RESTRICTED Report No. WZ-Ao This report was prepared for use within the Bank and its affiliated organizations. rney do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. L 1NIERNAT1UINAL DAUNK 1-'U KSlRLMAVMNDkA1VKU 'MN1 AJNN VELUFIV * a T T X rTh1 T T % Rr"T"T I e4/1/l%^ I MMrl%T IIERNATTAI~JiNAL 1J=~VZtL%JrViniN1 PkDD_)%_AAi1i'JN PRELIMINARY MEMORANDUM ON MALAYSIA's ECOCOMIC POSITION AND DEVELOPMENT PROBLEMS FepareEas Dp. 1te5 Far East Department mrTnRITT 1im1%TTTA TWPPO@ L;UILnL.rAvJ.L LsUJ.ILA1L.MFAkJ Currency Unit Malayan dollar 1 Malayan dollar = U.S. $0.327 1 U.S. $ M OM3.06 41 million - U.S. $327,000 TABLE OF CONTENTS Page No* SUMMrARY AID CONCLUSIONS CHAPTER I Recent Political and Economic 1 Development Institutional Backaround 1 Recent Trends in Output and Incomes 2 Public Development Efforts 3 Trends in National Expenditure and the Balance of Payments 4 Current Finance 5 CHAPTER II Growth Problems and Prospects 7 CHAPTER TTT The Financing Prohlnm 9 STATISTICAL APPENDIX Summarv and Conclusions i. During the past several years the volume of total output in M-i1 4ia has bkeen --n at Act a year but dule to ader-line i1y export prices real inccmes have risen by less than 5% annually. Apart VUUILIOUUliA dUrA VVLULAL g L Iw LLU un1V 111OuLo.2a,U.L.LLA4, ALAu L.oVo - J V the bulk of the recent growth in real income can be traced to the spurt in publoc Invemen eU1xpe1n*ur'5 wIcU UU t rUWfn Loit. LLIVVDaO ment rate from 12-13% in 1959/60 to 18% in 1965. ii. This growth in investment expenditures, which took place mainly in the public sector, led the investment rate to exceed the average sav"ngs rate. This has been reflected in a growing external deficit, the financing of which will require capital inflow from abroad for years to come. Because of the financial constraints, which are now being felt, the rate of growth of government spending will have to fall off, and it is unlikely that real income growth will exceed the 4.5% average of recent years. Since the bulk of investment is in assets with long gestation periods, the impact of the present heavy investment rate is unlikely to be felt until the early 1970's. iii. The Government is now preparing a new Malaysian development plan for 1966/70. Although the precise magnitudes are not yet known, it seems fairly evident that, on financial and administrative grounds, the total for the five-year period will not be able to exceed M$4.0 billion, including about M$500 million for defense or 30% more than the estimated level during 1961/6, Given the slow-down in real income growth expected, it will probably be pos- sible to finance no more than 0%o of the total amount from domestic sources. Another 10% might be forthcoming in the form of external* grants. In addition, aiven Malaysia's low external debt and high level of reserves. it should be possible to finance the balance by a cobination of about Pi$l,000 million in forein borrowine and'an equal draw-down. in reserves. ITTArOMrD1 1 Recent Political and Economic Developments Institutional Background 1. Singapore, Sarawak and Sabah merged politically with the Federation of Malaya in September 1963. The central government of Malaysia, which was in effect the former government of Malaya, assumed responsibility for defense and internal security and a few common services such as posts and telecommunications, but on the whole the new States retained considerable autonomy. In particular, Singapore retained effective control over finance and government spending. However, the components of Malaysia have long had strong ties - a common currency, similar institutions as a result of the colonial heritage, vigorous Chinese business communities,and common dependence on Singapore as the major entrepot centre so merger made little immediate difference to economic conditions. Some harmonization of taxes took place, but outside the field of finance there was very little cooperation or coordination between governments on economic policies through- out the two-year life of the former Malaysia. In particular, a common market - agreement on which had been a precondition to Singapore's entry into Malaysia - was not created, and in the important fields of industrial policy and economic planning no effective cooperation existed. In fact additional barriers to internal trade in manufactured goods were erected during 1964-65 to protect local manufacturing interests. 2. Mounting internal political and communal tensions led to the separation of Singapore from Malaysia on August 9, 1965 and the proclamation of Singapore as an independent country. Because only loose economic ties had been created, separation caused virtually no disruption to either eco- nomv apart from the temporary imposition of trade controls by Singapore on goods of Malaysian origin. In the long run, however, the growth of both the present Malaysia and Sineapore may be expected to suffer moderately because of hesitation on the part of private domestic and foreign investors, caused by political uncertainties and the probable removal of remaining hopes for an effective common market. However, it should be noted that the economic growth of Malaysia and Singapore in recent years has been achieved in the absence of effective economic merger, with the exception of industrial investment which took place in anticipation of the creation of a common market. Further economic growth may c expected, as long as Singa- Dore