Economy of Malaysia
Encyclopedia
The Economy of Malaysia is a growing and relatively open
state-oriented and newly industrialised market economy
. The state plays a significant but declining role in guiding economic activity through macroeconomic plans. In 2007, the economy of Malaysia was the 3rd largest economy in South East Asia and 28th largest economy in the world by purchasing power parity
with gross domestic product for 2008 of $222 billion with a growth rate of 5% to 7% since 2007 In 2010, GDP per capita (PPP)
of Malaysia stands at US$14,700. In 2009, the nominal GDP was US$383.6 billion, and the nominal per capital GDP was US$8,100.
The Southeast Asian nation experienced an economic boom and underwent rapid development during the late 20th century and has a GDP per capita of $14,800, being considered a newly industrialized country. On the income distribution, there are 5.8 million households in 2007. Of that, 8.6% have a monthly income below RM1,000, 29.4% had between RM1,000 and RM2,000, while 19.8% earned between RM2,001 and RM3,000; 12.9% of the households earned between RM3,001 and RM4,000 and 8.6% between RM4,001 and RM5,000. Finally, around 15.8% of the households have an income of between RM5,001 and RM10,000 and 4.9% have an income of RM10,000 and above.
As one of three countries that control the Strait of Malacca
, international trade plays a large role in its economy. At one time, it was the largest producer of tin
, rubber
and palm oil
in the world.
Manufacturing has a large influence in the country's economy. Malaysia is the world's largest Islamic banking and financial centre.
Since it became independent in 1957, Malaysia's economic record has been one of Asia's best. Real gross domestic product (GDP) grew by an average of 6.5% per year from 1957 to 2005. Performance peaked in the early 1980s through the mid-1990s, as the economy experienced sustained rapid growth averaging almost 8% annually. High levels of foreign and domestic private investment played a significant role as the economy diversified and modernized. Once heavily dependent on primary products such as rubber and tin, Malaysia today is a middle-income country with a multi-sector economy based on services and manufacturing. Malaysia is one of the world's largest exporters of semiconductor components and devices, electrical goods, solar panels, and information and communication technology (ICT) products.
Malaysia's capital market crossed the RM2 trillion threshold for the first time ever as at end-2010. The capital market had achieved an annual compounded growth rate of 11% from RM717bil in 2000 due to rapid industry expansion and strong regulatory oversight that underpinned investor confidence in the Malaysian capital market.
and indeed Southeast Asia
has been a center for trade for centuries. Various items such as porcelain
and spice
were actively traded even before Malacca and Singapore
rose to prominence. The Malacca Sultanate controlled the Straits of Malacca from its founding in 1402 to the 1511 invasion by Portugal. All the trade in the Straits, and especially the spices from the Celebes
and the Moluccas
, moved under its protection and through its markets.
In the 17th century, porcelain
and spice
s were found in several Malay states and were actively traded. Large deposits of tin
were found in several Malay states. Later, as the British
started to take over as administrators of Malaya
, rubber
and palm oil trees were introduced for commercial purposes. Instead of relying on the local Malays as a source of labour, the British brought in Chinese and Indians to work in the mines and plantations and provide professional expertise. Although many of them returned to their respective home countries after their agreed tenure ended, some remained in Malaysia and settled permanently. Over time, Malaya became the world's largest producer of tin, rubber, and palm oil. These three commodities along with other raw materials firmly set Malaysia's economic tempo well into the mid-20th century. As Malaya moved towards independence, the government began implementing economic five-year plans, beginning with the First Malayan Five Year Plan
in 1955. Upon the establishment of Malaysia, the plans were re-titled and renumbered, beginning with the First Malaysia Plan
in 1965.
s became the country's primary growth engine. Malaysia consistently achieved more than 7% GDP
growth along with low inflation in the 1980s and the 1990s.
Central planning has been a major factor in the Malaysian economy, as government expenditure was often used to stimulate the economy. Since 1955, with the commencement of the First Malayan Five Year Plan
, the government has used these plans to intervene in the economy to achieve such goals as redistribution of wealth and investment in, for instance, infrastructure projects.
A legacy of the British colonial system was the division of Malaysians into three groups according to ethnicity. The Malays were concentrated in their traditional villages, focusing mainly on agricultural activities, while the Chinese dominated Malaysian commerce. Educated Indians took up professional roles such as those of doctor
s or lawyer
s, while the less better-off worked the plantations. The Reid Commission
which drafted the Malaysian Constitution made a provision for limited affirmative action
through Article 153, which gave the Malays special privileges, such as 60% of university entrance (quota). However, after the May 13 incident
of racial rioting in the federal capital of Kuala Lumpur
, the government initiated more aggressive programmes aimed at actively establishing a Malay entrepreneurial class through direct intervention in the economy, aimed at alleviating poverty. This was done with the controversial New Economic Policy
(NEP). Its main objective was the elimination of the association of race with economic function, and the first five-year plan to begin implementing the NEP was the Second Malaysia Plan
. The success or failure of the NEP is the subject of much debate, although it was officially retired in 1990 and replaced by the National Development Policy
(NDP). Recently much debate has surfaced once again concerning the results and relevance of the NEP. Some have argued that the NEP has indeed successfully created a Middle/Upper Class of Malay businesspeople and professionals.
Despite some improvement in the economic power of Malays in general, the Malaysian government maintains a policy of discrimination that favours ethnic Malays over other races—including preferential treatment in employment, education, scholarships, business, access to cheaper housing and assisted savings. This special treatment has sparked envy and resentment amongst non-Malays. The ethnic Chinese control of the locally owned sector of the country's economy has been ceded largely in favour of the bumiputra/Malays in many essential or strategic industries such as petroleum retailing, transportation, agriculture and automobile manufacturing.
Current GDP per capita grew 31% in the Sixties and 358% in the Seventies, but this proved unsustainable and growth scaled back sharply to 36% in the Eighties. It rose again to 59% in the Nineties led primarily by export-oriented industries. This increase in GDP was brought about due to a shift from the traditional agricultural and resource based economy to one based on manufactured goods. From 1988 to 1996, Malaysia's economy expanded at 8 per cent, the second fastest after China, resulting in manufactured goods such as microchips and semiconductors making up 80 per cent of exports. Per capita income doubled from 1990 to 1996. Infrastructure projects were greatly increased in this time. Other countries looked to Malaysia at the time as an example for economic reform.
The rate of poverty in Malaysia
also fell dramatically over the years. However, its precipitous drop has been questioned by critics who suggest that the poverty line has been drawn at an unreasonably low level. The rapid economic boom led to a variety of supply problems. Labour shortages soon resulted in an influx of millions of foreign workers, many illegal. Cash-rich PLCs
and consortia of banks eager to benefit from increased and rapid development began large infrastructure projects.
As of 2006, the most recent five year plan is the Ninth Malaysia Plan
. The five year plans have been criticised for resembling the central planning of Soviet communism; the five-year time frame has been attacked for being insufficient in dealing with short-term crises and long-term trends. The effectiveness of the plans has also been disputed; at the beginning of 2005, the last year of the Eighth Malaysia Plan, almost 80% of the funds allocated under the plan had not been disbursed.
For purchasing power parity comparisons, the US Dollar is exchanged at 1.70 Ringgit only. Mean wages were $6.95 per manhour in 2009.
From 1988 to 1997, the economy experienced a period of broad diversification and sustained rapid growth averaging 9% annually.
By 1999, nominal per capita GDP had reached $3,238. New foreign and domestic investment
played a significant role in the transformation of Malaysia's economy. Manufacturing grew from 13.9% of GDP in 1970 to 30% in 1999, while agriculture
and mining
which together had accounted for 42.7% of GDP in 1970, dropped to 9.3% and 7.3%, respectively, in 1999. Manufacturing accounted for 30% of GDP (1999). Major products include electronic components – Malaysia is one of the world's largest exporters of semiconductor devices – electrical goods and appliances.
During the same period, the government tried to eradicate poverty with a controversial race-conscious positive program called New Economic Policy (NEP). First established in 1971 following race riots, commonly known in Malaysia as the May 13 Incident
, it sought to eradicate poverty
and end the identification of economic function with ethnicity. In particular, it was designed to improve the distribution of wealth among the country's population.. The NEP ostensibly ended in 1991, however the policies persist in the form of other programmes such as the National Development Policy. The policies are enforced overtly through race-based quotas for low-cost housing units, university placement, business equity ownership, etc.
Rapid growth was achieved partly through privatisation of inefficient state owned enterprises, thus subjecting them to commercial pressures and forcing them to better utilise their resources. Many deals were done behind closed doors and put through rather quickly. In one example Khazanah Nasional
alienated shares in DRB Hicom
to Mega Consolidated. This led to such deals being labelled mega projects.
Foreign funds were attracted to invest making the local money market and bourse liquid. This created opportunity for local businesses to raise capital on the KLSE
, and carry out infrastructure development in areas like telecommunications, highways and power generation to meet bottlenecks caused by rapid industrialisation. An intense labor shortage created employment for millions of foreign workers. Subsequent events show that more than 50% were illegal.
