Information about Asia and the Pacific Asia y el Pacífico
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Malaysia

Author(s):
International Monetary Fund
Published Date:
February 1998
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Information about Asia and the Pacific Asia y el Pacífico
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I. Real Sector

A. National Accounts

1. Growth accelerated in 1994–95, underpinned by strong domestic and external demand (Table 1). Exports of goods and services accelerated in 1994, owing to strong overseas demand and expanded production capacity, particularly in the electronics and electrical products industries. Private fixed capital formation grew by over 25 percent per year (in real terms), in response to lower corporate tax rates, an increase in the reinvestment allowance, the decline in interest rates during 1994 and early 1995, and strong demand. The bulk of spending was in the manufacturing and services sectors, especially the electronics and electrical products industries. Investment spending was also very high on oil and gas projects in 1994 (in line with expansion programs), and in the construction sector in 1995 (led by high outlays on residential and commercial property development and large privatized projects1). Public investment spending—driven by capacity expansion and modernization programs undertaken by the nonfinancial public enterprises (NFPEs), and by federal government outlays for infrastructure and human resource development—grew less rapidly in 1994–95, following high growth rates of NFPE outlays earlier in the Sixth Malaysia Plan period (1990–95). Private consumption spending was robust, fueled by rising disposable incomes and likely wealth effects from the impressive performance of the stock market during 1992–93.

Table 1.Malaysia: Expenditure on Gross Domestic Product in 1978 Prices, 1992-96
1992199319941995Prel.

1996
(In millions of ringgit)
Domestic demand91,725100,673114,577129,869138,010
Consumption58,26861,76967,82773,85678,394
Private44,80446,86651,45556,28860,763
Public13,46414,90316,37217,56817,631
Investment33,45738,90446,75056,01359,616
Private20,65224,59231,46039,44942,290
Public13,92215,09715,00316,26618,275
Change in stocks-1,117-785287298-949
Net exports1,141-56-4,662-9,561-7,785
Exports76,30389,455109,551128,837138,890
Imports75,16289,511114,213138,398146,675
Gross domestic product92,866100,617109,915120,308130,225
Net factor payments from abroad-5,199-5,326-5,983-6,714-7,078
Gross national product87,66795,291103,932113,594123,147
(Annual percentage change)
Domestic demand3.69.813.813.36.3
Consumption3.26.09.88.96.1
Private3.04.69.89.48.0
Public4.010.79.97.30.4
Investment4.216.320.219.86.4
Private0.519.127.925.47.2
Public28.08.4-0.68.412.4
Change in stocks 1/-2.10.41.10.0-1.0
Net exports 1/4.1-1.3-4.6-4.51.5
Exports6.217.222.517.67.8
Imports1.219.127.621.26.0
Gross domestic product7.88.39.29.58.2
Net factor payments from abroad12.12.412.312.25.4
Gross national product7.68.79.19.38.4
Source: Data provided by the Malaysian authorities.

Annual change as a percent of GDP.

Source: Data provided by the Malaysian authorities.

Annual change as a percent of GDP.

2. Growth moderated in 1996, owing mainly to a slowdown in exports and private investment spending (Table 1). The marked deceleration in export growth reflected several factors, including weaker external demand (particularly for electronics); the real appreciation of the ringgit; greater competition from lower-cost producers (particularly for electrical machinery); and lower agricultural prices. Slower growth in private investment spending was led by more moderate investment in the services sector (following the completion of expansion programs by the Malaysian Airline System and the independent power producers in 1995) and in the construction sector (owing primarily to slower spending on large privatized projects). Outlays by oil and gas companies also declined following the completion of expansion programs in 1992–95. However, investment in the manufacturing sector remained strong, continuing to rise by about 16 percent in real terms. Public investment spending accelerated slightly, owing to strong spending by the NFPEs to expand and upgrade power generation and distribution facilities, and increased momentum on a number of infrastructure projects. Private consumption spending moderated slightly, owing to a combination of lower earnings by commodities producers, firmer interest rates, and measures introduced in late 1995 to encourage saving.2 Public consumption spending slowed markedly, owing mainly to weaker growth in emoluments after the 1995 salary revision,3 and also to lower spending on supplies, services, and defense.

B. Sectoral Developments

3. Growth of manufacturing output fell slightly in 1996, although it continued to increase as a share of GDP (Table 3). Much of the slowdown was concentrated in export-oriented industries (where growth declined from 15¼ percent in 1995 to 8 percent in 1996), particularly electronics and electrical products. However, production in domestic-oriented industries strengthened to almost 17 percent, from 12¾ percent in 1995, owing to strong domestic demand for construction-related materials and chemicals and chemical products, as well as increased capacity in the chemicals industry.

Table 2.Malaysia: Expenditure on Gross Domestic Product in Current Prices, 1992-96
1992199319941995Prel.

1996
(In millions of ringgit)
Domestic demand146,490165,379193,326226,902247,956
Consumption94,386102,919116,504132,331145,020
Private75,04681,31392,568104,695117,008
Public19,34021,60623,93627,63628,012
Investment52,10462,46076,82294,571102,936
Private31,95639,25651,70166,64272,870
Public21,54124,10024,65627,47831,490
Change in stocks-1,393-896465451-1424
Net exports2,047-173-3,032-8,1991,654
Exports114,153135,525173,771208,671229,563
Imports112,106135,698176,803216,870227,909
Gross domestic product148,537165,206190,294218,703249,610
Net factor payments from abroad-8,006-8,265-9,433-10,608-11,791
Gross national product140,531156,941180,861208,095237,819
(Annual percentage change)
Domestic demand6.712.916.917.49.3
Consumption7.29.013.213.69.6
Private7.88.413.813.111.8
Public5.011.710.815.51.4
Investment5.719.923.023.18.8
Private1.422.831.728.99.3
Public29.211.92.311.414.6
Change in stocks 1/-1.90.30.80.0-0.9
Net exports 1/5.3-1.5-1.7-2.74.5
Exports9.018.728.220.110.0
Imports2.221.030.322.75.1
Gross domestic product12.211.215.214.914.1
Net factor payments from abroad17.73.214.112.511.2
Gross national product11.911.715.215.114.3
Source: Data provided by the Malaysian authorities.

Annual change as a percent of GDP.

Source: Data provided by the Malaysian authorities.

Annual change as a percent of GDP.

Table 3.Malaysia: Gross Domestic Product by Sector of Origin in 1978 Prices, 1992-96
1992199319941995Prel.

1996
(In millions of ringgit)
Primary sector23,60624,24424,28825,20925,941
Agriculture, forestry, and fishing15,53116,20516,04716,23016,616
Mining and quarrying8,0758,0398,2418,9799,325
Secondary sector30,47834,34739,37145,21050,749
Manufacturing26,85930,32434,78239,82544,664
Construction3,6194,0234,5895,3856,085
Tertiary sector38,78242,02646,25649,88953,535
Electricity, gas, and water1,9312,1762,4752,7973,119
Transport, storage, and communications6,4816,9217,7768,85510,006
Wholesale and retail trade11,19012,42813,42714,78116,111
Business services 1/9,64410,65011,71312,93814,491
Government services9,20110,07311,02211,45411,855
Other services 2/335-222-157-936-2,047
Gross domestic product92,866100,617109,915120,308130,225
(Annual percentage change)
Primary sector3.72.70.23.82.9
Agriculture, forestry, and fishing4.74.3-1.01.12.4
Mining and quarrying1.6-0.42.59.03.9
Secondary sector10.612.714.614.812.3
Manufacturing10.512.914.714.512.2
Construction11.711.214.117.313.0
Tertiary sector8.28.410.17.97.3
Electricity, gas, and water13.812.713.713.011.5
Transport, storage, and communications6.66.812.413.913.0
Wholesale and retail trade11.111.18.010.19.0
Business services 1/10.410.410.010.512.0
Government services4.99.59.43.93.5
Other services 2/-30.9-166.3-29.3496.2118.7
Gross domestic product7.88.39.29.58.2
(Percent of GDP)
Primary sector25.424.122.121.019.9
Agriculture, forestry, and fishing16.716.114.613.512.8
Mining and quarrying8.78.07.57.57.2
Secondary sector32.834.135.837.639.0
Manufacturing28.930.131.633.134.3
Construction3.94.04.24.54.7
Tertiary sector41.841.842.141.541.1
Electricity, gas, and water2.12.22.32.32.4
Transport, storage, and communications7.06.97.17.47.7
Wholesale and retail trade12.012.412.212.312.4
Business services 1/10.410.610.710.811.1
Government services9.910.010.09.59.1
Other services 2/0.4-0.2-0.1-0.8-1.6
Source: Data provided by the Malaysian authorities.

Finance, insurance, real estate, and business services.

Community, social and personal services, private nonprofit services to households and domestic services of households, less imputed bank service changes and plus import duties.

Source: Data provided by the Malaysian authorities.

Finance, insurance, real estate, and business services.

Community, social and personal services, private nonprofit services to households and domestic services of households, less imputed bank service changes and plus import duties.

4. Growth in the construction sector, although strong at 13 percent, was lower than in the previous two years. This was primarily due to a moderation in the growth of residential and nonresidential construction, partly in response to the anti-speculation measures introduced in October 1995.4 Growth in the civil engineering subsector also slowed somewhat, as increased construction value of road, rail, port and airport projects was more than offset by lower construction value of private power plants, following the completion of expansion programs in 1995.

5. Agricultural production improved in 1996, owing largely to increased output of palm oil, which, in turn, was due to an increase in matured areas and higher oil extraction rates. The 7 percent volume growth (Table 5) was somewhat offset, however, by lower palm oil prices. Production of rubber continued to decline, given labor shortages and the conversion of rubber land to more lucrative crops. Production of saw logs was also on a declining trend, in line with the government’s policy of sustainable forest management.

Table 4.Malaysia: Composition of Investment and Saving, 1992-96
1992199319941995Prel.

1996
(In millions of ringgit)
Gross domestic investment52,10462,46076,82294,571102,936
Private gross fixed capital formation31,95639,25651,70166,64272,870
Oil and gas3,2513,1643,4122,6161,583
Other28,70536,09248,28964,02671,287
Public gross fixed capital formation21,54124,10024,65627,47831,490
Federal government4,8385,4255,9236,4436,858
Statutory bodies1,6991,5901,6201,8581,759
State governments3,1872,7903,0863,5023,616
Local governments514569806760862
Public enterprises11,30313,72613,22114,91518,395
Change in stocks-1,393-896465451-1,424
Gross national saving46,48254,53564,74575,88289,960
Private sector22,09227,19631,40242,77053,650
Public sector24,39027,33933,34333,11236,310
(Percent of GDP)
Gross domestic investment35.137.840.443.241.2
Private gross fixed capital formation21.523.827.230.529.2
Oil and gas2.21.91.81.20.6
Other19.321.825.429.328.6
Public gross fixed capital formation14.514.613.012.612.6
Federal government3.33.33.12.92.7
Statutory bodies1.11.00.90.80.7
State governments2.11.71.61.61.4
Local governments0.30.30.40.30.3
Public enterprises7.68.36.96.87.4
Change in stocks-0.9-0.50.20.2-0.6
Gross national saving31.333.034.034.736.0
Private sector14.916.516.519.621.5
Public sector16.416.517.515.114.5
Source: Data provided by the Malaysian authorities.
Source: Data provided by the Malaysian authorities.
Table 5.Malaysia: Production of Major Primary Products, 1992-96
1992199319941995Prel.

1996
(In thousands of metric tons)
Output
Rubber1,1731,0751,1011,0891,084
Crude palm oil6,3737,4037,2207,8118,386
Crude palm kernel oil8129669781,0371,107
Cocoa220200177132122
Paddy 1/2,0701,9172,095
Tin (concentrate)1410765
Tin metal46403839
Bauxite33169174184219
Iron ore315223203202325
Copper1121001068886
(In thousands of barrels per day)
Crude oil659648660705715
(In thousands of cubic meters)
Saw logs43,51137,13535,67231,60030,304
Sawn timber9,5729,2248,7039,287
(In thousands of hectares)
Area under cultivation
Rubber1,7921,7681,7471,6931,688
Palm oil2,1972,3062,4102,5402,615
Paddy 1/670663689
(In kilograms per hectare)
Yields
Rubber9881,0001,9261,8001,780
Palm oil3,4303,7773,4263,5053,550
Paddy 1/3,1452,8932,809
Source: Data provided by the Malaysian authorities.

1995 and 1996 production is under the purview of the Ministry of Agriculture.

Source: Data provided by the Malaysian authorities.

1995 and 1996 production is under the purview of the Ministry of Agriculture.

6. Mining sector output grew more slowly in 1996, reflecting a slower increase in the production of crude oil in compliance with the national depletion policy. Production of liquefied natural gas (LNG) was significantly higher, owing to strong regional demand and increased capacity. The value of tin production continued to decelerate, owing to the depletion of high grade ores and lower tin prices.

7. The services sector grew by over 7 percent, about the same as in 1995. Stronger growth in the finance and insurance industries—following from strong loan growth, higher revenue from other banking services, and higher premium collections—was offset by slower growth in other subsectors. The electricity, gas and water, and transport, storage and communications industries were adversely affected by the export slowdown, while the wholesale and retail trade subsector saw increased competition arising from rapid expansion of outlets and shopping malls.

C. Saving and Investment

8. The decline in the saving/investment gap to 5¼ percent of GDP in 1996 primarily reflected a narrowing of the private saving/investment gap (Table 4). Gross national saving rose to 36 percent of GDP, from about 35 percent of GDP in 1995, as private saving increased in response to strong corporate profitability, higher real interest rates, and pro-saving measures implemented in late 1995 (see above). In addition, gross domestic investment declined by 2 percentage points to 41 percent of GDP from the previous year. This reflected the moderation in private investment spending, which was foreshadowed by the completion of a number of major projects, discussed above, and by a decline in the value of manufacturing investment approvals in 1995 (Table 7). During 1996, manufacturing investment approvals rebounded significantly.