and Malaysia continue to coonerate and-to maintain an attractive invest- ment climate; the use by both parties of protection for growing industries is. however. bound to increase. affected Singapore's trade and gave rise to a sharp growth in military -2 Recent Trends in Output and Incames 3. The Malaysian2/ economy has shown a rate of growth in real income of over 5% a year since 1958, and has displayed remarkable resilience in maintaining a growth of over 4% a year since 1960 despite a 20% adverse move- ment in the terms of trade caused mainly by the fal in the rubber price from its 1960 peak. In volume terms, total output has grown steadily at about 6% a year since 1958. Domestic export volume has been rising at a rate of around 6.5% up to 1964: export value likewise rose by almost the same amount between 1958 and 1964, but all this value increase took place in the 1958-60 period; since then the volume increases have been offset by price declines, and the slow growth which resumed in 1963 has not yet enabled exports to re- cover to their 1960 peak. 4. All regions of Malaysia shared this growth in GNP except Sarawak, where GNP appears to have stagnated since 1960, reflecting the fall in rubber prices and the paucity of alternative sources of income growth. Sabah. on the other hand, has benefited substantially from the timber boom and could probably have achieved more rapid growth were it not for an acute labor shortage. All components of Malaysia are vulnerable to export fluctuations, and over-all in the 1961-6h neriod about h6% of GNP originated in the exrort sector. This proportion was gradually declining, however, and one of the maior achievements of thne Annonv in renAnt vnarn has bAen to maintain economic growth despite stagnant exports. 5. The over-all trends in current incomes and exports can be seen in t.he fOlowin tabhle: I oep offo oAn 41 IOrAO 0I I0) 1. GNP in current market %j W.'W % .% %."'J I Wj% i 44W. (J.. 3 G osti exprts a % of GNP 46 53 55 49 47 45 143 4. Rate of growth of GNP (%) - 11 10 0 5.0 6.1 6.3 5. Rate of growth of export value Lj; - 0o8 4 -U V.o 2.- e"4 1/ "Malaysia", henceforth in this paper, refers to the States of Malaya, plus Sarawak and Sabah. 6. Between 1959 and 1964 the volume of rubber production went up by less than 3% a year, as large acreages were being taken out of production temporarily for replanting. With the price decline, the total value of rubber output in 1964 was substantially lower than in 1959. However, there has been considerable expansion of output and incomes in agricultural activi- ties other than rubber. The most important have been rice, palm oil, fish, livestock products and timber. For Malaysia, as a whole, real output of this group (agriculture other than rubber) has gone up at an average rate of 8% annually since 1959 (see Table 5). There has also been an encouraging growth in manufacturing - over 10% annually (excluding rubber processing), which shows that a start has been made in the process of import substitution. How- ever, this sector still constitutes less than 7% of GNP. By far the most, dramtic expansion in the past five years has come from the construction in- dustry, which expanded by around 20% annually in real terms, reflecting the sizeable expansion of investment which has taken place since 1919-60. The recent growth of government services at around 9% annually also reflects, in part, the expansion of public development efforts, as well as a considerable increase in defense expenditures. Public Develonment Efforts 7. Total investment in Malavsia has annroximately doubled since 1959. bringing the total to 18% of GNP by 1964, as compared with 12% in 1959. P PrivatA nnnit.al fnrmatton rose hv CO in this nrind, while nibli. inVet- ment nearly tripled. The latter expansion is a product of the high priority the gavernmez.t has asa% annually in the case of rubber and nearly 14% in the case of palm oil (which, will, however, remain much less important than rubber). 10. Expanded investment in irrigation and drainage has helped to stimulate other agricultural growth, mainly rice, and several projects now underway will lead to further increases in the future. Other public programs have contributed to the expanded output of fish, livestock products and pineapple. Beyond these, however, efforts to achieve a further diversifica- tion of agriculture have been quite modest, mainly because of staff shortages and an inadequate research base. 11. Rapid progress was made during the past five years in the expansion of transportation facilities, power and water supplies. To a large extent these investments formed part of a coordinated effort by the authorities to increase production and employment in the rural areas. Much of the invest- ment in road construction consisted of roads providing market access to underdeveloped rural areas. At the same time improvements were made in such areas in the provision of agricultural extension services, and in power, tele- communications, health and general education facilities. These comprehensive rural development efforts, executed with great elan by government officials at all levels, has contributed much in laying the foundation for a more prod- uctive rural economy. The increase in agricultural and other economic activity around development schemes that have been in operation for a number of years gives the impression that most of these efforts have been justified from an economic point of view. althouah some Parts of the rural road projects probably could not stand up to a screening on economic justification. 