MIXED ECONOMY

at a glance
MALAYSIA

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mixed economy
combination of the advantages of Free Enterprise System (FES) and Central
Command System (CCS)
price mechanism is allowed to operate however fails or works against public
interest in some cases

FREE ENTERPISE SYSTEM

few restrictions on business activities &

ownership
minimal ownership of government on
enterprises
aims for limited restrictions on trade &
minimal gov intervention

CENTRAL COMMAND SYSTEM

more government control rather than

free market to determine goods types,
quantity and price
key feature in communist society
eg: China, Cuba, North Korea, former
Soviet Union countries

MALAYSIA

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paragon of a mixed economy system
was one of the South East Asian Countries that experienced rapid economic growth in the early
90s
dubbed as one of the Asian Tiger Economy
Asian Tiger Economy is the economy of an Asian country which undergoes rapid economic growth,
usually accompanied by an increase in the standard of living.

CHARACTERISTICS AND EXAMPLES OF MALAYSIA (MIXED ECONOMY)

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government sets rules and regulations to directly intrude in the local market
practices embargo of commodities which the government believed to be deleterious to the nation
At the same time the government has carried out economic activities in providing public goods like
roads, schools, health and others.
the state-owned companies such as 1Malaysia Development Berhad(1MDB), Khazanah Berhad, Sime
Darby and Permodalan Nasional Berhad (PNB) are also actively involved in economic activities.
government also impose taxes and provide subsidies to ensure that the activities and welfare of its
citizens guaranteed.

UNDERSTANDING THE MIXED ECONOMY SYSTEM OF MALAYSIA

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LEVELS OF CONTROL
In Malaysia, the resources are controlled by the government, businesses and individuals.
The government controls those areas that are about national security (e.g. military) and provision of
basic amenities.
The government intervention in the market paved way to its economic growth.
The government decides on allocation of scarce resources so that everyone has a fair share as a
citizen of the country. Their interference brought about order in the market and welfare to the public.
The level of control is also weighed up by business laws that describe how operations in a specific
industry can be carried out.
Businesses that wish to establish operation in Malaysia can control all their business operations, but
must always be in line with government requirement and policies that are related to their business
process.
Firms have certain rules to follow set by the government to avoid exploitation of the resources as well as
human rights
Government also established a number of regulatory bodies to control the business operations within
the country. Examples of regulatory bodies :

EFFECTS AND EXAMPLES OF GOVERNMENT INTERVENTION IN MIXED

ECONOMY OF MALAYSIA

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RELATIVE PRICES OF GOODS AND INPUTS
The government will affect the price to change through taxation, subsidising or
even by direct price control. They regulate a maximum price or ceiling price and
minimum price or floor price of a certain product. Examples :

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PROPERTY DEVELOPMENT
Cheap housing is stimulated
through rent control. Any of
this approach definitely helps
to protect some local industry
and carries public welfare.

TAX AND FEES !

Foreign car companies are selling their
passenger car products with 140% to 300%
import duty plus sales tax of 10% as
imposed by the government to protect the
local car producers, Proton and Perodua.

FUEL SUBSIDIES
Currently, fuel is subsidised by the government of
Malaysia is another example that can be shown.

EXAMPLE
PRODUCTS

FLOUR
SUGAR
COOKING OIL

REAL PRICE

CONTROLLED PRICE AFTER SUBSIDY

SUBSIDY BY GOVERNMENT

AGRICULTURE AND AGRICULTURAL POLICY

Agricultural prices are subject to considerable fluctuations
Farmers income may be very low in some years or consumers might suffer paying a very high
price of food
If this situation happens then it will be very difficult to predict future prices. Thus, farmer could
not choose which of two or more crops to plant if prices cannot be predicted.
discourage them to make a long term plan in agricultural industry
Hence, the government intervenes by establishing a few bodies that will report to the
government to help farmers and to uplift the economic status as well as living standard of the
rural community.
Example of the bodies are Rubber Industry Smallholders' Development Authority (RISDA) and
Federal Land Development Authority (FELDA).

QUALITY OF GOODS
Unsafe goods are not legal to produce like guns unless the firm has license to do so and the
most popular regarding this issue is drugs.
Standard and Industrial Research Institute (SIRIM) is a Malaysian owned company which
provides licensing and testing of products before it can be sold in market.
In this way the government intervenes by assuring the quality durability and mark up price of
the product.

ADVANTAGES OF MIXED ECONOMY OF MALAYSIA

GOVERNMENTS IMPLEMENTATIONS TO SOLVE ECONOMIC PROBLEMS

Economic problems like unemployment, lack of development and balance of payments, and
inflation are addressed by the government through the use of taxes and expenditures.
The government control interest rates and bank lending, prices and income, and the foreign
exchange rate.
Unemployment had been addressed by providing assistant loans to small and medium industries
with much less interest rates. This is to help people to have their own income and avoid inflation
rate which happens when there is an uncontrollable increase in price. Inflations effect is
devaluation of currency as it goes higher.
GOVERNMENTS POLICIES TO PROMOTE LOCAL GOODS AND SERVCES
The focus of the government is geared toward promoting locally made goods and this is of high
advantage to the functionality of the economy as it would help boost its internal revenue
generation and limit the dependence of the economy on internationally made goods.
It can be seen that locally made products are promoted well in this economy with the tax value
that are been levelled on imported goods.
The tax policy is geared towards wading off the interest of customers on imported goods and as
such shifting this interest in locally made products
These locally made products will end up as success in both national and international markets as
can be seen with Malaysian companies such as Proton, Perodua, Petronas, and AirAsia

DISADVANTAGES OF MIXED ECONOMY OF MALAYSIA

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Since the government can enact certain policies to favor government corporations, other
corporations can be at risk of sustaining business growth.
It can be noticed in the international firms that maintain present in the country. The need for
competitiveness is vital on a level ground if these firms are to be profitable, but the note
from all indication is that the chances of these firms to successes are limited as a result of
the limitation in their competitive capacity as the government has already given the local
firms a higher competitive advantage by imposing higher task on international firms, and
limiting the chances of these international/non-government firms to adopt price-based
competitive sphere.
The implementations of taxes and fees on the companies have also brought negative effects
to the companies.

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CONCLUSION

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On that ground,mixed economy is right for the economic growth of Malaysia as it serves the
right background for understanding what should be invested and defining how such investment
will be undertaken, and also providing the necessary resources for such investment because it is
both the government and the individuals that combines to finance the production process.
Government has some control in manoeuvring the market open to capitalist shows an effective
economic system that promotes sense of balance among producers and consumers.
This provides welfare to the public, industrialisation by supporting large and small firms, public
infrastructures and institutions and other assistance like hospitalisation
Citizens can make decisions and all the national resources are utilised
Overall, in basis to factual examples provided above, it paves way to economic development of
Malaysia

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