The article did not reveal the true and exact situation as you need a lot of details to conclude something concrete and exact situation we are in.

To be fair, Malaysia does accumulated up significant foreign currency reserves in this 10 years time.

I don't understand how the article say "Malaysia reserves is collapsing", as BNM statistics on foreign currency reserves still hold up at around USD90 billion. For those more freely movement countries like HK and Taiwan, I can assure foreign currency reserves surely will ramp up because due to equities recovery, there are lot of hot money move around the region, aka a lot of money inflow to invest/speculate or whatever, while Malaysia no longer a major target since after the 1998 capital control in place + RM is not a freely traded currency as compared prior 1997.

Currently BNM foreign currency reserves is around USD 90+ billion as compared to USD 20-30 billion prior before 1997 crisis, which actually showing improvement over the decade.

Malaysia has high current account surplus mainly come from trade surplus ie. export > import.

While do remember, there are a lot of MNC (particular in E&E industry) that are contributed the trade surplus. E&E contributed more than 1/3 or nearly half of the export, while E&E are mostly owned by FDI or MNC.
Those payment or money from the export doesn't necessary want to come back to Malaysia, while we also relied heavily on foreign workers to support the export industry (we have no less than 2-3 millions foreign workers) that are essential and contributed the export industry, which those wages received by them are often remitted out from Malaysia to their home countries.

In the meantimes, Malaysia corporate are going out to look for growth after saturated domestic market, typical example would be banking industry, almost every local bank has expanded their operation to overseas or regional area through overseas acquisition which also resulted in money outflow. It is same for plantation company which venture to regional to expand their landbanks and business operation. In this kind of situation, we can't conclude it is bad or not good, Malaysia corporate manage or ability to expand elsewhere is a good sign, so can't say not good, although it will result in money outflow.

While we are having less and less FDI coming in. So more corporate are going out instead of going in.

while for equities and investment area, since after 1998 capital control in place, and RM no longer being freely traded international, fund, hedge fund or foreign funds are showing little interest to come to Malaysia which there is no significant inflow in term of investment fund. So Malaysia registered low net inflow in this area.

So we have lot of conditions need to be analysed before we conclude it is unhealthy or not. As long as the foreign currency reserves is in healthy situation to support external debt, and trade balance in healthy condition, then country face no real threat of economy meltdown.

If merely look at surface figure of current account situation, the one people should worry is US. If not USD is the world currency and they can print freely, the situation is much much more complicated.

The main and immediate worry of Malaysia situation is about gov budget deficit, not current account situation.

Just my 2 cents.

Here is the figure
http://www.bnm.gov.my/index.php?ch=111

Again, the focus point has been put on the wrong place, current accout balance is ok, foreign currency reserves is ok, it is the gov budget deficit that is not ok currently, which lead to gov debt become more and more.
The reason why we have inflation due to removal of subsidies (like sugar price, petrol price need to be hiked) is because with high gov budget deficit, gov no longer able to sustain the subsidies to supress the inflation.
If really want to focus on negative point, then this is the one poses the severe risk.

Positive about the debt is that gov is seeking domestic fund to fund the deficit instead external or foreigner through foreign currency.

Due to populatoin constraint, some industry need to go out for business expansion, which is not a bad thing, in fact, it is positive move.
Typical example would be handphone market, which is almost saturated. With penetration rate of more than 100%, aka HP subscription amount is more than population amount, then the only growth they can look for is overseas which has high population, typically would be India, whereby Maxis and Axiata(or Celcom) are venturing into that area.

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Added on January 15, 2010, 5:44 pmIn current situation, the one currency that is collapsing is USD.
Now near at par with AUD (0.93 currently).

This post has been edited by cherroy: Jan 15 2010, 05:46 PM