There is a general misunderstanding over the national savings of Malaysia.
The layperson thinks in terms of income that is not consumed but kept aside. In macroeconomic terms, the layman concept applies exactly to the closed economy.
In an open economy, however, there is an additional component that is exactly the same as the current account on goods and services in the Balance of Payments. The current account is added to the layman concept of savings.
So, the "huge" gross national savings rate of 30% to 40% for Malaysia that is often quoted should contain a sizeable "external trade surplus" that is attributable the corporate sector - in Malaysia, this would mostly be palm oil plantations and tourism (who is making the huge income from tourism?)
From the Final Estimates of the GDP by Income Approach published by the DOS, I only have at hand data up to 2004.
The gross national savings rate for Malaysia was estimated at 42.3% comprising 22.6% (closed economy) plus 19.7% (current account component).
It is therefore logical that when the National Accounts are redone by Institutional Sectors, we will find most of the surplus to go to the corporate sector.
The estimates by DOS by Institutional Sectors produced a different set of estimates for the gross national savings rate of 36.1%.
This statistical discrepancy is normal in the business because of the different sets of data used. There is nothing we can about it - but try to see beyond the precision and look at what the order of magnitude tells us.
Gross national savings rate (36.1%)
Corporate sector (33.5%)
Non-financial corporate sector (28.8%)
Financial sector (4.7%)
Government sector (2.0%)
Household sector (0.5%).
The data show that the corporate sector is the largest contributor in national savings while the household sector is tiny.
I have, in my last post, gave the data for the rate of gross savings for the respective sectors - against their respective incomes.
Corporate sector (80.4%)
Non-financial corporate sector (80.0%)
Financial sector (83.2%)
Government sector (24.2%)
Household sector (1.1%)
The household income includes not only wages and salaries, but also entrepreneurial (or profits) and property incomes (which flow from the corporate sector to the government and households.)
While it is correct to say that the gross national savings rate is high at 30% to 40%, it is not correct to conclude that, therefore, households must consume more.
Instead, the correct conclusion is that the corporate sector should invest more.
Investment is a challege for the corporate sector - to diversify in the local economy (the multiplier effect of job creation) or to venture abroad (where we create jobs outside the country).
Whether investment is forthcoming in Malaysia is not a function of the interest rate or bank's willingness to lend, for the corporate sector as a whole is flushed with funds. It is a problem of ideas, as well as that of intermediation of financial resources. While the old firms may be stuck in their agro-based industries, new firms in other sectors (manufacturing and services) may be under-resourced.