Table 6.Industrial Production Index, 1992-97
199219931994199519961997
Q1Q2
(Index numbers: 1993 = 100)
Total91.2100.0112.4127.1141.1146.6154.8
Mining98.8100.0103.6112.8119.4125.1120.0
Electricity89.0100.0113.8129.9146.5153.8167.0
Manufacturing88.6100.0114.9131.2147.3152.6164.5
Food91.7100.0106.1113.8118.8109.2122.9
Beverages96.2100.0115.5127.6147.5146.1135.8
Tobacco88.0100.098.8100.8108.3109.9138.8
Textiles76.6100.0119.3130.7133.2136.0150.4
Wearing apparel99.1100.096.495.692.786.991.8
Petroleum refineries92.3100.0116.5137.4149.3156.8168.0
Industrial chemicals94.7100.0110.2123.9154.3187.7169.4
Other chemical91.7100.0115.1115.0131.0127.8133.8
Wood products81.9100.0104.2110.5123.1116.8120.6
Rubber products84.6100.0115.4130.5145.0144.2147.1
Nonmetallic minerals94.3100.0113.1125.5156.2163.6175.2
Iron and steel88.8100.0114.8129.5153.6144.7172.3
Nonferrous metal96.3100.0114.5129.3144.0171.1196.7
Fabricated metal63.5100.0117.0127.6157.1181.3170.6
Electrical machinery and electronics85.8100.0121.8146.9159.9163.9182.0
Transport equipment96.6100.0119.8163.1199.5194.5218.5
(Annual percentage change)
Total8.79.612.413.111.011.611.5
Mining2.71.23.68.95.92.22.3
Electricity14.012.413.814.112.815.615.7
Manufacturing10.512.914.914.212.313.813.5
Food10.59.16.17.34.4-0.24.3
Beverages4.74.015.510.515.6-0.80.1
Tobacco-5.113.6-1.22.07.416.018.7
Textiles11.530.519.39.61.98.518.3
Wearing apparel4.60.9-3.6-0.8-3.0-5.62.3
Petroleum refineries3.78.316.517.98.713.28.9
Industrial chemicals2.85.610.212.424.515.027.0
Other chemical14.39.115.1-0.113.912.7-3.9
Wood products10.922.14.26.011.414.2-3.5
Rubber products15.518.215.413.111.15.7-4.4
Nonmetallic minerals9.76.013.111.024.520.213.8
Iron and steel18.912.614.812.818.68.311.9
Nonferrous metal16.53.814.512.911.434.730.1
Fabricated metal43.357.517.09.123.117.78.0
Electrical machinery and electronics13.616.621.820.68.813.614.7
Transport equipment-6.23.519.836.122.315.49.2
Source: Data provided by the Malaysian authorities.
Source: Data provided by the Malaysian authorities.
Table 7.Malaysia: Total Proposed Capital Investment in Approved Manufacturing Projects, 1992-96 1/(In millions of ringgit)
19921993199419951996
Total27,77513,75322,95120,86934,258
By ownership
Foreign ownership11,6233,7138,3506,40012,956
Joint ownership14,4816,52010,1178,60015,122
Malaysian majority9,2904,3777,5166,2407,616
Foreign majority5,1252,0842,5062,2247,407
Equal ownership66599513699
Malaysian ownership1,6713,5204,4845,8696,180
By industry
Electrical and electronic products1,5792,3056,3393,15213,062
Textiles and textile products1,3358951,316635480
Wood, furniture, and fixture7197672,5242,112978
Rubber and rubber products12090152171241
Food, beverages, and tobacco404459923506405
Petroleum and gas16,27134757083,713
Chemicals and chemical products1,6082,4903,5332,9003,342
Nonmetallic mineral products9752,1312,4734,0453,338
Basic and fabricated metal products2,9161,9672,8393,9982,166
Transport equipment3841,0728771,4151,183
Miscellaneous1,4641,5741,5001,2275,350
Source: Data provided by the Malaysian authorities.

Includes equity and loans.

Source: Data provided by the Malaysian authorities.

Includes equity and loans.

D. The Labor Market

9. Conditions in the labor market remained tight in 1996. Total employment increased by 3½ percent in 1996, down from 4 percent in 1995 (Table 9), and the unemployment rate eased to 2⅔ percent. As in earlier years, a large portion of the increase in the labor force was absorbed by the manufacturing, construction, and some service sectors, while agricultural employment declined.

Table 8Malaysia: Ongoing and Planned Investment in Infrastructure--Main Projects, 1992-2000
Main ProjectsExpected

Construction

Period
Estimated

Cost 1/

(RM million)
Estimated Annual Cost
1997199819992000
Government (Federate and State)
Roads--Ongoing Projects
Middle Ring Road II1992-2000995400100200210
Access Road to Bakun Hydroelectric Dam1995-1999403150150103
Simpang Pulai-Lojing-Gua Musang-Kuala Berang Road1990-20051,10080150150200
Kuala Kangsar-Grik Road1997-2000200501008020
Johor Bahru Inner Ring Road1996-1999118405028
Roads--Planned Projects
Batang Rejang Bridge1997-19992005010050
Upgrading Betong-Kayu Malam Road1997-199980304010
Rail
Light rail transit, system 1, phase I1993-19961,275completed
Light rail transit, system I, phase II1996-19981,900570760
Light Rail transit, system 21995-19994,350130517401305
Express rail link KL-KLIA1996-19992,1006301050420
KL Linear City People-mover Rapid Transit1997-19992,2004401100660
Ports
West port of Port Klang1995-20001,650138191166167
Tanjung Pelepas Port1995-20002,800605819335784
Pasir gudang phase IV1993-1996260completed
Phase II NBCT, Penang Port1996-200435571717165
Kuching port terminal1993-1997201955
Labuan integrated port1996-200024824080100
Bintulu port general cargo berth1995-1998185602205
Lahad Datu Port1995-19981083552
Total20,7284,7516,6913,6651,546

Preliminary estimates.

Preliminary estimates.

Table 9.Malaysia: Labor Market Developments, 1992-96
19921993199419951996
(In thousands)
Population19,04319,56420,11220,68921,169
Total labor force7,3707,6277,8348,1408,398
Labor force participation rate (in percent)66.766.866.866.966.9
Unemployment rate (in percent)1.61.72.92.82.6
Total employment7,2507,4987,6037,9158,181
Primary sector1,7751,7161,5151,4691,418
Agriculture, forestry, and fishery1,7381,6801,4771,4291,376
Mining and quarrying3736384142
Secondary sector2,1462,2862,4902,7112,914
Manufacturing1,6391,7421,8922,0522,209
Construction507544598659705
Tertiary sector3,3293,4963,5993,7353,850
Transport, etc.326344366395420
Wholesale and retail services1,3821,2921,2931,3281,354
Business services 1/300332352379395
Government services858864868872877
Electricity, gas, and water4748646973
Other services 2/416616655692731
(Annual percentage change)
Total labor force2.33.52.73.93.2
Total employment3.03.41.44.13.4
Primary sector-4.9-3.3-11.7-3.0-3.5
Agriculture, forestry, and fishery-5.2-3.3-12.1-3.3-3.7
Mining and quarrying12.1-2.75.67.12.7
Secondary sector10.96.58.98.97.5
Manufacturing11.56.38.68.47.7
Construction9.07.39.910.36.9
Tertiary sector2.75.02.93.83.1
Transport, etc.3.85.56.57.96.4
Wholesale and retail services5.2-6.50.02.72.0
Business services 1/7.510.66.27.44.2
Government services0.50.60.50.50.5
Electricity, gas, and water2.22.133.37.85.8
Other services 2/-3.948.16.35.65.6
(Percentage share of total employment)
Total employment100.0100.0100.0100.0100.0
Primary sector24.522.919.918.617.3
Agriculture, forestry, and fishery24.022.419.418.116.8
Mining and quarrying0.50.50.50.50.5
Secondary sector29.630.532.734.335.6
Manufacturing22.623.224.925.927.0
Construction7.07.37.98.38.6
Tertiary sector45.946.647.347.247.1
Transport, etc.4.54.64.85.05.1
Wholesale and retail services19.117.217.016.816.5
Business services 1/4.14.44.64.84.8
Government services11.811.511.411.010.7
Electricity, gas, and water0.60.60.80.90.9
Other services 2/5.78.28.68.78.9
Sources: Data provided by the Malaysian authorities.

Finance, insurance, real estate, and business services.

Includes hotels and restaurants, and other services.

Sources: Data provided by the Malaysian authorities.

Finance, insurance, real estate, and business services.

Includes hotels and restaurants, and other services.

10. Owing to inadequate supply of labor, the government has allowed controlled importation of foreign workers in recent years.5 The bulk of foreign workers have been employed in the manufacturing and service sectors, where skilled labor is scarce, and in the plantation and construction sectors, where unskilled workers are in short supply. Although the government’s policy on recruitment of expatriates remains liberal, the policy of employing unskilled foreign workers in general was tightened in 1996, reflecting the authorities’ desire to promote more sophisticated industries and increasing concerns over the social implications arising from the employment of a large number of foreign workers.6

11. For the economy as a whole, average labor productivity, measured as real GDP per worker, increased at a slower pace in 1996. It rose by about 4¾ percent, compared with over 6 percent in 1994 and 5 percent in 1995. Labor productivity growth in agriculture slowed from 12 percent in 1995 to about 6 percent in 1996, reflecting, in part, lower production of forestry products in line with the government’s policy of sustainable forestry management, and lower output of rubber and palm oil, owing to surplus stocks in the market. Productivity in the manufacturing sector also grew more slowly in 1996, particularly in the electrical and electronics industries, in part, owing to the slowdown in external demand.

12. While economy-wide wage data are not available, real wage growth exceeded improvements in real labor productivity in the manufacturing sector, leading to a large increase in unit labor costs in 1996.7 While the slowdown in productivity gains and the corresponding rise in unit labor cost partly reflects cyclical factors, there is concern over an erosion of international competitiveness, owing to rapid wage increases. As a result, the Guidelines on Wage Reform System were adopted in August 1996 by the National Labor Advisory Council, which comprises representatives of employers, employees, and the government, with the objective of establishing a closer link between wages and productivity growth. Under the Guidelines, wages will consist of a fixed component (mainly the basic wage) and an additional component in the form of variable payments. Changes in the basic wage would reflect factors such as changes in the cost of living, while the variable component would be based on productivity improvements and performance of the individual, work group, or organization.

E. Prices

13. Inflation has remained low and stable in recent years, despite strong domestic demand pressures. Consumer price inflation was 3½ percent in 1996, unchanged from the previous year, and moderated to 3 percent during the first quarter of 1997 (Table 13). Relatively high food price increases in recent years8 were to some extent offset by low import prices, particularly for clothing and footwear, as a result of low inflation in partner countries, the appreciation of the ringgit in effective terms, and the abolition of import duties on a wide range of items in the 1996 Budget.

Table 10.Malaysia: Registered Unemployed by Occupation, 1992-96
19921993199419951996
(Number of registered unemployed persons)
Total42,34431,61726,44521,73921,269
Industrial15,15011,3659,1987,8337,231
Agricultural319193132109106
Services1,189835584500447
Clerical19,83515,90913,58910,68411,209
Professional and technical4,5212,5582,1491,8731,723
Others1,330757793740553
(Percentage share of total registered unemployed)
Total100.0100.0100.0100.0100.0
Industrial35.835.934.836.034.0
Agricultural0.80.60.50.50.5
Services2.82.62.22.32.1
Clerical46.850.351.449.152.7
Professional and technical10.78.18.18.68.1
Others3.12.43.03.42.6
Source: Data provided by the Malaysian authorities.
Source: Data provided by the Malaysian authorities.
Table 11.Malaysia: Average Wage Rates in Selected Sectors, 1992-96 1/
199219931994 2/1995 3/1996
(In ringgit)
Estate workers17.6419.1021.10
Harvesting13.8013.0017.50
Sorting11.7613.0015.10
Mining
Manufacturing
Food manufacturing, beverages, tobacco industries20.5024.0123.16
Textile, weaving, etc., industries19.9631.0922.70
Wood and wood products, paper printing industries21.8023.9727.28
Chemical, petroleum, coal industries17.3032.1930.53
Nonmetallic, mineral industries19.1922.5328.40
Basic metal, metal products14.2225.9233.25
Wood products and other manufactures15.6018.7216.77
(Percentage change)
Estate workers-1.18.310.5
Harvesting15.0-5.834.6
Sorting-6.710.516.2
Mining
Manufacturing
Food manufacturing, beverages, tobacco industries45.517.1-3.5
Textile, weaving, etc., industries29.655.8-27.0
Wood and wood products, paper printing industries32.310.013.8
Chemical, petroleum, coal industries-9.986.1-5.2
Nonmetallic, mineral industries17.217.426.1
Basic metal, metal products-25.182.328.3
Wood products and other manufactures22.920.0-10.4
Source: Data provided by the Malaysian authorities.

For supervised personnel.

No survey was done in 1994, and 1996 survey data are still being processed.

1995 percentage changes are over 1993 levels.

Source: Data provided by the Malaysian authorities.

For supervised personnel.

No survey was done in 1994, and 1996 survey data are still being processed.

1995 percentage changes are over 1993 levels.

Table 12.Malaysia: Average Domestic Prices and Taxes on Energy-Related Products, 1992-97(Cents per liter; unless otherwise indicated)
19921993199419951996Q1

1997
Crude oil
Excise duty0.000.000.000.000.000.00
Import duty0.000.000.000.000.000.00
Gasoline regular 1/
Price106.00106.00106.00106.00106.00106.00
Excise duty51.7254.8558.6258.6258.6258.62
Import duty51.7254.8558.6258.6258.6258.62
Gasoline premium 1/
Price113.00113.00113.00110.00110.00110.00
Excise duty51.7254.8558.6258.6258.6258.62
Import duty51.7254.8558.6258.6258.6258.62
Kerosene 2/
Price66.1066.1066.1066.1066.1066.10
Excise duty11.3313.2917.060.000.000.00
Import duty11.3313.2917.060.000.000.00
Diesel oil
Price65.1065.1065.1065.1065.1065.10
Excise duty10.8213.2317.3219.6419.6419.64
Import duty10.8213.2317.3219.6419.6419.64
Fuel oil 2/
Price 3/
Excise duty (in tons)16.7316.7316.730.000.000.00
Import duty (in tons)16.7316.7316.730.000.000.00
Natural gas
Price 3/
Excise duty (cents/kg.)1.01.01.01.01.01.0
Import duty (cents/kg.)1.01.01.01.01.01.0
Source: Data provided by the Malaysian authorities.

