The government today raised its economic growth forecast this year to 6.0-6.5 percent after a stronger-than-expected performance in 2003 and announced sweeping relaxation of foreign exchange rules to woo investors.

The revised forecast, up from 5.5-6.0 percent previously, was based on a 4.1 percent global growth, an upturn in the world electronics cycle, increased intra-Asian trade and firm prices for crude palm oil and crude oil, Bank Negara Malaysia said in its 2003 annual report.

"The growth momentum is projected to strengthen further in the region of 6.0-6.5 percent in 2004," central bank governor Zeti Akhtar Aziz said in the report.

"Growth is expected to be stronger across almost all sectors of the economy, with the services and manufacturing sectors being the main drivers."

Private sector spending growth is expected to double to 8.7 percent, with investment up 11.5 percent after 1.1 percent last year while public spending will fall 5.7 percent to a more sustainable level after 3.6 percent growth.

Manufacturing is expected to grow 10.2 percent after 8.2 percent last year, services improve to 5.2 percent from 4.1 and mining to 5.5 percent from 4.8 percent but agriculture is likely to cool to 2.6 percent from 5.5 percent with construction down to 1.5 percent from 1.9 percent.

As parts of efforts to boost Malaysia's competitiveness, Zeti said foreign exchange rules would be further liberalised from April 1 to improve efficiency in the delivery system and cut cost of doing business.

Rules relaxed

To promote diversification, unit trust management firms, fund or asset managers and insurance companies will be allowed for the first time to invest abroad up to a certain limit to promote diversification.

The foreign currency account limit of firms with operational headquarters here will be raised to 100 million dollars from 70 million dollars currently and other rules eased to improve their cash flow management.

To deepen the bond market, foreign multinational companies (MNC) and multilateral development banks (MDB) of which Malaysia is a member are now allowed to issue ringgit-denominated bonds.

Rules on hedging will be relaxed, allowing MNCs, non-resident investors and resident companies to enter into forward forex contracts with onshore licensed banks to cut currency risks.

Reporting procedures for forex transactions will be abolished or simplified to cut exporter administration costs and non-residents will get easier access to ringgit credit facilities.

Economists said the upgrade in growth target was largely within expectations but cheered measures to woo investors amid intense regional competition from giants like China and India. - AFP