My Malaysia: Doubt Over Our Economics History

For me, this is just my own study. No intention of  judging what have been done for the past years of Malaysia. I share what I find and perhaps, we will have positive discussions.

No doubt, there are some ups and downs. We’ve gone through multiple times of economic challenges especially in 1980’s and late 1990’s. If we were to relate what happened earlier than that, I would say it would be unfair, since Malaysia was still young and we did not have enough strenght on facing economic crisis. Moreover, it was during the early 80’s, Malaysia agricultural based economy being switched more towards industrial based.

This was stated in New Zealand’s Ministry of Foreign Affairs and Trade in regards with Malaysia’s economic history:

Since achieving independence from Britain in 1957, Malaysia has industrialised rapidly.  Initially it relied on its primary commodities (eg. rubber, palm oil, timber and tin) and, up until the 1970s and early 1980s, these contributed significantly to economic growth.  Since the late 1980s, much of the growth has come from the expansion in the manufacturing sector, encouraged by the Government’s export-oriented approach to industrial transformation.  

Part of this approach involved the promotion of heavy industries through direct government involvement.  The Heavy Industries Corporation of Malaysia, a public-sector holding company, was formed in 1980 to form partnerships with foreign companies and set up industries such as petrochemicals, iron and steel, cement, paper and paper products, and machinery.  Tariffs on a wide range of manufactured goods were increased in the first half of the 1980s as part of this industrialisation move.

The economic crisis during 1985-87, which originated in a combination of budget deficits and lower prices for Malaysia’s major export products, put an end to the state-led heavy industrialisation push.  The Government addressed the crisis by placing greater emphasis on the role of the private sector and strengthening the conditions for export-oriented industrialisation through foreign direct investment (FDI).

This approach was highly successful and since the 1980s economic growth has been driven by expansion in the manufacturing industries.  The share of manufacturing in GDP increased from about 20 percent in 1987 to more than 34 percent in 1997, and contributed to more than half the increase in GDP.  The share of agriculture in GDP declined from more than 20 percent in the mid-1980s to less than 10 percent in 2003.

What have been done, cannot be undone. Malaysia’s economics  has transformed from agricultural based. In history, we learnt that Malaysia’s economics is based on agricultural based, as according to John H. Drabble, an honorary research associate at the University of Sydney, is the author of the classic works on the development of the Malayan rubber industry. His book entitled : An Economic History of Malaysia, c.1800-1990: The Transition to Modern Economic Growth. This ambitious work, stretching across almost two centuries, will be the standard by which future studies of Malaysian economic history are judged. One of notable point in synopsis made by EH.Net:

After decades of trying one plantation crop after another without much success in the late nineteenth century, Malaya hit the jackpot with rubber trees in the early twentieth century. By 1929, British Malaya attained the highest per-capita GDP of any country (or territory) in Asia (p. 113). The development of the automobile industry in industrial countries, especially in the United States, created an almost insatiable demand for tires, which were manufactured with rubber from colonial Malaya. Although dependence on any primary export product creates a boom and bust cycle, the rubber industry, combined with expansion of tin mining industry, made Malaya one of the most prosperous economies in the colonial world.

That is why Malaysia’s economics was based on agricultural based. Of course, in the review the book states:

One of the most contested issues in Malaysian economic debates has been the role of the government in the post-independence economy. Drabble records the mismanagement of many government enterprises in the 1970s and 1980s as well questionable government policies to subsidize large-scale heavy industries for a relatively small domestic market. The New Economic Policy (from 1970 to 1990) was intended to reduce the ethnic economic gap and to reduce poverty, but it has also created a Malay rentier class based on political and government patronage. In spite of all these problems, the government has continued to invest heavily in physical infrastructure and also in education and health. And the Malaysian economy has kept growing through all these ups and downs. Perhaps, the infusion of oil revenues has been sufficient to cover the economic mistakes with enough left over to stimulate economic growth.

Interesting enough, as this has been one of the issues still lingering Malaysians. Of course, when the RM is enough in hand, no fuss, but at times when we need to strenghten our line and face the crisis, some may shout for foul cry. For me, this is a normal human reaction, but some able to react resposibly and bear with condition. For muslims, bad times can also be a test (actually, tests can come either when we are in good moments or bad).

Since the decision made by government in shifting major activities from agricultural based, let us see the index prices for rubber, palm oil, timber and tin. (ODS Note: Malaysia has not abandoned agricultural activities, it is just more focus given to other economic activities)

For this information, I obtained them from The source take into consideration IMF’s forecast and data. Therefore I take the figures as good and reliable. This price index is for world market, not just for Malaysia alone.

For readers information, Price Index can be defined as “is a normalized average (typically a weighted average) of prices for a given class of goods or services in a given region, during a given interval of time. It is a statistic designed to help to compare how these prices, taken as a whole, differ between time periods or geographical locations.

Price indices have several potential uses. For particularly broad indices, the index can be said to measure the economy’s price level or a cost of living. More narrow price indices can help producers with business plans and pricing. Sometimes, they can be useful in helping to guide investment”.

After looking into the index, here is my summary for each rubber, palm oil, timber and tin. Kindly click the link and you’ll be guided to respective data.

Rubber: Without any doubt, the price was high in 1980. However, since then, the index went up and down, ranging between 74.97 and 50.52 before peaked at 105.23 in 1995. The index slightly reduce to 93.34 before going further down to 38.3 in 2002 before started to build up in 2003.

