Growing danger in Malaysia’s economy

Growing danger in Malaysia’s economy
Comment E-mail Print Share
First Published: Wed, Mar 12 2008. 01 33 AM IST
Updated: Wed, Mar 12 2008. 01 33 AM IST
The results of the Malaysian election demonstrate that Islamism is not a major threat there. The government, a coalition of Malay and Chinese parties, won only 139 of 222 seats, its worst result in the 51 years since Malaysian independence. The opposition coalition, which won 82 seats, contained both moderate Islamist and secular parties.
However, while Malaysia is well into the middle-income category, its population growth remains that of a much poorer country. Should commodity prices fall, weakening Malaysia’s currently formidable current account position, its rapid population growth could impose an intolerable economic and possibly political burden.
The National Front ruling coalition’s election result was the worst in five decades, with the opposition increasing its control from one to five states out of a total of 13. However, the opposition is itself a coalition between the Justice party, led by former National Front minister Anwar Ibrahim, which appealed to the secular and ethnically non-Malay populations in the big cities, and the Islamist Pan-Malaysian Islamic party (PAS).
Nevertheless, even the rural state of Kelantan, controlled by the PAS since 1990, is well connected to the world economy. Local supermarkets there are required to maintain separate checkout lanes for men and women, but the latest giant superstore to do so is Kelantan’s first branch of the British retailer Tesco.
Economically, Malaysia’s performance has been sound but unspectacular, given the high world prices for its energy, lumber and palm oil exports. Growth of 5.7% in the boom year of 2007 pales beside the records of China, India and Russia and was lower than Indonesia’s.
Conversely, Indonesia’s population growth rate of 1.2% was well below Malaysia’s, even though Malaysia has four times Indonesia’s per capita income.
While Malaysia runs its current large payments surplus, 15% of its 2007 gross domestic product, it can spend money financing the schools, housing, health care and infrastructure that its 1.8% population growth rate demands (the country has a population of more than 25 million).
If prices for Malaysia’s export commodities decline and resources become scarce, educating such large numbers of young people and finding them jobs and housing will become a real challenge.
In that event, extremist Islamism, with its appeal to unemployed and under-occupied youth, may also become much more of a threat.
Comment E-mail Print Share
First Published: Wed, Mar 12 2008. 01 33 AM IST
More Topics: Economy | Middle-Income | Economy | Population | Growth |