Sources say:

Statistics show it's stronger now and more resilient than ever.

KUALA LUMPUR: A decade after the Asian financial crisis, the economy is at its best shape, analysts have pronounced.Not only has Malaysia’s economy come out of crisis mode, statistics show that it is strong enough to face future shocks."Malaysia is now in better shape to withstand any mega surge in liquidity that could potentially destabilise the country," said OSK Research economist Sia Ket Ee.At its darkest period in 1998, the banking industry was bogged down in bad debt, the stock market benchmark index plunged to 262 points (the Kuala Lumpur Composite Index closed at 1,225.73 points yesterday) and there was a serious glut in the property market.The last few years, however, have shown a significant strengthening of economic fundamentals with the government’s move to improve competitiveness and its spending cuts to narrow the budget deficit. Agencies such as Pengurusan Danaharta Nasional Bhd, recapitalisation agency Dana- modal and the Corporate Debt Restructuring Committee — set up during the crisis period to clean up a potentially huge financial mess — have today ceased operations with commendable measures of success, analysts say.Danaharta, for example, formed in 1998 to carve out bad loans from banks and maximise the recovery value of their non-performing loan (NPL) portfolios, closed shop at end-2005 with a final NPL recovery rate of 58 per cent — one of the top performers among similar agencies worldwide.Economists cite the pegging of the ringgit to the US dollar in late 1998 and its unpegging in July 2005 as a bold and unconventional step to handle the crisis. "This is one of the things Malaysia has done correctly," said Joseph Tan of Standard Chartered, a Singapore-based economist.However, there are still areas that Malaysia needs to address in order to compete effectively, given that other "victims", such as South Korea, have made significant headway since the crisis.An area of concern is the slow pace of annual economic growth from pre-crisis days."Macroeconomic stability is at a higher level in Malaysia today, but there’s also been a loss in growth," said Sanjay Mathur of UBS Warburg, another Singapore-based economist.Annual GDP growth hovers in the 5-6 per cent range compared with the pre-crisis average of 7.5 per cent."Private investment is seriously languishing and the country lacks skills," said Mathur.The Malaysian economy should also be more open and spend more on human capital — a key area which will determine growth these days.He noted that while Malaysia was a relatively wealthy economy compared with many Asian counterparts, it lagged in terms of human capital. There were too few postgraduates in science and technology.To rectify the human capital development flaws, the government is offering initiatives under the Ninth Malaysia Plan.Tan said the serious shortage of talent needs to be addressed. "Competition today is on a different scale. The war is about talent, not capital."Malaysia could produce top graduates, he said, but the government needs to consider ways to retain its talent. The reform pace was also too slow compared with regional competitors, such as Singapore and Hong Kong. "Benchmarked against itself, Malaysia has made lots of improvement. But compared with other countries, especially in the area of foreign investment, it needs to act more speedily," said Tan.Countries like Thailand, for example, one of the worst-affected economies in Asia during the financial crisis, was until its recent military coup, a darling of foreign investors.Malaysia also needs to improve its corporate and income taxation, and business processes and efficiency, he said.