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THERE are many reports on the Malaysian economy based on specific areas like debts, which can be misleading and give a skewed picture.

It would be a simplistic argument, like looking at someone's total debts, but ignoring the person's earnings or earning potential. Reports that emphasise on the country's debt should take into account the gross domestic product or GDP, which is the total value of all goods and services produced by a country in a year.

We should look at the country's debt in relation to its GDP, meaning, the GDP ratio. This ratio would give a clearer picture of the economic health of the country.

Malaysia's public debt as a percentage of its GDP is 53.50 per cent for last year's estimate and is ranked 54 out of more than 150 countries (source: CIA World Factbook).

The definition given is the cumulative total of all government borrowings less repayments that are denominated in a country's home currency. As a comparison, Japan is more than 200 per cent, Singapore is more than 100 per cent, the United Kingdom is about 89 per cent and the United States is about 74 per cent.

The same source puts Malaysia's last year's GDP estimate at US$307.2 billion (RM921.6 billion), GDP real growth rate at 4.5 per cent and for country comparison with the world, Malaysia is ranked 72.

Malaysia's unemployment rate last year is stated as 3.2 per cent, and as a country comparison, we are ranked 27 in the world. That would essentially put Malaysia as one of the countries with a low unemployment rate. Malaysia's inflation rate (consumer prices) is stated as 1.9 per cent, and in comparison, we are ranked 30 in the world.

An International Monetary Fund (IMF) report, dated Feb 28 states that Malaysia's expansion is led by strong domestic demand, particularly investment, has a robust financial sector with high levels of capital, and wide ranging reforms should support higher, more inclusive growth.

The IMF report is consistent with the CIA World Factbook report, as the IMF estimates a growth rate of about five per cent for the year spearheaded with low unemployment and subdued inflation.

The World Bank ranking of economies across the world (benchmarked to June last year) ranks Malaysia as number 12 in terms of ease of doing business. This means that the regulatory environment in Malaysia is conducive for the starting and operating of new businesses.

This ranking goes across 10 different categories and Malaysia is ranked number one in terms of Getting Credit and ranked number four for Protecting Investors. We are ranked 11 for Trading Across Borders and number 15 for Paying Taxes. Malaysia's lowest ranking across the 10 categories is for Dealing With Construction Permits where we are ranked 96. This ranking encompasses 185 countries and our lowest score of 96 for Dealing With Construction Permits still puts us at just above 50 per cent for that category. Overall, Malaysia has a good report card.

This is where Malaysia is today.

Let's backtrack 16 years to the Asian Financial Crisis in 1997 and how it had impacted Malaysia.

In 1997, Malaysia was a large investment destination and our stock exchange, the KLSE, was one of the most active stock exchanges in the world. Our turnover sometimes exceeded that of some of the larger bourses like the New York Stock Exchange.

In the early part of 1997 the KLSE composite index was above 1,200 points and the ringgit was trading at 2.50 to the US dollar. In mid 1997, within days of the Thai Baht devaluation, ringgit was attacked by speculators. By the end of 1997, the KLSE had lost more than 50 per cent, and the composite index was below 600 points. The ringgit was trading at about 4.50 to the dollar in early 1998 from 2.50 to the dollar in early 1997.

Tun Dr Mahathir Mohamad, the prime minister then, imposed strict capital controls and pegged the ringgit at 3.80 to the dollar. The ringgit was also no longer a legal tender outside the country -- trading of the currency overseas was invalid.

This put the lid on many speculative transactions that could have damaged the economy further. Furthermore, Malaysia refused assistance from the IMF. Many other restrictive economic measures were implemented that saw the country float and not sink during a difficult period that affected many countries more badly than it did Malaysia.

All the macro economic policies formulated by the government would in some way directly or indirectly benefit the micro economies or small businesses of the country. A supply and demand chain has to be established for them to complement each other, as having one without the other is not going to complete the cycle and produce results.

D.K, council member, Gerson Lehrman Group Inc, New York, US

Source: NST, 22 May 2013

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