INTRODUCTION

What is economic growth? Economic growth is an increase in the capacity

of an economy to produce goods and services, compared from one period of time
to another. It can be measured in nominal or real terms, the latter of which is
adjusted for inflation. Traditionally, aggregate economic growth is measured in
terms of gross national product (GNP) or gross domestic product (GDP), although
alternative metrics are sometimes used.
In simplest terms, economic growth refers to an increase in productivity.
Often, but not necessarily, gains in productivity correlate with increased average
marginal productivity. This means the average labourer in a given economy
becomes, on average, more productive. It is also possible to achieve aggregate
economic growth without an increased average marginal productivity through
extra immigration or higher birth rates.
Based on expert opinion, John Neville Keynes, the experts in the Scope and
Method

of

Political

independent of

Economy,

any particular

positive
ethical

economic
position

growth

is

or normative

in

principle

judgments.

Economics also deals with the interrelations of human beings, and that the
investigator is himself part of the subject matter being investigated in a more
intimate sense than in the physical sciences.
Since 1957, Malaysia achieved its independence, our economy has gone
through a major transformation from a producer of raw materials such as such as
agriculture, forestry and minerals into an emerging multi-sector economy such
as oil and gas, automotive and services sector. Most of the efforts to getting up
from the crisis before independence, the development of heavy industries in
such as HICOM, a government funded agency. Such an approach has caused high
financial and administrative burden to the government. Hence, in 1983,
Malaysian then Prime Minister, Mahathir Mohamad announced the governments
intention to embark on a privatization policy to ease public sector involvement in
the economy. However, the privatization in Malaysia has resulted in both success
and failure.
The objective that to be underlined in this report is how to sustain positive
economic growth in the country, issues and challenge and are the Malays crucial
in Malaysian economics? Economic growth is the most powerful instrument for

reducing poverty and improving the quality of life in developing countries.

Growth also can generate prosperity and opportunity.

Strong growth and employment opportunities improve incentives for

parents to invest in their childrens education by sending them to school. This
may lead to the emergence of a strong and growing group of entrepreneurs,
which should generate pressure for improved governance. Strong economic
growth therefore advances human development, which, in turn, promotes
economic growth.
Malaysia

has

made

several

official

commitments

to

sustainable

development. It has pledged a 40 percent reduction in carbon emissions per unit

of gross domestic product by 2020, while reiterating its commitment at the Rio
Summit in 1992 to keep at least 50 percent of the nations landmass under forest
cover. Other than that, Malaysia also aspires to become the hub of green
technology in Southeast Asia. It is leading the manufacturing and marketing of
electric vehicles in the region. In May, the Kedah-based company, Amber Dual
Sdn. Bhd, formed a joint venture with the Beijing Auto International Corporation
to begin production of electric vehicles in July 2016.
Malaysia is a country that has been recognized as one of twelve mega
biologically diverse countries in the world. It is estimated that there could be
over 15000 known species of flowering plant, 286 species of mammals, 150
species of invertebrates, over 1000 species of butterflies, 12000 species of
moths and over 4000 species of marine fish in the country. Thus, this mega
biologically diverse must be reserved for our next generation. The sustainability
in Malaysia economy plays the important rule in order to achieve it.
Future growth will also need to be sustainable. This is very important to
our next generation. We only borrow this land to keep the resources for the next.
Thus, by improving management of water and other natural resources is
required, together with movement towards low carbon technologies by both
developed and developing countries. With the proper institutions, growth and
sustainability may be seen as complements, not substitutes.