The influx of foreign investment led to the KLSE
Composite index
trading above 1,300 in 1994 and the Ringgit trading above 2.5 in 1997. At various times the KLSE was the most active exchange in the world, with trading volume exceeding even the NYSE. The stock market capitalisation of listed companies in Malaysia was valued at $181,236 million in 2005 by the World Bank
.
Some of the more visible projects from that period are Putrajaya
, a new international airport (Kuala Lumpur International Airport
), a hydroelectric dam (Bakun dam), the Petronas Towers and the Multimedia Super Corridor. Proposals that were eventually canceled include the 95 km Sumatra
–Malaysia bridge (would have been world's longest), the Mega International Sea and Air port on reclaimed land in Kedah
(would have been world's biggest) and the KL Linear City (would have been the world's longest mall and the world's first city built over a river).
Concerns were raised during the time about the sustainability of the rapid growth and the ballooning current account. The mainstream opinion prevalent at that time was that the deficit was temporary and would reverse once imported equipment started producing for export. In spite of that, measures were taken to moderate growth especially when it threatened to overheat into the double digits. The main target was asset prices, and restrictions were further tightened on foreign ownership of local assets. Exposure of local banks to real estate loans were also capped at 20%.
As was widely expected, the current account deficit did narrow steadily, year to year, from 9% to 5% of GDP.
Malaysia has the largest operational stock of industrial robot
s in the Muslim world
.
. Foreign direct investment
fell at an alarming rate and, as capital flowed out of the country, the value of the ringgit dropped from MYR 2.50 per USD to, at one point, MYR 4.80 per USD.The Kuala Lumpur Stock Exchange
's composite index fell from approximately 1300 to nearly merely 400 points in a few short weeks. After the controversial sacking of finance minister Anwar Ibrahim
, a National Economic Action Council was formed to deal with the monetary crisis. Bank Negara
imposed capital control
s and pegged
the Malaysian ringgit at 3.80 to the US dollar. Malaysia refused economic aid packages from the International Monetary Fund
(IMF) and the World Bank, surprising many analysts. By refusing aid and thus the conditions attached thereof from the IMF, Malaysia was not affected to the same degree in the Asian Financial Crisis as Indonesia, Thailand and the Philippines.
Regardless, the GDP
suffered a sharp 7.5% contraction in 1998. It however rebounded to grow by 5.6% in 1999. The Government of Malaysia predicted 5.8% real GDP growth in the year 2000, but most analysts predicted growth will exceed 8% for the year.
In order to rejuvenate the economy, massive government spending was made and Malaysia continuously recorded budget deficits in the years that followed. Economic recovery has been led by strong growth in exports, particularly of electronics and electrical products, to the United States, Malaysia's principal trade and investment partner. Inflationary pressures remained benign, and, as a result, Bank Negara Malaysia
, the central bank, had been able to follow a low interest rate policy. The Malaysian economy recovered from the 1997 Asian Financial Crisis sooner than neighbouring countries, and has since recovered to the levels of the pre-crisis era with a GDP per capita of $14,800.
The post Y2K slump of 2001 did not affect Malaysia as much as other countries. This may have been clearer evidence that there are other causes and effects that can be more properly attributable for recovery. One possibility is that the currency speculators had run out of finance after failing in their attack on the Hong Kong dollar in August 1998 and after the Russian ruble
collapsed. (See George Soros
)
The fixed exchange rate
was abandoned on July 21, 2005 in favour of a managed floating system
within an hour of China announcing the same move. In the same week, the ringgit strengthened a percent against various major currencies and was expected to appreciate further. As of December 2005, however, expectations of further appreciation were muted as capital flight
exceeded USD 10 billion. According to Bank Negara's published figures, Malaysia's foreign exchange reserves increased steadily since the initial capital flight, from USD75.2 billion as at 15 July 2005 (just before the peg was removed) to peak at USD125.7 billion as at 31 July 2008, a few months before the global credit crisis that started in September 2008. As at 29 May 2009, the reserves stood at USD88.3 billion. In spite of the large positive current account surplus, foreign reserves have started to fall at a rapid rate. Official statistics released in March 2006, confirmed capital flight
of more than US$10 billion. However, as of the 4th fiscal year, a surge of FDI has pushed the KLSE above 1200 points, and is expected to strengthen to pre 1997 levels.
In March 2005, the United Nations Conference on Trade and Development
(UNCTAD) published a paper on the sources and pace of Malaysia's recovery, written by Jomo K.S. of the applied economics department, University of Malaya
, Kuala Lumpur
. The paper concluded that the controls imposed by Malaysia's government neither hurt nor helped recovery. The chief factor was an increase in electronics components exports, which was caused by a large increase in the demand for components in the United States, which was caused, in turn, by a fear of the effects of the arrival of the year 2000 (Y2K
) upon older computers and other digital devices.
In September 2005, Sir Howard J. Davies, director of the London School of Economics
, at a meeting in Kuala Lumpur, cautioned Malaysian officials that if they want a flexible capital market, they will have to lift the ban on short-selling put into effect during the crisis. In March 2006, Malaysia removed the ban on short selling. It is interesting to note that some of the measures taken by the Malaysian government in response to the Asian crisis, such as the ban on short selling, were swiftly adopted by the very countries that had previously been critical of the Malaysian response.
Regardless of cause and effect claims, rejuvenation of the economy also coincided with massive government spending and budget deficits in the years that followed the crisis. Later, Malaysia enjoyed faster economic recovery compared to its neighbours. The country has recovered to the levels of the pre-crisis era – as an example, the KLCI Composite Index hit an all time high of 1,386 on 20 June 2007 which is approximately 100 points higher than the pre-crisis record of 1,275 in 1993. While the pace of development today is not as rapid, it is seen to be more sustainable. Although the controls and economic housekeeping may or may not have been the principal reasons for recovery, there is no doubt that the banking sector has become more resilient to external shocks. The current account has also settled into a structural surplus, providing a cushion to capital flight. Asset prices are generally back to their pre-crisis heights, despite the effects of the global financial crisis. As of 21 May 2007, the Ringgit touched a nine-year high record at 3.39 against the US dollar. Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz says the Ringgit moves up on its own merit and in line with the Malaysian economy and not in tandem with the Chinese Yuan. Malaysia has shown the ability to absorb the crude oil price increases and most economies have shown high resilience in absorbing higher energy prices. Malaysia is the world's largest Islamic banking and financial centre.
was an internationalized currency, which was freely traded around the world. Just before the crisis, the Ringgit was traded RM2.50 at the dollar. Due to speculative activities, the Ringgit fell as much as RM4.10 to the dollar in matter of weeks. Bank Negara Malaysia
, the nation's central banks decided to impose capital controls to prevent the outflow of the Ringgit in the open market. The Ringgit is not traded internationally, a traveler needs to declare to the central bank if taking out more than RM10,000 out of the country and the Ringgit itself was pegged at RM3.80 to the US dollar.
The fixed change rate was abandoned to floating exchange rate
in July 2005, hours after People's Republic of China
announced the same move. At this point, the Ringgit is still not internationalized. The Ringgit continue to strengthen to 3.18 to the dollar in March 2008. Meanwhile, many aspect of the capital control has been slowly relaxed by Bank Negara Malaysia
. However, the government continues to not internalized the Ringgit. The government stated that the Ringgit will be internationalized once it is ready.
Bank Negara Malaysia
for the time being, uses interest rate targeting. The Overnight Policy Rate
(OPR) is their policy instrument, and is used to guide the short term interbank rates which will hopefully influence inflation and economic growth.
policy named as New Economic Policy soon after May 13 Incident
in 1969. Prior to the incident, the poverty rates among Malays were extremely high (at 65%) as was discontent between races, particularly towards the Chinese, who controlled 34% of the economy at the time. The Chinese minority still accounts for 70 percent of the country's market capitalization.
Through NEP, Bumiputera quotas are placed in housing developments, scholarship admission and also for ownership of publicly listed companies. The quota system has been relaxed recently since the March 8, 2008 General election. Bumiputera equity requirement for publicly listed companies has been relaxed since 12 November 2008 by allowing those companies to remove the quota once after IPO has been done. Further liberalization in the retail sector is expected to remove the present 30% Bumiputera listing requirements. According to the Secretary-General of Ministry of Domestic Trade and Consumer Affairs Datuk Mohd Zain Mohd Dom said, the amendments is reflective of Malaysia "moving towards progressive liberalisation"
The Malaysian New Economic Policy
was created in 1971 with the aim of bringing Malays a 30% share of the economy of Malaysia and eradicating poverty amongst Malays, primarily through encouraging enterprise ownership by Bumiputeras. After 30 years of the program, the NEP had somewhat met some of its goals. Bumiputera ownership increased to 18.9% in 2004 against 2.4% in 1970 and poverty decreased to 8.3% in 2004 against 64.8% in the 1970s.
The NEP is accused of creating an oligarchy
, and creating a 'subsidy mentality'. Political parties such as Parti Keadilan Rakyat
and Democratic Action Party
have proposed a new policy which will be equal for every Malaysian, regardless of race. When the Democratic Action Party was elected in the state of Penang
in 2008, it announced that it will do away with the NEP, claiming that it "... breeds nepotism
, corruption
and systemic inefficiency".
