Malaysia's Economic outlook

Malaysia - Ripple Effects or In Recession?

Second Finance Minister Tan Sri Nor Mohamed Yakcop was quoted by The Malaysian Insider on 11 January 2009 that their economy will not plunge into a recession though it feels the ripple effects of the global economic turmoil. Malaysia’s economic stability is supported by the high banking liquidity and private sector confidence, but if private sector confidence trended downward, the government would inject more funds into the market.

However, as a recession insidiously moves its way to consume the flourishing economies of the world, Malaysia is not spared either despite being able to maintain its full-year GDP growth forecast of 5.5%. This was evidently seen in Malaysia’s disappointing second half of 2008 as the weakening global economy weighs on exports and elevated inflation hurts domestic demand: GDP growth was reduced to 4.7% in 3Q08 after a strong 7.1% gain in the first-half of ’08 (revised upwards from 6.7%), bringing growth to an average of 6.3% in the first three quarters of ’08. Resilient private consumption, steady public investment and higher fiscal spending supported the growth in 3Q08. Malaysia had also revised down their 2009 growth forecast, from 5.1% to 4.7% with the global economic slowdown set to be far more protracted than the initial anticipation. Consumer and business confidence indices have both dropped sharply below the 100-points mark in the final quarter of 2008, the dividing line between optimism and pessimism, as indicated by the results of MIER’s 4Q08 surveys. The Business Conditions Index (BCI), which is based largely on firm-level information, has plunged to 53.8 points in 4Q08, shedding 45.8 points from 99.6 points in 3Q08, indicating that business confidence has deteriorated significantly. Though not as bad, the Consumer Sentiments Index (CSI) has fallen to 71.4 points in 4Q08, down 17.5 points from 88.9 points in 3Q08, as households start to feel the pinch from a softer economy. In addition, MIER’s indices for retail trade, residential property, tourism and the auto industry have all dropped below the threshold level. The sharp fall in both macro indices and the indices suggests that the outlook for the Malaysian economy would be dimmer than earlier expected. (Source: MIER, Malaysian Economic Outlook, 4th Quarter 2008 Update)

According to the New Zealand Press Association on 29 January 2009, it is found that the country percent of payments made at over 30 days past terms are as follows: India 52.3, Malaysia 40.2, Indonesia 35.7, Sri Lanka 31.1, Australia 31.0, Pakistan 30.7, New Zealand 30.0, Philippines 29.7, Singapore 28.4, Thailand 28.3, Bangladesh 28.1, China 23.2, Hong Kong 21.8, Vietnam 23.6, Japan 20.5, Taiwan 18.0, South Korea 17.6.

Malaysia believed that it will not be in recession due to the quick rollout of the RM7 billion stimulus package and the easing of the monetary policy by Bank Negara in November 2008. All of which was aimed to cushion Malaysia from the economic downturn. Malaysia is also set to unveil another package of economic measures aimed at reducing the cost of doing business by mid-2009.

Maintaining Business Confidence in Malaysia
In the recent years, we have seen the standards of corporate governance improving greatly in Malaysia and despite the fact that foreign companies - in particular foreign manufacturing companies - continue to be welcomed with open arms, Malaysia’s business environment continues to disappoint. An overall score of 61.5 ranks it 36th (out of 167 countries), but places it firmly below regional competitors Hong Kong and Singapore - which score 82.2 and 83.8, respectively - as the country’s affirmative action policy serves as a serious barrier to foreign firms in a number of key areas, and corruption remains a key concern.

Malaysia had recognized this and on July 3 2008 in Bernama, announced the setting up of the SME Credit Bureau, a central databank of credit information on small and medium-sized enterprises (SMEs) in Malaysia, fully operational by the end of 2008. Datuk Wan Azhar Wan Ahmad, chief executive officer of Credit Guarantee Corp Malaysia Bhd (CGC) was quoted as saying that this bureau will further enhance SMEs' access to financing and it has been proven throughout the world that credit bureau played an effective role in assisting SMEs to gain access to credit. Wan Azhar said a portal will be set up for the process of registering and identifying the SMEs, beginning as early as October last year.

"We expect to be able to make available some of these credit reports within the first or second quarter of 2009. But at the latest by the end of 2009, we will be able to provide a full range of services," he told reporters after the signing of a strategic alliance with Dun & Bradstreet Malaysia Sdn Bhd to establish the SME Credit Bureau.

The SME Credit Bureau will operate as a vital source of information on registration details, credit track records, debt level and obligations, financial statements and trade partners of SMEs.

Wan Azhar said information available for lenders to assess the creditworthiness of Malaysian SMEs was presently quite fragmented and the bureau will therefore act as an institution to provide the best comprehensive reports on SMEs. Hence, Dun & Bradstreet was chosen as the partner because of its capability, competency and track record in handling SME credit bureaus in other countries.

"The idea is to consolidate all the information. This will also give a better picture of the viability of doing business in a particular sector relating to a particular SME," he said. There are also plans to rate the SMEs which the bureau too, has the onus of computing. The information-gathering work, as per Wan Azhar, is to be undertaken on a voluntary basis as the SMEs themselves have to provide the company details, their history, track records and accounts to be processed. Therefore, for the SMEs, the information compiled by the bureau acts not only as a means for the firms to obtain loans but also as a kind of ‘report card’ to evaluate their SWOT besides improving on creditworthiness and ratings.

Former Group executive director of Dun & Bradstreet Malaysia and Singapore, William Lim Wah Liang, said Malaysia has taken the lead among Asean countries to set up an official credit bureau supported by government. CGC, a subsidiary of Bank Negara Malaysia, is in the business of providing credit enhancement services to SMEs in Malaysia, a niche area where the corporation has served about 35 years. Dun & Bradstreet Malaysia is a subsidiary of New York-based D&B Corp, a global provider of credit bureau and risk management solutions.

Sources:
http://www.themalaysianinsider.com.my/index.php/malaysia/15698?task=view http://www.themalaysianinsider.com/index.php/malaysia/15704-malaysia-to-cut-2009-gdp-forecast http://www.mier.org.my/surveys/index.php
http://economy-update.blogspot.com/2009/01/malaysian-economic-outlook-4th-quarter.html http://www.cnbc.com/id/28939289 http://www.findata.co.nz/News/1285244/Businesses_taking_longer_to_pay_bills.htm http://www.marketresearch.com/product/display.asp?productid=1939145&g=1 http://store.businessmonitor.com/bf/malaysia_business_forecast_report http://web6.bernama.com/client/mecd/news.php?id=271050