Financial Crisis Hit Malaysia

Topics: Economics, Malaysia, Macroeconomics Pages: 9 (3025 words) Published: December 8, 2012

In 1997, there are the one big issue happen in the global market which is the Asian faces the economic crisis problem This problem have create the big negative impact to the almost of the country in the Asian nation especially in the economic and also the financial condition. According to the research from ADBI Institute (2008) that the crisis is identified started in Thailand and later is spread to all the near country that located in the Asian nation. Thailand before this known as the country that hold the strong economy where their economic condition is stable for almost 1 decade before they face the economic crisis in July 1997.


The Thailand is applied the open market in their home country in order to attract the inflow the capital and investors in their country. According to the Laplamwanit (1999) the reason Thailand take a move to open market because of the several factors. The first is to cover up the Thailand economy. When the investors invest in the development of the country, this will boost up the economy. The other reason Thailand want the better economic condition and the last one were outside factors such as stagnation of the Japanese country and also the recession in the Europe country in 1990. From all these factors, Thailand enjoy have enjoyed the long duration time to get the nominal exchanged stability. The country adapts the step that to take the inflation rate low. Besides, Lamlamwarit also stated that economic Thailand also has the criteria that have the high saving for the country which is 33.3% from KDNK in 1991 until 1995 and also has the world most profitable bank which is Thailand Bank.

The successful story of Thailand in the economy have create the threat especially this situation will attract the speculative action in the international condition. This is because according to the Krongkaew (1999) Thailand has a lot of overflow capital and the banking institution increases their function rapidly. The banking institution is controlled by the Thailand Central Bank- Bank of Thailand. The overflow of the capital is the actively done because of the certain factors. The one factor is the lending money activities in the home country are to get the interest and also the small constrain since the Thailand government have adapt the open market in the country. The other reason is because the difficulties in borrowing from the abroad. Thailand has careless in capital inflow and lending practices is not really good for the long term. Thailand has taken the wrong action to do large investment in the real estate. Real estate investment is non-productive sectors in Thailand country since it is non tradable goods and also can be sell the real estate in the domestic area only. The FDI in the Thailand is also leading the huge effect for the economic crisis happen in Thailand. The observers have found that the most of the investors that invest in the FDI is speculators. Thailand later faces the problem when a lot of foreign circulated the foreign currency in their country. The situation in Thailand is has been happen in Mexico in 1994 until 1995 where the Mexico faces the big problem effect of the crisis economy. The reason economic crisis happen in Mexico is as same as the Thailand which is the lot of speculators invests in the domestic investment activities.

The Mexico also injects the lot of big capital in economic activities and also the loose procedure adapted by the financial institution in Mexico. All of the activities will leading to the slow growth economic and results the economic crisis problem.

In 1992 Europe Financial System have been repealed because the speculators activities to exploit at the time of unbalance of economy. The speculators intention is to reduce the currency value of the Thailand. When Thailand is attacked by the speculators since Thailand apply open market strategy, Thailand switch to feasible exchange rate regime on...
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