On April 21, 2009, the prime minister Najib Tun Razak
has announce liberalisation of 27 services sub-sector by abolishing the 30% bumiputera requirement. The move is seen as the government efforts to increase investment the service sector of the economy. According to the premier, many more sectors of the economy will be liberalized. On June 30, 2009, the premier announces further liberation moves including the dismantling of the Bumiputera equity quotas and repealing the guidelines of the Foreign Investment Committee, which was responsible to monitor foreign shareholding in Malaysian companies. However, any Malaysian companies that wishes to list in Malaysia would still need to offer 50 percent of public shareholding spread to Bumiputera investors.
The Malaysian government subsidizes and controls prices on a lot of essential items to keep the prices low. Prices of items such as palm oil cooking oil, petrol, flour, bread, rice and other essentials have been kept under market prices to keep cost of living low. In 2008, the government announced that it has spent RM40.1 billion in 2007 in subsidies to keep prices leveled. As of 2009, 22 per cent of government expenditures were subsidies, with petrol subsidies alone taking up 12 per cent.
Smuggling and hoarding, which leads to shortages, is a prominent problem in Malaysia due to the subsidies. For example, cooking oil is subsidised for domestic use only. This situation creates an environment where industrial players hoard domestic cooking oil for industrial use. During shortage time, such as the January 2008 cooking oil crisis, the government imposed a 5 kg limit for each purchase to relief domestic demand. However, the limited purchase has created more panic buying, which prompt the Government to negotiate with cooking oil manufacturers to increase their production capacity, and the situation reverted to normal within one week. Another example is when vehicles in Thailand
come to Malaysia to smuggle cheap petrol and diesel out of the country. The government also looking into restructuring the fuel subsidy so that the selected needy group will get the subsidy. The government is considering removing subsidies on diesel for general consumers while maintaining subsidies for suitable groups, such as those involved in public transport.
On January 2010, the government announce dual price structure for fuel, based on citizenship. Foreigners are expected to pay market price for fuel while citizens will have subsidy allocations based to engine capacity. The dual pricing structure is expected to begin on May 1, 2010.
The government has considered to remove the subsidies but a formal plan had yet to materialized as of 2007. In 2008, the government is considering to remove price controls on construction materials such as cement
and steel
bars while banning exports to ensure steady supply. The government is experimenting with the idea through allowing Sabah
and Sarawak
construction players to import steel and cement since February 2008. The government then, on May 12, 2008 removed ceiling prices on steel bars and billets and removed import duties on selected items under HS Code 7214.10 110 and 7214.20 910, which do not fully cover steel bars use by the construction industry. The government then further liberalized the cement industry by abolishing ceiling prices on June 5, 2008.
Another strategic item which is heavily subsidized but moving towards a market based approach is Natural Gas
which is used in the industrial sector. Beginning July 1, 2008, the government is expected to reduce the gas subsidy 5% to 10% per annum over 11 years, in which the gas price will reflect market price.
s that invests in local companies and also foreign companies. One such funds are Khazanah Nasional
Berhad which was established in 1993. Its objective is to help shape selected strategic industries in Malaysia and develop those investment for the benefit of Malaysia. The fund invest in major companies in Malaysia such as Proton Holdings in the automotive sector, CIMB
in the banking sector, Pharmaniaga in the medical sector, UEM Group
in the construction sector, Telekom Malaysia
in the communications industry and many other companies in many other industries. It is estimated that the fund size of Khazanah Nasional stands at around US$19 billion.
Another fund that is owned by the Malaysian government is the Employees Provident Fund
which is claimed to be the fourth largest state run pension fund in Asia. Like Khazanah Nasional
, the EPF invests and sometimes owns several major companies in Malaysia such as RHB Bank
. EPF investment is diversified over a number of sectors but almost 40% of their investment are in the services sector. Fund size in 2007 is estimated at US$100 billion.
Permodalan Nasional Berhad is a major fund manager controlled by the Malaysian Government. It offers capital guaranteed mutual funds such as Amanah Saham Bumiputera and Amanah Saham Wawasan 2020 which are open only to Malaysian and in some cases, Bumiputeras. As of April 2008, it manages MYR
120 billion of funds (36 billion USD), of which MYR76 million is unit trust funds. The fund manager is a sizable investor in strategic companies such as MMC Corporation Berhad, Maxis Communications Berhad and TM International Berhad among others.
Other than federal government funds, some states have created their own investment authority to manage state-owned sovereign wealth funds. First of such funds are launched by the state of Terengganu
through the establishment of Terengganu Investment Authority in December 2008. It initial fund size will be around USD 3 billion and derived from its oil royalties.
Berhad, Employees Provident Fund
and Pemodalan Nasional Berhad
.
The government's development plans, called the Malaysian Plan, currently the Ninth Malaysia Plan
, started in 1950 during the British colonial rule. The plans were largely centered around accelerating the growth of the economy by selectively investing in selective sectors of the economy and building infrastructure to support said sectors. For example, in the current national plan, three sectors - agriculture
, manufacturing
and services, will receive special attention to promote the transition to high value-added activities in the respective areas. Other than the generalized plans like the Ninth Malaysia Plan, the government also have a development plan that are targeted to improve the manufacturing sector which is called the Industrial Master Plan. Currently, the plan is called the Third Industrial Master Plan (IMP3) which covers a period from 2006 to 2020. The industrial plans aim to make Malaysia a major trading nation and build up the country's economy and human capital.
Economic Planning Unit , established in 1961 was instrumental in steering Malaysia to recovery from the 1997 Asian Financial Crisis. The unit is an agency under the Prime Minister's Department responsible for steering Malaysia's socio-economic development towards achieving a developed-nation status by the year 2020 through various measures such as preparing policies and strategies for socio-economic development, prepare medium and long term plans for the government and most importantly, advise the government on economic issues.
Government-linked investment vehicles such as Khazanah Nasional
Berhad, Employees Provident Fund
and Pemodalan Nasional Berhad
invest and sometimes own major companies in major sectors of the Malaysian economy. For example, Khanazah Nasional is a major shareholder in Proton Holdings, an automaker and CIMB
banking group in the financial sector. The government, however, is keen to sell stakes in their companies such as Malaysia Airlines
to let the companies remain globally competitive
. As of 20 March 2008, the Ringgit is traded at MYR
3.18 at the US dollar. The Ringgit has not been internationalised since September 1998, an effect due to the 1997 Asian Financial Crisis in which the central bank impose capital controls on the currency. As a part of series of capital controls, the currency was pegged between September 1998 to 21 July 2005 at MYR 3.80 to the dollar. In recent years, Bank Negara Malaysia
beginning to relax certain rules to the capital controls although the currency itself is still not traded internationally yet. According to the Bank Governor, the Ringgit will be internationalised when it's ready.
On September 2010, in an interview with CNBC
, Dato' Seri Najib Tun Razak
, which is the Prime Minister of Malaysia and also the Finance Minister said that the government is open to open up the Ringgit to off shore trading if the move will help the economy. He further added that before such a move to be made, it will ensure that rules and regulation will be in place so the currency will not be abused.
Malaysia is well-endowed with natural resources in areas such as agriculture, forestry and minerals. It is an exporter of natural and agricultural resources, the most valuable exported resource being petroleum. At one time, it was the largest producer of tin
, rubber
and palm oil
in the world. In terms of agriculture, Malaysia is one of the top exporters of natural rubber
and palm oil
, which together with sawn logs and sawn timber, cocoa, pepper
, pineapple
and tobacco
dominate the growth of the sector. Palm oil is also a major generator of foreign exchange.
Regarding forestry resources, it is noted that logging
only began to make a substantial contribution to the economy during the nineteenth century. Today, an estimated 59% of Malaysia remains forested. The rapid expansion of the timber industry, particularly after the 1960s, has brought about a serious erosion problem in the country's forest resources. However, in line with the Government's commitment to protect the environment and the ecological system, forestry resources are being managed on a sustainable basis and accordingly the rate of tree felling has been on the decline.
In addition, substantial areas are being silviculturally
treated and reforestation of degraded forest land is also being carried out. The Malaysian government provide plans for the enrichment of some 312.30 square kilometres (120.5 sq mi) of land with rattan
under natural forest conditions and in rubber plantations as an inter crop. To further enrich forest resources, fast-growing timber species such as meranti tembaga, merawan and sesenduk are also being planted. At the same time, the cultivation of high-value trees like teak
and other trees for pulp and paper are also encouraged. Rubber, once the mainstay of the Malaysian economy, has been largely replaced by oil palm as Malaysia's leading agricultural export.
Tin
and petroleum
are the two main mineral resources that are of major significance in the Malaysian economy. Malaysia was once the world's largest producer of tin until the collapse of the tin market in the early 1980s. In the 19th and 20th century, tin played a predominant role in the Malaysian economy. It was only in 1972 that petroleum and natural gas
took over from tin as the mainstay of the mineral extraction sector. Meanwhile, the contribution by tin has declined. Petroleum
and natural gas
discoveries in oil field
s off Sabah, Sarawak and Terengganu have contributed much to the Malaysian economy. Oil and gas resources are managed by Petronas
, the state controlled oil company which forms production sharing contracts with other players like Exxon-Mobil and Royal Dutch Shell
to explore oil fields in Malaysia. Other minerals of some importance or significance include copper, bauxite, iron-ore and coal
together with industrial minerals like clay, kaolin, silica, limestone
, barite
, phosphates and dimension stones such as granite
as well as marble blocks and slabs. Small quantities of gold are produced.
