Declining Exports and Rampant Corruption Plague Malaysian Economy

Recent data reveals that Malaysian exports for December grew slower than analyst predicted they would due to weaker commodity demand on the world market, according to Reuters. Natural gas output dropped as well, but experts believe government policy and higher domestic demand could compensate for lacking exports. The government also adjusted its budget late last month in recognition of lower oil prices.

Recent data reveals that Malaysian exports for December grew slower than analyst predicted they would due to weaker commodity demand on the world market, according to Reuters. Natural gas output dropped as well, but experts believe government policy and higher domestic demand could compensate for lacking exports. The government also adjusted its budget late last month in recognition of lower oil prices.

Malaysia is one of the wealthiest nations in Southeast Asia, but the Islamic country encountered a tailspin in 2015 because of slower demand from China, a vital trading partner; however, the most crippling blow derives from a lack of investor trust that stems from several major corruption scandals, a major issue for a country that heavily relies on foreign investment. Investors sold off $7.4 billion worth of stocks and bonds last year, and the currency fell 19% that same year.

Tainted Image

Prime Minister Najib Razak has drawn fire for accepting $681 million from Saudi Arabia, but he was cleared of wrongdoing and returned most of the funds in question. The government is fending off outside investigations from foreign countries that are freezing Malaysian bank accounts and investigating its state-run companies, but corruption in the Southeast Asian country is an internal matter that can only be solved by the Malaysian government. State-owned companies manage major sectors of the economy, but questions have been raised from the international community over the misallocation of $4 billion from various public firms.

Furthermore, state-owned development firm/investment fund, 1Malaysia Development Berhad (1MDB), of which the prime minister sits on the board, is being restructured and has been the subject of domestic and international investigations, placing a major dent in the government’s plan to use the firm as a vehicle to enhance development and foreign investment. Officials have dipped into the fund to compensate for financial shortfalls, but Malaysia remains in a better position than other economies in the region.

Malaysia Rising

Malaysia is among the most competitive economies in Southeast Asia and is set to become the 21st largest economy by 2050 through such means as electronics and liquefied natural gas production. Furthermore, the nation’s high education rate is another factor that will drive growth, and the economy is diversified enough to withstand major shocks on the world market.

Commodities are vital for the economy, but the country has other key areas to rely on, most notably consumer confidence. Malaysia’s high growth throughout the years has fueled a consumer-oriented economy, but this comes at a slight cost. The Malaysian Insider notes that Malaysia’s household debt may become problematic to the point of hampering economic growth by lowering consumer confidence and strong demand.