12. Encouragement of industrial development has been provided mainly through tax holidays and tariff protection. but also on a modest scale. in the provision of industrial estates and some financial help through a private develonment bank. However, in general. nast efforts to nromote industry have not been as intensive as the potential of this sector appears to warrant. This situation may now be changing. as there is a growing awareness of the need to reduce the economVs dependence on rubber exports. 13. The performance in implementing the various public sector programs has hen m. Trd the a1i+.vit and une % to Avpit nrnincts have outstripped the facilities for a thorough project evaluation - a problem which financing. Despite this problem, however, the performance of the governments and compares favorably with other countries in the region. While there is there appears to be less than in many other countries. By and large the development efforts i_n Malaysia have been resnal -----oneie-nA record of execution has been unusually good. Trends in National Expenditure and the Balance of Payments 14. Since 1959, personal consumption has risen at nearly the same rate terms, the increase has been only slightly lower, since domestic prices have ueen quitue staube. TUS, oUgeUer wth tle sharp rise in inveUment, has contributed to a steady growth of import demand, which has led to a sharp drop in the country's export surplus - from 10% of GNr to less than 17 at present. The table below, which shows over-all expenditure trends for the States of Malaya, is roughly representative or Malaysia as a whole: States of Malaya - Expenditure on GNP (,$ million, current prices) Growth 1959 1960 1961 1962 1963 1964 lo p.a. Private C%nsumnption 3375 3632 3818 4012 4230 4375 5.4 Public Consumption 1/ 774 791 851 914 1060 1150 8.0 Total Consumption 4149 U23 4669 4926 5290 5525 6.0 Private fixed capital formation 436 567 583 633 622 645 8.0 Public fixed capital 2/ formation 144 188 323 497 528 541 33.0 Total fixed capital 580 755 906 1130 1150 1186 16.0 Gross Nationalz/ Expenditure 8' 4669 5298 5655 6134 6541 6920 8.0 Current foreign balance 1/ +637 +568 +235 +62 +39 +96 - Gross National Product 5306 5866 5890 6196 6590 7016 5.8 1/ Before private transfers abroad. 2/ Excludes financial transfers to the private sector. / Includes stock changes. 1-5. Afte-r taking account of currnt private transfors abroad, averaging about ji.?200 million annually, ;alaysia' s current account balance has changed from a sur-Pua,.verrja9,W00 nllion in 1959 and 1960 to a deficit of - -rouid 226 96 I. :ot c;pital inflo - main prAvto foreign invest- ont--has continued to bt substanti,l throughout tb oriod. but was not sufficient Ln 1963 and 1964 to provent a rodorto draw down in the large for- ei,n exchan-c rcservces which had accumulated over the oudt orcvicus d-cade. At the and of 1964, tot.-l Halaysin exchange reservos net of sinking funds - are astimatod Pt nbout M:,.2 billion- as .oinst a neak of nearly M.2.' bil- lion at the end of 1962. The former amount corresponds to nearly 80 of 1961 imnorts. recent years. Government rovonues have kept approximately in step with GNP -ro+h dinOc 1960, -ema4-4. 01 of th ++nl owr cnrrent outlays have gone up much faster, so that thcre has been a substantial decline " 6 - in total public savings in the period - from around M$460 million in 1960 to M$250 in 196 and 1965. With public capital development expenditures rising as indicated earlier, the over-all position of the public sector has shifted from a surplus of M$200 million in 1960 to a deficit of M$400 million in 1964 and perhaps M$550 million in 1965. (The rise in 1965 is due mainly to capital defense outlays), Net foreign borrowing has averaged only about M$60 million in recent years and domestic borrowing (other than from-- the Provident Funds, which are treated as current receipts) about M$80 mil- lion. Grant assistance rose from less than M$30 million in 1962-63 to m$66 million in 1964 and perhaps M$100 million in 1965. Thus there remained a. large gap in both of the last two years - in the order of M$250-300 million which had to be met by a draw down in the government's domestic and foreign assets. - 7 - CHAPTER 2 Growth Problems and Prospects 17, In spite of strongly increased development efforts in recent years, the Malaysian economy is still faced with a nurmber of basic problems. The most important of these arises from the dependence of the economy on external market developments of two commodities, rubber and tine Although diversification of production has led to some improvement, around 70% of exports and 30% of GNP still directly depend on rubber and tin, The short-run swings in world market prices of both products are large and hard to predict. In the past they have caused wide variations in the year to year movement of real incomeso In the future the economy will remain very vulnerable to short-run price changes of this nature. More important, it is to be expected that both prices for tin and natural rubber will fall towards a permanently lower position in the next several yearse Barring major and at present unexpected changes in synthetic rubber technology, it seems likely that natural rubber will be able to maintain a substantial share of the total rubber market of the future. but at a price some 20% below the current level of IM$067 per lb. At this Price level. investment in hih vielding rubber would still vield a reasonable return, and consequently the Government intends to continue its reolantina and new planting prnram s A corolnary nf this devtlon- ment is that the dependence of the economy on rubber in the next several years will decline to only a ndnt et.ent is likely to exceed the overall rate of output growth for the economy . -h- - -.. - _ j _ _* ._Qo 'a -W Ca.s,v CM1o DOu.. a.4 aUtjU JC anything like the rate of the past five years growth,in construction C.C W . WV C.