Malaysia Overview

About Malaysia: 

Malaysia is a country with a constitutional monarchy in Southeast Asia on the South China Sea. Malaysia is divided into two regions, known as West Malaysia and East Malaysia. West Malaysia, also known as Peninsular Malaysia, consists of the southern portion of the Malay Peninsula and nearby islands. Thailand borders West Malaysia on the north, and Singapore lies off the southern coastal tip. East Malaysia occupies the northern section of Borneo Island, as well as offshore islands. East Malaysia shares Borneo with Brunei, which lies on a small section of the northern coast, and with the Kalimantan region of Indonesia, which lies to the south. Malaysia is a federation of 13 states and 3 federal territories. The city of Kuala Lumpur, coextensive with the federal territory of the same name, is the capital and largest city. Located near Kuala Lumpur is the administrative center of the federal government, Putrajaya, which also makes up a federal territory.

From the late 18th to the early 19th century, Britain gradually gained control of Peninsular Malaysia, and most of northern Borneo fell into private British hands. During the same period, the largely Malay population became diversified, as ethnic Chinese and Indians immigrated to work in Malaysia’s tin and rubber industries. Since independence in 1957, ethnic tensions, especially between Chinese and Malays, have dominated political and economic issues. Despite the tensions, however, Malaysia has experienced rapid economic growth, particularly in the manufacturing sector, and economists include the country among Asia’s newly industrialized economies (NIEs).

Economy:

The economy of Malaysia once relied principally on the production of raw materials for export, most importantly petroleum, natural rubber, tin, palm oil, and timber. After Malaysia gained independence in 1957, however, the development of the manufacturing sector took priority. From the mid-1970s to mid-1990s Malaysia had one of the world’s fastest-growing economies, mainly due to rapid industrialization. In the late 1980s industry replaced agriculture as the largest contributor to the gross domestic product (GDP). The services sector, especially tourism, also drove growth.

In 1991 the Malaysian government launched the ambitious “Vision 2020” program, which envisions Malaysia attaining the status of a developed nation by 2020. Toward this goal, the government has invested heavily in modernizing the infrastructure of the Kuala Lumpur metropolitan area. The modernization is designed to propel Malaysia into the digital age and position it as a hub for high-technology businesses in Southeast Asia. However, the country’s reliance on exports of manufactured goods, such as computer microchips and other electrical components, has made its economy susceptible to regional and global economic downturns. Malaysia was one of many Asian countries that suffered economic decline during a regional economic crisis in 1997 and 1998. This crisis led to the delay of some infrastructure projects and possibly of the Vision 2020 goal.

The nation’s economy expanded an average of 5.2 percent annually in the period 2005. In 2003 Malaysia’s annual budget included revenues of about $25 billion and expenditures of about $21 billion. The country’s GDP was $313.8 billion in 2006. Industry, including mining and construction, accounted for 48.1 percent of the GDP; services, 43.6 percent; and agriculture, forestry, and fishing, 8.3 percent.

Labor:

In 2005 Malaysia had a labor force of 11 million workers. Some 15 percent of Malaysian jobs were in agriculture, forestry, and fishing; 30 percent in industry; and 55 percent in services. Unemployment was comparatively low, with only 3.5 percent of the workforce unable to find work in 2004.

Agriculture, forestry, and fishing:

Some 5 percent of Malaysia’s land is under cultivation for field crops and 18 percent is used for plantation agriculture. Malaysia ranks as the world’s leading producer and exporter of palm oil. The country was once the leading producer of natural rubber, but in the early 1990s Thailand and Indonesia surpassed Malaysia after Malaysia began shifting to more profitable crops such as palm oil. Other important export crops are cacao, sugarcane, pepper, coconuts, and pineapples. The principal subsistence crop is rice. Cassava and bananas are also important.

The country is a leading world supplier of tropical hardwoods. Exports of raw timber have declined since the mid-1990s, in part because the government of Malaysia introduced measures to encourage the local production of finished goods, such as plywood and furniture. Most wood processing takes place in West Malaysia, where log exports are banned, while Sarawak provides the bulk of raw timber.

In 2004 Malaysia’s annual fish catch was 1.5 million metric tons, nearly all of it from ocean waters. Aquaculture (the farming of fish and shellfish) has expanded rapidly to help supply the domestic market. However, domestic production of fish has not kept pace with increasing consumption, and Malaysia is an importer of fish products.

Mining:

Production of petroleum and natural gas has increased greatly since the 1970s, and the refining of crude oil is a major industry. In 2004 mineral fuels provided 12 percent of Malaysia’s export revenues. Malaysia’s tin reserves rank among the largest in the world, although production has declined sharply, from about 70,000 metric tons of concentrates in the early 1970s to about 3,000 in 2004. Much of the decline is due to a sharp fall in the world commodity price for the metal. Mining activity also yields bauxite, copper, iron ore, silver, and gold.

Manufacturing:

In 2004 manufactured items accounted for 75 percent of exports by value. Electronic goods constitute most of Malaysia’s manufactured exports. Principal industrial activities are the processing of palm oil, petroleum, timber, rubber, and tin; and the production of electrical and electronic equipment, processed food, textiles, chemicals, building materials, and handicrafts. In addition, Malaysia produces its own automobile, the Proton.

Services:

Among the most important of the service industries is tourism. The government has launched successful international campaigns to promote tourism in Malaysia. In 2005, 16.4 million tourists traveled to Malaysia for short visits from nearby Singapore or other Southeast Asian countries, although a large number arrived from more distant places, including Japan and Taiwan.

Energy:

Malaysia is self-sufficient in energy. In 2003 annual production was 79 billion kilowatt-hours. Some 93 percent of the country’s production came from thermal plants burning fossil fuels (petroleum and natural gas), and 7 percent was from hydroelectric sources.

Communications:

The government of Malaysia tightly controls and monitors most public communications. Government censorship, and the expectation of it, imposes restrictions on the news media. Malaysia has 42 daily newspapers publishing in four languages. A government agency, Radio Television Malaysia, controls and monitors radio and television broadcasting. The state-run Radio Malaysia operates six radio networks, and Television Malaysia operates two television networks; two private television networks also exist. The government has made it a policy to not censor the Internet, which as a consequence has become an important alternative source of information for the Malaysian public.

Foreign Trade:

Export trade totaled $127 billion in 2004. Major exports include semiconductors and electrical equipment, palm oil, chemicals, petroleum, machinery appliances and parts, wood and wood products, and textiles. The chief buyers of exports are the United States, Singapore, Japan, China (including Hong Kong), and Thailand. Imports were valued at $104 billion in 2004. Major imports include electrical and electronic products, machinery and transportation equipment, chemicals, manufactures of metal, petroleum, and iron and steel products. The leading suppliers of imported goods are Japan, the United States, Singapore, China, Taiwan, and South Korea.

Malaysia is a founding member of the Association of Southeast Asian Nations (ASEAN) and is a full participant in the ASEAN Free Trade Area (AFTA), established in 1992 with the goal of establishing nearly free trade among member nations. With the formal implementation of AFTA in 2002, member nations were to gradually reduce tariff barriers to 5 percent or less. Malaysia became a member of the World Trade Organization (WTO) in 1995.

Currency and Banking:

The Malaysian unit of currency is the ringgit, consisting of 100 sen. Malaysia’s central bank and bank of issue is the Bank Negara Malaysia, in Kuala Lumpur. There is a stock exchange in Kuala Lumpur.

Please click here for more information about Malaysia.