DESCRIPTION OF SITUATION/PROBLEM STATEMENT

Malaysias wealth of natural resources has been indispensable to its
economic growth, but this growth has come at significant human and
environmental cost. Although the Southeast Asian nation met all eight of the
UNs Millennium Development Goals (MDGs) before the 2015 deadline, Prime
Minister Najib Razak has admitted that the MDGs fell short of achieving truly
sustainable development.
In the construction industry, sustainability is generally interpreted as
environment oriented or focused. The main reason for the neglect of
sustainability in some developing countries is that most of the sustainable
methods may cause a conflict between long-term environmental benefit and
short term economic operational goals. A greater concern is given to economic
and social issues, like the return on investment of a project, than to the affected
environmental issues such as the pollution caused by the construction of the
project. Therefore it is important to maintain a balance between environmental
protection, economic development and social development in prioritising
sustainability in the industry.
The first issues and challenge on how to sustain our economic growth is in
palm oil production which is an important engine of Malaysias economic growth.
According to The Wall Street Journal, Malaysia exports around $12 billion of palm
oil per year, 40 percent of the worlds supply. But the palm oil industry is
notorious for dangerous conditions and abusive labour practices that exploit a
largely migrant workforce. For example, FELDA estimate that 85% foreigner
make up as the workforce compared to local people especially Malays. For our
peoples, this job is the last choice compared to other job. This is the serious
problem since migrant worker kept involved in our economic development.

Migrant palm oil workers told the Wall Street Journal that they were paid
less than minimum wage of RM 900 per month, that their pay checks were
subject to arbitrary deductions by their employers, or that they were not paid at
all. Many are exposed to toxic herbicides and perform physically dangerous jobs
with no safety equipment. Reforming the palm oil industry to comply with human
rights standards is a challenge Malaysia will need to meet to achieve the
sustainability.
As the result of rapid economic growth in Malaysia over the past two
decades, air and water pollution is generally expected to become more
challenging. Air Pollutant Index (API) in several Malaysian states reached
hazardous levels due to airborne haze. API reading stated that Johor is the most
affected area compared to another state and the worst in Malaysias history
which reached 746. Any API reading above 301 is considered hazardous. The
haze, initially attributed to Indonesia, but Malaysia companies are also complicit.
It is caused by harmful slash and burn land clearance. Roughly 25 percent of the
palm oil companies that clear land in Indonesia are Malaysian. Malaysias
extensive investment in Indonesia stems from a 1997 investment treaty, in
which Indonesia allocated 1.5 million hectares of land for palm oil development.
The sources of the pollution are also from the transportation or even industrial
sector through the burning of fossil fuel. It usually affected the major cities such
as Kuala Lumpur and Penang and Johor Bahru.
Next challenges is from illegal logging. Malaysias wealth of natural
resources has been essential to its economic growth but this problem cannot be
the curse and be the reason Malaysia economy keep be disturb by illegal and
irresponsible hand. This may happen because by the demanding in the import
export of our wood keep on increasing. For example Sarawak one of the states
richest in the natural resources. In Sarawak, the illegal logging become worse
every day. According to Transparency International Malaysia, Malaysia loses RM
800 to 900 million in timber every year to illegal logging and corruption.
Growth in Malaysia, the world's second-largest exporter of liquefied
natural gas, has faltered due to weak energy prices and risks linked to a financial
scandal involving state-owned 1Malaysia Development Berhad (1MDB). The
ringgit currency slumped to 6-year lows last year. Malaysia people had to deal
with rising inflation and lower consumption and private investment expected to
take a toll on economic growth in 2016. The recent rally in oil prices would not
4

have an immediate impact on the Malaysian economy. Crude oil prices to exceed
$60 per barrel for at least two to three years.
Across the medium terms, probability that Malaysia will face the challenge
in this scandal and issue are remain significant. Headline inflation is forecast to
edge higher in 2016 to between 2.5% and 3.5% compared to 2.1% last year. This
happen due to weak ringgit. The scandals over US$11 billion in debt racked up
by state fund 1MDB, and nearly US$700 million of deposits into Prime Minister
Najib Razak's private accounts. Other than drop in the Malaysia ringgit (MYR)
also caused by Malaysias 1MDB debts. This has also affected confidence in the
ringgit and Malaysia economy.
Malaysia is currently moving towards sustainability in a slower pace,
mainly due to lack of human resources and skills. In developing countries where
the private sector has a very narrow market base to leverage is another main
challenge. It was also noted that there is a conflict between experienced
contractors and younger engineers. The experienced contractors do not have
much exposure to sustainable construction and therefore prefer to use
conventional method of construction that are tried and tested. On the other
hand, the effort of new and younger engineers whom are exposed to this subject
during their higher education is usually hampered due to the lack of experience
and skills in the particular field.
To adjust food consumption towards diets that are less-resource intensive
and more nutritious will also be crucial for food sustainability. In particular,
reducing food wastage may contribute significantly to the sustainability of the
food system. Currently, it is estimated that 32 per cent of the total food produced
globally is wasted including Malaysia.
From figure 1 a) on appendix, the Malaysian economy expanded by 4.2%
in the first quarter of 2016. The slight moderation in growth mainly reflected
external shocks to the economy and cautious spending by the private sector.
Private sector activity remained the key driver of growth, although the pace of
expansion moderated amid on-going adjustments in the economy. Private
consumption expanded by 5.3%, supported by continued wage and employment
growth. Private investment grew at a slower rate of 2.2%. This shows in Figure 1
b) on appendix. This was mainly attributable to the cautious business sentiments
and lower investments in the upstream mining sector.

