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For 30 years Malaysia has industrialised rapidly,
transforming itself from an economy whose livelihood
relied primarily on the production of mineral and
agricultural export commodities-palm oil, natural
rubber, tropical timber and other minor mineral
and agricultural products-into an economy dominated
by manufacturing and services.
In 2002 manufacturing accounted for 30.6% of
nominal GDP, up from 30.5% in 2001, whereas the
share of services fell to 50.7% from 51.8%. The
manufacturing sector tends to raise its share
of GDP during (export-led) economic upturns; the
share of services usually grows in a more stable
manner. Malaysia aims to become a fully developed
nation by 2020.
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Electronics production dominates
manufacturing |
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Malaysia still plays a leading role in world markets
for some of its commodities. It is still an important
source of rubber and is the dominant world producer
of palm oil. Palm oil output reached a record 11.9m
tonnes in 2002. Manufactures account on average
for 85% of gross export earnings. Electronic goods
are the single most important category and have
grown at a double-digit rate for most of the past
25 years, declining only in 1985 and in 2001. Electronic
goods production is heavily dependent on imported
parts. It is government policy to raise the domestic
content of exports and the value added in production.
The strong export orientation of the electronics
industry makes it vulnerable to fluctuations in
global demand. In 2002 Malaysia's total exports
of goods and services were equivalent to 114% of
nominal GDP, a high figure by international standards. |
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A high, but falling, rate
of capital investment |
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A major change in economic structure in Malaysia
during the last decade has been the decline in capital
investment. Two economic downturns in the past six
years have severely dented gross fixed investment,
which fell from 43.1% of nominal GDP in 1997 to
a low of 21.9% in 1999, to stand at 23.2% in 2002.
The reduction has been caused by lower foreign direct
investment (FDI) and lower private domestic investment.
Fearing that a sustained level of lower investment
will eventually lead to slower economic growth,
the government introduced measures to stimulate
private domestic investment in the 2003 budget,
after boosting public investment for four consecutive
years. |
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