The impact of AFTA on Malaysian local banks and competitiveness of the Malaysian financial sector Pt. 1

The Malaysian local banks have experienced rapid growth during the past three decades except for the financial crisis in 1997. This growth has been accompanied by low inflation, falling poverty, reductions in income inequality, and rising per capita income.

The banking sector has played a decisive role in Malaysian economic success, contributing significantly to output, investment and exports. Although they have been at the forefront in transforming the Malaysian economy, it has also made the country highly dependent on the buoyancy of the external factors.

While the Malaysian local banks have experienced rapid growth, it does not imply that these industries are also displaying high demand growth in Malaysian markets.

In an ideal situation, one would like to see the emergence of foreign banks that has a heavy concentration that exhibit high growth in Malaysian financial markets.

One way to ascertain that a country is indeed contesting the dynamic markets is to assess whether the local banks have been moving towards higher growth potential
markets and has a higher concentration and high demand in Malaysian market.

What are the Malaysian local banks in terms of their revealed comparative advantage and to what extent has financial sector witnessed a shift in its improved comparative advantage over time?

To what extent have the Malaysian local banks performance been a reflection of its financial sector specializing in industries with growing world demand?

Does Malaysian financial sector have the capacity to adapt to the changing structure of world demand?

To what extent does competition or complementarities exit in world financial markets between Malaysia and other ASEAN member countries?

Is there any convergence of financial specialization patterns between Malaysia and other ASEAN countries?

To what extent has Malaysian financial specialization shifted away from traditional intensive products to high value-added knowledge and technology intensive products?

What are the implications of changing comparative advantage in Malaysian financial sector and how can Malaysia sustain or enhance its competitiveness at the macro as well as at the enterprise level?

exclusively by: mi1