Question

In 1997, Malaysia imposed capital control on all capital leaving the country during the peak of the financial crisis. Evaluate how such policy has leave an impact on our economic development and if Malaysia should continue on current course of liberalizing our economy to encourage foreign participation. (250 words)

Answer 1

Ehen there would be a capital control on all the capital outflows from the country, it will be resulting into lot of domestic focused growth in the country and all the domestic funds are used in development and growth of the domestic industry rather than investment into the foreign market because there has been a high regulation which has been placed on this capital outflows.

Duch kinds of practices are authoritarian and they are primitive practices which will not be helpful in the long run because there would be a restriction on the free flow of funds from one country to another countries and if one country is not trying to invest into the another country, the another country will also be refraining to invest in the Malaysian countries and this will be reflecting through the lack of the foreign funds, so it is not all about the domestic money availability, but it is also about the foreign reserves of a country which will help it in dealing with adverse economic cycles.

Policy will have a impact on the economic development because this will hamper the growth of the industry in the long run even though it will be propelling the growth of the domestic industry in the short run by increasing of the employment and domestic growth, but it will also be leading to a halt in the Global foreign inflows into the country and thus leading to decrease in the currency value in foreign exchange terms.