Economic Risk in Malaysia

Economic risk can be defined as the likelihood that events, including economic mismanagement, will cause drastic changes in a country's business environment that adversely affect the profit and other goals of a particular business enterprise. In other words Investment risk associated with the overall health of the economy of the country or locality in which the investment is made.

 

The Country Risk Tier (CRT) reflects A.M. Best’s assessment of three categories of risk: Economic, Political and Financial System Risk. Economic risk in Malaysia is moderate. At independence in the 1960s, the Malaysian economy depended upon rubber and tin. Since then the economy has transformed to become a regional manufacturing center, services provider and offshore financial center. The government encourages foreign investment but maintains approval rights for individual investments, often opting to restrict foreign equity or encouraging the transfer of technology from foreign firms.

 

Because of an export oriented development policy, Malaysia has managed to transform itself from a primary commodity producer to a newly industrialized country (NIC) in a period of 20 years. Substantial growth was halted by the 1997-98 Asian financial crisis, though it s effects were checked by the imposition of capital controls and highly expansionary fiscal policies. Subsequent restructuring initiatives have greatly strengthened the financial sector and the exchange rate and investment environment has been gradually liberalized. Nevertheless, long-term challenges have become apparent in recent years as growth has moderated from the torrid rates experienced in the early 1990s.

 

At present the Malaysian economy is experiencing a significant recession and the economy is expected to contract by 3.5% in 2009 and then grow at a modest 1.5% in 2010.

 

Regional Comparison 

 

Country	Country Risk Tier
Malaysia	CRT3
Philippines	CRT4
Indonesia	CRT4
Singapore	CRT1
Thailand	CRT3
Vietnam	CRT5