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Annual Report 2001

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Malaysia

Economic performance

Being an open and trade-dependent economy, Malaysia was affected by the global downturn in the electronics industry and the US economic slowdown. Despite the more difficult external environment, which worsened in the aftermath of the 11 September attacks, growth of the Malaysian economy remained positive at 0.4% in 2001. Pragmatic and flexible policies to strengthen the economy, put in place since the Asian financial crisis, have enabled the economy to weather the more challenging external environment. In particular, the increase in public spending by the Government and the introduction of two stimulus packages targeted at boosting consumption and investment—one in March, and the other in September—totaling 7.3 billion ringgit, helped cushion the adverse impact of the weaker external sector on the domestic economy. Hence, the deterioration of the manufacturing subsector by 5.1%, largely due to weaker external demand, was offset by positive growth in the domestic sectors of the economy—in particular the services sector, which expanded by 4.9%. The nation’s macroeconomic fundamentals remained strong with inflation subdued at below 2%, unemployment contained at below 4%, the current account balance remaining in surplus at 8.9% of GNP, strong external reserves at $30.8 billion at end-2001 (up $4.9 billion from the lowest level in 2001), as well as a sound and resilient banking system.

ADB operations

Operational strategy: In light of high domestic liquidity and low interest rates, Malaysia is following a policy not to receive new assistance from multilateral finance institutions for public sector investment. Implementation of ongoing projects is continuing, and Malaysia participates in and supports ADB’s subregional activities.

Malaysia is an active participant in the Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA) and the Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT) subregional initiatives. Malaysia participated in the implementation of the regional technical assistance approved in December 2001 for Expanding the Strategy for Small and Medium Enterprise Development in the East ASEAN Growth Area, and Strengthening Subregional Cooperation in the Transport Sector of the EAGA and the IMT-GT.

Malaysia is also a comparatively advanced economy in the region, with strong experience in privatization, small and medium enterprise development, and government service. ADB has asked the Government to share its experience with ADB members and contribute to knowledge transfer.

Policy dialogue: Although implementation of ongoing projects is continuing, there was no new activity; thus, there was no policy dialogue.

Loans and technical assistance: No loans or technical assistance were approved in 2001.

Project implementation: Since joining ADB in 1966, Malaysia has received 76 loans, of which 3 were active at the end of 2001. Contract awards totaled $25.6 million, bringing the cumulative figure to $1.4 billion. The contract award ratio was 34.0%, higher than the ADB-wide average of 14.8%. Disbursements during the year totaled $15.0 million, bringing cumulative disbursements to $1.4 billion. The disbursement ratio was 16.5%, lower than the ADB-wide average of 20.5%.

In November 2001, during the official launching of the Development Projects Monitoring System by the State Government of Sarawak, ADB briefed senior government officials on issues relating to project implementation and proactive portfolio management, including ADB's project rating system. Additional briefings on effective portfolio management tools and seminars relating to business opportunities are planned in 2002.

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