Malaysia's minimum wage policy - Economy 2011/2012

Starting my blog in stormy weather such as an election year in Malaysia, it might be expected that I focus on the election, rallies, lack of transparency, corruption and the freedom of speech/press. Although it is quite tempting to talk about the last Bersih 3.0 rally and questionable behaviour of the police, I am rather concerned about the recently announced minimum wage for the lower end of Malaysian income groups. While this announcement by prime minister Dato' Seri Najib Razak has been placed strategically before Labour Day and certainly before the election, there is not only the question of politics, but how it affects the labour market, investments and the economy. Let me add, we will not experience the effects before the election as the implementation will take another 6 - 12 months.

A first look on the Malaysian economy shows recovery, a trade surplus and even rising investments.

Malaysia’s Economy 2011/2012

Malaysia currently commands a total population of 28,3 mio. according to the 2010 census (Dept. of Statistics, Malaysia 2010: POPULATION DISTRIBUTION AND BASICDEMOGRAPHIC CHARACTERISTIC REPORT 2010) and generates a gross domestic product (GDP) of approx. USD 247 bill, growing by more than 5 %. Per capita, we are talking about USD 15,600 according to Malaysian statistics and sources such as the CIA World Factbook. Although the Malaysian Dept. of Statistics might not be as manipulative as mainland China in many ways, we should keep political motivations behind certain figures in mind. Leaving a lot of topics such as inflation, the stock market and main industries for later posts, I still would like to mention basic trade and investment figures. In this context, I refer to external trade such as exports, which is still recovering from the financial crisis in 2008/2009. Overall, Malaysia was able to present a positive trade balance with exports worth USD 212,7 bill. and imports worth USD 168 bill. in 2011. Without being presumptuous, we can conclude that Malaysia is an export nation and draws its current development and growth from the trade surplus with major trading partners such as Australia, Japan, Hong Kong, US and South Korea. China has recently become the biggest export market for Malaysian goods, but provides nearly the same amount of products to the Malaysian market.

FDI for SEA since 1990

Main export goods are oil, gas, rubber, palm oil, timber and products thereof as well as E&E products (Dept. of Statistics,Malaysia  Feb. 2012: Malaysia Ext. Trade Statistics). What is next? As the chart on your left hand indicates, Malaysia is facing some issues in regard to foreign direct investment (FDI), but made some achievements recently. In 2011, the country saw FDIs of about USD 10,7 bill. with a growth rate of more than 12 % in comparison to 2010 (New Straits Times 21 Feb. 2012: Malaysia's FDI up 12,3 % in 2011). While 2011 meant a surge of FDI, Malaysia experienced a steady decline from 1993 to 2009. Please refer to the chart above for details. For now, I will not tackle the FDI hassle, which the country mainly caused through protectionism and discriminatory policies. When I am talking about market entry strategies in the future, there will be enough time to discuss the investment environment and how policies improved already.


This overview seems to be a good point to stop for my next post, which will continue with the labour market, salary groups and what we can expect from the minimum wages.