%J ILX %L%1LACL~0LJ.J.Y 0 r.LLLL1jr C.LD. WJ..LL- LV VV.L .J.L VJL .1 J.J- because of limitations on known deposits, Expansion of timber production WA.-L-L. =OLW VJ VV~ --6VVWU.L* .11 LX& LJ mLn,1 %.LL LX.J LJ6i, QU4 D.UV4 down in the growth rate also seems likely in the absence of a common market with .ngaoeo On balance, a growth o.f. real output at &o70 annually seems likely between 1964 and 1970. Given the drop expected in .L,,LDIJ,.r M-Ad tz"n1 prACeS rea .& -3. LUMUWone.L V .2- ~ L A.- ~~LJ.~IJ 4o5% - or about the same as the rate achieved since 1960. Export earnings are nov expected to grow at al, w.LIuI UnU t.PUV1U LA LUU va±u.Lu V1n offsetting moderate increases in other exports. 19. In the light of these growth prospects, the fast natural Increase in population ky3 a year) constitutes another serious probLem, especially because of the related problem of underemployment in rural areas and unemployment in.urban areas, especially in the 16o-2 age group. Information on trends is inadequate, but it appears that the problem has had approximately the same dimensions since l95. The rapid increase in expenditures over the past five years appears to have contained the employment problem but not solved it, and it is highly improbable that sufficient employment opportunities can be created in the near future to solve this problem. Because of the financial restraints, emphasis will have to be limited to programs of training, relocation, etc. to relieve specific structural or regional problems. - 8 . 20. Other special problems are also pressing; inadequate housing in urban areas) pockets of poverty in rural areas, and the need to improve the competitive ability and economic opportunities of the more seriously disadvantaged indigenous people, It ast be emphasized that a steady long-run expansion of the social services will be possible only if adequate resources are created in advance for this purpose through direction of the major part of investment to productive purposes. Where social investments are made, the emphasis should whenever possible be on creating conditions for social and cultural change. without which economic growth will be hindered. Malaysia is moving into a situation in which both foreign resonurces and napital are becnminL more scarce. Public capital expenditures and policies towards private invest- ment should reflent this. and emnhanq7 nadpu-nt rninrns frnm tAnital as well as the particular benefits to the economy of achieving import snbstitutinn nr Arnort growth- been designed to cope with these problems, and it is known that the nav 1e wT 4 n e-%%4,mY4"- -"-g+ha 4-1-o-el wn+h e 14 -an However, as noted, the Plan is still under preparation, and it is too conment on the financial problems posed by a plan the size now known to bc unLder Consideration, - 9 - Chapter 3 The Financing Problem 22. We understand that the total size of the Plan for 1966-70 has been tentatively set at about 143.5 billion, excluding defense. This would amount to around 7.5% of projected GNP in the period, and compares with an estimated actual amount of about IS2,900 (also excluding defense) in 1961-65* The latter corresponded to nearly 8% of GNP. 23. It is clear that the domestic financial resources of the public sector during the next five years will be inefficient to finance this amount of development expenditure, As noted, public sector current savings have declined rather sharply in the past, and it will not be an easy task to keep them from falling further in the futurea Revenue is at present at a comparatively high level in 1alaysia - 19,5% of GNP and 21.3% after including social security taxes. Given the prospects for declining net incomes in the rubber and tin in;stries on which revenue is heavily dependent, it is evident that the scope for increases in revenue is limitedO Additional taxes, especially on imported coimod:Lties, and rate revisions in existin taxes may brina an increase in total revenues, provided revenue collection is improved, The scope for additional tax- ation is however limited by the daneer of imnineine on Drivate sector savings and private investment, which are essential to maintaining a healthy rate of growth. On balance. it would seam that an increase by 1970 to 21% of GNP (or 23% including social security taxes) appears an ambitions although not impnsible bnhiativn- 2L± ()n thA e~r_-nq ePnnMj.xvra qs±n- 4t isq 4.potan thatn t.he. 10% annual growth in recent years be curtailed, if public savings are not to tive expenditures, debt service, and the current costs of agencies with area capital pograms have all gwn at a ma4A ae+n v4c+tng ommit- ments in education and defense make an early curtailment difficult, but ':t J..5 :Ls WJ. V I r VWS L CL ~UO Si %.L1 &J L. AU vuI viJo IJJ L,'.