Effective January 1, 1995, there are only two grades of petrol available at petrol stations, i.e., leaded petrol (RON 97).

Duties on kerosene and fuel oil were abolished on October 10, 1994.

Prices of fuel oil and natural gas (liquefied) are not available.

Source: Data provided by the Malaysian authorities.

Effective January 1, 1995, there are only two grades of petrol available at petrol stations, i.e., leaded petrol (RON 97).

Duties on kerosene and fuel oil were abolished on October 10, 1994.

Prices of fuel oil and natural gas (liquefied) are not available.

Table 13.Malaysia: Consumer Price Index, 1992-97 1/
Weights19921993199419951996199519961997
Q1Q2Q3Q4Q1Q2Q3Q4Q1
(Index numbers; 1994 = 100)
Food34.992.895.0100.0104.9111.0103.9104.2104.9106.5108.8110.2111.7113.1115.3
Beverages and tobacco3.683.095.3100.0102.4104.6100.8102.2103.1103.3103.2104.5105.4105.3105.2
Clothing and footwear3.6100.3100.8100.0100.099.3100.3100.1100.199.499.599.599.398.799.1
Gross rent, fuel, and power21.294.497.7100.0103.4106.7102.3103.0103.7104.5105.4106.3107.2107.7108.3
Furniture and household equipment5.697.198.4100.0102.8103.9100.4102.6103.9104.0103.9103.8104.0103.9104.0
Medical care and health expenses1.992.096.7100.0103.1106.9101.9102.9103.5104.0105.6106.4107.3108.1109.5
Transport and communications17.990.595.6100.0101.8103.2101.0101.5102.1102.7103.1103.5102.8103.3103.8
Recreation, education, cultural services5.898.999.3100.0102.5105.9101.8102.3102.9103.1105.5106.1106.1105.8106.1
Miscellaneous5.695.197.7100.0104.2106.9103.4103.9104.6104.9106.1106.8107.1107.4109.2
Total10093.196.4100.0103.4107.1102.4103.0103.7104.6105.9106.8107.4108.1109.2
(Annual percentage change)(4-quarter percentage change)
Food6.42.35.34.85.84.45.15.04.84.75.86.56.26.0
Beverages and tobacco8.614.84.92.42.21.62.72.72.42.42.32.21.91.9
Clothing and footwear3.00.5-0.80.0-0.70.30.2-0.1-0.5-0.8-0.6-0.8-0.7-0.4
Gross rent, fuel, and power3.73.52.43.33.23.83.43.42.93.03.23.43.12.8
Furniture and household equipment2.61.41.62.81.10.82.83.73.73.41.10.1-0.10.1
Medical care and health expenses3.55.13.43.03.73.53.32.92.63.63.43.73.93.7
Transport and communications4.45.64.61.81.31.61.71.92.02.12.00.70.60.7
Recreation, education, cultural services2.90.40.62.63.32.12.52.72.93.63.73.12.60.6
Miscellaneous2.32.72.44.22.55.56.22.62.52.62.82.42.42.9
Total4.73.53.73.43.53.23.73.53.43.43.73.63.33.1
Source: Data provided by the Malaysian authorities.

New weights apply in 1995. Figures for 1991-95 have been revised based on 1994 base year.

Source: Data provided by the Malaysian authorities.

New weights apply in 1995. Figures for 1991-95 have been revised based on 1994 base year.

14. Producer prices rose at a more moderate rate of 2⅓ percent in 1996, down from about 4 percent in 1994 and 1995 (Table 14).9 The moderation reflects mainly lower prices for rubber, crude palm oil and sawn timber, and a slower increase in import prices, owing, in part, to the appreciation of the ringgit.

Table 14.Malaysia: Producer Price Index, 1992-97 1/
Weights19921993199419951996199519961997
Q1Q2Q3Q4Q1Q2Q3Q4Q1
(Index numbers; 1989 = 100)
Food14.9103.4105.0111.0113.6119.9113.0112.3114.2114.9116.9119.8122.4120.5121.1
Beverages and tobacco2.1121.7131.0133.7136.7137.4135.8136.4137.1137.5137.4137.4137.4137.3137.3
Crude materials18.0103.2103.1113.4121.3119.5122.5124.2120.0118.4121.9123.1117.5115.3116.4
Mineral fuels18.8105.4104.7100.099.7112.2100.7100.299.098.9106.9110.0110.6121.2120.7
Animal and vegetable oils8.5104.5101.2121.5153.0144.2156.2156.4150.8148.6145.5147.3139.9143.9155.5
Chemicals4.4106.1106.8107.0109.3110.5108.6109.2109.8109.6110.4110.9110.7109.9110.2
Manufactured goods, n.e.i.10.8107.7109.0112.4112.3113.2111.1112.2112.5113.3113.3113.4112.9113.0112.5
Machinery and transport equipment18.4100.1102.5102.9101.0101.6102.5101.699.8100.3101.3101.2101.4102.3102.4
Miscellaneous goods3.6107.9108.3114.1116.7120.7114.9115.7117.7118.5120.6120.9120.9120.3119.1
Communication and transport0.6106.7111.2113.1112.7113.0112.7112.7112.5112.7113.0113.0113.0113.0112.5
Total100104.3105.1109.3113.6116.2114.3114.4113.0112.9115.3116.7115.6117.3118.5
Domestic production79.3110.7105.4110.7115.9119.2116.5116.8115.4115.1118.1119.9118.3120.4121.7
Imports20.7103.9103.7103.9104.6104.7105.5105.0103.8104.0104.2104.5104.6105.3105.7
(Annual percentage change)(4-quarter percentage change)
Food1.55.72.45.53.01.82.22.43.56.77.24.93.6
Beverages and tobacco7.62.02.30.53.32.21.61.91.20.70.2-0.1-0.1
Crude materials-0.110.07.0-1.513.810.03.80.9-0.5-0.9-2.1-2.6-4.5
Mineral fuels-0.7-4.5-0.312.52.21.5-2.4-2.36.29.811.722.512.9
Animal and vegetable oils-3.220.026.0-5.841.731.119.614.1-6.9-5.8-7.2-3.26.9
Chemicals0.70.22.21.11.62.22.72.21.71.60.80.3-0.2
Manufactured goods, n.e.i.1.23.1-0.10.8-1.4-0.10.40.82.01.10.4-0.3-0.7
Machinery and transport equipment2.40.4-1.80.5-1.4-1.6-2.2-2.0-1.1-0.41.62.01.1
Miscellaneous goods0.45.42.33.40.61.03.24.15.04.52.71.5-1.2
Communication and transport4.21.7-0.40.3-0.4-0.2-0.6-0.40.30.30.40.3-0.4
Total0.84.03.92.36.85.12.41.60.92.12.33.92.8
Domestic production-4.85.04.72.87.96.13.11.91.42.72.54.63.0
Imports-0.20.20.70.11.70.9-0.10.2-1.2-0.50.81.31.4
Source: Data provided by the Malaysian authorities.

New weights apply in 1996. Figures for 1993-95 have been revised based on 1989 base year.

Source: Data provided by the Malaysian authorities.

New weights apply in 1996. Figures for 1993-95 have been revised based on 1989 base year.

A. F. The Property Market

15. Buoyed by a long period of sustained economic growth and easy access to credit, the property markets have performed so strongly in recent years that the authorities took action to restrain speculation in 1995 and again in April 1997.10 Under the most recent measures, loans to the broad property sector (excluding infrastructure projects, factories, and houses and apartments costing less than RM 150,000) are limited to 20 percent of total loans.11 The industry as a whole continued to perform robustly in the first half of 1997 as demand remained high in the growing economy, although there were increasing indications during the third quarter that some projects (both private and public) would be delayed. Nevertheless, there is an overhang of projects soon to be completed and consequent concerns about oversupply in some segments of the market—high-end condominiums, office buildings in Kuala Lumpur, shopping centers in nonprime locations, and hotels (Box). Consequently, the previously large price increases are expected to moderate and prices in some market segments are likely to soften.

II. Fiscal sector

A. Overview

16. The consolidated public sector includes the federal, state, and local governments; statutory bodies; and the NFPEs. There were large revisions to the fiscal data from 1991–95, which led to an improvement in the recorded public sector balances by ½ percent to 2 percent of GDP over this period. Large data revisions for the NFPEs account for a significant portion of the improvement in the fiscal position and reflect changes in the treatment of depreciation allowances, and an adjustment from fiscal- to calendar-year basis for some enterprises. In addition, there was a reconciliation of data collected by the Ministry of Finance and Bank Negara, which are received at different times of the year, resulting in data revisions for the NFPEs as well as the state governments.

Box.Malaysia: Summary of Conditions in the Malaysian Property Markets

Type of PropertyDemandSupplyPrices/RentsOutlook
RESIDENTIALStrong in general.34 percent increase but slowing sharply, costs rising.Smaller increases in 1996 than 1995; stabilizing 1997.Good in general with high profits (27 percent in 1996).
Landed propertyStrong with excess demand, especially for terraced houses.Increasing, but with fewer new projects.Rising strongly.Good; high profits for developers.
High-rise condosSome weaknesses.Projected 58 percent increase in 1997.Price correction.Consolidation.
High price condo unitsGood; foreign demand reduced by government measures.Oversupply.Have been rising but are expected to stabilize.Consolidating, but profits still high for developers.
Medium price condo unitsStable.New supply projected to be higher in 1997 than in 1996.Stable but nonprice incentives are being offered.Supply expected to increase at an even higher rate in 1998.
Low income housingSubsidized; strong.Less than demand; expected to increase.Slight increase.Reasonably good, but profit rates are low.
NON-RESIDENTIALPockets of weakness.Oversupply in some, not all areas.Decreases or slower rates of increase.Some starts and completions are being delayed.
OfficesStrong for new buildings, but some slowdown in the take-up rate; weak for old buildings.88.5 percent increase expected in 1998; oversupply in some cities; some planned projects are being delayed.Prices are either falling or rising only slightly; rents are consolidating.Approvals frozen for buildings with more than 20 storeys in Kuala Lumpur, despite postponements, take-up rate expected to decline to 63 percent in 1998 from 94 percent in 1996.
Retail spaceOK in strong locations, weak elsewhere.Some developers have rescheduled projects to reduce oversupply in nonprime areas.Falling for complexes, small increases for shophouses.Highly competitive, take-up rate expected to decline.
Shopping centersWeak.Oversupply, huge increase in 1996; to mitigate oversupply, completions due in 1998 are being delayed.Stable; but prices fell 14 percent outside prime areas.Weaker demand may cause take-up rate to decline to 54 percent in 1998 (from 86 percent in 1994).
ShophousesStrong in prime areas.Big increase in 1996.Rose 7 percent in 1996.Expected to moderate.
IndustrialStrong, with government incentives to locate in the Multi-Media Super Corridor.Will increase with the Multi-Media Super Corridor.Rose 24 percent in 1996.Strong profit margins (27 percent in 1996).
AgriculturalFor conversion to other uses; decline in agricultural activity.Slower rate of growth in value of transactions in 1996.Number and value of transactions increasing at a slower rate.
Hotels and OtherGovernment is promoting tourism for Commonwealth Games in 1998.94 percent increase currently under construction; possible oversupply in KL.Tariffs for hotel rooms currently stable.Overbuilding; competitive.
OverallGood in some areas, fair in others, as long as economic growth continues.Strong, but slowing except for low-cost housing; oversupply a problem in some segments.Vary.Consolidation; some postponements are under way to mitigate oversupply.
Sources: Property Market Report 1996; Bank Negara Malaysia Report on the Annual Survey of Companies in the Construction Sector for the Year Ending December 31, 1996; Indeks Harga Rumah Malaysia; Survey of Office Space and Condominiums In and Around Kuala Lumpur for the Second Half of 1996; and information provided by the Malaysian authorities.
Sources: Property Market Report 1996; Bank Negara Malaysia Report on the Annual Survey of Companies in the Construction Sector for the Year Ending December 31, 1996; Indeks Harga Rumah Malaysia; Survey of Office Space and Condominiums In and Around Kuala Lumpur for the Second Half of 1996; and information provided by the Malaysian authorities.

17. The fiscal data show a trend improvement in the overall public sector balance, from substantial deficits to significant surpluses, during the period 1992–95 (Table 25). Although this fiscal contraction was partly reversed in 1996, the overall balance still recorded a surplus of over 1½ percent of GDP. The improvement in the fiscal position during the earlier period was due, in part, to revenues from the full or partial privatization of NFPEs. However, even if privatization receipts are excluded, the improvement was quite substantial and largely reflected efforts to reduce current expenditures. Indirect and direct taxes have also been reduced in recent years, leading to a decline in the revenue to GDP ratio. However, Malaysia has had a strong revenue performance as a result of sustained economic growth.

Table 15.Malaysia: Federal Government Revenue and Grants, 1992-97(In millions of ringgit)
1992199319941995Prel.

