Badawi's State Of Euphoria

Prime Minister Abdullah Ahmad Badawi is probably wrong if he is as confident as he says he is 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 speech and figures, probably prepared for him by the Ministry of International Trade and Industry, are hardly realistic.

While the Malaysian economy has been robust over recent years, his boast that the country is immune from a US recession is incorrect.

There are direct and indirect elements that can make a US recession contagious, not only to Malaysia and other countries in Asia.

Using data from Malaysia’s state-owned External Trade Development Corporation (MATRADE), the US is still Malaysia’s biggest trading partner, with total trade of MR170.80 billion in fiscal year 2006.

In 2006 Malaysia exported RM589 billion to all markets. Almost 77 percent came from manufactured products, 62 percent of that from electronic items.

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?