ROLE OF EXPORT TO ENHANCE WEALTH IN MALAYSIA

Over the past three decades, Malaysia has shown impressive economic growth,

placing this country in a group of fast-growing Southeast Asian economies and among the top

performing economies in the world. This achievement has been consciously undertaken

through export expansion strategies and by attracting foreign investments. Malaysia also

noteworthy when studying dynamic trade and development performance because of its

unusually rapid industrialization and its highly dynamic export growth, especially exports of

manufactured goods. The Najib administration seeks to propel Malaysia to high-income

nation status by 2020 through its market-friendly New Economic Model (NEM), which

includes the five-year 10th Malaysia Plan (10MP) and the ambitious Economic

Transformation Programme (ETP).

From this article, we manage to realize that importance of export or country’s trade surplus in

our economy. The author also underline that China has become the second biggest economy

after U.S. We have made research through various data and found that Malaysia’s total

exports increased 6.9% to RM50.47bil in September 2010 from a year earlier (Sept 2009),

while imports grew 14.6% to RM43.47bil during the same period. Total trade rose 10.4% to

RM93.94bil. A trade surplus of RM7.01bil was recorded in September, making it the 155th

consecutive month of trade surplus since November 1997 according to International Trade

and Industry Ministry (Miti). The increase in exports in September was largely due to higher

exports of liquefied natural gas, crude petroleum, palm oil, crude rubber, chemicals and

chemical products, optical and scientific equipment as well as rubber products.

From our study in macroecomy, we can take Keynesian system on export and import as

example how the trade surplus makes impact on income for Malaysian.

Y= E = C + I + G + X – Z

C = a + bY

Z= u+vY

Y= gross domestic product (GDP) u = autonomous component of import

C= Consumption v = marginal propensity to import

I= Investment

G= government spending

X= export

Z= import

Substitute Z and C to GDP equation

Y = a + bY + I + G + u + vY

Y – bY + vY = a + I + G + X – u

(1 – b + v)Y =a+I+G+X–u

Ŷ = 11-b+v(a+I+G+X-u)

From the equation that we calculate, 11-b+v is autonomous expenditure multiplier. Therefore,

the more open economy to foreign trade (the higher v), the smaller will be response of

income to aggregate demand shock.

This show us that the proactive country in trading, the less impact for their citizen’s income

when facing shock like increasing in price. The author also express that government should

expand Malaysia’s product to the world and keep the money flowing into the country.

WIDENING PRODUCT RANGE

During 15-18 century, the mercantilists who dominate in international trade and balance of

payments theory view that exports have a crucial role in a country's wealth accumulation and

economic status consolidating and improving. Recently, U.S government have launched their

plan to increase their export to the world.

“President Barack Obama on Wednesday launched a drive to double U.S. exports over the

next five years in a move that reaches out to business groups and Republicans who have

criticized his inaction on trade.”

“So let it be written. So let it be done.”

Source: (Reuters, 24th February)

President of U.S has made change in his legacy by focusing on export to generate the

economy and encourage firms and producer to take a role in this policy. U.S has many

products around the world such as Mcdonald’s, NIKE and etc. However, President Barrack

Obama still has plan to expand U.S export in 5 years. This is because the economy grows

slowly and increases the concern for U.S citizen with unemployment rate and inflation. The

author also emphasize that Malaysia should widening the product range and establish

Malaysia in this world. Sector in Malaysia that should be expand such as travel, electronics,

micro-chips, automotive and etc.

“ In difference to global experience of exemplary advanced countries, the most effective way

to generate economic activities, thus widening the product range, is to have policies and

practices that leave as much money as possible in the people’s pocket.”

The author advertise that Malaysia should have better policies to develop and attract business

in the market and encourage people to consume in domestic rather than imported product.

Advertisement such as ‘Belilah barang buatan Malaysia’ is good example and all Malaysian

should realize that the money will flow out of country if they continue spending in imported

goods. Strong product range will help increase the GDP per capita and purchasing power for

Malaysian to consume. By having good product range in domestic market, foreign market

should not be a problem for Malaysian business to enter. This articles also express that

Malaysian consume more their income in taxes rather than consumption.