THE IMPACT OF INTERNATIONAL TRADE ON MALAYSIA ECONOMIC DEVELOPMENT

BY NUR AFZA SYAHIDA, NUR AFIFA, DAN NUR IZZATI IDAYU

Malaysia is a country that practises openness of the economy which they allows export and import occur in which is known as international trade. Import and export are also an indicator that are often used to measure a country’s economic situation. According to the data that had been stated by the official website of the Ministry of Finance, the value of import and export of the main goods within year 2014 to 2016 keep increasing on an annual basis. As a result of this, it was a positive impact of international trade in response to the country’s GDP. One of the main sectors that are imported into Malaysia are electrical and electronics sector, minerals and also steel. The export value of each of this sector also keep increasing in the year of 2017 over the previous year. Hence, this shows an increase in the indicator of import and export.

However, international trade indirectly give an impact on economic growth. One of the most obvious effect is the law of one price. The law of one price is basically valid on arbitrage activity because it is caused by the different in price of the same goods. On the other hand, there is a big impact of international trade on the perspective of manpower. A downturn in international trade can lead to the layoffs of skilled labour. As an example, the layoffs of workers from the industry of radio, television and communication equipment in the electrical and electronics sector. This is because, the output and employment in this sector is incentiviced workers. The last negative consequences of international trade is that the import of capital goods which the goods will then be used by manufacture, construction and also transportation sector. This is because, any construction project will be needed a lot of capital, thus in the same time affecting the growth of the nation. This is due to the capital goods are the long term goods. Hence it will give an impact in which defisit of the balance of payments.