1996
Budget 1/

1997
Tax revenue30,19933,23439,01243,30649,16852,356
Taxes on net income and profits14,38615,66117,40820,13622,66123,663
Oil production companies3,4172,8592,2102,1372,2032,570
Petronas2,2831,9131,4131,6721,7622,056
Other oil companies1,134946797465441514
Other companies7,5248,55110,56211,70714,16614,326
Individuals3,4414,2484,5676,2036,1726,645
Other 2/436989120122
Taxes on property231177219281437422
Taxes on goods and services8,4109,98611,90414,02915,96617,193
Sales tax3,0823,4684,1314,8685,4735,736
Imported goods1,1121,3431,5461,6641,7681,624
Domestic goods1,9702,1252,5853,2043,7054,112
Selective excises on goods3,0623,7124,2985,2805,7906,292
Tobacco and alcoholic beverages7008879131,0551,0661,151
Petroleum products1,1381,4231,6201,8991,9082,008
Motor vehicle tax1,1451,3261,6972,2802,7563,075
Other797668466058
Selective excises on services2,2662,8063,4753,8814,7035,165
Motor vehicle tax1,0701,1521,3131,4961,6991,807
Taxes on international trade6,0736,0306,8006,4747,1738,045
Import duties4,3844,5665,6425,6216,1327,075
Tobacco and alcoholic beverages358295332366419401
Petroleum products1,3601,4611,7501,5461,6851,772
Other import duties2,6662,8103,5603,7094,0284,902
Export duties1,6891,4641,1588531,041970
Petroleum1,6461,4291,098751996868
Palm oil6728742486
Other372832282116
Other tax revenue 3/1,0991,3802,6812,3862,9313,033
Nontax revenue7,8598,3358,1687,7659,8909,156
Property income6,5256,7215,4185,5535,6345,887
Public financial institutions1,010501382196
Rent and interest 4/1,6412,3791,6541,7411,6671,139
Dividends paid by Petronas3,1003,1003,1003,1003,1003,100
Petroleum royalties7747416267108481642
Administrative fees and charges on sale of goods, fines, and forfeit9871,4132,1261,6923,4812,971
Contributions to pension fund000000
Other nontax revenue347201624520775298
Capital revenue573774868876
Total revenue38,11541,60647,25451,15759,14661,588
Foreign grants000000
Total revenue and grants38,11541,60647,25451,15759,14661,588
In percent of GDP
Tax revenue20.320.120.519.819.718.9
Nontax revenue5.35.04.33.64.03.3
Total revenue25.725.224.823.423.722.3
Source: Data provided by the Malaysian authorities.

Includes effects of tax measures contained in the 1997 Budget.

Consists of income taxes on cooperatives and other direct taxes.

Excludes expenditure refunds and net lending.

Excludes revenue from sales of shares.

Source: Data provided by the Malaysian authorities.

Includes effects of tax measures contained in the 1997 Budget.

Consists of income taxes on cooperatives and other direct taxes.

Excludes expenditure refunds and net lending.

Excludes revenue from sales of shares.

Table 16.Malaysia: Economic Classification of Federal Government Expenditure and Net Lending, 1992-97
1992199319941995Prel.

1996
Budget

1997
(In millions of ringgit)
Current expenditure 1/33,09433,01935,74937,94043,75542,571
On personnel, goods, and services15,37515,38717,23918,82221,63920,240
Wages and salaries10,38310,32211,01611,43314,32413,078
Other goods and services 2/4,9925,0656,2237,3897,3157,162
Interest payments 3/7,3047,1666,8156,5216,7956,595
Subsidies and other current transfers10,41510,46611,69512,59715,32115,736
Transfers to state governments1,2191,3021,4401,4101,4511,556
Pensions2,1832,3202,7372,7553,5093,648
Other current transfers 4/7,0136,8447,5188,43210,36110,532
Development expenditure6,3868,2686,49711,01912,97014,378
Direct development expenditure7,4378,0849,10710,82410,77313,238
Net lending 5/-1,051184-2,61019521971140
Adjustment for accounts payable-263-57-655-649-2550
Total expenditure and net lending39,21741,23041,59148,31056,47056,949
(In percent of total expenditure and net lending)
Current expenditure 1/84.480.186.078.577.574.8
Expenditure on goods and services39.237.341.439.038.335.5
Wages and salaries26.525.026.523.725.423.0
Other goods and services 2/12.712.315.015.313.012.6
Interest payments 3/18.617.416.413.512.011.6
Subsidies and other current transfers26.625.428.126.127.127.6
Transfers to state governments3.13.23.52.92.62.7
Pensions5.65.66.65.76.26.4
Other current transfers 4/17.916.618.117.518.318.5
Development expenditure16.320.115.622.823.025.2
Direct development expenditure19.019.621.922.419.123.2
Net lending 5/-2.70.4-6.30.43.92.0
Adjustment for accounts payable-0.7-0.1-1.6-1.3-0.50.0
(In percent of GDP)
Current expenditure22.320.018.817.317.515.4
Expenditure on goods and services3.43.13.33.42.92.6
Wages and salaries7.06.25.85.25.74.7
Direct development expenditure5.04.94.84.94.34.8
Source: Data provided by the Malaysian authorities.

Includes expenditure refunds.

Includes defense expenditures shown in the development budget and some net lending shown in the current budget.

Excludes contributions to the sinking funds.

Consists of subsidies, indemnities, refunds and write-offs, transfers to statutory bodies, and other transfers.

Includes repayments of loans from revenue, loan funds, and revenue from sales of shares.

Source: Data provided by the Malaysian authorities.

Includes expenditure refunds.

Includes defense expenditures shown in the development budget and some net lending shown in the current budget.

Excludes contributions to the sinking funds.

Consists of subsidies, indemnities, refunds and write-offs, transfers to statutory bodies, and other transfers.

Includes repayments of loans from revenue, loan funds, and revenue from sales of shares.

Table 17.Malaysia: Functional Classification of Federal Government Expenditure and Net Lending, 1992-97(In millions of ringgit)
1992199319941995Prel.

1996
Budget

1997
General services25,97827,12730,04833,60437,68839,052
General public services6,3556,5846,4989,1978,6699,042
General administration3,8864,1474,2056,4265,7006,107
Internal security2,4692,4372,2932,7712,9692,935
Defense4,5004,9515,5656,1216,0916,183
Education8,0598,53810,10810,60312,48912,651
Health2,4142,4072,5292,7723,4743,472
Social security 1/2,1832,3202,7372,7553,5093,648
Housing and community developments2,4672,3272,6112,1563,4564,056
Thereof: Community and social securities1,6131,4371,7021,4252,1432,404
Economic services8,0027,7768,9499,30911,97811,996
Agriculture, forestry, and rural development2,3892,4422,5362,4952,6182,582
Transport and communication3,5173,4643,7304,1915,6555,489
Other economic services 2/2,0961,8702,6832,6233,7053,925
Unallocable5,5006,3843,2496,0467,0595,901
Public debt interest7,3047,1666,8156,5216,7956,595
Transfers to state governments1,2191,3021,4401,4101,4511,556
Others 3/-3,023-2,084-5,006-1,885-1,187-2,250
Adjustment for accounts payable-263-57-655-649-2550
Total expenditure and net lending39,21741,23041,59148,31056,47056,949
Memorandum item:
Public debt interest/GDP (percent)4.94.33.63.02.72.4
Source: Data provided by the Malaysian authorities.

Includes government pensions.

Includes general administration, regulations and research, mining, manufacturing and construction, and utilities.

Includes expenditure refunds and net lending items.

Source: Data provided by the Malaysian authorities.

Includes government pensions.

Includes general administration, regulations and research, mining, manufacturing and construction, and utilities.

Includes expenditure refunds and net lending items.

Table 18.Malaysia: Federal Budgetary Developments, 1992-97
1992199319941995Prel.

1996
Budget

1997
(In millions of ringgit)
Total revenue and grants38,11541,60647,25451,15759,14661,588
Tax revenue30,19933,23439,01243,30649,16852,356
Nonpetroleum tax revenue22,63826,06232,33436,97342,37645,138
Taxes on net income and profits 1/11,20012,97915,41718,28020,89521,515
Sales tax and excises 2/8,3719,94312,96514,51616,98918,218
Taxes on international trade3,0673,1403,9524,1774,4925,405
Petroleum tax revenue7,5617,1726,6786,3336,7927,218
Oil production companies3,4172,8592,2102,1372,2032,570
Excises and duties4,1444,3134,4684,1964,5894,648
Nontax revenue7,9168,3728,2427,8519,9789,232
Petroleum3,8743,8413,7263,8103,9484,742
Other 3/4,0424,5314,5164,0416,0304,490
Total expenditure and net lending39,21741,23041,59148,31056,47056,949
Current expenditure33,09433,01935,74937,94043,75542,571
Wages and salaries10,38310,32211,01611,43314,32413,078
Other expenditure on goods and services4,9925,0656,2237,3897,3157,162
Interest payments7,3047,1666,8156,5216,7956,595
Subsidies and transfers10,41510,46611,69512,59715,32115,736
Development expenditure6,1238,2115,84210,37012,71514,378
Direct expenditure7,4378,0849,10710,82410,77313,238
Net lending 4/-1,314127-3,265-4541,9421,140
Overall balance-1,1023765,6632,8472,6764,639
Memorandum items:
Current balance4,9648,55011,43113,13115,30318,941
Primary balance 5/6,2027,54212,4789,3689,47111,234
(In percent of GDP)
Total revenues25.725.224.823.423.722.3
Total expenditures26.425.021.922.122.620.6
Overall balance-0.70.23.01.31.11.7
Current balance3.35.26.06.06.16.8
Primary balance4.24.66.64.33.84.1
Source: Data provided by the Malaysian authorities.

Includes taxes on property.

Includes “other tax revenue.”

Includes capital revenue and foreign grants.

Includes adjustment for accounts payable.

Overall balance plus interest payments.

Source: Data provided by the Malaysian authorities.

Includes taxes on property.

Includes “other tax revenue.”

Includes capital revenue and foreign grants.

Includes adjustment for accounts payable.

Overall balance plus interest payments.

Table 19.Malaysia: Federal Government Operations, 1992-97(In millions of ringgit)
1992199319941995Prel.

1996
Budget

1997
Total revenue (grants are zero)38,11541,60647,25451,15759,14661,588
Transfers from:000000
Statutory bodies000000
State governments000000
Local governments000000
NFPEs000000
Total expenditure and net lending39,21741,23041,59148,31056,47056,949
Current expenditure 1/33,09433,01935,74937,94043,75542,571
Transfers to:3,9174,3504,5844,4514,1424,894
Statutory bodies2,6032,9333,0362,9532,5863,217
State governments1,2191,3021,4401,4101,4511,556
Statutory grants707798888914907938
Other grants512504552496544618
Local governments9511510888105121
NFPEs000000
Direct development expenditure7,4378,0849,10710,82410,77313,238
Transfers to:1,8201,3892,1432,0962,7432,834
Statutory bodies1,3781,0341,5971,5872,1712,312
State governments 2/736575817679
Local governments1557687816670
NFPEs214214384347430373
Net lending-1,051184-2,6101952,1971,140
Net loans to:-1,695-579-2,7667651,87458
Statutory bodies33-5165434343
State governments103128345247261261
Local governments-18-10-10-12-8-8
NFPEs-1,813-692-3,2664871578-238
Adjustments for accounts payable-263-57-655-649-2550
Overall balance-1,1023765,6632,8472,6764,639
Financing (net)1,102-376-5,663-2,847-2,676-4,639
External (net)-3,168-3,135-4,757-1,635-2,177
Project loans-184-1,199-429-534-1503
Market loans-2,858-1,824-4,328-1,101-674
Other-126-112000
Domestic (net)4,2702,759-906-1,212-499
Banking system-217-1,730-810-1,863-1,410
Central bank-403-578-574-417-1,015
Claims on federal government 3/-1,071-1165001,1441025
Deposits by federal government 3/668-462-1,074-1,561-2040
Commercial banks186-1,152-236-1,446-395
Claims on federal government 3/-959-736517-944228
Deposits by federal government 3/1,145-416-753-502-623
Nonbanks4,4874,489-96651911
Employees Provident Fund1,812-4201,0071,123-399
Petronas-5020-302-44-70
Insurance companies 4/8601,1306091,1191513
Other2,3173,779-1,410-1,547-133
Memorandum items:
Privatization revenues1,2914842,909000
Current balance4,9648,55011,43113,13115,30318,941
Overall balance (in percent of GDP)-0.70.23.01.31.11.7
Overall balance excluding privatization revenues (in percent of GDP)-1.6-0.11.41.31.11.7
Source: Data provided by the Malaysian authorities.

Excludes net lending shown in the current budget.

Includes reimbursements to state governments.

Net of claims and deposits from Pension Trust Fund (which are included in monetary survey figures).

Insurance companies are currently required to hold 25 percent of assets in government securities.

Source: Data provided by the Malaysian authorities.

Excludes net lending shown in the current budget.

Includes reimbursements to state governments.

Net of claims and deposits from Pension Trust Fund (which are included in monetary survey figures).

Insurance companies are currently required to hold 25 percent of assets in government securities.

Table 20.Malaysia: Operations of Statutory Bodies, 1992-97(In millions of ringgit)
1992199319941995Prel.

1996
Budget

1997
Total revenue6,9536,9087,9576,7727,0187,943
Own revenue2,9722,9413,3242,2322,2612,414
Transfers from:3,9813,9674,6334,5404,7575,529
Federal government3,9813,9674,6334,5404,7575,529
State governments000000
Local governments000000
NFPEs000000
Total expenditure6,7235,6695,8825,1495,5655,010
Operating expenditure4,0794,1244,2623,2913,8063,185
Transfers to:000000
Federal government000000
State governments000000
Local governments000000
NFPEs000000
Development expenditure2,6441,5451,6201,85817591825
Overall balance2301,2392,0751,6231,4532,933
Financing (net)-230-1,239-2,075-1,623-1,453-2,933
External-222-187-108-167-174-177
Domestic347-1,397119-73-6434
Net borrowing from federal government33-5165434343
Other314-1392-46-116-107-9
Change in assets (increase -)-355345-2,086-1,383-1,215-2,790
Memorandum items:
Current balance2,8742,7843,6953,4813,2124,758
Overall balance (in percent of GDP)0.20.71.10.70.61.1
Source: Data provided by the Malaysian authorities.
Source: Data provided by the Malaysian authorities.
Table 21.Malaysia: Operations of State Governments, 1992-97(In millions of ringgit)
1992199319941995Prel.

