For ASEAN, this challenge will involve countries in the region to identify areas of comparative advantage and leverage extensively on the complementarities that the rise of China and India present. For Malaysia, enhancing our competitiveness and positioning ourselves much higher in the global value-added production chain will be critical. Malaysia – agenda for sustained economic growth The full impact of the global recession was felt in Malaysia in the first quarter of 2009 when the economy contracted by 6.2%. Since then, timely counter-cyclical fiscal and monetary policy responses, together with a sound financial sector have contributed significantly to improving domestic economic conditions. In the third quarter, real year-on-year GDP contraction slowed to 1.2%. Of significance, the economy had registered two consecutive quarters of quarter-on-quarter growth, growing by 4.8% and 5.7% in the second quarter and third quarter respectively. Domestic demand has been the key driver of these improvements. Recent indicators have suggested that a more broad-based recovery is gathering momentum. Better labour market conditions, improving private sector confidence and continued access to financing have supported the increasing strength of domestic activity. Prospects are that year on year GDP in the fourth quarter will show positive growth. The recovery is expected to gather some strength in 2010. The economy will be driven primarily by domestic demand, with private expenditure contributing a growing share while the gradual recovery in external demand will provide a further support to growth.
As Asia gathers strength and has a more forceful impact on the global economy, opportunities arise for Asia to shape a global order of greater stability, sustainable growth and shared prosperity. One area that Asia has begun to recognise is the importance of a more balanced growth strategy both for the benefits of Asia and the world in general. Indeed, three particular trends within Asia are already emerging and they will continue to gain momentum as policy places greater focus on them. First is the balancing of an outwardoriented development strategy with efforts to promote the greater role of domestic demand. For some Asian economies, this takes the form of promoting domestic investment activity to meet the immense development needs within Asia, as well as to accelerate the transformation of Asian economies towards higher value-added output. For many, policy content to build broader social safety net and institutions to increase the role of private consumption in contributing to growth is gaining importance. The second trend in Asia is the acceleration of regional economic integration as intraregional trade and investment flows rise rapidly and financial markets are increasingly interlinked. Following the rapid trade liberalisation across Asia to improve market access is the growing pace of intra-regional investment flows. Increasingly, a vast market for goods and services will be created. Within Asia, as China becomes the locus of economic growth and transformation, the speed of ASEAN economic integration as one common market will provide added support to Asia’s pace of growth and dynamism.