Malaysia's broad and shallow continental shelf
consists of several deep water prospective areas. Malaysia has 500,000 km2 available for oil and gas exploration. 51 of the 70 producing fields in Malaysia are oil field
s. In January 2004, Malaysia's oil reserves
were estimated to be 4.84 Goilbbl, while natural gas reserves stood at 87 trillion standard cubic feet (2,460 km3). The country produces about 0.00075 Goilbbl barrels of crude oil every day and 2.20 trillion standard cubic feet (60 km3) of natural gas condensate
s per year. In 2004, Minister in the Prime Minister's Department, Mustapa Mohamed
, revealed that Malaysia's oil reserves stood at 4.84 Goilbbl while natural gas reserves increased to 89 trillion cubic feet (2,500 km³). This was an increase of 7.2%. As of January 1, 2007, Petronas
reported that oil and gas reserve in Malaysia amounted to 20.18 Goilbbl equivalent. In January 2008, the Malaysian natural gas reserves holds up to 14670000000 barrels (2,332,343,617,650 l) of oil equivalent. As of January 2009, Malaysia has proven oil reserves of up to 4 Goilbbl.
The government estimates that at current production rates Malaysia will be able to produce oil up to 18 years and gas for 35 years. In 2004, Malaysia is ranked 24th in terms of world oil reserves and 13th for gas. 56% of the oil reserves exist in the Peninsula while 19% exist in East Malaysia. The government collects oil royalties of which 5% are passed to the states and the rest retained by the federal government.
Other minerals of some importance or significance include copper, bauxite, iron-ore and coal together with industrial minerals like clay, kaolin, silica, limestone, barite, phosphates and dimension stones such as granite as well as marble blocks and slabs. Small quantities of gold
are produced.
and New Zealand in investor protection category of the survey.
The government is moving towards a more business friendly environment by setting up a special task force to facilitate business called PEMUDAH, which means "simplifier" in Malay. Highlights includes easing restrictions and requirement to hire expatriates, shorten time to do land transfers and increasing the limit of sugar storage (a controlled item in Malaysia) for companies. The Government aims to be in the top 10 in the Ease of doing business survey before 2010 in order to attract even more foreign investors.
The efforts of PEMUDAH is beginning to show fruits as their ranking improved to number 20 in 2009, with marked improvement in four areas: getting credit; dealing with construction permits; paying taxes; and enforcing contracts.
Malaysia is an important trading partner for the United States. In 1999, two-way bilateral trade between the U.S. and Malaysia totaled U.S. $30.5 billion, with U.S. exports to Malaysia totaling U.S.$9.1 billion and U.S. imports from Malaysia increasing to U.S.$21.4 billion. Malaysia was the United States' 10th-largest trading partner and its 12th-largest export market. During the first half of 2000, U.S. exports totaled U.S.$5 billion, while U.S. imports from Malaysia reached U.S.$11.6 billion.
The Malaysian Government encourages Foreign Direct Investment
(FDI). According to Malaysian statistics, in 1999, the U.S. ranked first among all countries in approved FDI in Malaysia's manufacturing sector with approved new manufacturing investments totaling RM5.2 billion (US$1.37 billion). Principal U.S. investment approved by the Malaysian Investment Development Authority (MIDA) was concentrated in the chemicals, electronics, and electrical sectors. The cumulative value of U.S. private investment in Malaysia exceeded $10 billion, 60% of which is in the oil and gas and petrochemical sectors with the rest in manufacturing, especially semiconductors and other electronic products.
In the first six months of 2007, Malaysia's total trade increased by 2.2% to RM522.38 billion, compared with RM511.11 billion in the same period of 2006.
which was established in 1992 to promote trade among ASEAN members. Most tariffs among the first generation member states were scrapped in 2007. ASEAN itself is increasingly playing a large role in free trade negotiation on behalf of its members. ASEAN as a group hopes to establish a free trade agreement with the European Union
by 2009.
The Malaysian Government is negotiating free trade deals with Australia, Chile
and India, but has suspended negotiation of free trade deal with United States indefinitely after eight rounds of negotiation. Malaysia is seeking membership into the Trans Pacific Partnership, a regional trade pact between the United States and countries in the Pacific Rim. As of October 2010, TPP members has agree to allow Malaysia to join as a full negotiation member of the group. Malaysia will join the third round of negotiations in Brunei.
Officials have expressed desire for free trade agreements their ASEAN members Singapore and Thailand. The Malaysian Trade Ministry released a statement in Vietnam
saying that the FTA "has the potential to increase trade, investment cross flows and economic cooperation between the two countries. The agreement would also serve to make Chile a gateway for Malaysia's exports to the Latin American market."
Malaysia signed a Japan-Malaysia Economic Partnership Agreement with Japan on 13 December 2005. This leads to a Free trade agreement which was in effect from 13 July 2006 and expected to be fully realized in 2016. The agreement itself is an extension of an FTA between ASEAN and Japan, which is called Asean-Japan Comprehensive Economic Partnership.
On 8 November 2007, Malaysian and Pakistan signed a bilateral Free Trade Agreement which will come in force on 1 January 2008. Malaysia will cut tariffs on 140 lines while Pakistan will cut 124 lines. Most tariffs and duty is expected to be eliminated by 2012.
On 26 October 2009, Malaysia and New Zealand signed a bilateral Free Trade Agreement. New Zealand will cut tariffs on 99.5 percent of goods sent to Malaysia beginning 2010. This agreement itself is an extension of the ASEAN-Australia-New Zealand Free Trade Agreement.
Other 'economic areas' showing an interest in establishing free-trade agreements with Malaysia are the European Union
and Hong Kong
. However, before any talks can be initiated regarding new FTAs, Joint Economic Co-operation deals need to be concluded. International Trade and Industry Minister, Tan Sri Muhyiddin Yassin
has expressed the hope that talks will be concluded by the end of 2008.
The Minister of International Trade and Industry, Datuk Mustapa Mohamed announced that there was a sharp reduction in FDI and Malaysia only received RM4.2 billion FDI, about 78% reduction, for the first five months of 2009.
On the other hand, FDI in other Asean countries has grown rapidly. Malaysia was very much ahead of Vietnam on attracting FDI. Now it has to compete with the latter for the FDI.
shipping route and manufacturing are both key sectors of the country's economy. Manufacturing has a large influence in the country's economy, although Malaysia’s economic structure is moving away from it.
Malaysia has 18 companies that rank in the Forbes Global 2000
ranking for 2009.
. The central bank limits foreign participation through licensing limits. The central bank launched a Financial Sector Master plan in 2001 to revamp the finance sector following the Asian Financial Crisis. The master plan calls for emphasis on Islamic Banking, of which Malaysia has become a centre of. Malaysia has the highest number of female workers in Islamic banking.
Maybank
is Asia-Pacific's largest Islamic banking service provider with US$6.4 billion (RM22.48 billion) Syariah-compliant assets. Malaysia also accounts for two thirds of global $82.2 billion sukuk
market in 2007. Khazanah Nasional
owns the largest retakaful
company in the world, ACR Retakaful Holdings Limited
, with capital base amounting to 300 million US Dollars.
A quarterly report prepared by the Economist Intelligence Unit
on behalf of Barclays Wealth
in 2007 estimated that there were 48,000 dollar millionaires in Malaysia (over twice that of China).
In April 2009, the government announce new licenses will be issued for investment banking Islamic banking
, takaful
and insurance business between 2009 to 2011. It also announced that the threshold foreign equity ownership has been raised from 49% to 70% and allowed foreign banks to open up new branches and micro-credit facilities. This move was done as an attempt to put Malaysia in as center for Islamic banking and also to liberalize the financial sector.
list of companies in 2007. It also ranked 18 in the industry of the same list. The company has ove up to the rank by being 95th in 2008 in terms of revenue and 8th most profitable company in the world and the most profitable in Asia. Since inception in 1974, Petronas have paid the government RM 403.3 billion, with RM 67.6 billion in 2008. The payment represents a 44% of the 2008 federal government revenue.
Petronas is also the custodian of oil and gas reserves for Malaysia. Hence, all oil and gas activities are regulated by Petronas. Malaysia encourages foreign oil company participation through production sharing contracts, in which significant amount of oil will be given away to the foreign oil company until it reaches a production milestone. Currently, many major oil companies such as ExxonMobil
, Royal Dutch Shell
, Nippon Oil
, and Murphy Oil
are involved in such contracts. As a result, 40% of oil fields in Malaysia are developed.
Malaysia and Thailand has a wedge shaped area 150 km from Kota Bharu
, Kelantan
and 260 km from the shores of Songkhla
, Thailand which is jointly developed by Petronas
and its Thailand counterpart. The area, which is called Malaysia-Thailand Joint Development Area, has 4.5 Tcuft of proven reserves.