%jw C&L'.A V/i L.J 1968. 25. Assuming continued sound financial policies, a considerable addition to this, continued growth is to be expected in funds collected LL'- G, V'L% UV J .-&UJA&k#Q OLU~.- Q1;,UU-.LUJ MUMMUO FL C4 _#11 A;11-LD Wcluo I,U the expectation of a total current surplus of the public sector during tA next fiVe years of r Jp4)V LL VO Taknug accoun 01 a aM.sy military build-up of M$500 million during the period, this would leave an inverall"" public SDctOr defIcitJ uInLg this. period of iVJOe_,V>(U 0l.LILLI4) 26o OpportuniAties for flnanclg this deficit Dy borrowing in the domestic market are limited because of institutional limitations, which it wiLl take time to overcome and because of the need to reserve most available banking funds for credit to the private sector, The most that could be expected from this source during the next five years is about 14$200 millions net of repayments. This will leave M$2,370 million to be financed by external sources - grants, loans and use of the public sector's accumulated foreign assets. 0-7~~~ ~ ~ ~ -1-J - - .- A- 4. - - . 0 would be warranted to help sustain the pace of development, However, present M$2,300 million in this time period, This would bring the level own to the equivalent of about four or five month- imports by 1970, anU this would appear to be the minimum cushion necessary in view of the continued uncertainties in the balance of payments outlook. Thus there would still be a gap in the range of about M$1,00 million to be financed by foreign grants and loans. 28. At present, the prospects are for a decline in the level of grant financing from the 1965 level of $105 million which was provided mainly to help finance the defense build up. However, while military grants may taper off, the possibility of a continuation of grants for Borneo development together with other grants from Colombo Plan countries seems to justify expecting around M$80 million a year in this form of aid, Foreign borrowing in private markets has probably only limited potentialo Market; loans of fS million and US$25 million have been successfully raised in the past two years, but the scope for future market borrowing is unclear. As far as borrowing from official sources is concerned, the administrative capacity of the public sector to generate projects for foreign financing has to date been severely limited, and utilization of such funds has been com- paratively small. However, given an adequate effort by the government to improve its techniques of project identification and preparation, it should be feasible to borrow around M$l,000 million on a project basis over the Plan period. Assuming that lenders were willing to finance up to 60% or 65% of the total cost of a given project or program this would imply that nearly half of the development Drogram of M$3.500 million would have to be of a type eligible for external finance. While posing a serious challenge it might be feasible for the Government to meet this target. This problem could of course be reduced, if some program financing were available. 29. This prospective financing pattern is summarized below:- - 11 - Public Sector Finance, 1964-1970 Actual Est. Total k(1)M$1milion) ±JLU -LYU2 L7'uu -L7u I7J L; L7' J7 .L7 IV 7'.wJ Current revenue 'existing rates) 1h57 159o 1705 1760 1820 1u75 1950 91U + new revenue - - 0 60 80 100 120 400 Current expenditure 3op > u >75 1790 1>u 1900 ^4 0 1u = Current surplus 72 46 70 30 0 -35 -65 -10 + Surplus of public authorities 36 49 60 75 85 105 110 435 + Social security funds 142 155 170 185 195 210 235 995 L otal1 annua.L. Aesources 2_p0 25,0 ~ _jV r- 280 iIr - -.. less,capital expend.(incl. defense) 646 800 750 775 800 825 850 4000 Financed by: Local borrowing (net) 86 65 40 30 4o o 50 200 Foreign boarrowing (gross) L u 130 u 13 uu 250 300 30 1180 less repayments -15 -19 -26 -31 -43 -50 -60 -210 Foreign borrowing (net) 16 111 104 169 207 250 240 970 Grants 66 105 80 80 80 80 80 400 Use of assets, etc. 228 270 226 206 193 175 200 1000 30. The balance of payments position is difficult to estimate precisely in the absence of adeonate dataa Tt is tlIpr- however that a definit nl current account of increasing magnitude is likely to emerge as imports are Ii kly, t.n nnnM n i n ot.-n,yn awn i f a ann ersh1 cu trnn5 e%f 4 a il%o+4 +11- tion is achieved. Net investment income payments to abroad are also likely to ri;i qs r sarvss qrp drawn down and as thp qtnnek nf nuhlic and nrivate foreign investment increases. On a regional basis, only Sabah is likely to manin+.nin -n t n-de nninO Anneran ii -cti4iii 4- 141,vnl +a oa+4 + incur a large trade deficit. 31o Overall, it appears likely that the growing deficit on goods and - -esen -411 - -1enin+ +-o -- -nA M(b1 0 AA a a k ad A - ..6 . .i Q.L V.W, e W-L-6- VULUAA.Cl UI &LV L"A% A fLfvV VVVI ULIV YZA.JL%UU U1 AUUrL"y 4- ljo of average GNP. After allowing for continued private remittances abroad A soum p"u,V_..