MALAYSIA PROJECTS HEALTHY SALES GAINS.

(From Market - Asia Pacific)

Malaysia's new prime minister, Abdullah Ahmad Badawi, takes over an economy that succeeded in sidestepping the recent global economic slowdown

An upsurge in oil and gas prices coupled with an improved international price for palm oil helped to offset losses in the high-tech sector over the past two years. Internal demand lost some of its upward momentum early last year but there are increasing signs of a recovery

The value of imports dipped during 2003, thus boosting Malaysia's overall trade surplus. However, increased household and industrial demand should drive the value of imports up more than 5 percent in 2004 and 2005

Malaysia is finding it difficult to compete with China for foreign direct investment in the high-tech sector, but enough capital should flow in to drive capital investment upward by more than 5 percent year-on-year by from now through mid-2004

Recent agricultural reforms should bring production more closely into line with domestic and foreign demand. In addition, Malaysia is poised to move higher up the value added chain in its food export offerings. Private sector expenditure on farm and food processing equipment should show gains approaching 10 percent this year

The previous administration used public sector stimuli to keep the economy from stalling in 2002 and 2003, but faced with a rapidly rising deficit, Prime Minister Badawi has little choice but to cut back on federal spending. As a result, orders for equipment, materials, and services associated with infrastructure projects will drop off by the second half of this year