In an effort to diversify the economy and make Malaysia’s economy less dependent on exported goods, the government has pushed to increase tourism in Malaysia
. As a result tourism has become Malaysia’s third largest source of income from foreign exchange, although it is threatened by the negative effects of the growing industrial economy, with large amounts of air and water pollution along with deforestation affecting tourism. The majority of Malaysia's tourists come from its bordering country, Singapore. In 1999, Malaysia launched a worldwide marketing campaign called “Malaysia, Truly Asia” which was largely successful in bringing in over 7.4 million tourists. In recent years tourism has been threatened by the negative effects of the growing industrial economy, with large amounts of air and water pollution along with deforestation affecting tourism.
The Ministry of Culture, Arts and Tourism (MOCAT) was established in 1987 under which the TDC was incorporated. TDC existed from 1972 to 1992, when it became the Malaysia Tourism Promotion Board (MTPB), through the Malaysia Tourism Promotion Board Act, 1992. Tourism Malaysia
aims to market Malaysia as a premier destination of excellence in the region.
Science Policy in Malaysia is regulated by the Ministry of Science, Technology, and Environment. Other ministries, such as the Ministry of Agriculture and the Ministry of Health also have science departments. Training in scientific areas was promoted during the 1970s and 1980s. From 1987-1997 research and development used 0.24% of GNP, and in 1998 high-tech exports made up 54% of Malaysia's manufactured exports. The country is one of the world's largest exporters of semiconductor devices, electrical goods, and information and communication technology products.
In 2002 the Malaysian National Space Agency (Angkasa) was formed to deal with all of Malaysia's activities in space, and to promote space education and space experiments. It is focused on developing the "RazakSAT" satellite, which is a remote sensing satellite with CCD cameras. In early 2006, Sheikh Muszaphar Shukor
and three other finalists were selected for the Angkasawan spaceflight programme. This programme came about when Russia agreed to transport one Malaysian to the International Space Station
as part of a multi-billion dollar purchase of 18 Russian Sukhoi Su-30MKM fighter jets by the Royal Malaysian Air Force.
In an effort to create a self-reliant defensive ability and support national development Malaysia privatised some of its military facilities in the 1970s. This has created a defence industry, which in 1999 was brought under the Malaysia Defence Industry Council
. The government continues to try to promote this sector and its competitiveness, actively marketing the defence industry. One way it does this is through the Langkawi International Maritime and Aerospace Exhibition, one of the largest defence and civil showcases in the Asia Pacific, regularly attended by over 500 companies. The Malaysian Armed Forces relies heavily on local military technology and high-tech weapons systems designed and manufactured by foreign countries.
Open economy
An open economy is an economy in which there are economic activities between domestic community and outside, e.g. people, including businesses, can trade in goods and services with other people and businesses in the international community, and flow of funds as investment across the border...
state-oriented and newly industrialised market economy
Market economy
A market economy is an economy in which the prices of goods and services are determined in a free price system. This is often contrasted with a state-directed or planned economy. Market economies can range from hypothetically pure laissez-faire variants to an assortment of real-world mixed...
. The state plays a significant but declining role in guiding economic activity through macroeconomic plans. In 2007, the economy of Malaysia was the 3rd largest economy in South East Asia and 28th largest economy in the world by purchasing power parity
Purchasing power parity
In economics, purchasing power parity is a condition between countries where an amount of money has the same purchasing power in different countries. The prices of the goods between the countries would only reflect the exchange rates...
with gross domestic product for 2008 of $222 billion with a growth rate of 5% to 7% since 2007 In 2010, GDP per capita (PPP)
Per capita income
Per capita income or income per person is a measure of mean income within an economic aggregate, such as a country or city. It is calculated by taking a measure of all sources of income in the aggregate and dividing it by the total population...
of Malaysia stands at US$14,700. In 2009, the nominal GDP was US$383.6 billion, and the nominal per capital GDP was US$8,100.
The Southeast Asian nation experienced an economic boom and underwent rapid development during the late 20th century and has a GDP per capita of $14,800, being considered a newly industrialized country. On the income distribution, there are 5.8 million households in 2007. Of that, 8.6% have a monthly income below RM1,000, 29.4% had between RM1,000 and RM2,000, while 19.8% earned between RM2,001 and RM3,000; 12.9% of the households earned between RM3,001 and RM4,000 and 8.6% between RM4,001 and RM5,000. Finally, around 15.8% of the households have an income of between RM5,001 and RM10,000 and 4.9% have an income of RM10,000 and above.
As one of three countries that control the Strait of Malacca
Strait of Malacca
The Strait of Malacca is a narrow, stretch of water between the Malay Peninsula and the Indonesian island of Sumatra. It is named after the Malacca Sultanate that ruled over the archipelago between 1414 to 1511.-Extent:...
, international trade plays a large role in its economy. At one time, it was the largest producer of tin
Tin
Tin is a chemical element with the symbol Sn and atomic number 50. It is a main group metal in group 14 of the periodic table. Tin shows chemical similarity to both neighboring group 14 elements, germanium and lead and has two possible oxidation states, +2 and the slightly more stable +4...
, rubber
Rubber
Natural rubber, also called India rubber or caoutchouc, is an elastomer that was originally derived from latex, a milky colloid produced by some plants. The plants would be ‘tapped’, that is, an incision made into the bark of the tree and the sticky, milk colored latex sap collected and refined...
and palm oil
Palm oil
Palm oil, coconut oil and palm kernel oil are edible plant oils derived from the fruits of palm trees. Palm oil is extracted from the pulp of the fruit of the oil palm Elaeis guineensis; palm kernel oil is derived from the kernel of the oil palm and coconut oil is derived from the kernel of the...
in the world.
Manufacturing has a large influence in the country's economy. Malaysia is the world's largest Islamic banking and financial centre.
Since it became independent in 1957, Malaysia's economic record has been one of Asia's best. Real gross domestic product (GDP) grew by an average of 6.5% per year from 1957 to 2005. Performance peaked in the early 1980s through the mid-1990s, as the economy experienced sustained rapid growth averaging almost 8% annually. High levels of foreign and domestic private investment played a significant role as the economy diversified and modernized. Once heavily dependent on primary products such as rubber and tin, Malaysia today is a middle-income country with a multi-sector economy based on services and manufacturing. Malaysia is one of the world's largest exporters of semiconductor components and devices, electrical goods, solar panels, and information and communication technology (ICT) products.
Malaysia's capital market crossed the RM2 trillion threshold for the first time ever as at end-2010. The capital market had achieved an annual compounded growth rate of 11% from RM717bil in 2000 due to rapid industry expansion and strong regulatory oversight that underpinned investor confidence in the Malaysian capital market.
Early and colonial history
The Malay PeninsulaMalay Peninsula
The Malay Peninsula or Thai-Malay Peninsula is a peninsula in Southeast Asia. The land mass runs approximately north-south and, at its terminus, is the southern-most point of the Asian mainland...
and indeed Southeast Asia
Southeast Asia
Southeast Asia, South-East Asia, South East Asia or Southeastern Asia is a subregion of Asia, consisting of the countries that are geographically south of China, east of India, west of New Guinea and north of Australia. The region lies on the intersection of geological plates, with heavy seismic...
has been a center for trade for centuries. Various items such as porcelain
Porcelain
Porcelain is a ceramic material made by heating raw materials, generally including clay in the form of kaolin, in a kiln to temperatures between and...
and spice
Spice
A spice is a dried seed, fruit, root, bark, or vegetative substance used in nutritionally insignificant quantities as a food additive for flavor, color, or as a preservative that kills harmful bacteria or prevents their growth. It may be used to flavour a dish or to hide other flavours...
were actively traded even before Malacca and Singapore
Singapore
Singapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...
rose to prominence. The Malacca Sultanate controlled the Straits of Malacca from its founding in 1402 to the 1511 invasion by Portugal. All the trade in the Straits, and especially the spices from the Celebes
Sulawesi
Sulawesi is one of the four larger Sunda Islands of Indonesia and is situated between Borneo and the Maluku Islands. In Indonesia, only Sumatra, Borneo, and Papua are larger in territory, and only Java and Sumatra have larger Indonesian populations.- Etymology :The Portuguese were the first to...
and the Moluccas
Maluku Islands
The Maluku Islands are an archipelago that is part of Indonesia, and part of the larger Maritime Southeast Asia region. Tectonically they are located on the Halmahera Plate within the Molucca Sea Collision Zone...
, moved under its protection and through its markets.
In the 17th century, porcelain
Porcelain
Porcelain is a ceramic material made by heating raw materials, generally including clay in the form of kaolin, in a kiln to temperatures between and...
and spice
Spice
A spice is a dried seed, fruit, root, bark, or vegetative substance used in nutritionally insignificant quantities as a food additive for flavor, color, or as a preservative that kills harmful bacteria or prevents their growth. It may be used to flavour a dish or to hide other flavours...
s were found in several Malay states and were actively traded. Large deposits of tin
Tin
Tin is a chemical element with the symbol Sn and atomic number 50. It is a main group metal in group 14 of the periodic table. Tin shows chemical similarity to both neighboring group 14 elements, germanium and lead and has two possible oxidation states, +2 and the slightly more stable +4...
were found in several Malay states. Later, as the British
British Empire
The British Empire comprised the dominions, colonies, protectorates, mandates and other territories ruled or administered by the United Kingdom. It originated with the overseas colonies and trading posts established by England in the late 16th and early 17th centuries. At its height, it was the...
started to take over as administrators of Malaya
British Malaya
British Malaya loosely described a set of states on the Malay Peninsula and the Island of Singapore that were brought under British control between the 18th and the 20th centuries...