%, Vounsfe u-be o veral"I U4oLWj LU LouA L.LW1U WoLUUU mCAJy %WILu- late to M$ 3,500 million, part of which will be offset, as discussed above, by grants wuoJ±..ug perUhps my uO illion. Private capital inflows, net, are projected to be slightly lower than in the past at M$ 1,100 million uecause 01 tone uveinoment uncertainties and tne impact of ne overseas pro- fits tax on remittances by British companies. Net public borrowing plus assets use, totalling V3 2,000 million, would balance the capital account, and be consistent with the public sector assumptions indicated above. - 12 - 32. Yalaysiats present external debt is quite modest - around 1$750 million, or less than 10% of the gross national product. This includes about 4220 million undisbursed. Service on this debt will reach a peak in 1969, of about M7 million or about 2% of projected exports. Therefore, there seems to be ample scope for additional foreign borrowing over the next five years. New gross foreign borrow- ings of Y1.000 million (in addition to utilization of the undisbursed $240 million) by 1970 would raise total debt service by that year to about M0l,0 million or 1.5% of nroiected GNP and hi of roiented exports. Statistical Appendix Table No. 2. Estimated Population by age-group and by race, end - 1963 4. States of Malaya - Tin Statistics 1953-64 r'. nu.1Pu.A A :-o - A-*.bt .-1u ± , 4.resi-ry , tuuL_ r1 LLr 6. States of Malaya - Gross Domestic Product by Industrial ur.g-i, Ine-un lm . urces pIces 7. States of Malaya - Gross Domestic Product by Industry of Origin (lApt-l9oh) 8. States of Malaya - Principal exports 1959-64 9. States of Malaya - Principal imports Y.Y-o4 10. States of Malaya - Balance of Payments 1958-64 11. Consolidated Public Sector Finance 1960-oy 12. Gold and Foreign Exchange Reserves 13. Malaysia - Total Public Development Expenature, IYou-±yo4 Table 1 MAIAYSIA - Land Use and Area 1962-1963 (S-.mile-s ) Total States of Malaya Sabah Sarawak Malaysia Rubber . 6,250 362 570 7,182 Rice ............... .............. 1,5o 143 44o 2,J23 Coccnut ........ .................. 800 142 86 1,028 Oill Palm .*@oo.eoo..o.u.o.... og. 275 10 - 285 Pepper ....................... -- -- 12. 11 Sage .,.. . .... ... . .... .. - 6 14 1-43 Fruits .......................... 34o 9 16 365 Shifting Agriculture 5......90.....099-0 1,00* 8,450+ 9,1450 Other crops and fallow land ...600 68 169 837 Forest Reserves .Dooo oo.o.o...**..* 13,350 9,98C* 11,550 34,880 All other land ..................... 27,545 18,568 26,818 72,034 Total .m.*..oo,****..... 50,700 29,388 48,250 ]28,338 * Rough estima te + Excluding hill padi Sources Information from Agricultural Departments of the various regions. Table 2 MAIAYSIA - Estimate Population by ARe-group and by Race, end-1963 States of Malaya Sarawak Sabah Malaysia Total No. N~o. A. AGE-GROUP -... .......... 1,326 17.3 151 187 95 18.9 1,572 17.5 5-9 .0 lp.o..... 1,173 15.3 133 16.4 79 15.9 1,385 15.4 10.-14 .......... 988 12,.9 84 10.hý 48 9.6 1,120 1-2.5 15-.19 ................ 741 9.7 72 8.8 bl 8.3 854 9.5 20Cý-2 9 ........... 1,-00I l 0i p127 14.7 115 14.2 84 16,8 1,236 1-3.8 30-39 ................... 813 10.6 96 11.8 65 13.0 974 10,9 ho--49 ...........h....... 651 8.5 72 8.9 44 8.9 767 8,6 50--59 ................ 467 6.,1 46 5,7 24. 4.8 537 6.o 60 and over ........ 374 4,.9 41 5.1 191 3.8 434 4.8 TOTAL ................ 7,660 100.0 810 100.0 199 100.0 8,969 100,0 B. RACE Maýlaysif ....... . 383 7 50.>1 142 17.5 32 2/ 6.4 4.,011 44.7 Chinese ................ 2,841 37.1 255 31.5 117 23.5 3,213 35.8 Indians and Pakistanis .. 843 1100 -- -- -- - 847 9.4 Sea Dayak .- - 254 314 -- 254 2.8 Kadazan ............ -- - 160 32,0 160 1,8 Other indigenous -...... 4- 150 18.5 177 35.5 331 3.7 Other non-indigenous . ... :135 1,8 9 1.1 13 2.6 157 1.8 TOTAL (all races) .... 7,660 100e0 810 100,0 499 100.0 8,969 100,0 Percentage Distribution ...... 85.4 9.0 5.6 100.0 1 Includes Indonesians 2f Mainly Indonesians Source: Adaptation of official Projections based on latest census in each region. Net migration is excluded. Table 3 STATES OF MAMYA - Rubber Statistics 1953-196)j Planted Acreage Production Yield per Small1- Small- Tapped Year Estates holdings Total Estates holdings Acre - Estates 00acr) (000 long tons) 1954 2,028 129629 586.5 345.5 2h1.0 480 1955 ,025 ,656 7 35 . 286 .2 4 90 i OK 9 g An41 7 -2Å Kg C 940 b.on 1956 2,017 1;686 626.0 351.6 274L4 496 1C7 g,nn0 17,71 33 268.9A o35 1958 1,989 1,766 662.9 390.1 272.8 586 i1959 1, 1,e3 9 Y'n. 69. . n08 nQ 0 6.1 1960 13942 1,892 708.4 414.1 2914.3 676 1961 1, 1 -1.968 736-"g.7 12 r, I^ 307.2 7^ .J-7U J- -L 7L42 Lj7U UG( f 4c7 o.J -)V t* -i 1962 1,933 2,064 751.6 439.2 312.4 745 1964 1,918 2,235 81901 471.7 347.4 822 Average Singapore Export Unit Year Exports Imports Price R.ScS.#1 Values (000 long tons) (Mialayan cents per Ib.) (Malayan $ per ton) 1954 612.1 27.1 67.3 1,476 1955 659.5 33.3 114.2 2,402 1956 649.4 43.7 96.8 2,122 1957 655.1 37.9 88.8 1,991 1958 690.2 56.1 80.2 1,735 1959 782.9 53.3 101.6 2,199 1960 766.8 70.7 108.1 2,385 1961 790.6 64.9 83.5 1,824 1962 79100 67.3 78.2 1,729 1963 841.5 53.2 72.4 1,633 1964 847.8 40.6 68.1 1,538 Source: Department of Statistics, States of Malaya. Note: Production of Rubber in the States of Malaya accounts for about 92% of total Malaysian production. Comparable Malaysian data are not yet prepared. Table 4 STATES OF MALAYA - Tin Statistics 1953-1964 At . 1/ .,e 1/- ..--- .L A . rI'QUUr.UIQr1 WIU 11-aUe kEUIIUbaLIU -LUIIg WAJ101 Year Proauction- imports- Concentrates 1/ Metal Total 1953 56*3 6.0 27.1 35.1 62.2 >45k 60.7 OO2 3.5 37.3 68.8 1955 61.2 10.8 33.9 37.9 71-9 1956 62.3 10.9 20.6 52.4 73.0 1957 59,3 13.9 19.4 50.4 69.8 1958 38.5 7.9 6.3 38.5 44.8 1959 37.5 8.7 .7 i41 44.8 1960 52.0 20.7 .3 76.3 76.6 1961 56.o 16.6 .4 7h.2 7h.6 1962 58.6 25.0 .5 81.3 81.3 1963 59.9 20.1 .5 84.6 8$.1 1964 60.0 10.3 .5 71.2 71.7 1/ Tin content of concentrates. B. Tin Prices London-Cash New York-prompt Singapore-ex-works (E/long ton) (US cents/1b.) (M$ per picT 1953 731.7 95.8 363.9 195L 719.h 91.8 353.6 1955 740.1 94*7 365.5 1956 787.7 101.2 387.0 1957 754.8 96.2 373.2 1958 73h.9 95.1 369.3 1959 785.4 102.0 396.9 1960 796.6 101.h 193.8 1961 888.6 113.3 U7-7 1962 89__ 11h..6 LLb7.8 1963 909.7 116.6 455.4 1'I1 ,Tqnin-ry 1.011.0 1A.0 .A June 1,183.0 149.0 583.2 December 1-117.0 163.1 Ab7. 