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The year 2016 will be remembered for its extraordinary events. It started on a promising note with the signing of the Trans Pacific Partnership (TPP) Agreement in February 2016, after prolonged years of negotiations. This was followed by the unexpected United Kingdom vote in favour of leaving the European Union (Brexit) in June and Donald Trump's stunning victory in the U.S. presidential election in November. The latter event has now cast doubt over whether the TPP will be ratified. In Southeast Asia the death of Thailand's revered King Bhumibol Adulyadej, the world's longest-reigning monarch, in October, also marked another historical moment. China's launching of the Asian Infrastructure Investment Bank (AIIB) in January 2016 signalled a new era in global finance, as the new international bank is perceived to rival the U.S.-led World Bank. All ten economies in Southeast Asia have signed on to be members, although the ratification of Malaysia and the Philippines had not been completed at the time of writing. Within the region there have been several changes that may affect its internal cohesiveness, as well as the region's economic and political relations with external powers. These include changes in political leadership in Laos, the Philippines, and Vietnam, while rising tensions over territorial disputes in the South China Sea have strained relations between China and some countries in the region. The signing of the TPP has also been perceived by some members of ASEAN as disruptive to ASEAN integration. Amidst such changes, how did the Southeast Asian economies fare in 2016? The main objective of this chapter is to examine the growth of the ten Southeast Asian economies over the year and the main factors that have contributed to this growth. It also discusses the issues that have the potential to affect economic growth of these countries in 2017 and beyond. Economic Performance in 2016 Overall Growth Performance Global growth is projected to fall from 2015 to 2016 due to the uncertainties associated with Brexit and the global impact of the U.S. election results of November 2016. Even in the Asia Pacific, the growth rate for the region is forecast to stagnate from 2015 to 2016. Five of the Southeast Asian economies are expected to have slower growth in 2016 compared to 2015 (Table 1).

The overall pattern of outward foreign direct investment from Malaysia indicates increasing participation in global outflows of foreign direct investment, especially to Southeast Asia. In 1980, Malaysia was ranked eleventh in the top fifteen developing and transition economies in terms of stocks of outward foreign direct investment, but it moved up to the tenth position by 2013. Outward flows surpassed inward flows after 2007 and Malaysia became a net capital exporter. This paper seeks to examine the pattern of outward foreign direct investment from the country, key motivations, and some of its impact. Government-linked companies are key players in these outward flows, especially in the oil and gas and services sector. The main findings in this paper show that outward investment from Malaysia is driven mainly by a horizontal, market-seeking type of investment while the literature indicates that its impact on trade is insignificant. Given the key role played by government-linked companies in outward foreign direct investment, an important return from these investments will be the repatriation of profits back to the home country. To promote greater transparency, these companies need to report to the public the returns and repatriation of profits on their investments abroad for Malaysia’s current and future development.

I. Introduction The emergence of the Asian financial crisis in 1997 and its subsequent negative impact on Malaysia's economy in 1998 disrupted the decade-long sterling economic growth that the country had enjoyed prior to the crisis. Although the economy recovered quickly in 1999, there were numerous external and internal challenges that have confronted it since then. Externally, the catastrophe of September 11 and global downturn in 2001/2002 as well as the emergence of health risks associated with the Sudden and Acute Respiratory Syndrome (SARS) and the avian flu in 2003, the tsunami in 2004, and escalating oil prices in 2005/2006 all posed different challenges to Malaysia's small, open economy. Internally, steering the country to the next stage of development require a continuous search for a balance between further liberalization and the development needs of the country. While the former is dictated by the size of Malaysia's relatively small domestic economy, the latter also includes the restructuring of society according to ethnic considerations and goals as encapsulated in the New Economic Policy (NEP). In spite of its own struggles with development, Malaysia is mindful that poor neighbours can be a source of problems which may spill over its borders, thereby undermining the peace and prosperity of the country (Mahathir 1997, p. 2). Hence, during his tenure as Prime Minister, Tun Mahathir advocated the use of "prosper-thy-neighbour" policies or policies that seek to assist neighbouring countries to develop together with Malaysia. Post Mahathir, the continued use of this policy is very much in line with ASEAN's Vision 2020 that envisaged ASEAN as a community of caring societies where there would be "equitable access to opportunities for total human development" and in which the development gap among member economies would be reduced even as members forged closer economic integration (ASEAN 1997 as cited in UNDP 2004, p. 124). Based on this Vision, the Initiative for ASEAN Integration (IAI) was adopted at the Fourth Informal Summit in 2000 in order to narrow the development gap within ASEAN by assisting the new members--Cambodia, Laos, Myanmar, and Vietnam (or the CLMV countries)--to participate fully in regional economic integration. This plan was subsequently formally adopted at the ASEAN Ministerial Meeting in 2001 in its "Hanoi Declaration on Narrowing the Development Gap for Closer ASEAN Integration". This paper is organized as follows: after the introduction, an assessment of the major reforms in the financial and the manufacturing sectors is presented in section II. The update on the Malaysian economy is followed by a comparison of the economic performance and human development of Malaysia with that of the ASEAN-10 in section III in order to ascertain the extent of the development gap between Malaysia and the other member countries. Malaysia's contributions to the IAI programmes are evaluated in section IV while section V draws some policy implications based on the analysis in the earlier sections. The conclusion in section VI summarizes the main findings of this paper. II. Post-Crisis Malaysian Financial and Manufacturing Sector II.1 Financial Sector Since the crisis was essentially a financial crisis, the focus of this section will be on the main reforms in the financial sector. Malaysia's financial sector is highly diversified and among the most advanced in the ASEAN region, with banks accounting for two-thirds of the sector in terms of assets, and non-bank financial intermediaries for one-third. There is an offshore financial sector in the province of Labuan that is the Labuan Offshore Financial Centre. After recovering from the Asian financial crisis, Bank Negara Malaysia (BNM), or the central bank, stepped up its financial reforms through the implementation of the Financial Sector Master Plan (FSMP, 2001-2010), which was launched in 2001. The FSMP has three phases; in the first phase, it focused on the building of domestic banking capacity. …

Introduction The year 2002 started on an optimistic note as growth in the United States picked up in late 2001 and the first quarter of 2002. This gave rise to the hope that the American economy was on the way towards recovering from the turmoil of the previous year and the recovery will in turn lead to beneficial effects for Southeast Asia due to the extensive trade and investment links between the two.

The objective of this study is to examine the influence of trade policies and industry charac teristics on productivity growth of the Malaysian manufacturing sector between 1986-91. The results show that productivity growth in the Malaysian manufacturing sector was influ enced positively and significantly by the rate of growth in output, exports as well as by for eign investment. In contrast, increasing capital intensity is seen to have a negative impact on productivity growth. Examining the labour situation in Malaysia reveals severe labour con straints that may have hindered the absorption of the productivity gains from the increases in capital Hence trade policies need to be complemented by appropriate industrial policies in the nation's pursuit of higher productivity growth.