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University of Wollongong

Graduate School of Business


TBS 905 Economic Analysis for Business

Describe, Compare and Contrast the Economies of

Hong Kong SAR and Malaysia


MAIN ASSIGNMENT

Prepared by Mahendra Singh


25 October 2010
Introduction

This report describes, contrasts and compares the Economies of Malaysia and
Hong Kong. It showcases few economic indicators from last 5 years that are
analyzed and interpreted the underlying factors comparing the two
economies.
This comparison aims to show the statistical data to represent which country
made the most of its scarce resource and has the potential for the citizens to
have a better quality of life in general.

Introduction to Hong Kong (SAR) Economy

Hong Kongs economic system is made independent of China under the


principle of One Country, Two Systems. With minimum intervention from
the Chinese government, it is treated as a free market economy. Hong Kong is
on the major International Financial centers in the world that features low tax
and free trade.

But Hong Kongs low open economy left itself exposed to the slowdown of the
global economy. Its GDP fell in 2009 due to the Global Financial Crisis. As
China is becoming increasingly the largest trading partner with Hong Kong,
nearly valuing half of Hong Kongs exports. Hong Kong has recovered from
the downturn quickly than the people anticipated. Its natural resources are
very limited, and so raw materials and food are imported.

Hong Kong closely links its currency to the US dollar, maintaining the 1983s
arrangement.

Introduction to Malaysias Economy

Malaysia, since the 1970s have transformed itself from raw materials
producers to an emerging multi-sector economy. In 2003, Prime Minister
Abdullah influenced to farther up the economy by attracting investments in
technology industries and pharmaceuticals for value-added production chain.
The current administration of Prime Minister Najib, also continued similar
efforts to boost the economy by introducing several reforms in the service
sector. Electronics still plays a significant role boosting exports as a major
driver of the economy. Malaysia has also profited as an oil and gas exporter.
Petronas, the state oil producer supplies more than 40% of government
revenues. Nevertheless in 2009, the decreasing demand for consumer goods
worldwide did hurt the economic growth of Malaysia.

For simplicity, clarity and commonality, the US Dollars are represented


throughout the report.
Gross Domestic Product

Gross Domestic Product (GDP) measures an economys total expenditure on


newly produced goods and services and the total income earned from the
production of these goods and services. More precisely, GDP is the market
value of the final goods and services produced within a country in a given
period of time. GDP is a good measure of economic wellbeing because people
prefer higher to lower incomes. But it is not a perfect measure of wellbeing.
For example, GDP excludes the value of leisure and the value of clean
environment. {Stonecash et al 2009, p150}.

Economists use GDP as a primary tool to gauge productivity and to measure


how effective the nation has used its resources to produce the services and
goods.

Real GDP is the production of goods and services valued at constant prices.

Real GDP
250
200
150
Hong Kong SAR
100
Billion US $ Malaysia
50
0

Table 1 Real GDP - Source IMF Data and Statistics

The GDP of Hong Kong is closely higher than that of Malaysia and in 2008
Malaysias GDP went higher than Hong Kongs. But this statistics doesnt
represent the standards of living or the quality of life that the citizens of each
nation enjoy, or the way the wealth produced by the nation is shared among
its citizens. But it does provide the overall indication of the well being of the
nation, its people.

Hong Kongs GDP : After easing of travel restrictions from China, the total
number of tourists from
mainland to Hong Kong has increased from 4.5 Million (2001) to 17.7 Million
(2009).

40% of Chinese firms are listed on Hong Kong stock exchange.

And in last 10 years Hong Kongs service industry has rapidly grown to 90%
( 2009 ) of the territorys GDP, and this was due to the manufacturing
industries moving into China. From 1989 to 2008 the GDP growth has
averaged a strong 4% . { Source: CIA World Factbook - Unless otherwise
noted, information in this page is accurate as of February 19, 2010}

Malaysias GDP : In the last four years, Malaysias growth has been the
fastest despite the hike in domestic consumption and the fall of the key tech
exports. The major part in helping this growth was due the production of
crude palm oil becoming the 2nd largest producer in the world. Petroleum,
liquefied natural gas, Electronic equipments, wood and wood products,
rubber, palm oil, chemicals and textiles were the major items exported from
Malaysia. The Major export partners were US (15.6 %), Singapore (14.6 %),
Thailand (5 %) and Hong Kong (4.6 %) {Source
http://www.economywatch.com/economic-growth/malaysia.html)
Components of GDP

To see how the nation is really performing among the other nations lets look
deeper into its economy that is, the components of the GDP. Here below the
pie charts displays the components that produces the GDP of both nations.

