Trade is the catalyst for Malaysia’s economic success

The Dollar Business Bureau | @TheDollarBiz

A recent report from the World Bank reveals that Malaysia’s endeavour to improve trade competitiveness has helped its economy grow, and almost 60% of goods and services produced in the country is consumed abroad. According to the World Bank, Malaysia's economy is expected to grow by 5.4% in 2014 and 4.6% in 2015, helped mainly by exports which contribute about 22% of the country’s GDP. “Trade is an engine of growth towards high-income status. As small and open economy, Malaysia’s path to high-income status is tied to its trade performance,” says the World Bank report. There are three major ways in which trade contributes to Malaysia’s growth. First, trade has allowed a small economy like Malaysia to take advantage of economies of scale. Second, open international trade makes its economy competitive on a global scale, making domestic firms more efficient and productive. Finally, trade provides access to foreign inputs, investment and technology. The World Bank projects a positive outlook for 2014 and 2015 in anticipation of revival of major economies. However, there are challenges that Malaysia needs to address to continue its export growth. The World Bank says Malaysia has to increase its knowledge-intensive activities in the production process, and boost services exports which is currently way below its potential. “The country can also increase value-addition significantly in electronics and petrochemicals,” says the report. India's imports from Malaysia currently stands at about $9.2 billion. The two countries hope to increase bilateral trade from the current $13.4 billion to $15 billion by 2015.