1965 June 1,t920.0 -- Source: Department of Statistics, States of Malaya. Note: All domestic tin production is in the States of Malaya, and vLUuLa.zy C". VLentrepo t a e n I Va nmayu PV.uo and smelters. Table 5 MALAYSIA - Production Volume Indices and Annual Rates of Growth, Aericulture Forestry and Fisheries (1959=100) Annaul Rates of Growt Weights Indices 1964 1970 (Prceent) 196 165 197 Over 1959 Over 1965 uibbr- - - - - -11-h 191 1Ah 2-7 6._ Forest. Products- - - - - 191 196 229 1LA I Rice 7A4 13 1,0 177 AA T4rm-+r^M n 7 r) 144 17( 900 10 7 roe-u+ 'D + - + '7 T40 1 M0 Ino 1 -1 rL.in ** *** *********** **95 4o3. .Ljr .L'J Ca4 7*14 kJ*S n-v 0 11Q I Of 7I0 f, -7 T)O 1raULlilUQALL U11U AU1'HULU ***** aes -L7 UU -UUV )2u -LV*7 L-)*[ U611ur Rg1-LLU.UU1-a-L rruuuut,,- LV .1 -L ±L4 -L4U 46C 0; Combined index ............ 100.0 128 135 177 .1 5.0 Combined Index without Rubber L1.5 147 154 195 8oo 4.8 Export Commodities 69.8 125 133 177 4.6 5.9 Domestic Commodities ...... 30.2 136 142 177 6.3 4.5 Source: Mission estimate. Table 6 STATES OF MALAYA ~- Estimated Industrial Origin of Gross Domestic Product 1959-1964 (M-2millions, current prices) Actual Preliminary 1960 1961 -1962 1963 16 Agriculture .................... noa. 2,158 1,984 1,963 2,008 1,991 of which: RubbEr ....................... 1,2-33 1,062 1,030 1,020 982 Rubber processing ........... o " 182 136 132 130 130 Forestry . " 84 78 77 8.3 90 Fishing ...................... 91 L06 127 136 148 Other . 568 602 597 639 641 Mining and Quarrying .......... .. 306 :381 391 430 536 Manufacturing 1./1........... 263 :282 321 360 409 Building and Construction ............. 158 191 240 300 370 Electricity, water & sanitary services . 70 78 86 98 110 Transport, storage and cormmunications 189 190 198 202 210 Wholesale and retail trade ............. 805 845 884 930 990 Barking, insurance and real estate .... " 71 76 86 96 105 Ownership of dwelli,ngs ............... 245 255 264 277 289 Services a) private ..........e.. 309 344 362 38,6 416 b) gcverrnent- elucation ..... 164 177 206 227 241 - health ........ 62 67 75 80 86 Public admirnistration and deferice, and goverrnmernt services n..eeo ........ 400 400 416 45>4 521 GDP at factor cost .................... 4,76o 5,200 5,270 5,492 5,838 6,274 * indirect taxes (net) ........... -756 -914 808 840 895 901 GDP at market prices ......... 5,516 6,114 6,078 6,332 6,733 7,175 * net factor incomes from abroad .... -- 211 - 2148 - -188 - 136 - 143 - 159 ONP at market prices ........... ..... 5,305 5,866 5,890 6,196 6,590 7,016 1/ Excludes all rubber processing Source: Based on data supplied by Department of Statistics, States of Malaya. Table 7 STATES OF HAAYA - Gross Domestic Product by Industry of Origin (1957-1964) Mf.~JJLLLL±V1Z) LidLI .9 U1U1 L ,U J -J.L LI= 0 1957 1958 1959 1960 1961 1962 1963 19(1 1. Agriculture, Forestry, nunting and Fisn1g8.@ 1,7 ,oe 1,80 1,7Y z,U_y ,1U22,1yo 2,26Y (a) Rubber planting,.. ,11 1,155I L> 1,21e.5 1,23ej3 1,286c 1, 37 1,36 1 25o L ,10 (b) Other .............. 649 667 655 743 773 795 827 86) 2.. Mining and Quarrying.... 288 203 218 306 338 351 410 37 3. Manufacturing........... ) 445 468 496 528 547 ) 500 515 544 4. Construction....*........ ) 158 198 275 300 3h0 5. Electricity, Water and Sanitary Services..... 63 53 54 70 79 90 loo 110 6. Transportation, Storage and Communication...... 147 149 168 189 204 212 216 225 7. Wholesale and Retail Trade................. 653 646 688 805 859 902 9147 995 8. Banking Insurance and Real Estate.......... 1 54 62 71 79 87 96 105 9. Ownership of Dwellings.. 223 234 238 245 253 264 277 289 10 Services.............. 499 527 557 639 606 671 752 796 11. Public Administration and Defense........... 325 325 332 349 371 383 412 450 GDP at factor cost.... 4,508 4,528 4,731 5,200 5,514 5,833 6,234 6,500 Source: Department of Statistics, State of Malaya. Table 8 STATES OF MALAYA - Principal Exports 1959-64 (111 millions" 1959 1960 1961j 1962 196 3 J-10ft Rubber (includes re exports . 1,722 1,829 1,h2 1,368 1,374 1,303 Tin metal (primary ... 295 506 550 616 638 723 Tin ore 1.......... U 2 3 4 4 6 Iron ore . 100 140 164 166 176 163 Oil-palm. products .... 61 71 68 72 76 88 Copra ................ 13 35 19 9 13 3 Coconut oil . 30 24 28 22 22 12 Timber ............... 33 55 42 48 65 87 Pineapple products 2/ 24 28 29 31 33 37 Other ................ 194 237 281 290 304 359 TOTAL ...... 2.U76 2.927 2,626 2.626 2,705 2.781 Tin-in-concentrates. P/'rpq frit nnrf .nnA nrndunt- iM1 Table 9 STATES OF MALAYA - Principal Imports, 1959-64 k19~ JIL.L.LVI0j 1959 1960 1961 1962 1963 1964 1/ 1. Food .............. 510 558 562 563 657 676 2. Beverages and tobacco 8......... 0 82 88 72 01 50 3. Crude materials (except fuel)..... 210 339 283 340 292 228 4. Mineral fuels, etc. 129 149 143 151 153 167 5. Chemicals ......... 120 143 159 153 168 177 6. Machinery and trans- port equipment ... 243 330 389 482 512 519 7. Manufactured goods. (not elsewhere specified) ...... 