1996
Budget

1997
Revenue and grants6,6957,3617,9648,3909,0729,814
Own revenue5,4035,9946,4496,8997,5458,179
Transfers from:1,2921,3671,5151,4911,5271,635
Federal government1,2921,3671,5151,4911,5271,635
Statutory bodies000000
Local governments000000
NFPEs000000
Expenditure6,7477,0276,9097,7658,90210,202
Operating expenditure4,0203,9494,3444,3144,8035,275
Transfers to:20159290324585343
Federal government000000
Statutory bodies000000
Local governments20159290324585343
NFPEs000000
Development expenditure and net lending2,7273,0782,5653,4514,0994,927
Direct development expenditure2,8282,7073,0203,6414,0744,804
Transfers to:11611611285114114
Federal government000000
Statutory bodies000000
Local governments11611611285114114
NFPEs000000
Net lending-101371-455-19025123
Local governments-28-313-71
Other-99363-452-20332122
Overall balance-523341,055625170-388
Financing (net)52-334-1,055-625-170388
External000000
Domestic52-334-1055-625-170388
Borrowing from federal government103128345247261261
Other borrowing, including change in assets-51-462-1,400-872-431127
Memorandum items:
Current balance2,6753,4123,6204,0764,2694,539
Overall balance (in percent of GDP)0.00.20.60.30.1-0.1
Source: Data provided by the Malaysian authorities.
Source: Data provided by the Malaysian authorities.
Table 22.Malaysia: Operations of Local Governments, 1992-97(In millions of ringgit)
1992199319941995Prel.

1996
Budget

1997
Total revenue2,0212,3702,6292,8723,2343,161
Own revenue1,6351,9042,0322,2942,3642,513
Transfers from:386466597578870648
Federal government250191195169171191
Statutory bodies000000
State governments136275402409699457
NFPEs000000
Total expenditure2,0082,2022,5522,8653,0032,960
Current expenditure1,4941,5881,7462,1052,1402,197
Transfers to:000000
Federal government000000
Statutory bodies000000
State governments000000
NFPEs000000
Development expenditure514614806760863763
Overall balance13168777231201
Financing (net)-13-168-77-7-231-201
External000000
Domestic-13-168-77-7-231-201
Borrowing from federal government-18-10-10-12-8-8
Borrowing from state governments-28-313-71
Other borrowing including change in assets7-166-64-8-216-194
Memorandum items:
Current balance5277828837671,094964
Overall balance (in percent of GDP)0.00.10.00.00.10.1
Source: Data provided by the Malaysian authorities.
Source: Data provided by the Malaysian authorities.
Table 23.Malaysia: General Government Operations, 1992-97 1/(In millions of ringgit)
1992199319941995Prel.

1996
Budget

1997
Total revenue and grants 2/48,12552,44559,05962,58271,31674,694
Federal government38,11541,60647,25451,15759,14661,588
Statutory bodies2,9722,9413,3242,2322,2612,414
State governments5,4035,9946,4496,8997,5458,179
Local governments1,6351,9042,0322,2942,3642,513
Total expenditure and net lending48,92050,20749,69257,18966,49767,012
Total current expenditure 2/38,75038,17141,22742,87549,77747,991
Federal government29,17728,66931,16533,48939,61337,677
Statutory bodies4,0794,1244,2623,2913,8063,185
State governments4,0003,7904,0543,9904,2184,932
Local governments1,4941,5881,7462,1052,1402,197
Total direct development expenditure 2/11,70111,65912,68215,24915,04218,055
Federal government5,8316,9097,3489,0758,46010,777
Statutory bodies2,6441,5451,6201,8581,7591,825
State governments2,7122,5912,9083,5563,9604,690
Local governments514614806760863763
Net lending-1,268434-3,562-2861,933966
Adjustments for accounts payable-263-57-655-649-2550
Overall balance-7952,2389,3675,3934,8197,682
Financing795-2,238-9,367-5,393-4,819-7,682
External-3,390-3,322-4,865-1,802-2,351-177
Domestic (including change in assets)4,1851,084-4,502-3,591-2,468-7,505
Memorandum items:
Current balance9,31814,23717,75819,6214,73126,627
Overall balance (in percent of GDP)-0.51.44.92.51.92.8
Overall balance excluding privatization revenues (in percent of GDP)-1.41.13.42.51.92.8
Net lending5451,126-296-7733551,204
Federal government (other)644763156-5703231,082
State government (other)-99363-452-20332122
Source: Data provided by the Malaysian authorities.

Includes federal, state, and local governments, and the statutory bodies.

Net of transfers.

Source: Data provided by the Malaysian authorities.

Includes federal, state, and local governments, and the statutory bodies.

Net of transfers.

Table 24.Malaysia: Operations of Nonfinancial Public Enterprises (NFPEs), 1992-97 1/(In millions of ringgit)
1992199319941995Prel.

1996
Budget

1997
Operating surplus13,54113,64314,80316,36416,11118,307
Transfers from:214214384347430373
Federal government214214384347430373
Statutory bodies000000
State governments000000
Local governments000000
Transfers to:000000
Federal government000000
Statutory bodies000000
State governments000000
Local governments000000
Development expenditure16,14719,45816,19615,22218,45419,653
Overall balance-2,606-5,815-1,3931,142-2,343-1,346
Financing2,6065,8151,393-1,1422,3431,346
External3894,2775,7617,7682,844
Domestic2,2171,538-4,368-8,910-5011,346
Borrowing from federal government-1,813-692-3,2664871,578-238
Borrowing from state governments000000
Other (including changes in assets)4,0302,230-1,102-9,397-2,0791,584
Memorandum items:
Operating surplus net of transfers13,32713,42914,41916,01715,68117,934
Current balance13,54113,64314,80316,36416,11118,307
Overall balance (in percent of GDP)-1.8-3.5-0.70.5-0.9-0.5
Privatization receipts 2/032801,10000
Overall balance excluding privatization receipts (in percent of GDP)-1.8-3.7-0.70.0-0.9-0.5
Source: Data provided by the Malaysian authorities.

As a result of privatization, the number of NFPEs declined from 44 in 1992 to 31 in 1996.

Privatization receipts from the sale of Petronas Dagan in 1993 and Petronas Gas in 1995.

Source: Data provided by the Malaysian authorities.

As a result of privatization, the number of NFPEs declined from 44 in 1992 to 31 in 1996.

Privatization receipts from the sale of Petronas Dagan in 1993 and Petronas Gas in 1995.

Table 25.Malaysia: Consolidated Public Sector, 1992-97 1/(In millions of ringgit)
1992199319941995Prel.

1996
Budget

1997
Total revenue and grants 2/61,45265,87473,47878,59986,99792,628
Federal government38,11541,60647,25451,15759,14661,588
Statutory bodies2,9722,9413,3242,2322,2612,414
State governments5,4035,9946,4496,8997,5458,179
Local governments1,6351,9042,0322,2942,3642,513
NFPE operating surplus13,32713,42914,41916,01715,68117,934
Total expenditure and net lending66,66670,14368,77071,57782,94386,530
Total current expenditure 2/38,75038,17141,22742,87549,77747,991
Federal government29,17728,66931,16533,48939,61337,677
Statutory bodies4,0794,1244,2623,2913,8063,185
State governments4,0003,7904,0543,9904,2184,932
Local governments1,4941,5881,7462,1052,1402,197
Total direct development expenditure 2/27,63430,90328,49430,12433,06637,335
Federal government5,6176,6956,9648,7288,03010,404
Statutory bodies2,6441,5451,6201,8581,7591,825
State governments2,7122,5912,9083,5563,9604,690
Local governments514614806760863763
NFPEs16,14719,45816,19615,22218,45419,653
Net lending5451,126-296-7733551,204
Adjustment for accounts payable-263-57-655-649-2550
Overall public sector balance-5,214-4,2694,7087,0224,0546,098
Financing5,2144,269-4,708-7,022-4,054-6,098
External-3,0019558965,966493-177
Domestic (including changes in assets)8,2153,314-5,604-12,988-4,547-5,921
Memorandum items:
Current balance 3/22,64527,66632,17735,63837,13244,561
Current balance (percent of GDP)15.216.716.916.314.916.1
Overall balance (percent of GDP)-3.5-2.62.53.21.62.2
Privatization revenues1,2918122,9091,10000
Overall balance, excluding privatization revenues (percent of GDP)-4.4-3.10.92.71.62.2
Source: Data provided by the Malaysian authorities.

Consists of the federal, state and local governments, statutory bodies, and NFPEs.

Net of transfers.

Excludes capital revenue and foreign grants.

Source: Data provided by the Malaysian authorities.

Consists of the federal, state and local governments, statutory bodies, and NFPEs.

Net of transfers.

Excludes capital revenue and foreign grants.

18. Fiscal incentives have been used to promote growth and investment in strategic sectors and to encourage training with a view to improving Malaysia’s competitiveness. The 1995, 1996, and 1997 Budgets provided fiscal incentives to promote the services sector, retraining of labor, and a shift toward higher value-added production. Under the Second Industrial Master Plan (1996–2005), the government is also encouraging the upgrading and construction of training institutions to meet the needs of high technology industries.

19. Development expenditures have been quite high, in an effort to reduce supply constraints in the economy by channeling investment into infrastructure, education, and research and development. Private sector investment has been encouraged (through soft loans) to complement the efforts of the government in the development process, particularly for large infrastructure projects. The NFPEs account for over 50 percent of total public sector development expenditure with the three largest NFPEs—Tenaga (the power company), Telekom Malaysia, and Petronas (the oil company)—accounting for the dominant share of these outlays. Development expenditures are projected to decline from 1999, as investment in infrastructure projects winds down toward the end of the Seventh Malaysia Plan.

B. Developments in 1995

20. Fiscal policy aimed at containing demand pressures in 1995 and the consolidated public sector surplus increased by ¾ of a percentage point to 3¼ percent of GDP. Although the federal government balance, which had risen to 3 percent of GDP in 1994 as a result of privatization revenues, fell to 1⅓ percent of GDP in 1995 (Table 19), this was offset by an improvement in the financial position of the NFPEs. Privatization revenues, from the sale of a Petronas subsidiary, boosted the overall balance of the NFPEs from a deficit of ¾ percent of GDP in 1994 to a surplus of ½ percent of GDP in 1995 (Table 24).12

21. Federal government revenues increased at a slower pace in 1995 as a result of tax cuts (Table 15). The corporate income tax rate was lowered from 32 percent to 30 percent, and personal income tax rates were lowered by 2-3 percentage points to a range of 0 percent to 32 percent. Although corporate tax receipts grew more slowly in 1995, individual tax revenues increased strongly as a result of a shift from ex-post collection to taxation at source. Import duties, excise duties, and sales taxes were also reduced on a wide range of goods but indirect taxes increased, owing to higher revenues from motor vehicles, petroleum, and petroleum products.

22. While federal government current expenditures increased moderately in 1995, development expenditures increased by 19 percent (Table 16). The expansion was largely due to an effort to complete projects in the final year of the Sixth Malaysia Plan (1991–95).

23. Higher development expenditures also led to a decline in the surplus of the state governments and the statutory bodies in 1995. The consolidated surplus of the state governments fell in 1995, as a result of weaker revenue performance and a significant expansion in expenditure outlays (Table 21). While operating expenditures increased only moderately, development expenditures rose by 21 percent, leading to a reduction in the overall balance. For the statutory bodies, although operating expenditures declined sharply in 1995, this was offset by higher development expenditures leading to a reduction in the overall surplus from about 1 percent of GDP in 1994 to ¾ percent of GDP in 1995 (Table 20).

C. Developments in 1996

24. A deterioration in the fiscal position of the NFPEs and a sharp increase in operating expenditures of the general government led to a reduction in the public sector surplus from 3¼ percent of GDP in 1995 to about 1½ percent of GDP in 1996. Although the federal government had a budget surplus for the fourth consecutive year, it declined marginally from 1⅓ percent of GDP in 1995 to about 1 percent of GDP in 1996 (Table 18). The financial position of the lower levels of government—the state governments and the statutory boards—also weakened in 1996.

25. Federal government revenues increased by 15½ percent in 1996, despite the income tax and tariff reductions that were introduced in the 1996 Budget, as a result of continued economic growth and more efficient tax collection machinery (Table 15).13 Higher corporate tax receipts as well as improved tax administration led direct tax revenues to increase significantly more than budgeted. Indirect taxes as well as nontax revenues also increased strongly, owing to higher stamp duty collections from property and stock market transactions, petroleum-based revenues, and import and export duties. Although import duties have been reduced over time to make domestic industries more competitive and efficient, revenue declines were offset by higher revenue receipts from duties on motor vehicles and petrol in 1996.

26. Operating expenditures of the federal government were much higher than budgeted and increased by 15 percent in 1996, owing to a salary revision for civil servants and an increase in current transfers (Table 16). While the government maintained tight controls on expenditures for goods and services, wage payments increased significantly reflecting about RM 1 billion of salary increases and an equivalent amount for backdated wage awards for 1995, which were paid out in 1996.14 Pension payments rose by over 27 percent as a result of the salary revision. Current transfers increased by 23 percent, owing to higher grants for the state governments and statutory bodies for restructuring. While development expenditures were almost unchanged, as it was the first year of the Seventh Malaysia Plan, net lending rose significantly, reflecting about RM 1 billion in soft loans to the public enterprise Perwaja to cover its operating losses in 1996.

27. Total federal government debt declined from 42 percent of GDP in 1995 to 36 percent in 1996 (Table 26). The accumulated fiscal surpluses have enabled the federal government to prepay its external loans and its debt policy has been to limit its external borrowing to refinancing loans and drawdown project loans. Domestic borrowing in 1996 was mainly to accommodate market demand for Malaysian government securities, owing, in large part, to the minimum liquidity requirements placed on financial institutions.

Table 26.Malaysia: Outstanding Federal Government Debt, 1992-96
1992199319941995Prel.

1996
(In billions of ringgit; end of period)
Domestic debt76.176.578.078.079.2
Government securities66.666.064.764.766.9
Treasury bills4.34.34.34.34.3
Other5.16.29.09.08.0
Foreign debt20.919.414.813.310.5
International institutions and foreign governments 1/8.07.87.67.15.3
Market loans12.911.67.36.25.2
Total debt97.095.992.891.489.7
(In percent of GDP)
Domestic debt51.246.341.035.731.7
Government securities44.940.034.029.626.8
Treasury bills2.92.62.32.01.7
Other3.43.84.74.13.2
Foreign debt14.111.77.86.14.2
International institutions and foreign governments 1/5.44.74.03.22.1
Market loans8.77.03.82.82.1
Total debt65.358.048.841.835.9
Source: Data provided by the Malaysian authorities.