In the manufacturing sector, growth was supported by the continued

expansion in both export and domestic oriented industries, although at a slower
pace. Additionally inflation also the challenge that Malaysian had to face today.
As measured by the annual change in the Consumer Price Index (CPI), was higher
at 3.4% in the first quarter of 2016 due to the reduction in electricity tariff
rebates in January 2016 and the base effect from the larger decline in domestic
fuel prices in the first quarter of 2015.
Looking further ahead, based on figure 1 c) on appendix, MIDF Research
also noted the base tariff remains at 38.53 sen/kWh which is indicating a
potential further rise in electricity rates should power generation costs, from
natural gas to coal, go up. TNB has also indicated the rebate may be lost
eventually, given the further subsidy rollback announced with piped gas price is
raised by RM1.50/mmbtu to RM18.20/mmbtu. Other than that, a fall in the oil
price as a result of an increase in oil supply is expected to increase global growth
overall, as would be expected for any positive supply shock. Recent estimates
from the International Monetary Fund suggest that the increase in global growth
from the recent fall is likely to be substantial.

SOLUTION/VIEWS TO OFFER
To ensure the protection and conservation of Malaysia biodiversity,
government or either NGO need to create a network of protected areas that are
representative of the ecosystem found in Malaysia. Building on its reputation as
an exporter of solar products, Malaysia also must become the hub of green
technology in Southeast Asia. It is also leading the manufacturing and marketing
of electric vehicles in the region.
Other than that, by promoting low-carbon growth. Today Malaysia can
reduce carbon emissions per unit of gross domestic product. Low carbon growth
6

in developing countries is one that requires new impetus. This involves socioeconomic and scientific research, and work with governments and the private
sector to take research into practice. International agreements for mitigation and
carbon trade need to be refined and implemented. Strategies need to be
developed to ensure that new technological innovations are adapted to and
disseminated in developing countries like Malaysia.
By encourage the international private sector to play its part, working
alongside the domestic private sector also can avoid overcome and can sustain
and improve Malaysia economy. Key proposals revolve around challenging
business to leverage its core business and core skills and competencies to
contribute to development. We envisage working with business in six sectors
such as retail, mobile phones, extractives, financial, infrastructure, and utilities to
develop action plans.
Through sustainability in food industry which is food waste, in order to
substantially reduce the quantity of food lost and wasted, changes have to take
place at different levels of the food chain which is production, storage,
transportation and consumption. Changing the production and consumption
patterns of wealthier countries and consumers, including dietary habits, could
make a remarkable contribution to ensuring food and nutrition security. Publicity,
advocacy, education and legislation will need to be used to bring about such
cultural changes so as to reduce high levels of retail and domestic food waste in
high- and upper middle income countries. Furthermore, better policy instruments
for promoting sustainable diets are still needed.
Other than that, Malaysia government should terminate the intake of
unskilled foreign labour. One important way to push for massive structural
change to the Malaysian economy is to reduce the number of unskilled foreign
labour and to push for mechanisation and automation so that Malaysian workers
are paid better with more skilled component in their jobs. Hence Home Minister
Zahid Hamidis proposal to bring in 1.5 million Bangladeshi unskilled workers is
foolish and against national interest.
In a recent speech, Janet Yellen, the Chair of the Federal Reserve Board,
stated that, "The most important factor determining continued advances in living
standards is productivity growth." 7 I could not agree with her more. If a country
can maintain a decent productivity growth even after it has exploited imported
technology and an underutilized labour force, that country is likely to succeed in
7