, rubber
Rubber
Natural rubber, also called India rubber or caoutchouc, is an elastomer that was originally derived from latex, a milky colloid produced by some plants. The plants would be ‘tapped’, that is, an incision made into the bark of the tree and the sticky, milk colored latex sap collected and refined...
and palm oil trees were introduced for commercial purposes. Instead of relying on the local Malays as a source of labour, the British brought in Chinese and Indians to work in the mines and plantations and provide professional expertise. Although many of them returned to their respective home countries after their agreed tenure ended, some remained in Malaysia and settled permanently. Over time, Malaya became the world's largest producer of tin, rubber, and palm oil. These three commodities along with other raw materials firmly set Malaysia's economic tempo well into the mid-20th century. As Malaya moved towards independence, the government began implementing economic five-year plans, beginning with the First Malayan Five Year Plan
First Malayan Five Year Plan
The First Malayan Five-Year Plan was the first economic development plan launched by the Malayan government, just before independence in 1957. The colonial British government had concentrated available resources on fighting the Malayan communist insurgency instead of developing the rural areas of...
in 1955. Upon the establishment of Malaysia, the plans were re-titled and renumbered, beginning with the First Malaysia Plan
First Malaysia Plan
The First Malaysia Plan was an economic development plan implemented by the government of Malaysia. It was the first economic plan for the whole of Malaysia—Sabah and Sarawak included—as opposed to just Malaya, which previous economic plans had confined themselves to...
in 1965.
Post-independence
In the 1970s, Malaysia began to imitate the four Asian Tiger economies (Republic of Korea (South Korea), Republic of China (Taiwan), then British Crown Colony of Hong Kong and the Republic of Singapore) and committed itself to a transition from being reliant on mining and agriculture to an economy that depends more on manufacturing. In the 1970s, the predominantly mining and agricultural based Malaysian economy began a transition towards a more multi-sector economy. Since the 1980s the industrial sector has led Malaysia's growth. High levels of investment played a significant role in this. With Japanese investment, heavy industries flourished and in a matter of years, Malaysian exportExport
The term export is derived from the conceptual meaning as to ship the goods and services out of the port of a country. The seller of such goods and services is referred to as an "exporter" who is based in the country of export whereas the overseas based buyer is referred to as an "importer"...
s became the country's primary growth engine. Malaysia consistently achieved more than 7% GDP
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
growth along with low inflation in the 1980s and the 1990s.
Central planning has been a major factor in the Malaysian economy, as government expenditure was often used to stimulate the economy. Since 1955, with the commencement of the First Malayan Five Year Plan
First Malayan Five Year Plan
The First Malayan Five-Year Plan was the first economic development plan launched by the Malayan government, just before independence in 1957. The colonial British government had concentrated available resources on fighting the Malayan communist insurgency instead of developing the rural areas of...
, the government has used these plans to intervene in the economy to achieve such goals as redistribution of wealth and investment in, for instance, infrastructure projects.
A legacy of the British colonial system was the division of Malaysians into three groups according to ethnicity. The Malays were concentrated in their traditional villages, focusing mainly on agricultural activities, while the Chinese dominated Malaysian commerce. Educated Indians took up professional roles such as those of doctor
Physician
A physician is a health care provider who practices the profession of medicine, which is concerned with promoting, maintaining or restoring human health through the study, diagnosis, and treatment of disease, injury and other physical and mental impairments...
s or lawyer
Lawyer
A lawyer, according to Black's Law Dictionary, is "a person learned in the law; as an attorney, counsel or solicitor; a person who is practicing law." Law is the system of rules of conduct established by the sovereign government of a society to correct wrongs, maintain the stability of political...
s, while the less better-off worked the plantations. The Reid Commission
Reid Commission
The Reid Commission was an independent commission responsible for drafting the Constitution of the Federation of Malaya prior to Malayan independence from Britain on 31 August 1957.-History:...
which drafted the Malaysian Constitution made a provision for limited affirmative action
Affirmative action
Affirmative action refers to policies that take factors including "race, color, religion, gender, sexual orientation or national origin" into consideration in order to benefit an underrepresented group, usually as a means to counter the effects of a history of discrimination.-Origins:The term...
through Article 153, which gave the Malays special privileges, such as 60% of university entrance (quota). However, after the May 13 incident
May 13 Incident
The 13 May Incident is a term for the Sino-Malay sectarian violences in Kuala Lumpur , Malaysia, which began on 13 May 1969...
of racial rioting in the federal capital of Kuala Lumpur
Kuala Lumpur
Kuala Lumpur is the capital and the second largest city in Malaysia by population. The city proper, making up an area of , has a population of 1.4 million as of 2010. Greater Kuala Lumpur, also known as the Klang Valley, is an urban agglomeration of 7.2 million...
, the government initiated more aggressive programmes aimed at actively establishing a Malay entrepreneurial class through direct intervention in the economy, aimed at alleviating poverty. This was done with the controversial New Economic Policy
Malaysian New Economic Policy
The Malaysian New Economic Policy , was an ambitious and controversial socio-economic restructuring affirmative action program launched by the Malaysian government in 1971 under the then Prime Minister Tun Abdul Razak. The NEP ended in 1990, and was succeeded by the National Development Policy in...
(NEP). Its main objective was the elimination of the association of race with economic function, and the first five-year plan to begin implementing the NEP was the Second Malaysia Plan
Second Malaysia Plan
The Second Malaysia Plan was an economic development plan introduced by the government of Malaysia with the goal of implementing the Malaysian New Economic Policy...
. The success or failure of the NEP is the subject of much debate, although it was officially retired in 1990 and replaced by the National Development Policy
National Development Policy
The National Development Policy replaced the Malaysian New Economic Policy in 1990 but continued to pursue most of NEP policies. The Malay share of the economy, though substantially larger, was not near the 30% target according to government figures...
(NDP). Recently much debate has surfaced once again concerning the results and relevance of the NEP. Some have argued that the NEP has indeed successfully created a Middle/Upper Class of Malay businesspeople and professionals.
Despite some improvement in the economic power of Malays in general, the Malaysian government maintains a policy of discrimination that favours ethnic Malays over other races—including preferential treatment in employment, education, scholarships, business, access to cheaper housing and assisted savings. This special treatment has sparked envy and resentment amongst non-Malays. The ethnic Chinese control of the locally owned sector of the country's economy has been ceded largely in favour of the bumiputra/Malays in many essential or strategic industries such as petroleum retailing, transportation, agriculture and automobile manufacturing.
Current GDP per capita grew 31% in the Sixties and 358% in the Seventies, but this proved unsustainable and growth scaled back sharply to 36% in the Eighties. It rose again to 59% in the Nineties led primarily by export-oriented industries. This increase in GDP was brought about due to a shift from the traditional agricultural and resource based economy to one based on manufactured goods. From 1988 to 1996, Malaysia's economy expanded at 8 per cent, the second fastest after China, resulting in manufactured goods such as microchips and semiconductors making up 80 per cent of exports. Per capita income doubled from 1990 to 1996. Infrastructure projects were greatly increased in this time. Other countries looked to Malaysia at the time as an example for economic reform.
The rate of poverty in Malaysia
Poverty in Malaysia
Poverty in Malaysia is a controversial economic issue. The definition of poverty and the poverty line for Malaysians has been disputed, and government policies to address poverty such as the Malaysian New Economic Policy have been met with political protest....
also fell dramatically over the years. However, its precipitous drop has been questioned by critics who suggest that the poverty line has been drawn at an unreasonably low level. The rapid economic boom led to a variety of supply problems. Labour shortages soon resulted in an influx of millions of foreign workers, many illegal. Cash-rich PLCs
Public limited company
A public limited company is a limited liability company that sells shares to the public in United Kingdom company law, in the Republic of Ireland and Commonwealth jurisdictions....
and consortia of banks eager to benefit from increased and rapid development began large infrastructure projects.
As of 2006, the most recent five year plan is the Ninth Malaysia Plan
Ninth Malaysia Plan
Ninth Malaysian Plan abbreviated as '9MP', is a comprehensive blueprint prepared by the Economic Planning Unit of the Prime Minister's Department and the Finance Ministry of Malaysia with approval by the Cabinet of Malaysia to allocate the national budget from the year 2006 to 2010 to all...
. The five year plans have been criticised for resembling the central planning of Soviet communism; the five-year time frame has been attacked for being insufficient in dealing with short-term crises and long-term trends. The effectiveness of the plans has also been disputed; at the beginning of 2005, the last year of the Eighth Malaysia Plan, almost 80% of the funds allocated under the plan had not been disbursed.
