Three ways how the economy can reduce imports

Import substitution policy

A policy or initiative to reduce import should be imposed so imports can be reduced. Businesses should be able to produce goods locally. Probably raw materials would still be imported but raw materials can be manufactured to other goods, of which it has its own sellable value and create demand from other countries to be exported out.

Given good infrastructures and communication facilities, Government may also encourage Foreign Direct Investment by getting business corporations to invest on establishing a manufacturing or operating facility in Malaysia. Other than providing jobs to the local, goods produced may also be exported out. Other than goods, products like services, talent and machinery items can be locally produced with a lower cost since duties, transportation cost and management cost can be reduced. These manufactured goods or services that produced with lower cost can be exported to further create trade surplus.

This is a long term solution that can economically improve the economic situation of a country further.

Supporting Trade Policy

Government may impose supporting trade policy like import tax, higher duty and so on. This action will help to increase price of imported goods thus discouraging market from continuing using all the imported goods.

Market is not only reducing consumption of imported items, locally manufactured goods will also be strongly supported locally thus strengthen the local manufacturer to continue manufacture their goods, thus increased the foreign importers to continue buy their goods from the manufacturer.

Governments often work with other country’s government to deal on agreements that will benefits both or more parties. ASEAN countries signed a treaty called AFTA to regulate the trades between participating countries. It would often help all participating countries to improve their trade scenarios. As per AFTA treaty, will have to impose lower import tax for goods traded from a participating country to another participating country

Exchange rate policy

Using this policy, a government will always attempt to lower its currency value. By doing this, it will discourage import thus more goods can be exported out as the currency exchange rate will be lower, thus other country will be able to obtain the goods at a better price. Anyway, this is not a good policy to exercise as it will actually lower the buying power of the people and will cause inflation.

This would normally be used as a short term solution, could be due to certain economic condition of a country. When it is used for long, inflation will further increase price of goods so the purpose of lowering price of goods will no longer be achieved.

What is Full Employment

Basically full employment is achieved when an unemployment rate reached 2%. Readings made through books and internet shows that some would define variable percentage of full employment. There were 0%, 1%, 3%, 4% and even up to 5%. In this context, we will use 2% as the benchmark for full employment rate.

This 2% is considering only people who are eligible to work, at certain age for instance from age 16-60, not inclusive of children. These 2% is actually including those who were just graduated from university, those who were in between jobs and those who are waiting to get into a new job. Malaysia is considered one of the countries with full employment besides Austria, China, Switzerland, Germany and Japan.

Full employment is highly influenced by factors of production being fully utilized in the country. One of the factors is the land & premise availability factor. Mentioning Malaysia as an example, initiating a business would require a premise and probably a land to start with. Considering Malaysia has a lot of new business parks or shop house lots being developed, it is considered that the offering of premises to start a business is very high. Land would also easy to be rented out.

Other factor would be rising of public construction work like building highways, parks, public buildings, transportation and internet infra using public funds. These are the medium where people can make use to create business or to find a job as these projects would create many jobs and it will continue to provide jobs through maintaining the infrastructure build as using these infra will definitely for some payment.

Government may also impose other policies like active labor market policies of which to protect both employers and employees. Tax policies for start-up companies will also help to boost new companies in order to generate more business thus creating more jobs for the people.

When most of the factors above exist, more and more business will grow, thus more jobs created. With supplest job in the market, people would easily get a job or switching jobs thus full employment rate is achieved.

Vatican Humor

After getting all of Pope Benedict's luggage loaded into the limo, (and he doesn't travel light), the driver notices the Pope is still standing on the curb.

'Excuse me, Your Holiness,' says the driver, 'Would you please take your seat so we can leave?'

'Well, to tell you the truth,' says the Pope, 'They never let me drive at the Vatican when I was a cardinal, and I'd really like to drive today.'

'I'm sorry, Your Holiness, but I cannot let you do that. I'd lose my job! What if something should happen?' protests the driver, wishing he'd never gone to work that morning.

'Who's going to tell?' says the Pope with a smile?

Reluctantly, the driver gets in the back as the Pope climbs in behind the wheel. The driver quickly regrets his decision when, after exiting the airport, the Pontiff floors it, accelerating the limo to 205 kph. (Remember, the Pope is German.)

'Please slow down, Your Holiness!' pleads the worried driver, but the Pope keeps the pedal to the metal until they hear sirens.

'Oh, dear God, I'm going to lose my license -- and my job!' moans the driver.

The Pope pulls over and rolls down the window as the cop approaches, but the cop takes one look at him, goes back to his motorcycle, and gets on the radio.

'I need to talk to the Chief,' he says to the dispatcher.

The Chief gets on the radio and the cop tells him that he's stopped a limo going 205 kph.

'So bust him,' says the Chief.

'I don't think we want to do that, he's really important,' said the cop.

The Chief exclaimed,' All the more reason!'

'No, I mean really important,' said the cop with a bit of persistence.

The Chief then asked, 'Who do you have there, the mayor?'

Cop: 'Bigger.'

Chief: 'A senator?'

Cop: 'Bigger.'

Chief: 'The Prime Minister?'

Cop: 'Bigger.'

Well,' said the Chief, 'Who is it?'

Cop: 'I think it's God!'

The Chief is even more puzzled and curious, 'What makes you think it's God?'

Cop: 'His chauffeur is the Pope!'