393 489 5h0 613 621 617 8. Other 5.......... 5h 61 64 73 71 63 TOTAL ....... 1,739 2,151 2,228 2,47 2,534 2,505 17Excludes ShiDs. Aircraft and Military WeaDons imDorted by Government. Source: Department of Statistics, States of Malaya. Tale10 - MS million) 1-urre-LI. _ U L, count L;v_7 L.LUJ L1Pue -YU_) J..;1UL 1. echUOnROISexport \.o.i0.}****** 00) nycn noo nono n(U ) "{on 2. Merchandise imports (c.i.f.)..... 1657 2151 2230 2447 2534 2605 3. Trade balance .......******** * r0 +((O 15 >1O +1(Y +171 ( +7O 4. Investment income from abroaa net).................. -138 -26o -212 -155 -170 -L5i 5. Other services.................. +108 +54 +47 +42 +47 +11 6. Current balance on goods and services...........906000..... +198 +562 +231 +62 +48 -4 7, Current international transfers -209 -204 -203 -215 -234 -336 a) official .,.,.......... 6 8 -2 -12 -23 -131:' b) private .................. -215 -212 -201 -203 -201 -205 8. Balance on current account....... -11 +350 +28 -153 -176 -340 Capital Account 9. Net inflow of long-term capital a) public 3/ ................ -8 32 28 51 61 46 b) private ........ .....,, 70 130 155 290 220 (275) 10. Private short-term capital 5/,... n.a. -80 -66 -65 -78 (-75) 11. Change in foreign assets (- increase)............... 13 -340 -61 +3 +74 (+80) 12. Errors and omissions .......... -6L -9L -56 -86 -151 +14 13. Balance on capital account....... +11 -350 -28 +153 +176 +340 Source: Department of Statistics, States of Malaya. 1/ Subject to revision. 2/ Accunedfo mnlyIz byN tr --nszfay- +.r% ii nP&T ntt f Min-ysia- / As derived from government accounts. / Mainly loans from Malayan to Singapore banks. Table IT MAT.AYSTA - nn.nliant.ed Publin Sentor Vinnnp (10r-1QA innmm"r Aonunts by the Cnt+rl ad S+ta G1ornments A Unh14 Aandni+4-c 1960 1961 1962 1963 19641/ 1965 2 Current revenue... 1304 1356 1418 1500 1457 1596 Current expenditure -...... 973 1033 112o 1253 1o8 1550 Current surplus.,,,,,. 331 323 29o 247 72 46 Public Authorities Surplus.. 31 33 33 33 36 49 increase in provident fund assets........,........ 98 109 117 132 142 155 Total Current Resources.. 460 465 448 412 250 250 Capital expenditure of governments 3/.............. 216 36 539 598 575 6 2 Capital expe7diture of public authorities ......... . 8 45 63 55 71 115 Total capital expenditure .. 244 401 602 653 646 807 Overall deficit or surplus.. +216 +64 -154 -241 -396 0557 Financed bv: DomleStic borrownirng (nefX.)- 98 39 43 -1 P(6 6f Foreign borrowing (gross).. 73 46 69 103 31 130 L e ss r e pyent - ~ ,,%.. m,n n1 -t -1 -12-1 Vorei;gn borrowd-ng (nt- t* 9R '8 01 '1A 11 Use of assets (increase-)0, -320 -114 +55 +98 +232 +276 Grants ****************** 51 4 28 -_ - Other sources; errors + Qmiioin 0. ^7 - -92 -7A -I 1/ Preliminary / Includes part of defense expenditure Table 12 HALAYSIA - Gross Gold and Foreign Exchange Reserves 1953 and 1-959-1964 (mid-market values in M millions as at December 31st) mid- Dec. 1. Central Government and States of Malaya 1953 1959 1960 1961 1962 1963 1964 1966 Ta- Certral Government............... . 29 607 916 1,095 1,07? 1)034 979 - (excluding sinking funds)...... (344) (476) (767) (911) (8[5) (763 (964) - 1(b) Bank Negara Malaysia&*** ...... 0 11.3 1.3 .. 155 150 2..8 - 1(c) Currency Board 2/................ 907 93 951 107 1078 1080 - 1(d) IMF Gold Tranche................. 0 0 0 0 10 22 23 - 1(e) Government Agencies 3/........... included in 1(a) .0 g1 83 (0 88 87 - 1(f) Commercial Banks.................. 175 (est. 150 167 12 133 133 15 1(g) Other Private Agencies h/ ....... na. 26 27 9 3 3 32 SUBTOTAL........................ 1,,0 )893 22 i 72,3 97 2)54 )37 2, 57 7 n.a. 2. State of SIriwak 6,6 o1 2Ta)-S eGovrn2ent 607............... 9089 1 2 3 1 9 - 2(b) Commercial Banks'.,3 (7...6 6 n.a7) 20 (8) ( 9 - SUBTOTAL.................... 66 13 116 11 100 71 66 n.a. 3. State of Sabah 73,7 Rate Government ............ 11 162 2 1 33 138 53 3(b) Cormercial Banks. .. . , na 7 3 3.0 :1 n.a. 267 27l 29 31343 SUBTOTAL...................... 11 51 6 2 52 56 6'72 - TbAL MALAlYS ......................... nt2 2O6 26t 2568 20 T 18 2,626 (excluding sinking funds) 6/.. 1,199 1,875 2,29b 2,384 2,667 2,393 2,420 (2,325) 1/ Preliminary T/ Malaysia's share of the exchange assets of the Currency Board, which is estimated at 73% on the basis of currency circulation. -2- (Table 12 continued) 3/ Comprising Post Office Savings Bank Employees Provident Fund MATalayan Rubber Fund Board S. Indian Labour Fund Board Malaysian Railways National Electricity Board Penana Port Commission W Comprising the four principal private provident funds only. Insurance companies, and other enterprises and individuals, are known to own substantial foreign assets: their magnitude is unknown, but for Malaysia as a whole is now likely to exceed M$ 3C0 million. S/ Including Post Office Savings Bank 6/ But including sinking funds of the Borneo States' governments. Source: based on Staff study prepared in Bank Negara Malaysia. Note: Details may not add to totals due to rounding. Table 13 MALAYSIA - Total Public Development EaMenditure, 1960-1964 (including transfers to the private sector) M% million % of total Rubber replanting 136 5 Land development 208 8 Drainaee and irrieation 100 1 Other agriculture 21 1 Roads 381 15 Other transport 149 6 Electric nower 360 15 Communications 103 4 Wtepr nnH qA nrnap H (-- 11 s i n-1- 7 Health and education 290 12 PD equipment 113 4 A Lmnisrtn and rs 22209 100 TOTAL 2,509 100