WHAT a difference a year makes. Last year Malaysia's economy was written off by many local and foreign fund managers and analysts while its leaders were said to be "mad" and "out of their minds".  The conclusion was that the economy had only one way to go - down. Questions such as "Can anyone save Malaysia?" and "How much longer?" were commonplace and frequently asked.

Today, the mood is decidedly upbeat. Many now admit that Malaysia's policies have worked and want to hear what Malaysia has to say.  The questions now being asked relate to the quick recovery, stronger gross domestic product (GDP) growth and how Malaysia has managed to turn around and whether the recovery can be sustained.

A recent survey by the National Economic Action Council (NEAC) of fund managers and financial analysts based in Kuala Lumpur and Singapore showed that 92 per cent expressed confidence that "economic recovery is sustainable". In a number of other areas Malaysia's performance compared with other crisis-hit countries in the region - South Korea, Thailand and Indonesia - is ranked better by the respondents.

Among them is the progress made in dealing with non-performing loans and bank recapitalisation. In the corporate sector, however, the respondents contend that Malaysia needs to improve corporate governance and restructuring. This, they argue, will help to attract more foreign portfolio investments into the country. The conclusion neverthless is that the worst is over for the Malaysian economy. "Economic growth has started and is expected to continue," Tun Daim Zainuddin, First Finance Minister, said last week.

His statement is supported by recent indicators that the real economy is picking up momentum.  This has prompted many analysts and international organisations to revise their growth figures upwards to 6.5 per cent this year and even higher next year. The World Bank, IMF and the ADB are more bullish now on the Malaysian economy compared with last year.

The ADB, for example, has revised its forecast from 0.7 per cent to 2 per cent growth this year and 3.9 per cent next year.  Malaysia's quick recovery which is said to "differ from its peers in terms of strength of recovery" has "impressed" the World Bank.

As such Malaysia has been asked to participate at the press conference immediately after the annual meetings of the World Bank and IMF in Washington DC later this month.  Among the positive signs are the better earnings of corporations and all indications are that these will be in keeping with the recovery already underway. Inflation is below 3 per cent, foreign direct investment continues unabated with several electronic firms moving their operations from Singapore to Malaysia.

Manufacturing sales registered a significant increase of 18.9 per cent in July, the highest year-on-year increase in 17 months, trade surplus remains strong and external and domestic demand is on the rise and foreign reserves have risen to US$32.34 billion (US$1 = RM3.80) from a low of US$20 billion in August 1998. Malaysia, which opted for its own "remedies" to the crisis, has avoided much of the pain and "social costs" evident in neighbouring countries. Merrill Lynch in its commentary on Malaysia entitled "Not Just Another Recovery Story" outlines at least three other recovery indicators which distinguish it from its "peers".
These are the country's ability to generate internal liquidity via currency account surpluses; small risk of liquidity leakage in the system due to the low level of foreign debt and surplus liquidity ensuring interest rates remain low.

The current account surplus of 10.5 per cent of GDP this year and 8.8 per cent next year are "expected to be the strongest among the crisis-hit countries". Malaysia which entered the crisis with strong fundamentals and low foreign debt has maintained this position.

Its foreign debt service ratio even now is hardly 6 per cent of exports. In addition to these there are other indicators that are not computed and as such do not show up in the numerous staistics that analysts, fund managers and economists frequently look at.

These include the general "feel good" atmosphere, the traffic jams that have come back, patrons at restaurants and cafes ordering more drinks and food rather than just nursing their drinks over a longer period, the difficulty in getting taxis especially during peak periods, crowded shopping complexes where people are not just window shopping.

While there are increasing signs and indicators that analysts and fund managers are beginning to recognise improvements in the Malaysian economy there is still a "perception gap" which must be narrowed if not eliminated. The private sector, chambers of commerce, businessmen and entrepreneurs who have benefited from government policies should now "walk the extra mile" and help narrow this perception gap and spread the word.

The battle may have been won but the war is still on. It needs to be "fought" on a number of fronts, not least the dissemination of information to correct the negative publicity and perception.
It is also important to remain vigilant and continue with efforts to futher improve the economy through improved productivity and enhanced competitiveness. There is no room for complacency.