Unit trust as a mobiliser and dispenser of funds: efficiency and equity considerations

Abstract

The Malaysian economy has been able to sustain its growth of over 8 per cent for nine consecutive years since 1988. The standard of living has improved and the incidence of poverty has been reduced progressively. To a significant extent, this progress has been made possible by the high rate of capital accumulation which in turn depended on the rate of savings. The high rate of savings which has improved from time to time, has been an important element that has enabled Malaysia to achieve its present prosperity. Historically, Malaysia has sustained a high rate of savings from an average of 25.4 per cent of Gross National Product (GNP) in the 70s to 29.3 per cent in the 80s and to 34.6 per cent in the 90s. The low rate of inflation has ensured that the domestic value of ringgit is not eroded by significant price increases. With various types of investment instruments available in the financial market, unit trust has becoming more popular as a savings instrument. Furthermore, the relatively well-developed financial infrastructure of Malaysia, with its diversified savings products and a wide network of financial institutions, has created opportunity and convenience to earn a positive real rate of return on savings.