Pre-print of: Julian, CC & Ahmed, ZU 2009, 'Doing business in Malaysia', Thunderbird International Business Review, vol. 51, no. 1, pp. 53-70.
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The importance of international trade to the Malaysian economy can hardly be exaggerated. Trade represents a lifeline for the Malaysian economy. Export-oriented industrialization in the 1990s converted the labor-surplus economy into a labor-deficit one and then back to a labor-surplus one in 2000 and beyond. The incidence of poverty has fallen by half since the early 1980s. Trade has also contributed much to the structural transformation and modernization of the economy. Had Malaysia been a closed economy, Malaysia would have shared the same fate as some other less developed countries that remain economically backward. Its external trade policy has paved the way for greater inflows of foreign direct investment, as foreign direct investors are not so much interested in serving the small domestic market as serving the vast external market. The large inflows of foreign direct investment have conferred positive effects on the domestic economy. This has meant significant improvements in the overall living standards for the Malaysians. Internationalization has provided employment opportunities, thereby raising their living standards through higher and more stable earnings.