Group Study Report - Country Analysis:

Country Analysis: Do you want to setup your company here?

Date: 10 November - 16 November 2012

Group Member: Stephen Shiao, Virginia Atkinson, Darren Tay, Peipei Li

Subject Country: Malaysia:

 

Topics:

1. Analysis Past performance
1. External
2. Internal
2. Strategy
1. Goal
2. Policy
3. Context,
1. physical - size, resources, imports/exports
2. political - stable,democracy, power, government, corruption, vigilant press
3. Institution - industrial, infrastructural, bureaucracy
4. Ideological - bill of rihts, culture, immigration, material wealth 
5. International - inflation
4. prediction

Analysis Past performance

External

In 2012, Malaysia hosted the world's second-largest initial public offering (IPO) when a local palm oil producer, Felda Global Ventures, listed on the local stock market, Bursa Malaysia, on June 28th.

•The IPO is part of a government plan to sell off state-linked firms and attract foreign investors to the country. This initiative forms one element of a plan to transform Malaysia into a high-income nation by 2020.

Internal

Recent statements by the prime minister, Najib Razak, and his deputy, Muhyiddin Yassin, have hinted that more cash hand-outs could be in the offing as speculation persists over a possible snap election later this year.

Strategy

Goal

Services in Malaysia have been growing in importance for the economy in the past few years. In 2010, Services was responsible for 49.3 percent of the GDP. The concerted development of the service industry is part of the national development strategy to venture into new growth areas and broaden the economic base for exports. It is also expected to provide the basis for sustained growth in the economy in order to achieve the vision of becoming a developed nation by 2020.

According to the 10th Malaysia Plan (RMK 10), the goal for the service industry is to achieve 61 percent of GDP share by 2015 – with an annual growth of 7.2 percent. Under the IMP3, non-government services are targeted to grow at an average annual rate of 7.5 percent. Construction services are also expected to increase annually by 5.7 percent. The Malaysia government is also expected to invest nearly RM687.7 billion or US$228.384 billion dollars over the next fifteen years into services alone.

Policy

The monetary policy committee of Bank Negara Malaysia (BNM, the central bank) kept its official policy interest rate, the overnight policy rate, unchanged at 3% at its meeting in July 2012.

Context,

physical - size, resources, imports/exports

The strength of domestic demand was borne out in trade data for May, which showed a 16.2% year-on-year jump in the value of imports. This, coupled with other data, has prompted an upward revision to our GDP forecast for 2012.

political - stable, democracy, power, government, corruption, vigilant press

Institution - industrial, infrastructural, bureaucracy

Malaysia is a newly industrialized country that experienced an economic boom and underwent rapid development during the late 20th century. Prior to this rapid of rapid industrialization, Malaysia was the world’s largest producer of tin, rubber and palm oil. When the tin market collapsed during the early 1980s, the Malaysian government was forced to diversify and modernize the economy.

Today, Malaysia has moved into the third stage of economic development, with growing emphasis on services. The Industrial Master Plan (IMP3) was created to develop the country into a major trading nation by focusing on services and human capital. IMP3 is expected to cover the period from 2006 to 2020.

Malaysia also has a vibrant oil and gas industry. In 2010, Malaysia was the 28th largest oil producer and the 17th largest natural gas producer in the world. Currently, Malaysia has 2.9 billion barrels worth of proven oil reserves and 2.35 trillion cu m of proven natural gas reserves. This makes them the 32nd and 17th ranked country in the world respectively.

Oil and natural gas reserves in Malaysia are managed by Petronas – a Fortune 500 company wholly owned by the Malaysian government.

Ideological - bill of rights, culture, immigration, material wealth

International – inflation

Expect consumer prices to rise by an average of 1.9% in 2012, compared with 2.2% previously. Annual inflation will average 3% in 2013-16. The planned introduction of a new consumption tax and the gradual withdrawal of subsidies are expected to push up consumer prices from 2013.

During the first eight months of the year the overall consumer price index rose by an average of 1.8% year on year. The food and non-alcoholic beverages category recorded a 2.8% year-on-year increase in prices

Prediction

Outlook for 2012-2017

 

•The forecast period is likely to be dominated by preparations for the next general election. The poll does not have to take place until 2013, but the Economist Intelligence Unit expects it to be held in 2012.

•We expect the ruling Barisan Nasional (BN) coalition to win the next election. The BN hopes to regain the two-thirds majority that it lost at the 2008 general election.

• The government will fail to balance the budget in 2013-17 as it continues to allocate funds to infrastructure projects. The monetary authorities will maintain a neutral stance in 2013, but will tighten policy from 2014 onwards.

• The economy is expected to remain on a sustainable growth path in 2013-17. Growth in 2013 is expected to slow slightly to 4.5%, compared with an estimated 4.9% in 2012.

• The current account will remain in surplus in 2013-17, equivalent to an annual average of 6.2% of GDP, compared with an estimated 6.7% in 2012.

Conclusion:   

We have more than 50% vote among team members favors forming investment in Malaysia. Followings are the summary of our discussion result, leads us believe it will be profitable to start business in there.

Malaysia will continue to post substantial trade and current-account surpluses in the next five years. The service industry is important, e.g. data center etc. It is one of the five countries without debt in South Asia, The political dominate and controls the economy, it’s all about relationship, which leads corruption. Race is one of the big problems.

The North east beach is white sand beach, better than Hawaii. It is good for tourist business development.

Land and Real Estate was gaining 30-40 % but now is decline. Tourist and sightseeing are good business, good for put money opening shops. Malaysia ranks 9^th place for retirement in the world. Some hi-tech industry formed some base here; for example, it is the first setup of out of state factory for Intel. It has 2nd/3rd biggest IPO in 2012.

There are 60 % of the surface is open for land development, very rich in nature resources. Food and water are very good, which supplies surrounding countries. General election date is decided by Prime Minister. It supposes to take place in 2012, but becomes to be expected 2013.

BN to  Malaysia is similar to Democratic Party to US. There are some small ones but no effect to the control of the country. Muslin and DAP have few seats in the congress.

Small has been grouped into UMNO, which one of the three to form BN. People are Malaysian, Indian and Chinese, and populations are biased. The combination of different people forms different parties.

Land and factory building in china is good experience for industry development. Base on this, does Malaysia will be next wave? The answer is positive.

Business formed alliance of several small countries, they are helping each other and form attractive investment environment, and put Singapore as its center, also balanced each other. Malaysia has bright future and worth to put money for business development.