growing. High productivity growth enable countries to feed vastly increasing

populations and hence sustain growth.
Many organizations have a process and template for the development of a
performance improvement plan. Thus, to overcome the lack of human resources
and skills, young people especially Malays, especially those disenchanted with an
academic education and in danger of dropping out of school, need to understand
the high demand that exists, and the competitive salaries available, for skilled
and well-prepared vocational and technical personnel. Young people can be
inspired by a vision of vocational career paths that include entrepreneurship and
small business formation based on technical and trades expertise, as well as the
possibilities for academic re-entry in technical, engineering, and others.
However, inflationary pressure may start to kick in if the electricity tariff
was adjusted and petroleum subsidy was further reduced. Rather than confront
the fluctuation of our electricity tariff, the best possible solution is move Towards
Renewable Resources by reducing the worlds dependence on non-renewable
resources and to improve overall conservation efforts. Much of the industrial age
was created using fossil fuels, but there is also known technology that uses other
types of renewable energies such as steam, solar and wind. The major concern
isnt so much that we will run out of gas or oil, but that the use of coal is going to
continue to pollute the atmosphere and destroy other natural resources in the
process of mining the coal that it has to be replaced as an energy source. This
isnt easy as many of the leading industries use coal, not gas or oil, as their
primary source of power for manufacturing.
Illegal logging is a pervasive and widespread problem especially in
Sarawak, causing enormous damage to forests, forest peoples, and the
economies of producer countries. Figure 1 c) on appendix show how the
deforestation in Sarawak. Thus to overcome it, government must introduce forest
certification system. The process of certification involves the assessment of
particular forests against publicly available criteria, and only if the forests meet
these standards is timber certified. For forest certification to work, consumers
must be able to identify timber, wood products, or paper that come from forests
managed following the standards set out by the certification body. These
products, therefore, need to be labelled. Once a forest has been certified, the
forest owners obtain the right to label products from those forests with the
names of certifiers or logos. There is, however, a long and often complicated
8

path from the forest to the point of sale: the product supply chain. To be able to
guarantee the consumer that a particular product comes from a well-managed
forest, this supply chain needs to be certified as well. The ownership and control
aspect of the product supply chain is referred to as the chain of custody.
In the palm oil industry which acts as the main step of Malaysian to
sustain our economy, the problem is today government always use the migrants
workforce compared to local people especially Malays people. To overcome this
problem, Malays need to involve in order to be more responsible towards our
sources and our import export of our palm oil industry. In producing countries like
Malaysia, millions of farmers and their families work in the palm oil sector. Palm
oil plays an important role in the reduction of poverty in these areas. In Indonesia
and Malaysia, a total of 4.5 million people earn their living from palm oil
production. Stopping the production of palm oil altogether would create
significant problems for these people who support their families by working in
this industry. To sustain the involving of this local community, government should
protect indigenous communities and help smallholders overlook the rich vein of
criminality in the plantation sector.
By increasing the private investment grew, Malaysia can sustain the
economy since this is one of the factor in order to achieve the sustainability from
now and towards the future. Malaysian must shape a new image for itself in the
eyes of foreign investors, and one of the clearest signs of this change is that
foreign direct investments (FDI) are increasingly targeted at consumer facing
businesses. Investments will look to commodities that could be extracted and
exported. In contrast, many investors will allocating funds to enterprises, which
provide immediate services to local people.
Michael Rogers, EYs global deputy private equity leader, summed up the
optimistic feelings, saying, I think increased investment from local and foreign
investors across a wide range of industries is really driving the story, and price
earnings is becoming an important part of that narrative.