Compared to the economies in developed countries, here the service sector


contributes the most GDP to each of these nations. This represents a
developed nation that has gone from basic agriculture industries moving
forward to service sector to fulfill consumer desires.

Hong Kong SAR - Components of GDP


Agriculture Industry Services

Agriculture 0% Industry 8%

Services 92%

Table 2 Components of GDP Source http://www.indexmundi.com (2009 est.)

From the above graph, the economic structure of Hong Kong can be divided
into following sectors;

Primary sector: The Steep hillside is mainly responsible for zero agriculture.
Forcing most of the agriculture imports from China. Not even 0.1% of labor
forces were engaged in Hong Kongs 2009 agriculture sector.

Secondary Sector : In 2009, the manufacturing sector of Hong Kong


contributed 7.6% to nations GDP. It produces and exports textiles, electrical
goods and appliances, footwear, clocks, plastics, toys, printed materials and
precious stones.
Tertiary Sector: The major drive of Hong Kongs economy is services sector.
Around 92.3 % , in 2007 was contributed to the nations GDP which
apparently is a drastic increase from 1980s 68.3%.

Malaysia - Components of GDP


Agriculture Industry Services

Agriculture; 10%

Services; 48%
Industry; 42%

Table 3 Components of GDP Source http://www.indexmundi.com (2009 est.)

From the above graph, the economic structure of Malaysia can be divided into
following sectors;

Primary Sector: Its development is largely due to the wealth of natural


resources like forestry and agriculture. Rubber and palm oil plays major
forieng exchange earners in this sector.

Secondary Sector: Malaysia is the largest exporter of semiconductors and


electrical goods and appliances in the world.

Tertiary Sector: This service sector comprises of finance , tourism and


telecommunications.
Real growth in GDP is an indicator that projects a countrys performance in
comparison with its peers, also identifies the trends and hw well the countrys
economy is changing over time and reacting to external factors.

Real GDP Compound Growth


10.00%
8.00%
6.00%
4.00% Hong Kong
%
2.00% Malaysia

0.00%
-2.00%
-4.00%

Table 3 - Source: IMF - 2009 World Economic Outlook

Line Graph of Malaysia and Hong Kong to show the past 5 yrs how the
countries have done

Explain the graph

With the GDP data , the following table determines the purchasing power
parity basis that is divided by the population for the same year as of July
GDP - per capita (PPP)
$50,000
$40,000
$30,000
Hong Kong
$20,000
US $ Malaysia
$10,000
$0

Table 4 - Source: IMF - 2009 World Economic Outlook

Explain the graph

About GDP Per Capita (Adjusted by Constant Prices)


The GDP dollar estimates given on this page are adjusted for inflation. The
term Constant Prices refers to a metric for valuing the price of something over
time, without that metric changing due to inflation or deflation. The gross
domestic product per capita is the value of all final goods and services
produced within a nation in a given year divided by the average (or mid-year)
population for the same year. The gross domestic product (GDP) is one of the
measures of national income and output for a given country's economy. GDP
can be defined in three ways, all of which are conceptually identical. First, it is
equal to the total expenditures for all final goods and services produced within
the country in a stipulated period of time (usually a 365-day year). Second, it
is equal to the sum of the value added at every stage of production (the
intermediate stages) by all the industries within a country, plus taxes less
subsidies on products, in the period. Third, it is equal to the sum of the
income generated by production in the country in the periodthat is,
compensation of employees, taxes on production and imports less subsidies,
and gross operating surplus (or profits). source (wikipedia)House Hold
Savings Graph

Graph for 5 yrs for both Countries

Tabular info on Population and Ageing Population

(Source OECD Factbook 2010)

Explain the Graph

Home Ownership and Explain wrt the graphs

Hours Worked

Bar Chart of no. of hours worked by 2 countries in general from last 5 years
(Source OECD Factbook 2010)

Explain the Graph

Real GDD per hour graph

And explanation

Trade Balance

Bar graph and its explaination


Conclusion

References

http://www.tradingeconomics.com/Economics/GDP-Per-Capita-PPP.aspx?
Symbol=MYR

http://www.indexmundi.com/g/r.aspx?t=0&v=66&l=en

http://www.indexmundi.com/malaysia/gdp_real_growth_rate.html

http://www.tradingeconomics.com/Economics/GDP-Per-Capita-PPP.aspx?
Symbol=MYR

LATEST GDP [Fact sheet]:

Malaysia : http://www.dfat.gov.au/geo/fs/mlay.pdf

Hong Kong : http://www.dfat.gov.au/geo/fs/hong.pdf