Malaysia: All That Glitters Is Not Gold


By John Richardson

ANYONE who visits Kuala Lumpur, Malaysia’s capital city, might well come away with the impression that everything is well with the country.

The hotels are heaving as are the restaurants,  bars and shopping centres. So are the stalls on Petaling Street where, remarkably, it is possible to buy a luxury, top-of-the range watch, with a little bit of haggling, for as little as $20.

But all that glitters is not gold, of course. The watches on sale in Petaling Street are fakes and so before you even get to the airport, there is every chance that your “Rolex” or “Tag Heuer” will no longer work.

Is there a parallel with Malaysia’s economic growth model, as it has largely been based  on consumer debt? Last year’s “Fed taper” worries highlighted the problems for an economy where consumer debt levels have become unsustainable.

And there is another problem for Malaysia and the rest of ASEAN: A heavy dependence on China during a period when China’s economy is  a severe downturn as a result of its property bubble and the commodity trading abuses linked to that bubble.

ASEAN exported 12.2% of its total outbound shipments to China in 2013, up from 7.3% decade earlier, according to a new report by Moody’s Investors Service.

And after  Singapore , which, of course, is a relatively small economy within ASEAN, Malaysia is the most exposed to China-bound exports as a share of nominal GDP (see the above chart).

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