KARACHI, Oct 26: The director of Institute of Business Administration, Danishmand says IBA needs $9-10 million to acquire excellence in business education and promises that it’s benefits would exceed Kahuta output.

IBA’s motto is to produce “leadership and ideas for tomorrow” that has capitulated IBA students to important positions in the corporate world in Pakistan, UK and the US.

Danishmand wants to invest in training of teaching staff, the library and employment of a few foreign faculties. He also wants audit of the education system by foreign experts so as to raise the IBA standards to a level that would attract students from the region.

He has motivated at least two major banks, Habib Bank and United Bank, to donate handsome amounts, to promote quality business education that is needed to modernize the banking system.

There is a premium on innovative and creative ideas, whether it is banking or macro-economic management.

What innovative ideas can do is demonstrated by Malaysia. The recent visit of Prime Minister Mahathir Mohammad to Pakistan will help expand trade and investment. But there are valuable lessons to be learnt from Malaysia’s experience in economic development.

Defying conventional wisdom of multilateral donors, Malaysia adopted an independent approach to macro-economic management and an appropriate strategy to soften the impact of the East Asia 1997-98 fiscal crisis. It did not seek IMF funding for a bail-out.

Now, Malaysia is throwing yet another innovative and creative approach to tackle economic problems. In this current phase of political conflicts, global economic slump and declining foreign investment, the Malaysian government is working for paradigm shift in economic management, targeting a “domestic driven economic growth.” The turnaround after the East Asian crisis is explained largely due to strengthening of domestic demand by fiscal stimulus achieved in an environment of low inflation.

The Malaysian budget announced last month is steering the economy on a new course that would reduce dependence on foreign investment.

With the exception of China, all East and South Asian countries including India and Thailand are witnessing slow-down of foreign investment. Foreign direct investment (FDI) has declined to 2.1 billion Malaysian ringit (US$0.60 bn) in 2001 compared to ringit $14.4 in 2000.

Malaysia’s independent approach to ease the impact of the East Asian crisis was criticised by western economists and multilateral agencies but they were proved wrong. It imposed capital controls to stop flight of capital, which was lifted once the situation so warranted. The ringit was pegged to the greenback at 3.8 in September 1998 after the economy plunged into recession. The peg helped to protect the economy from Asian financial crisis. The ringit is now stable. As the dollar is expected to depreciate in 2002 and 2003, the fixed parity would make both ringit and export competitive.

Like China and South Korea, Malaysia’s economic performance in the current global economic slump, has won admiration of Asians and westerns alike. In 2002, Malaysia recorded a growth rate of 4 per cent and is poised to raise it to 6-6.5 per cent in 2003.

The fiscal stimulus that helped boost government consumption and recover domestic demand, will be maintained until 2003 and would be cut in the next two years as the economy gains strength. The size of the budget deficit during 2001 was 5.2 per cent of the GDP, much lower than feared.

It is domestic demand that has sustained the economy. Malaysia’s external debt at the March-end 2002 stood at 50 per cent of the GDP. Exports at $90 billion exceeded imports at $71.8 billion in 2001. The current account surplus was to the tune of $7.8 billion.

Inflation measured by CPI is 1.4 per cent. The average lending and deposit rates are 6.4 per cent and 3.2 per cent respectively.

After nearly a decade of strong economic growth averaging 8.7 per cent annually, Malaysia was hit hard by the regional financial crisis in 1997. The economy suffered a sharp 7.5 per cent contraction in 1998 but rebounded a year later to grow at 5.6 per cent. Malaysia is one of the world’s largest exporters of semi-conductors devices, electrical goods and appliances. These constitute 60 per cent of its gross exports.

The manufacturing sector contributes over 30 per cent of the GDP.

Malaysia is also a tourist destination particularly for Asians and its foreign exchange earnings on this account is $6.3 billion per annum. The tourists come from neighbouring Singapore, Saudi Arabia, Jordan , Kuwait Turkey, Jordanian as well as other parts of the world. After 9/11, it launched a massive campaign to attract tourists who went to other destinations.

Malaysia’s New Economic Policy (NEP) 1971 was aimed at eradication of poverty and phasing out linkages of economic function to ethnicity.

NEP was formulated to put ethnic Malays and other indigenous people at par with those with enhanced economic status. Rapid economic growth in the decade of 1990s has expanded share for the indigenous people without reducing the economic advancement of other groups.

Under the NEP, the government provided funds to Malays to acquire foreign sharing holdings. In 1991, the NEP expired and was replaced by National Development Policy, which contains the NEP goals without specific equity targets and timetables.