1” construct. It is surely a challenge to guarantee that Malaysia be considered as the other finish.

Execution of AFTA

With the execution of Afta at the beginning of the twelvemonth. it has changed the competitory landscape for most Malaysians. Tariff on a broad scope of merchandises have been drastically reduced and Asean makers have to be factored into competitory analysis.

The liberalisation of the market topographic point permeates more advanced tax-based trades. structured securitization and the usage of derived functions. Hence. the start of Afta would see an inflow of foreign providers offering “price competitive” merchandises to the Malayan market due to the decrease in import duty. This will greatly increased the chance of competition. particularly when bigger manufacturers from Thailand and Indonesia enter the markets. Due to the bigger populations of these states. the foreign rivals enjoy a greater grade of economic systems of graduated table and lower unit costs.

Removal of protective duties will necessitate local participants to be more efficient and competitory in confronting a flat playing field. while coercing many companies to re-strategize. restructure. construct confederations and re-position themselves for endurance. This would necessitate the companies to increase fight. to cut down production cost to a competitory degree and to bring forth superior quality merchandises. which will be hard to excel. These duty alterations will merely be good if the industries concerned can stay competitory.

However. Afta should besides be looked upon as a considerable chance? V an option to believing that the West is our lone market. To set more focal point on Afta trade will buffer Malayan concerns on the impact of dependence on traditional markets. We should acknowledge that free trade is inevitable if we want efficient allotment of resources to accomplish the best value for the consumers.