Consists of project loans and suppliers credit.

Source: Data provided by the Malaysian authorities.

Consists of project loans and suppliers credit.

28. The financial position of the NFPEs moved from a surplus of ½ percent of GDP in 1995 to a deficit of about 1 percent in 1996 (Table 24). This was due to a reduction in the operating surplus, as well as significantly higher development expenditures in 1996 resulting from investment in infrastructure projects and the oil and gas industries. The lower operating surplus in 1996 reflected, in part, the absence of privatization receipts, which had boosted revenues in the previous year. In addition, however, Perwaja had operating losses of about RM 2 billion and Tenaga had lower profits as more independent power producers (IPPs) came on stream.15

29. The financial position of the state governments (Table 21) and the statutory bodies (Table 20) weakened marginally, but continued to remain in surplus. State government revenues, particularly from petroleum and forestry, increased in 1996, but operating expenditures also rose, owing to higher outlays for wages and salaries. Development spending for infrastructure, housing, and social and community programs also increased significantly in 1996, leading to a reduction in the overall balance. Higher expenditures for housing are in line with the objectives of the Seventh Malaysia Plan (1996–2000) to provide affordable low-cost housing.

III. Money, credit, and financial institutions

A. Overview

30. While significant fiscal restructuring and consolidation have contributed to moderating demand pressures in recent years, monetary policy has also played an important role. Monetary policy was tightened progressively from late 1995 to mid-1996, with two increases in the statutory reserve requirement (SRR) during the first half of 1996. Monetary expansion moderated in the early part of 1997, following rapid expansion in 1995–96, but credit growth continued to be strong, in part financed by increases in bank capital and issuance of debt instruments to nonbanks. Although indicators of financial system soundness improved significantly in the 1990s, rapid growth in lending for property and the purchase of shares—particularly by relatively small financial institutions—has raised prudential concerns, and led to the introduction of a number of credit control measures over the past two years. The capital market has expanded rapidly, although the growth of the bond market has been hindered by the lack of a benchmark yield curve, owing to a limited supply of government securities.

B. Money and Credit Market Developments in 1995 and 1996

31. While the accumulation of net foreign assets by the banking system contributed significantly to rapid growth of monetary aggregates in the earlier part of the 1990s, domestic credit expansion to the private sector has played a dominant role in more recent years. Following a moderation in 1994, growth of broad monetary aggregates (M2 and M3)16 accelerated in 1995 (Tables 32 and 34). Monetary policy was tightened accordingly in the latter part of the year, and the one-month interbank rate increased by ½ percent in October. M3 increased by 18 percent in 1995, up from under 16 percent in 1994. The banking system’s net foreign asset position declined during the year, and the government’s fiscal operation contributed negatively to monetary growth, while credit to the private sector grew by 30 percent, compared with 17 percent in 1994. The expansionary effect of credit expansion on monetary growth was to some extent offset by a sharp decline in other items (net), owing to increases in bank capital and issuance of debt instruments to nonbanks.17 Reserve money growth slowed sharply to 19 percent in 1995 from 43 percent in 1994, in part reflecting some unwinding of the buildup in deposits by commercial banks with the central bank during the previous year.18

32. Monetary policy was further tightened in the first half of 1996, as the SRR was increased by one percentage point each in February and June. In addition, guidelines on credit card operations were tightened with effect from January 1. M3 expanded strongly in the first quarter of 1996 and, after a slowdown during the second and third quarters, resumed rapid growth in the final quarter to reach an annual growth rate of close to 24 percent. As the banking system’s net foreign asset position strengthened marginally, and the government’s fiscal outturn remained a contractionary influence on monetary growth, the strong monetary expansion continued to reflect rapid (28 percent) expansion of credit to the private sector. Credit growth was particularly strong in lending for property and purchase of shares and for consumption.19 As in 1995, the credit expansion was in part financed by issuance of debt instruments to the nonbank private sector and increases in bank capital. Reserve money expanded strongly in 1996, reflecting a rapid buildup of deposits by financial institutions at the central bank, in association with an increased pace of short-term capital inflows through the banking system.

33. Expansion in money supply moderated somewhat in the first quarter of 1997, with M3 growing at a year-on-year rate of 20 percent. Credit to the private sector continued to grow rapidly, however, at a year-on-year rate of 30 percent. Growth continued to be particularly strong in lending for property, for the purchase of shares, and for consumption.

34. With respect to interest rates, the tightening of monetary policy at end-1995 reinforced the upward trend that began in 1995 and continued through the first half of 1996 (Table 36). Interest rates remained firm for the second half of 1996 and the early part of 1997, as the stance of monetary policy was maintained. The interest differential with Singapore was stable in 1996, following a significant increase in the previous year, while that with the United States widened by a small amount during 1996. These developments attracted some short-term capital inflows during the year, but the interest differentials were significantly lower than the levels recorded in 1992–93 when the surge in capital inflows occurred.

Table 27.Malaysia: Operations of the Employees’ Provident Fund, 1992-96(In millions of ringgit)
1992199319941995Prel.

1996
Receipts10,87112,67914,90016,98521,131
Contributions6,3177,3768,79210,32412,899
Investment income4,5045,2515,6896,5998,137
Other50524196295
Expenditure1,8722,3312,7343,3313,980
Withdrawals1,7602,2052,5923,1603,768
Operating expenditure112126142171212
Balance8,99910,34812,16613,65417,151
In percent of GDP6.16.36.46.26.9
Holding of government securities39,63539,26440,72139,15038,754
Registered employees (in thousands)66006900730077608050
Registered employers (in thousands)206223236256276
Source: Data provided by the Malaysian authorities.
Source: Data provided by the Malaysian authorities.
Table 28.Malaysia: Assets and Liabilities of Bank Negara, 1992-97(In millions of ringgit, end of period)
19921993199419951996199519961997
Q1Q2Q3Q4Q1Q2Q3Q4Q1
Foreign assets47,21876,47568,20363,79670,03164,25967,20265,33963,79663,84866,87267,87270,03172,189
Gold and foreign exchange46,07575,30966,83161,68267,86562,76965,56063,32161,68261,66164,67565,62667,86570,097
IMF reserve position8488391,0221,7231,7381,1371,2821,6491,7231,7881,7881,8251,7381,661
Holdings of SDRs295327350391428353360369391399409421428431
Claims on federal government 1/5614549802,1553,1181,4729881,7852,1552,8413,4003,0583,1181,752
Other domestic assets11,81323,37123,61622,52523,59023,39623,86724,58722,52522,83025,64924,05523,59022,796
Bills discounted3,8603,5243,3703,1771,3483,6874,0133,4433,1772,8842,8961,5991,3481,378
Deposits with banks and NFIs 2/1,9441,7492,9542,4373,9412,4742,5473,2042,4372,4882,6241,9833,9411,716
Loans and advances2,3692,6373,4454,1964,6603,6013,9344,0854,1964,5084,5844,5954,6604,726
Deferred expenditure05,7075,1364,5663,9955,1365,1365,1364,5664,5664,5664,5663,9953,995
Other3,6409,7548,7118,1499,6478,4988,2378,7198,1498,38410,97811,3129,64710,981
Total assets59,592100,30092,79988,47696,73989,12792,05891,71188,47689,51895,92194,98596,73996,737
Currency in circulation13,17414,64917,17018,91321,06617,65217,51517,84918,91319,71419,46720,02921,06621,567
Currency outside banks12,12413,50715,88417,43318,98016,24616,13916,48017,43318,15017,91018,19318,98019,415
Bank notes and coin1,0501,1421,2861,4802,0861,4061,3761,3691,4801,5641,5571,8362,0862,152
Capital account4,1474,1653,5073,5643,5893,5073,5073,5073,5643,5643,5643,5643,5893,589
Paid-up capital100100100100100100100100100100100100100100
General reserve fund3,5563,5562,8882,9392,9842,8882,8882,8882,9392,9392,9392,9392,9842,984
Allocation of SDRs491509519525505519519519525525525525505505
Other liabilities42,27181,48672,12265,99972,08467,96871,03670,35565,99966,24172,89071,39272,08471,581
Deposits at BNM40,61273,20866,88457,75866,71962,67864,43561,59057,75856,68463,06163,59266,71964,808
Banks and NFIs 2/27,55956,76246,87642,37449,42744,46346,82745,21042,37443,21548,05449,51449,42755,184
Federal government5,6792,9116,4698,37811,1084,6775,4818,6858,3787,10310,1789,56911,1085,592
Other7,37413,53513,5397,0066,18413,53812,1287,6957,0066,3664,8294,5096,1844,032
Other reserves75341434343434343434343434343
Bank Negara bills and bonds07,1615,0067,1054,9684,4664,8247,3837,1057,8947,9235,4594,9685,476
Other9061,0761891,0933557801,7341,3401,0931,6201,8622,2983551,254
Total liabilities59,592100,30092,79988,47696,73989,12792,05891,71188,47689,51895,92194,98596,73996,737
Source: Data provided by the Malaysian authorities.

Federal government securities.

Nonmonetary financial institutions (finance companies, merchant banks, and discount houses).

Source: Data provided by the Malaysian authorities.

Federal government securities.

Nonmonetary financial institutions (finance companies, merchant banks, and discount houses).

Table 29.Malaysia: Monetary Authorities’ Account, 1992-97 1/
19921993199419951996199519961997
Q1Q2Q3Q4Q1Q2Q3Q4Q1
(In millions of ringgit; end of period)
Net foreign assets47,19676,43568,17363,77070,01564,23267,18465,30863,77063,82266,84667,84670,01572,151
Net domestic assets-21,891-48,182-27,691-15,800-5,165-22,821-24,447-20,526-15,800-10,273-9,152-6,929-5,165-3,248
Net claims on federal government-5,118-2,457-5,488-6,223-7,990-3,205-4,492-6,901-6,223-4,263-6,779-6,511-7,990-3,840
Claims on private sector1,1072,4003,3194,0724,5363,4503,8093,9374,0724,1904,4554,4724,5364,597
Claims on banks and NFIs 2/, 3/-11,566-38,7273,4433,2501,3483,7604,0863,5163,2502,9572,9691,8871,3481,378
Less other items net 3/-6,314-9,398-28,964-16,899-3,059-26,826-27,850-21,078-16,899-13,157-9,797-6,777-3,059-5,383
Of which: BNM bills and bonds07,1615,0067,1054,9684,4664,8247,3837,1057,8947,9235,4594,9685,476
Reserve money25,30628,25340,48147,97064,85041,41142,73744,78247,97053,55057,69460,91664,85068,904
Currency in circulation13,17414,64917,17018,91321,06617,65217,51517,84918,91319,71419,46720,02921,06621,567
Deposits of commercial banks7,6438,16114,74519,08828,69715,49716,66817,91319,08822,53725,45027,05528,69731,327
Deposits of NFIs 2/3,8224,6057,3549,18714,6967,7407,9388,4929,18710,79612,32413,39514,69615,995
Deposits of private sector6678381,21378239152261652878250345343739115
(Twelve-month percentage change)
Foreign assets (net)55.062.0-10.8-6.59.8-29.3-23.3-21.9-6.5-0.6-0.53.99.813.1
Domestic assets (net)173.2120.1-42.5-42.9-67.3-60.9-54.3-54.8-42.9-55.0-62.6-66.2-67.3-68.4
Claims on federal government (net)28.4-52.0123.413.428.478.5-25.31.313.433.050.9-5.628.4-9.9
Claims on private sector-3.5116.838.322.711.426.136.521.722.721.417.013.611.49.7
Claims on banks-301.5234.8-108.9-5.6-58.521.933.74.5-5.6-21.4-27.3-46.3-58.5-53.4
Reserve money12.811.643.318.535.227.325.417.218.529.335.036.035.228.7
Currency in circulation9.111.217.210.211.411.312.811.110.211.711.112.211.49.4
Deposits of commercial banks9.66.880.729.550.345.341.525.629.545.452.751.050.339.0
Deposits of NFIs31.620.559.724.960.044.831.120.724.939.555.357.760.048.2
Memoranda (RM million)
Bank and NFI required reserves11,28612,69021,88328,08343,17523,19924,48226,21228,08333,17637,63640,13943,17546,927
Bank and NFI excess reserves1,2291,2191,5021,6722,3031,4441,5001,5621,6721,7201,6962,1462,303
Source: Data provided by the Malaysian authorities.

Bank Negara Malaysia accounts plus Treasury IMF operations.

Nonmonetary financial institutions (finance companies, merchant banks, and discount houses).

Since January 1994, claims on banks exclude short-term deposits with the central bank.

Source: Data provided by the Malaysian authorities.

Bank Negara Malaysia accounts plus Treasury IMF operations.

Nonmonetary financial institutions (finance companies, merchant banks, and discount houses).

Since January 1994, claims on banks exclude short-term deposits with the central bank.

Table 30.Malaysia: Statement of Assets and Liabilities of Commercial Banks, 1992-97(In millions of ringgit; end of period)
19921993199419951996199519961997
Q1Q2Q3Q4Q1Q2Q3Q4Q1
Foreign assets5,22110,37210,51710,25710,19611,05410,4279,46510,25710,4579,6849,29410,19613,139
Reserves8,4689,03815,43620,10830,33616,54617,73918,89320,10824,05126,46128,40130,33632,939
Claims on federal government11,0699,8729,6959,67011,75110,2529,80410,5789,67010,20910,36510,99311,75111,852
Claims on private sector109,263121,188140,632183,453230,863149,434158,371170,364183,453194,781204,542220,659230,863249,616
Claims on NFIs 1/7,8288,32612,35116,72524,69311,41212,06213,01416,72514,41918,19518,56924,69326,213
Unclassified assets26,95256,29844,09244,37738,73641,89945,84844,38744,37741,59042,19337,00838,73642,210
Assets168,801215,095232,722284,590346,575240,597254,251266,701284,590295,507311,440324,924346,575375,969
Foreign liabilities18,68231,48817,00015,87321,83019,23017,24215,86015,87314,33020,31422,89621,83028,802
Federal government deposits1,4571,8712,7824,1025,4953,2304,1824,3384,1024,5734,3865,2455,4957,334
Demand deposits18,60128,71531,15635,51443,81330,55332,70633,00135,51436,58237,27640,94243,81346,038
Time and savings deposits72,72488,62097,532122,918155,440101,353109,014115,585122,918129,824135,348141,542155,440160,419
Repurchase agreements6,4908,2639,2029,61211,7839,3379,4669,4429,61211,32710,3699,97311,78312,428
Bonds and money market instruments15,23214,90726,48138,61742,74025,72328,60934,73638,61738,80542,88344,65042,74049,278
Credit from central bank-12,943-40,080-18,079-10,190-2,700-16,253-17,084-13,652-10,190-6,012-6,401-5,715-2,700-4,020
Credit from NFIs 1/4357422,1162,8131,3612,0472,8472,2992,8133,1562,6561,6391,3611,818
Capital accounts14,65016,63023,52829,17236,28624,75725,76426,55629,17230,83932,31833,91336,28641,528
Unclassified liabilities33,47363,94041,00436,15930,52740,62041,50538,53636,15932,08332,29129,83930,52732,344
Liabilities168,801215,095232,722284,590346,575240,597254,251266,701284,590295,507311,440324,924346,575375,969
Source: Data provided by the Malaysian authorities.