Macro-economic trend
This is a chart of trend of gross domestic product of Malaysia at market prices estimated by the International Monetary Fund with figures in millions of Malaysian Ringgit.| Year | GDP (in millions) |
Exchange (1 USD to MYR) |
Inflation Index (2005=100) |
Nominal Per Capita GDP (as % of USA) |
PPP Per Capita GDP (as % of USA) |
|---|---|---|---|---|---|
| 1980 | 54,285 | 2.17 | 47 | 14.78 | 19.19 |
| 1985 | 78,890 | 2.48 | 60 | 11.44 | 19.33 |
| 1990 | 119,082 | 2.70 | 65 | 10.47 | 20.87 |
| 1995 | 222,473 | 2.50 | 79 | 15.69 | 27.02 |
| 2000 | 343,216 | 3.80 | 92 | 11.47 | 26.01 |
| 2005 | 494,544 | 3.78 | 100 | 12.67 | 26.67 |
| 2010 | 765,966 | 3.04 | 113 | 17.81 | 31.03 |
For purchasing power parity comparisons, the US Dollar is exchanged at 1.70 Ringgit only. Mean wages were $6.95 per manhour in 2009.
From 1988 to 1997, the economy experienced a period of broad diversification and sustained rapid growth averaging 9% annually.
By 1999, nominal per capita GDP had reached $3,238. New foreign and domestic investment
Investment
Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...
played a significant role in the transformation of Malaysia's economy. Manufacturing grew from 13.9% of GDP in 1970 to 30% in 1999, while agriculture
Agriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...
and mining
Mining
Mining is the extraction of valuable minerals or other geological materials from the earth, from an ore body, vein or seam. The term also includes the removal of soil. Materials recovered by mining include base metals, precious metals, iron, uranium, coal, diamonds, limestone, oil shale, rock...
which together had accounted for 42.7% of GDP in 1970, dropped to 9.3% and 7.3%, respectively, in 1999. Manufacturing accounted for 30% of GDP (1999). Major products include electronic components – Malaysia is one of the world's largest exporters of semiconductor devices – electrical goods and appliances.
During the same period, the government tried to eradicate poverty with a controversial race-conscious positive program called New Economic Policy (NEP). First established in 1971 following race riots, commonly known in Malaysia as the May 13 Incident
May 13 Incident
The 13 May Incident is a term for the Sino-Malay sectarian violences in Kuala Lumpur , Malaysia, which began on 13 May 1969...
, it sought to eradicate poverty
Poverty
Poverty is the lack of a certain amount of material possessions or money. Absolute poverty or destitution is inability to afford basic human needs, which commonly includes clean and fresh water, nutrition, health care, education, clothing and shelter. About 1.7 billion people are estimated to live...
and end the identification of economic function with ethnicity. In particular, it was designed to improve the distribution of wealth among the country's population.. The NEP ostensibly ended in 1991, however the policies persist in the form of other programmes such as the National Development Policy. The policies are enforced overtly through race-based quotas for low-cost housing units, university placement, business equity ownership, etc.
Rapid growth was achieved partly through privatisation of inefficient state owned enterprises, thus subjecting them to commercial pressures and forcing them to better utilise their resources. Many deals were done behind closed doors and put through rather quickly. In one example Khazanah Nasional
Khazanah Nasional
Khazanah Nasional Berhad is the investment holding arm of the Government of Malaysia entrusted to hold and manage the commercial assets of the government and to undertake strategic investments. Khazanah was incorporated under the Companies Act 1965 on 3 September 1993 as a public limited company...
alienated shares in DRB Hicom
DRB-HICOM
DRB-HICOM Berhad is one of Malaysia's leading corporations, playing an integral role in the Automotive Manufacturing, Assembly and Distribution industry through its involvement in the passenger car and four wheel drive vehicle market segment, the national truck project and the national motorcycle...
to Mega Consolidated. This led to such deals being labelled mega projects.
Foreign funds were attracted to invest making the local money market and bourse liquid. This created opportunity for local businesses to raise capital on the KLSE
Bursa Malaysia
Bursa Malaysia is an exchange holding company approved under Section 15 of the Capital Markets and Services Act 2007. It operates a fully integrated exchange, offering the complete range of exchange-related services including trading, clearing, settlement and depository services.- History :Bursa...
, and carry out infrastructure development in areas like telecommunications, highways and power generation to meet bottlenecks caused by rapid industrialisation. An intense labor shortage created employment for millions of foreign workers. Subsequent events show that more than 50% were illegal.
The influx of foreign investment led to the KLSE
Bursa Malaysia
Bursa Malaysia is an exchange holding company approved under Section 15 of the Capital Markets and Services Act 2007. It operates a fully integrated exchange, offering the complete range of exchange-related services including trading, clearing, settlement and depository services.- History :Bursa...
Composite index
Index (economics)
In economics and finance, an index is a statistical measure of changes in a representative group of individual data points. These data may be derived from any number of sources, including company performance, prices, productivity, and employment. Economic indices track economic health from...
trading above 1,300 in 1994 and the Ringgit trading above 2.5 in 1997. At various times the KLSE was the most active exchange in the world, with trading volume exceeding even the NYSE. The stock market capitalisation of listed companies in Malaysia was valued at $181,236 million in 2005 by the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
.
Some of the more visible projects from that period are Putrajaya
Putrajaya
Putrajaya is a planned city, located 25km south of Kuala Lumpur, that serves as the federal administrative centre of Malaysia. The seat of government was shifted in 1999 from Kuala Lumpur to Putrajaya, due to the overcrowding and congestion in the Kuala Lumpur areas...
, a new international airport (Kuala Lumpur International Airport
Kuala Lumpur International Airport
Kuala Lumpur International Airport , or KLIA serves the capital city of Malaysia, Kuala Lumpur, and is one of Southeast Asia's largest airports. It is also Malaysia's main international airport. It is situated in the Sepang district, in the south of the state of Selangor, about from Kuala Lumpur...
), a hydroelectric dam (Bakun dam), the Petronas Towers and the Multimedia Super Corridor. Proposals that were eventually canceled include the 95 km Sumatra
Sumatra
Sumatra is an island in western Indonesia, westernmost of the Sunda Islands. It is the largest island entirely in Indonesia , and the sixth largest island in the world at 473,481 km2 with a population of 50,365,538...
–Malaysia bridge (would have been world's longest), the Mega International Sea and Air port on reclaimed land in Kedah
Kedah
Kedah is a state of Malaysia, located in the northwestern part of Peninsular Malaysia. The state covers a total area of over 9,000 km², and it consists of the mainland and Langkawi. The mainland has a relatively flat terrain, which is used to grow rice...
(would have been world's biggest) and the KL Linear City (would have been the world's longest mall and the world's first city built over a river).
Concerns were raised during the time about the sustainability of the rapid growth and the ballooning current account. The mainstream opinion prevalent at that time was that the deficit was temporary and would reverse once imported equipment started producing for export. In spite of that, measures were taken to moderate growth especially when it threatened to overheat into the double digits. The main target was asset prices, and restrictions were further tightened on foreign ownership of local assets. Exposure of local banks to real estate loans were also capped at 20%.
As was widely expected, the current account deficit did narrow steadily, year to year, from 9% to 5% of GDP.
Malaysia has the largest operational stock of industrial robot
Industrial robot
An industrial robot is defined by ISO as an automatically controlled, reprogrammable, multipurpose manipulator programmable in three or more axes...
s in the Muslim world
Muslim world
The term Muslim world has several meanings. In a religious sense, it refers to those who adhere to the teachings of Islam, referred to as Muslims. In a cultural sense, it refers to Islamic civilization, inclusive of non-Muslims living in that civilization...
.
Asian financial crisis and recovery
The year 1997 saw drastic changes in Malaysia. There was speculative short-selling of the Malaysian currency, the ringgitRinggit
Ringgit mostly refers to the Malaysian ringgit, which is the local currency in Malaysia, but it can also refer to the Brunei dollar or Singapore dollar in the Malay language. The word ringgit was originally used to refer to the serrated edges of Spanish silver dollars widely circulated in the area...
. Foreign direct investment
Foreign direct investment
Foreign direct investment or foreign investment refers to the net inflows of investment to acquire a lasting management interest in an enterprise operating in an economy other than that of the investor.. It is the sum of equity capital,other long-term capital, and short-term capital as shown in...
fell at an alarming rate and, as capital flowed out of the country, the value of the ringgit dropped from MYR 2.50 per USD to, at one point, MYR 4.80 per USD.The Kuala Lumpur Stock Exchange
Kuala Lumpur Stock Exchange
The Kuala Lumpur Stock Exchange dates back to 1930 when the Singapore Stockbrokers' Association was set up as a formal organisation dealing in securities in Malaya...
's composite index fell from approximately 1300 to nearly merely 400 points in a few short weeks. After the controversial sacking of finance minister Anwar Ibrahim
Anwar Ibrahim
Anwar bin Ibrahim is a Malaysian politician who served as Malaysian Deputy Prime Minister from 1993 to 1998. Early in his career, Anwar was a close ally of Prime Minister Mahathir bin Mohamad but subsequently emerged as the most prominent critic of Mahathir's government.In 1999, he was sentenced...