Palm Oil: in 1980, the index is quite high – 131.05. The index went down for 3 years before rise in 1984. However, the index price for palm oil fell down below 100 until year 1994. The index for Palm Oil was considered good, having more than 100 till 1999. However, it is noticalbe, even in 1999, the index already started to go down before bounced back in 2003. 

Timber: In my opinion, the timber index is not so good for Malaysia, even in the 1980’s. However, in  1993, the index went up above 100 and maintained for a couple of years till 1997. After that, it went below 100 until 2005.

Tin: There are just only a few years that index for Tin is above 100 – 1981,1982,1983,1984,1985, 1989, 2004, 2005, and 2006. In which, the years that I do not mentioned, the index is below 100.

Econstats also provides a summary for Malaysia. Feel free to browse and look the index prices. Feel free also to your own analysis on any data in comparing Malaysia’s performance (e.g. GDP).

Back to the key elements of Malaysia’s source of economic income – rubber, palm oil, timber and tin; before the transformation of Malaysia in 1980’s. Try to imagine, if we were to maintain our economic based on agricultural activities, NO decisions made to transform our main economic activities, would we have survived two economic crisis in 1980’s and late 1990’s? Would we be able to have our infrastructure like we have right now if we mainly depend on rubber, palm oil, timber and tin? The index prices for the sources have been not so good and uncertain. If we are to attract investors, would we be able to get them to invest on agricultural activities?

However, do bear in mind that the indices are just one of ways to look on how one country’s performance in economy. GDP, as provided by Wenger J Khairy can give us another insight on how we were since 1980. Yes, the exchange for Ringgit Malaysia and USD has not been good, especially during the late 90’s.

With all these economics figures and stats, and compare to what we have currently in Malaysia, including the infrastructure; technology development; business and working opportunities; professionals, who be able to work abroad; poverty rate; education opportunities.. should we be thankful and work way forward in making Malaysia a more prosperous place to live?

Since at the start of the article I’ve mentioned about New Zealand’s Ministry of Foreign Affairs and Trade, let us ponder on comparisons made between Malaysia and New Zealand for the year 2003, the year when our 4th PM tender his resignation in October..shall we?

2003 Calendar year Malaysia New Zealand
GDP (US$, billions) 103.2 78.2
Primary industries – % 17.9 7.8
Goods Producing industries – % 38.1 22.7
Service industries – % 46.2 69.5
GDP per capita (US$, PPP)a 9,600 21,000
Real GDP growth per annum, 93-03b 5.3 3.4
Current account (US$, billions) 13.4 -3.5
Goods exports (US$, billions) 105.1 16.8
Goods imports (US$, billions) 79.3 17.2
Inflationc 1.1 1.8
Unemployment rate 3.6 4.7
Exchange rate (US$1)d 3.8 1.7

a. World Bank’s Purchasing Power Parity (PPP) GDP estimates divided by respective populations

b. Annual average % change

d. Average for the year

Further can be read here.

Questions on the street: Should we try to weigh ALL the ups and downs and work out way forward on how we can improve things? As an analogy made by me in one of the Tazkirah – If our boat hit something and water started pouring in..should we blame the thing that the boat hit and not do anything? Or should we do something? Jump out the boat can be an option too..but will you abandon your “boat”?

One thought on “My Malaysia: Doubt Over Our Economics History

  1. bro, if you really don’t know what is the real reason for the ringgit to be whacked that way, perhaps speak to currency traders who worked in the mid 90s throughout.

    everyone knows commodity prices and index fluctuates, is given based on its characteristics.

    the boat hit something not based on accident and it’s from the doing of the government at that time. it wasn’t soros who whacked us, we allowed the speculators to do the job. when you have an empty vesel, you just can’t withstand the storm.

    we of course want to rescue the boat but we need to sack the captain and the crews for doing such a lousy job. the ship has to go on and you need crews to repair and navigate out of it.

    bro, i hate to poke you on all these malaysia’s GDP and stats figures. if you are in the banking and economists circle, they will tell you, it’s “bullshit”.

    if you don’t believe me, talk to some economists from major banking treasury/econ desks.

    ODS: Now my friend, this very article is all about what IF the transformation was not done. This article is about what IF back in the 80’s and so on, we still depend heavily on those 4 sources which we used to rely on. The price do fluctuate, and it has been resembled in the historical data.

    About the GDP thingy, might as well you discuss it with Wenger J Khairy, as he is the one who banking on that issue. As for me, I look into more variables on how our economy performed and performes, not just GDP and Forex alone.

    That is why I took some variables exactly from the mentioned New Zealan’s ministry’s web to show HOW foreign country(ies) evaluate economic strenght. DO we see GDP only? Don’t we see other variables too?

    Again, my purpose of writing this article is to see, if we were to maintain on those 4 sources, would we be in better position, or worse. It is about IF we were to maintain the approach that was used from pre-independance of Malaysia, would we have MORE sustainable growth, sufficient fund for development, study opportunities for young Malaysians, working opportunities for professionals, business and investment opportunities etc.

    In my opinion, if the transformation made was wrong, I guess the rich ones are those who are 100% in the business of those 4 natural resources. The top 10 rich list also should come from those who involved in the business of those 4 natural resources.

    But are they?🙂

You are part of people on the street. My opinion might not as good as yours. Come, please share your thoughts with us!!!

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