Nonmonetary financial institutions (finance companies, merchant banks, and discount houses).

Source: Data provided by the Malaysian authorities.

Nonmonetary financial institutions (finance companies, merchant banks, and discount houses).

Table 31.Malaysia: Deposit Money Banks--Consolidated Statement of Assets and Liabilities of Commercial Banks and Bank Islam, 1992-97(In millions of ringgit; end of period)
19921993199419951996199519961997
Q1Q2Q3Q4Q1Q2Q3Q4Q1
Foreign assets5,24610,48210,54210,32010,25511,08010,4549,50510,32010,5469,7269,33910,25513,187
Reserves8,6049,24215,81020,45930,72716,91518,09219,23620,45924,42826,93228,81530,72733,515
Claims on federal government11,32410,69011,12710,18212,02011,27710,88611,15110,18210,71510,78111,21812,02011,995
Claims on private sector110,418122,337141,965185,472233,270150,904159,981172,110185,472196,926206,787223,018233,270252,267
Claims on NFIs 1/7,8288,32612,35216,80224,77111,43612,11613,08216,80214,48918,31518,68424,77126,420
Unclassified assets27,03856,40644,23944,60139,49042,22746,10044,71544,60141,81442,76837,36339,49043,150
Assets170,458217,483236,035287,836350,533243,839257,629269,799287,836298,918315,309328,437350,533380,534
Foreign liabilities18,68431,48817,00015,87321,83019,23417,24315,86015,87314,33020,31522,89821,83028,814
Federal government deposits1,4951,9032,8584,1495,5463,3234,2384,3924,1494,6634,4495,2965,5467,459
Demand deposits18,93129,12831,72336,19144,62331,19033,34033,63836,19137,35237,99641,69344,62347,016
Time and savings deposits73,68290,18499,749124,935157,858103,431111,244117,500124,935131,687137,815143,567157,858162,508
Repurchase agreements6,4908,2639,2029,61211,7839,3379,4669,4429,61211,32710,3699,97311,78312,428
Bonds and money market instruments15,25114,93326,52938,65542,79125,76028,63634,77438,65538,84342,94744,70442,79149,337
Credit from central bank-12,943-40,080-18,079-10,190-2,709-16,253-17,084-13,652-10,190-6,012-6,401-5,715-2,7094,020
Credit from NFIs 1/4357422,1162,8131,3612,0472,8472,2992,8133,1562,6561,6391,3611,992
Capital accounts14,84316,88423,81329,47836,61725,05026,07626,87229,47831,15632,64834,25336,61741,865
Unclassified liabilities33,59064,03841,12336,32030,83340,72041,62338,67436,32032,41632,51530,12930,83333,135
Liabilities170,458217,483236,035287,836350,533243,839257,629269,799287,836298,918315,309328,437350,533380,534
Source: Data provided by the Malaysian authorities.

Nonmonetary financial institutions (finance companies, merchant banks, and discount houses).

Source: Data provided by the Malaysian authorities.

Nonmonetary financial institutions (finance companies, merchant banks, and discount houses).

Table 32.Malaysia: Monetary Survey, 1993-97 1/
1993199419951996199519961997
Q1Q2Q3Q4Q1Q2Q3Q4Q1
(In millions of ringgit; end of period)
Net foreign assets55,42961,71458,21758,44056,07860,39558,95358,21760,03856,25754,28758,44056,524
Net domestic assets96,983116,528157,012205,800123,759131,502142,485157,012166,771178,619189,828205,800220,713
Net domestic credit131,067148,065189,354236,290159,103165,946175,905189,354202,905210,795226,901236,290257,560
Net claims on federal government6,3302,781-190-1,5164,7492,156-142-1901,789-447-589-1,516696
Claims on private sector124,737145,284189,544237,806154,354163,790176,047189,544201,116211,242227,490237,806256,864
Other items net-34,084-31,537-32,342-30,490-35,344-34,444-33,420-32,342-36,134-32,176-37,073-30,490-36,847
Broad money (M2)152,413178,240215,227264,238179,836191,896201,438215,227226,809234,876244,113264,238277,237
Narrow money (M1)48,07856,17463,59378,69055,69858,03359,13863,59366,80168,68373,71878,69082,441
Reserve money28,25340,48147,97064,85041,41142,73744,78247,97053,55057,69460,91664,85068,904
Less: Bank notes and coin1,1421,2861,4802,0861,4061,3761,3691,4801,5641,5571,8362,0862,152
Less: Bank deposits at Bank Negara8,16114,74519,08828,69715,49716,66817,91319,08822,53725,45027,05528,69731,327
Plus: Bank demand deposits29,12831,72336,19144,62331,19033,34033,63836,19137,35237,99641,69344,62347,016
Quasi-money plus repos 2/98,472120,726134,551169,644112,784120,726126,948134,551143,017148,188153,543169,644174,936
Bank NCDs 3/5,86313,10017,08315,90411,35413,13715,35217,08316,99118,00516,85215,90419,860
(Twelve-month percentage change)
Foreign assets (net)64.211.3-5.70.4-16.0-3.9-18.8-5.77.1-6.9-7.90.4-5.9
Domestic credit12.813.027.924.819.628.027.227.927.527.029.024.826.9
Claims on government (net)34.4-56.1-106.8699.6-28.4-36.5-107.7-106.8-62.3-120.7316.0699.6-61.1
Claims on private sector11.816.530.525.522.129.729.030.530.329.029.225.527.7
M223.016.920.822.87.317.317.220.826.122.421.222.822.2
M135.316.813.223.712.512.97.413.219.918.424.723.723.4
(Twelve-month change as a percent of M2 at beginning of period)
Foreign assets (net)17.54.1-2.00.1-6.3-1.5-7.9-2.02.2-2.2-2.30.1-1.5
Domestic credit12.011.223.221.815.522.221.923.224.423.425.321.824.1
Claims on government (net)1.3-2.3-1.7-0.6-1.1-0.8-1.2-1.7-1.6-1.4-0.2-0.6-0.5
Claims on private sector10.713.524.822.416.722.923.024.826.024.725.522.424.5
M110.15.34.27.03.74.02.44.26.25.57.27.06.9
Source: Data provided by the Malaysian authorities.

Consolidation of the accounts of the monetary authorities, commercial banks and Bank Islam.

Quasi-money is equal to Bank Negara time deposits plus bank time and savings deposits.

Negotiable certificates of deposit.

Source: Data provided by the Malaysian authorities.

Consolidation of the accounts of the monetary authorities, commercial banks and Bank Islam.

Quasi-money is equal to Bank Negara time deposits plus bank time and savings deposits.

Negotiable certificates of deposit.

Table 33.Malaysia: Nonmonetary Financial Institutions—Consolidated Statement of Assets and Liabilities of Finance Companies, Merchant Banks and Discount Houses, 1992-97(In millions of ringgit; end of period)
19921993199419951996199519961997
Q1Q2Q3Q4Q1Q2Q3Q4Q1
Foreign assets129137167209362165174189209231255273362458
Reserves4,4368,42110,39412,28015,91011,73512,00511,20412,28013,61114,64315,02515,91018,288
Claims on federal government4,2093,7273,0732,9954,8562,8202,5643,1192,9953,3024,0764,4634,8565,201
Finance companies2,1221,9901,9362,0313,4661,8631,7412,0112,0312,3162,7173,0753,4663,587
Merchant banks1,0411,103546431754503507553431585754797754862
Discount houses1,046634591533636454316555533401605591636752
Claims on private sector52,70659,68371,02491,554121,09173,34177,89383,63991,55496,825104,299111,010121,091128,847
Finance companies39,41544,90351,68165,64185,69853,75857,07861,31865,64169,47973,22679,03985,69891,759
Merchant banks9,56310,61913,07415,90721,18313,45113,80213,77815,90716,09118,44219,05621,18323,193
Discount houses3,7284,1616,26910,00614,2106,1327,0138,54310,00611,25512,63112,91514,21013,895
Claims on commercial banks5,4827,0319,1359,14810,6208,3188,7768,2589,1488,5589,3298,86410,62010,414
Finance companies4,3096,0446,6427,3957,6406,2936,8316,3657,3956,8547,2436,8767,6407,883
Merchant banks5898252,2611,4682,3791,7651,7901,7271,4681,5391,7261,5432,3792,126
Discount houses584163233285601260155166285165360445601405
Unclassified assets7,4499,13811,51713,91416,42811,07212,87911,23713,91412,88313,21513,40416,42816,747
Assets74,41188,137105,310130,100169,267107,451114,291117,646130,100135,410145,817153,039169,267179,955
Foreign liabilities0453062433985996211374362
Federal government deposits4537227071,2132,1168991,0501,0111,2131,6471,7681,8922,1162,619
Time and savings deposits44,80156,36161,07368,69286,62163,36265,35267,58068,69277,60678,47281,78186,62187,707
Finance companies35,44043,20047,39654,21265,91847,86151,24652,05954,21259,25760,58163,42365,91867,670
Merchant banks6,3729,4648,9648,88013,47011,0479,0279,9918,88012,13711,71212,03313,47013,450
Discount houses2,9893,6974,7135,6007,2334,4545,0795,5305,6006,2126,1796,3257,2336,587
Repurchase agreements2,5942,3043,3275,0795,6103,2084,6184,1285,0793,5334,5294,6395,6105,614
Bonds and money-market instruments5,0915,0397,55611,09720,0477,9287,9109,84911,09712,78115,55417,54720,04720,296
Credit from commercial banks6,0856,91113,26719,09428,46912,60413,12912,81619,09415,57619,33319,85628,46934,070
Finance companies2,6543,2525,56210,37016,2496,2395,9597,39010,3708,2369,51810,34616,24920,845
Merchant banks2,0632,1864,9694,9795,6853,2823,8653,0694,9793,2064,2814,2105,6857,108
Discount houses1,3681,4732,7363,7456,5353,0833,3052,3573,7454,1345,5345,3006,5356,117
Capital accounts5,9346,8208,58810,77213,8038,9319,4459,88810,77211,12112,04312,98513,80314,639
Unclassified liabilities9,4539,93510,76214,09112,55810,48012,70212,27514,09113,14514,11714,30212,55814,949
Liabilities74,41188,137105,310130,100169,267107,451114,291117,646130,100135,410145,817153,039169,267179,955
Source: Data provided by the Malaysian authorities.
Source: Data provided by the Malaysian authorities.
Table 34.Malaysia: Banking Survey, 1993-97 1/
1993199419951996199519961997
Q1Q2Q3Q4Q1Q2Q3Q4Q1
(In millions of ringgit; end of period)
Net foreign assets55,52161,85158,36458,75956,20460,48459,04358,36460,26856,51154,52358,75956,920
Net domestic assets154,526181,462229,300297,028189,922201,106213,752229,300245,882259,719274,521297,028310,056
Net domestic credit193,755221,455282,690360,121234,365245,353261,652282,690301,386317,402340,482360,121388,989
Net claims on federal government9,3355,1471,5921,2246,6703,6701,9661,5923,4441,8611,9821,2243,278
Claims on private sector184,420216,308281,098358,897227,695241,683259,686281,098297,941315,541338,500358,897385,711
Other items net-39,229-39,993-53,390-63,093-44,443-44,247-47,900-53,390-55,504-57,683-65,961-63,093-78,933
Total liquidity (M3)210,048243,313287,662355,785246,125261,588272,796287,662306,149316,229329,045355,785366,976
Monetary liablities42,96548,25953,80663,21047,43149,58350,14953,80655,39355,71359,66063,21065,441
Narrow money (M1)48,07856,17463,59378,69055,69858,03359,13863,59366,80168,68373,71878,69082,441
Less: Bank & NFI demand deposits5085616017865275124976016126466637861006
Less: NFI deposits at BNM4,6057,3549,18614,6947,7407,9388,4929,18610,79612,32413,39514,69415,994
Quasi-money liabilities156,598173,027207,873261,467179,031190,058198,194207,873223,753230,978239,612261,467267,874
Quasi-money and bank repos98,472108,966134,551169,644112,784120,726126,948134,551143,017148,188153,543169,644174,936
NFI time and saving deposits56,36161,07368,69286,62163,36265,35267,58068,69277,60678,47281,78186,62187,707
NFI repos2,3043,3275,0795,6103,2084,6184,1285,0793,5334,5294,6395,6105,614
Less: Bank and NFI fixed deposits539339449408323638462449403211351408383
Bank and NFI NCDs10,48522,02725,98331,10819,66321,94724,45325,98327,00329,53829,77331,10833,661
Memorandum item:
Broad money (M2)152,413178,240215,227264,238179,836191,896201,438215,227226,809234,876244,113264,238277,237
(Twelve-month percentage change)
Foreign assets (net)63.811.4-5.60.7-15.9-3.9-18.9-5.67.2-6.6-7.70.7-5.6
Domestic credit12.214.327.727.419.626.225.727.728.629.430.127.429.1
Claims on government (net)10.3-44.9-69.1-23.1-28.2-38.8-52.0-69.1-48.4-49.30.8-23.1-4.8
Claims on private sector12.317.330.027.722.028.327.330.030.930.630.327.729.5
M135.316.813.223.712.512.97.413.219.918.424.723.723.4
M223.016.920.822.87.317.317.220.826.122.421.222.822.2
M323.815.818.223.79.016.816.618.224.420.920.623.719.9
(Twelve-month change as a percent of M3 at beginning of period)
Foreign assets (net)12.83.0-1.40.1-4.7-1.1-5.9-1.41.7-1.5-1.70.1-1.1
Domestic credit12.413.225.226.917.022.822.925.227.227.528.926.928.6
Claims on government (net)0.5-2.0-1.5-0.1-1.2-1.0-0.9-1.5-1.3-0.70.0-0.1-0.1
Claims on private sector11.915.226.627.018.223.823.826.628.528.228.927.028.7
Source; Data provided by the Malaysian authorities.