CONCLUSION
Malaysia is classified as a middle-income country. In recent years, Malaysia
has been transformed from an agro-based economy to a manufacturing
economy. Malaysia is the fastest growing economies amongst ASEAN countries.
Government programs to develop and promote investment in the key
sectors of agriculture, manufacturing, and services will need to be dealt with in
a holistic manner.
As the concern for the issues and scandal increases, the need for greater
focus on sustainable practice becomes more urgent. The major consideration
that impedes the change of practice to sustainable method in the industry is
found to be financial. This shows that awareness should be raised and knowledge
needs to be delivered to contractors, developers and the public on the long term
benefit of sustainable economy.
The relationship between economic growth, human well-being, and the
achievement of a sustainable future has a long and complex intellectual history.
The American conservationist Gifford Pinchot emphasized that the right of the
present generation to use what it needs and all it needs of the natural resources
now available equally our obligation so to use what we need that our
descendants shall not be deprived of what they need. Thus, developing countries
like Malaysia should monitor their economic policies independently from external
organizations such as the IMF. Other than that, the government should play
important roles when its necessary like the case of Malaysias government
during its crisis.
This can be made possible with the government playing the main role.
Through joint effort with educational institutions, research and development
activities can be increased to enable local production materials and technology
at a lower cost and hence encourage other people to adopt sustainable practice.
Training programs can be organised to increase and deliver knowledge on
sustainability of our economy.

10

Malaysian Government has made a lot of effort to continuously

tackle, improve and overcome the sustainable development challenges and
issues. Credit should be given for the excellent work that has been done by the
stakeholders involved. Consequently, lot more has to be done in order to achieve
certain objectives. Stakeholders have to be more focus and get involved deeply.
More capable and productive research has to be done. Good governance has to
be maintained so that the formulation of policies will be fair for everybody. Last
but not least, educate people as early as their childhood age so that they know
what kind of future they want.
Going forward, the Malaysian economy is expected to remain on a
sustained growth path of 4-4.5%, despite the challenging economic environment
globally and domestically. Domestic demand will continue to be the principal
driver of growth, sustained primarily by private sector spending. However,
domestic consumption is expected to grow at a moderate pace as households
continue to adjust to the higher cost of living. Overall investment is also
expected to grow at a slower pace but will remain supported by the
implementation of infrastructure development projects and capital spending in
the

manufacturing

and

services

sectors.

Uncertainties

in

the

external

environment and the on-going adjustments in the domestic economy pose

downside risks to growth.

REFERENCES
1. Daniel M. Hausman. (2008). The Philosophy of Economics. United States of
America by Cambridge University Press, New York.
2. Noranida Mokthsim, Khairulmaini Osman Salleh. (2013). Malaysia's Efforts
toward Achieving a Sustainable Development: Issues, Challenges and
Prospects. University of Malaya, Kuala Lumpur.
3. Pereira, A.O.J.J. (2005). Sustainable Development Indicators. Providing
Environmental for National Reporting Paper presented at the Millennium
4.

Development Goals.
Amanda Yeoh. (2015). Malaysia: Facing the Challenges of Sustainable

Development.
5. Adib Povera, Goh Pei Pei. (2015). New Straits Time, Haze: Johor still with
highest API readings.
6. Ross, A. (2009). Modern Interpretations of Sustainable Development.
Journal of Law and Society, 36(1), 32-54.
11

7. UKM, C. C. P. (2010) Workshop on Climate Change & Biodiversity:

Mobilizing the Research Agenda 13-14 December 2010, UKM, Bangi.
8. Haruhiko Kuroda Governor of the Bank of Japan. (2015). How to Sustain
Economic Growth in Asia Speech at the Amartya Sen Lecture.
9. http://www.therakyatpost.com/business/2015/12/09/midf-power-tariff-up-2from-january/ (retrieved on 2nd October 2016)
10.http://www3.weforum.org/docs/Manpower_YouthEmploymentChallengeSol
utions_2012.pdf (retrieved on 2nd October 2016)
11.Bernama. (2013). External environment poses key challenge to Malaysia's
growth. Kuala Lumpur, Malaysia.

APPENDICES

12

Figure 1 a): The Malaysian economy in the first quarter of 2016.

Figure 1 b): GDP Expenditure components in 2016.

Figure 1 c): Tenaga Historical Average Tariff.

13

Figure 1 d): Sabah and Sarawak forest from 1950 until 2020.

Figure 1 e): Malaysia as the one of the illegal logging in the world.

14