MSIA NEEDS TO DIVERSIFY EXPORT BASE, CONTINUE FOCUS ON EMERGING MARKETS

KUALA LUMPUR, June 7 (Bernama) -- Malaysia needs to look at how it can
diversify its export base, and also revisit its focus from Western to more
emerging markets, says Tai Hui Cheung, Standard Chartered's Regional Head of
Economic Research, Southeast Asia, Global Research.

"Malaysia is dependend on commodities and foreign direct investments and
although such growth is sustainable, it needs to diversify.

"If you try to switch towards domestic demand, it will not provide the
impetus that will give you the growth of five to six per cent each year to reach
your aspiration of US$15,000 (per capita income) in five to 10 years time," he
said.

Malaysia's current per capita income stands at US$7,000. Under the New
Economic Model, the country is aiming to reach a per capita income of US$15,000.

He said previously Malaysia traded significantly with Europe, United States
(US) and Japan but that is not where the growth will be in the next five to 10
years.

"The growth will be in China, India and emerging markets. I think
the key success factor for Malaysia is whether it can change its previous focus
towards more emerging markets.

"Malaysia is still very well positioned to capture these advantages and
activities," he said after a presentation at the Global Research Seminar - "A
Strong Start to 2010", by Standard Chartered Bank here today.

However, he reiterated that strengthening the ties with the emerging markets
did not mean the country was abandoning its relationship with the Western
market. In the efforts to globalise, one cannot ignore the Western market, he
said.

In terms of diversification, he said Malaysia was still well placed to take
advantage of the developing tourism and Islamic banking industry as they were
very promising areas, besides commodities.

On the country's deficit, he said it was relatively low, but added that it
would need to look at measures to broaden its revenue base.

"The discussion about goods and service tax needs to continue. On the
expenditure side, there is a need for some sort of consolidation. The discussion
over subsidies reduction is still worthy for long term projects," he said.

The implementation of these policies would depend on what other policies the
government implements at the same time, he said.

"All of these measure will have some degree of impact on the economy, and
what you want to do is to smooth out the impact of these measures and without
having significant damage to the general public," he pointed out.

Tai said that these implementations would be better when applied in a "time
of strength" and when global energy prices are on a declining phase.

Perhaps in the next one to two years when the economy is still in the growth
phase, he suggested.

Meanwhile, Tan said Standard Chartered was looking at a more conservative
growth forecast of five per cent for 2010 and 5.5 per cent for 2011 for
Malaysia.

"It's more conservative forecast not just only for Malaysia but across Asia
because there are a lot of uncertainties with the recovery in US and Europe," he
added.
-- BERNAMA