Consolidation of the accounts of the monetary authorities, commercial banks and Bank Islam, finance companies, merchant banks, and discount houses.

Source; Data provided by the Malaysian authorities.

Consolidation of the accounts of the monetary authorities, commercial banks and Bank Islam, finance companies, merchant banks, and discount houses.

Table 35.Malaysia: Money and Banking Indicators, 1992-97
19921993199419951996Q1

1997
(Billions of ringgit; total per period)
Liquidity operations of Bank Negara-23.68-39.3724.3415.6511.26-1.79
Interbank transactions volume432.60544.50818.90857.20888.30280.51
(In percent; end of period)
Interest rates
Interbank rate (overnight)7.916.164.906.507.156.43
Treasury bill rate (3-month)7.105.244.505.806.486.31
Deposit rate (12-month) 1/7.846.296.156.897.267.25
Average base lending rate 1/9.298.226.838.039.189.24
Average lending rate 1/10.269.658.249.2810.1210.14
Loan/deposit ratio 2/
Commercial banks93.983.583.788.989.392.1
Finance companies86.885.687.489.790.889.2
Risk-weighted capital ratio (RWCR) 3/
Commercial banks11.712.911.710.611.2
Finance companies9.28.810.19.710.1
(Number)
Institutions not meeting the minimum RWCR
Commercial banks111000
Finance companies643100
(Percent of total loans)
Nonperforming loans 4/
Commercial banks14.613.09.84.93.8
Principal portion9.58.37.53.62.9
Interest-in-suspense5.14.72.31.30.9
Finance companies16.014.511.26.64.7
Principal portion10.49.98.14.53.4
Interest-in-suspense5.64.63.12.11.3
General provision 5/
Commercial banks1.21.31.61.71.9
Finance companies1.01.11.31.51.5
(Percent of nonperforming loans)
Total outstanding bad debt provision
Commercial banks30.934.335.657.579.8
Finance companies25.727.734.053.061.0
Memorandum items:
Number of institutions
Commercial banks373737373737
Finance companies414040404040
Source: Data provided by the Malaysian authorities.

Commercial banks.

Deposits include repurchase agreements and negotiable instruments of deposit; loans exclude housing loans sold to Cagamas.

The minimum RWCR is currently 8 percent for all institutions; before 1994, it was 8 percent for finance companies and domestic banks. Compliance was mandatory by end-December 1992.

As a percent of total loans including housing loans sold to Cagamas.

As a percent of total loans including housing loans sold to Cagamas and less interest-in-suspense and specific provisions; minimum required provision is 1 percent.

Source: Data provided by the Malaysian authorities.

Commercial banks.

Deposits include repurchase agreements and negotiable instruments of deposit; loans exclude housing loans sold to Cagamas.

The minimum RWCR is currently 8 percent for all institutions; before 1994, it was 8 percent for finance companies and domestic banks. Compliance was mandatory by end-December 1992.

As a percent of total loans including housing loans sold to Cagamas.

As a percent of total loans including housing loans sold to Cagamas and less interest-in-suspense and specific provisions; minimum required provision is 1 percent.

Table 36.Malaysia: Interest Rates of Commercial Banks and Finance Companies, 1992-97 1/, 2/(In percent; end of period)
19921993199419951996199519961997
Q1Q2Q3Q4Q1Q2Q3Q4Q1
Fixed deposits
1-month7.96.45.26.57.25.65.75.96.56.87.27.17.27.2
7.96.55.36.77.35.85.86.06.77.07.47.37.37.4
3-month7.96.45.36.67.25.85.86.06.66.97.27.27.27.3
8.06.55.55.57.36.05.95.75.57.77.47.37.37.4
6-month7.96.35.86.77.36.16.06.16.76.97.37.37.37.3
8.06.55.96.97.46.36.26.26.97.27.47.47.47.4
9-month7.96.36.06.97.36.36.16.26.97.17.37.37.37.3
8.06.46.16.97.46.46.46.36.97.27.47.47.47.4
12-month7.86.36.26.97.36.66.36.46.97.07.37.37.37.3
8.06.46.57.07.46.76.56.57.07.27.47.47.47.4
Savings deposits3.33.33.53.33.53.33.33.33.33.33.43.33.53.4
5.05.05.05.05.55.05.05.05.05.55.55.55.55.5
Average base lending rate 3/9.38.26.88.09.27.17.57.68.08.68.99.29.29.2
10.610.58.49.410.78.58.99.19.49.810.310.610.710.7
Average lending rate 4/10.39.78.29.310.18.58.78.89.39.710.010.110.110.1
12.312.211.511.511.911.411.411.411.511.611.912.011.911.8
Source: Data provided by the Malaysian authorities.

Most frequently quoted rates (or the average of the two most frequently quoted rates), unless otherwise indicated.

Rates in italics are corresponding interest rates of finance companies.

With effect from February 1991, all lending rates are pegged to a bank’s declared base lending rate, with the exception of those levied on loans to priority sectors and those prescribed by law.

Refers to the weighted average lending rate of all commercial banks and finance companies, respectively.

Source: Data provided by the Malaysian authorities.

Most frequently quoted rates (or the average of the two most frequently quoted rates), unless otherwise indicated.

Rates in italics are corresponding interest rates of finance companies.

With effect from February 1991, all lending rates are pegged to a bank’s declared base lending rate, with the exception of those levied on loans to priority sectors and those prescribed by law.

Refers to the weighted average lending rate of all commercial banks and finance companies, respectively.

C. Monetary Policy Operation

35. Bank Negara continued to strengthen its operating framework for monetary policy during 1995–96, focusing more on money market liquidity and interest rates, while continuing to closely monitor developments in monetary and credit aggregates. The primary policy instruments used by Bank Negara in recent years have included increases in the SRR, direct borrowing from or lending to the banking system, and the transfer of government and Employees Provident Fund (EPF) deposits to the central bank. These instruments have been supplemented by sales of government securities and Bank Negara bills. In addition, direct instruments, such as lending guidelines, credit controls, and moral suasion, have been used during times of protracted excess liquidity and to impact the composition of private credit in the economy.

36. The SRR, which is unremunerated, has been raised nine times since 1989, from 4½ percent of eligible liabilities to 13½ percent in 1996. The authorities recognize that the SRR is an inflexible instrument and that the high level of unremunerated reserves imposes a significant implicit tax burden on financial intermediation. Nevertheless, during periods of substantial excess liqudity, the SRR has been preferred to other available instruments, as it directly reduces banks’ access to funds and serves as a clear signal to the market of a tightening in the policy stance.

37. A number of measures were taken in 1996 to increase the efficiency of open market operations as a policy instrument, including increased issues of government securities, the restructuring of the principal dealers system, and the introduction of a fully automated system for tendering (FAST).20 Nevertheless, open market operations continue to be hindered by a limited supply of government paper, owing to prudent fiscal policies and the small volume of Bank Negara (BNM) bills, which have only been issued since 1993. Secondary markets for government papers and BNM bills are not well developed, owing to limited supply and captive demand resulting from minimum liquid asset requirements.21 Additionally, a new formula for the base lending rate (BLR) was introduced in November 1995 to improve the link between lending rates and short-term interbank rates, and thereby strengthen the role of the money market as a channel for the transmission of monetary policy.

D. Financial Institutions

38. The banking system in Malaysia, broadly defined, consists of commercial banks, merchant banks, finance companies, and discount houses. Other nonbank financial institutions include the National Savings Bank, pension and provident funds, insurance companies, and specialized credit agencies. Commercial banks hold the majority of total banking system assets (accounting for 67 percent of the total at end-1996). The number of commercial and merchant banks has been relatively stable over recent years, while there has been some rationalization of the finance company sector as a result of mergers and acquisitions among a number of the smaller companies.

39. Moves to deregulate and liberalize the financial system over the last decade have been accompanied by a tightening of prudential supervision and regulation, including a number of specific prudential financial requirements, as well as the provision of regular statistical reports and inspections. While commercial banks are still the only institutions that may provide checking facilities and hold foreign exchange licenses, financial sector policies have been directed toward expanding the range of activities that finance companies and merchant banks may undertake, and placing similar regulatory requirements on all institutions. A two-tier banking framework was introduced in December 1994 for commercial banks, and extended in 1996 for finance companies and merchant banks, with the objective of liberalizing and consolidating the financial system in stages, and ultimately creating a core of efficient, well-managed institutions that can service the domestic economy as well as compete internationally.22

40. Following the financial sector crisis in the mid-1980s, indicators of financial system soundness improved substantially in the 1990s (Table 35). Nonperforming loans in banks and finance companies fell from 20 percent of outstanding loans in 1990 to a provisional figure of 4 percent in 1996, aided by a sustained period of strong economic expansion and a large increase in asset prices. Risk-weighted capital adequacy ratios were maintained at levels in excess of minimum Basle standards, and general provisions of commercial banks have increased to close to 2 percent of gross loans in 1996, from ¾ percent in 1990.

41. These improvements notwithstanding, persistently strong credit expansion to the private sector in recent years23—particularly for property and the purchase of stocks and shares—has raised prudential concerns. At end-March 1997, 30 percent of banks’ outstanding loans were to the broad property sector and another 9 percent were to the equity markets, bringing the total for shares and property to 39 percent. Credit growth was particularly rapid among smaller institutions, in part reflecting their efforts to build their asset bases to achieve Tier-1 status. Loans extended by Tier-2 commercial banks, merchant banks, and finance companies increased by 35 percent in 1996, compared with 22 percent in Tier-1 institutions. In view of the potential prudential risks related to high credit growth for property and shares, as well as concerns that this would fuel asset price inflation, Bank Negara introduced lending limits for property and for purchase of stocks and shares with effect from April 1, 1997.24

E. Capital Market Developments

42. The Malaysian capital market has recorded rapid growth since the mid-1980s and has emerged as a major source of funds; financing from the capital market accounted for 35 percent of total financing during 1990–96, compared with only 10 percent over 1980–85. The rapid development of the capital market has been supported by a number of measures in recent years to strengthen, broaden, and deepen the market. These include the establishment of the second board of the Kuala Lumpur Stock Exchange (KLSE) in 1992, the establishment of the Securities Commission in 1993 as the sole regulatory body for the capital market, improvements in the trading and settlement infrastructure, the establishment of credit rating agencies, and the liberalization of guidelines for selected institutional investors.

43. The capitalization of the KLSE more than tripled between 1992 and 1996, approaching 325 percent of GDP at end-1996 (Table 38). The Kuala Lumpur Composite Index (KLCI) increased by 24 percent in 1996, following lackluster performance in 1994–95. The Second Board—which trades stocks in smaller, less well-capitalized companies—experienced even greater growth in 1996, with the Second Board Index (SBI) rising by 93 percent; this compares with an average rate of growth of 37 percent in the previous four years. The KLCI and SBI fell by 18 percent and 5 percent, respectively, in the first seven months of 1997, as market sentiment declined, owing to a combination of factors, including the lending limits imposed in March and developments in Thailand.

Table 37.Malaysia: Direction of Financial Institution Lending, 1992-97
19921993199419951996Q1

1997
(In millions of ringgit; end of period)
Agriculture6,054.85,306.74,582.05,255.16,051.16,799.6
Mining and quarrying1,137.5883.7723.01,184.3990.51,146.6
Manufacturing29,356.531,461.737,337.748,818.255,655.056,592.3
Electricity735.11,003.72,998.83,749.95,126.85,864.3
General commerce15,165.215,681.017,135.221,432.225,149.625,715.7
Building and construction12,449.713,917.015,721.520,232.927,826.831,164.6
Real estate14,931.915,266.614,623.920,571.828,033.130,473.1
Individual housing loans20,972.924,324.628,019.432,752.939,661.041,748.4
Transport, storage, and communication3,123.43,608.84,053.45,101.37,572.78,221.5
Finance, insurance, business services17,414.122,887.122,868.131,874.046,681.955,415.7
Restaurants, hotels, and boarding houses1,874.62,028.32,349.82,703.03,007.63,488.5
Purchase of stocks and shares4,346.75,543.312,722.013,943.615,862.015,871.4
Consumption credit17,085.619,512.022,699.129,518.940,063.141,480.2
Other11,569.313,073.417,452.123,754.031,188.835,331.0
Total156,217174,498203,286260,892332,870359,313
(Percentage share)
Agriculture3.93.02.32.01.81.9
Mining and quarrying0.70.50.40.50.30.3
Manufacturing18.818.018.418.716.715.8
Electricity0.50.61.51.41.51.6
General commerce9.79.08.48.27.67.2
Building and construction8.08.07.77.88.48.7
Real estate9.68.77.27.98.48.5
Individual housing loans13.413.913.812.611.911.6
Transport, storage, and communication2.02.12.02.02.32.3
Finance, insurance, business services11.113.111.212.214.015.4
Restaurants, hotels, and boarding houses1.21.21.21.00.91.0
Purchase of stocks and shares2.83.26.35.34.84.4
Consumption credit10.911.211.211.312.011.5
Other7.47.58.69.19.49.8
Total100.0100.0100.0100.0100.0100.0
Source: Data provided by the Malaysian authorities.
Source: Data provided by the Malaysian authorities.
Table 38.Malaysia: Developments in Malaysian Exchanges, 1992-97
19921993199419951996Q1

1997
Kuala Lumpur Stock Exchange (KLSE)
Main Board