|30 January 2008|
| It’s whistling past the graveyard to think that Malaysia is going to escape a US downturn unscathed |
Prime Minister Abdullah Ahmad Badawi is probably wrong if he is as confident as he says he is that that Malaysia is positioned to avert any negative fallout from a threatened US recession by virtue of trade with the rest of Asean, which on its surface outweighs that of the US.
Following the Davos conference in Switzerland, the prime minister pointed out that 86 percent of Malaysia's GDP is domestically generated and added: "This has become one of our economic strengths (as we are no longer acutely dependent on external trade), and these strengths have come from the policies that we have drawn up and implemented, which are far-sighted.”
The small domestic market would not be able to consume excesses from a contracting export market. The major manufactured products for export, especially electronic and electrical products, are not suitable for domestic use. What are Malaysians going to do with a few billion dollars worth of unsold semiconductors, computer chips and other high-technology products?
In the same year, export trade with Asean countries was RM154 billion. It is safe to assume that more than 60 percent of exports to Asean countries went to Singapore. Malaysia’s trade with Singapore was MR146.9 billion, making it the second largest trading partner after the U.S. With the exception of Thailand, trade with other Asean countries was insignificant. Lumping Singapore together with other Asean countries to show market diversification is self-deceiving and unjustified. Being the second largest trading partner and for the sake of clarity, Singapore should be classified individually.
There also seems to be a great discrepancy between MATRADE figures and those given by an independent body SUITE101.com, which quoted Bridgesingapore.com, usembassy.com and the CIA World Factbook as its sources. The data shows Singapore's total trade with Malaysia in 2006 was US$77 billion. Taking an exchange rate at a constant US$1.00 - RM3.40, trade with Singapore was a whopping RM262 billion, not the RM146.9 billion MATRADE uses, making it the biggest trading partner, bigger than the US.
Was the huge difference a result of under- and over-invoicing? It's difficult to say which figures were correct. This can only be established if the external trade corporation were to openly dispute the figures from the other sources.
Singapore will thus continue to play a major role in Malaysia's export trade due to two factors. Its efficient ports, higher frequency of ships visiting and its status as a financial center make it cheaper and faster to transact business and ship cargoes to practically any destination. Singapore’s status as an entrepot, with Malaysia as its industrial and resource hinterland, distorts the trade figures that give Asean its trade pre-eminence over the consuming west. Not recognizing that, and not acting on it, spells trouble for Malaysia and its economy.