Malaysia's economy could grow between 4.0 and 4.5 percent in 2003, supported by expansion in all sectors despite the uncertainties brought about by Sars, the Middle East crisis and the war against terrorism, a senior minister said today.

International Trade and Industry Minister Rafidah Aziz made the prediction as she released the ministry's annual report for 2002 at a news conference here.

The report said export growth was expected to be sustained, given projected three percent growth in the global economy.

Total exports increased by six percent to RM354.4 billion in 2002 compared with RM334.3 billion in 2001. Imports rose by 8.3 percent to RM303.5 billion.

"The manufacturing sector, which accounted for 82 percent of total exports, was a major contributor to the improved export performance," the report said.

Increased investments

The sector grew by 4.5 percent compared with a contraction of 6.6 percent in 2001, with growth in 2003 to be supported by stronger intra-Asian trade, it said.

MITI said although Malaysia would remain a major production base for electronics and electrical products and parts, manufacturers are expected to shift labour-intensive operations to lower-cost countries.

In 2002, a total of 841 investment applications with proposed investments totaling RM18.8 billion were received compared to 837 applications worth RM16.5 billion the previous year.

China was again expected to provide a strong stimulus for Malaysia's export expansion in 2003, the report said.

The economic outlook in the emerging markets of the Middle East and Eastern Europe remained promising, providing opportunities for Malaysia to further enhance its exports to these countries.

Worldwide semiconductor sales were expected to grow by 20 percent in 2003 and this will provide continued opportunity for the expansion of electronics and electrical exports, the ministry said.

New markets

"The regional and global economic environments are still facing the uncertainties brought about by Sars (Severe Acute Respiratory Syndrome), the conflicts in the Middle East and the fight against global terrorism," Rafidah said.

To overcome these challenges Malaysia would seek new markets and engage in bilateral trade agreements with its trading partners.

"We are doing whatever needs to be done. The greater focus will be to spur domestic demand and open up regional markets," she said.

Rafidah said Malaysia had began Free Trade Agreement (FTA) negotiations with Japan, China, South Korea, India, the United States and some Middle East countries.

"We are doing it progressively to secure new markets."

Testy ties

Rafidah said economic relations with the United States, Malaysia's largest individual trading partner, were strong despite a souring of diplomatic ties over Malaysia's strong opposition to the US-led invasion of Iraq.

"It is like husband and wife. We may be testy for different reasons, testy about principles like the Iraq war but it has nothing to do with business," she said.

Malaysia's trade with the US grew by 7.7 percent to RM121.2 billion in 2002 compared to the previous year.

The US was Malaysia's single largest trading partner and accounted for 18.4 percent of its total trade in 2002, followed by Singapore (14.7 percent), Japan (14.2 percent), China (6.6 percent), and Taiwan (4.6 percent).

These countries accounted for 58.5 percent of Malaysia's total trade in - AFP