, a National Economic Action Council was formed to deal with the monetary crisis. Bank Negara
Bank Negara Malaysia
Bank Negara Malaysia is the Malaysian central bank. Established on January 26, 1959 as the Bank Negara Malaya, its main purpose was to issue currency, act as banker and adviser to the Government of Malaysia and regulate the country's credit situation...
imposed capital control
Capital control
Capital controls are measures such as transaction taxes and other limits or outright prohibitions, which a nation's government can use to regulate the flows into and out of the country's capital account....
s and pegged
Fixed exchange rate
A fixed exchange rate, sometimes called a pegged exchange rate, is a type of exchange rate regime wherein a currency's value is matched to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold.A fixed exchange rate is usually used to...
the Malaysian ringgit at 3.80 to the US dollar. Malaysia refused economic aid packages from the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
(IMF) and the World Bank, surprising many analysts. By refusing aid and thus the conditions attached thereof from the IMF, Malaysia was not affected to the same degree in the Asian Financial Crisis as Indonesia, Thailand and the Philippines.
Regardless, the GDP
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
suffered a sharp 7.5% contraction in 1998. It however rebounded to grow by 5.6% in 1999. The Government of Malaysia predicted 5.8% real GDP growth in the year 2000, but most analysts predicted growth will exceed 8% for the year.
In order to rejuvenate the economy, massive government spending was made and Malaysia continuously recorded budget deficits in the years that followed. Economic recovery has been led by strong growth in exports, particularly of electronics and electrical products, to the United States, Malaysia's principal trade and investment partner. Inflationary pressures remained benign, and, as a result, Bank Negara Malaysia
Bank Negara Malaysia
Bank Negara Malaysia is the Malaysian central bank. Established on January 26, 1959 as the Bank Negara Malaya, its main purpose was to issue currency, act as banker and adviser to the Government of Malaysia and regulate the country's credit situation...
, the central bank, had been able to follow a low interest rate policy. The Malaysian economy recovered from the 1997 Asian Financial Crisis sooner than neighbouring countries, and has since recovered to the levels of the pre-crisis era with a GDP per capita of $14,800.
The post Y2K slump of 2001 did not affect Malaysia as much as other countries. This may have been clearer evidence that there are other causes and effects that can be more properly attributable for recovery. One possibility is that the currency speculators had run out of finance after failing in their attack on the Hong Kong dollar in August 1998 and after the Russian ruble
Russian ruble
The ruble or rouble is the currency of the Russian Federation and the two partially recognized republics of Abkhazia and South Ossetia. Formerly, the ruble was also the currency of the Russian Empire and the Soviet Union prior to their breakups. Belarus and Transnistria also use currencies with...
collapsed. (See George Soros
George Soros
George Soros is a Hungarian-American business magnate, investor, philosopher, and philanthropist. He is the chairman of Soros Fund Management. Soros supports progressive-liberal causes...
)
The fixed exchange rate
Fixed exchange rate
A fixed exchange rate, sometimes called a pegged exchange rate, is a type of exchange rate regime wherein a currency's value is matched to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold.A fixed exchange rate is usually used to...
was abandoned on July 21, 2005 in favour of a managed floating system
Floating exchange rate
A floating exchange rate or fluctuating exchange rate is a type of exchange rate regime wherein a currency's value is allowed to fluctuate according to the foreign exchange market. A currency that uses a floating exchange rate is known as a floating currency....
within an hour of China announcing the same move. In the same week, the ringgit strengthened a percent against various major currencies and was expected to appreciate further. As of December 2005, however, expectations of further appreciation were muted as capital flight
Capital flight
Capital flight, in economics, occurs when assets and/or money rapidly flow out of a country, due to an economic event and that disturbs investors and causes them to lower their valuation of the assets in that country, or otherwise to lose confidence in its economic...
exceeded USD 10 billion. According to Bank Negara's published figures, Malaysia's foreign exchange reserves increased steadily since the initial capital flight, from USD75.2 billion as at 15 July 2005 (just before the peg was removed) to peak at USD125.7 billion as at 31 July 2008, a few months before the global credit crisis that started in September 2008. As at 29 May 2009, the reserves stood at USD88.3 billion. In spite of the large positive current account surplus, foreign reserves have started to fall at a rapid rate. Official statistics released in March 2006, confirmed capital flight
Capital flight
Capital flight, in economics, occurs when assets and/or money rapidly flow out of a country, due to an economic event and that disturbs investors and causes them to lower their valuation of the assets in that country, or otherwise to lose confidence in its economic...
of more than US$10 billion. However, as of the 4th fiscal year, a surge of FDI has pushed the KLSE above 1200 points, and is expected to strengthen to pre 1997 levels.
In March 2005, the United Nations Conference on Trade and Development
United Nations Conference on Trade and Development
The United Nations Conference on Trade and Development was established in 1964 as a permanent intergovernmental body. It is the principal organ of the United Nations General Assembly dealing with trade, investment, and development issues....
(UNCTAD) published a paper on the sources and pace of Malaysia's recovery, written by Jomo K.S. of the applied economics department, University of Malaya
University of Malaya
The University of Malaya is located on a campus near the centre of Kuala Lumpur, and is the oldest university in Malaysia. It was founded in 1905 as a public-funded tertiary institution...
, Kuala Lumpur
Kuala Lumpur
Kuala Lumpur is the capital and the second largest city in Malaysia by population. The city proper, making up an area of , has a population of 1.4 million as of 2010. Greater Kuala Lumpur, also known as the Klang Valley, is an urban agglomeration of 7.2 million...
. The paper concluded that the controls imposed by Malaysia's government neither hurt nor helped recovery. The chief factor was an increase in electronics components exports, which was caused by a large increase in the demand for components in the United States, which was caused, in turn, by a fear of the effects of the arrival of the year 2000 (Y2K
Year 2000 problem
The Year 2000 problem was a problem for both digital and non-digital documentation and data storage situations which resulted from the practice of abbreviating a four-digit year to two digits.In computer programs, the practice of representing the year with two...
) upon older computers and other digital devices.
In September 2005, Sir Howard J. Davies, director of the London School of Economics
London School of Economics
The London School of Economics and Political Science is a public research university specialised in the social sciences located in London, United Kingdom, and a constituent college of the federal University of London...
, at a meeting in Kuala Lumpur, cautioned Malaysian officials that if they want a flexible capital market, they will have to lift the ban on short-selling put into effect during the crisis. In March 2006, Malaysia removed the ban on short selling. It is interesting to note that some of the measures taken by the Malaysian government in response to the Asian crisis, such as the ban on short selling, were swiftly adopted by the very countries that had previously been critical of the Malaysian response.
Regardless of cause and effect claims, rejuvenation of the economy also coincided with massive government spending and budget deficits in the years that followed the crisis. Later, Malaysia enjoyed faster economic recovery compared to its neighbours. The country has recovered to the levels of the pre-crisis era – as an example, the KLCI Composite Index hit an all time high of 1,386 on 20 June 2007 which is approximately 100 points higher than the pre-crisis record of 1,275 in 1993. While the pace of development today is not as rapid, it is seen to be more sustainable. Although the controls and economic housekeeping may or may not have been the principal reasons for recovery, there is no doubt that the banking sector has become more resilient to external shocks. The current account has also settled into a structural surplus, providing a cushion to capital flight. Asset prices are generally back to their pre-crisis heights, despite the effects of the global financial crisis. As of 21 May 2007, the Ringgit touched a nine-year high record at 3.39 against the US dollar. Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz says the Ringgit moves up on its own merit and in line with the Malaysian economy and not in tandem with the Chinese Yuan. Malaysia has shown the ability to absorb the crude oil price increases and most economies have shown high resilience in absorbing higher energy prices. Malaysia is the world's largest Islamic banking and financial centre.
Economic policies
Like many other independent nations, Malaysia's economic policies were shaped by various events in the nation's history since independence.Monetary policy
Prior to the 1997 Asian Financial Crisis, the Malaysian ringgitMalaysian ringgit
The Malaysian ringgit is the currency of Malaysia. It is divided into 100 sen...
was an internationalized currency, which was freely traded around the world. Just before the crisis, the Ringgit was traded RM2.50 at the dollar. Due to speculative activities, the Ringgit fell as much as RM4.10 to the dollar in matter of weeks. Bank Negara Malaysia
Bank Negara Malaysia
Bank Negara Malaysia is the Malaysian central bank. Established on January 26, 1959 as the Bank Negara Malaya, its main purpose was to issue currency, act as banker and adviser to the Government of Malaysia and regulate the country's credit situation...
, the nation's central banks decided to impose capital controls to prevent the outflow of the Ringgit in the open market. The Ringgit is not traded internationally, a traveler needs to declare to the central bank if taking out more than RM10,000 out of the country and the Ringgit itself was pegged at RM3.80 to the US dollar.
The fixed change rate was abandoned to floating exchange rate
Floating exchange rate
A floating exchange rate or fluctuating exchange rate is a type of exchange rate regime wherein a currency's value is allowed to fluctuate according to the foreign exchange market. A currency that uses a floating exchange rate is known as a floating currency....
in July 2005, hours after People's Republic of China
People's Republic of China
China , officially the People's Republic of China , is the most populous country in the world, with over 1.3 billion citizens. Located in East Asia, the country covers approximately 9.6 million square kilometres...
announced the same move. At this point, the Ringgit is still not internationalized. The Ringgit continue to strengthen to 3.18 to the dollar in March 2008. Meanwhile, many aspect of the capital control has been slowly relaxed by Bank Negara Malaysia
Bank Negara Malaysia
Bank Negara Malaysia is the Malaysian central bank. Established on January 26, 1959 as the Bank Negara Malaya, its main purpose was to issue currency, act as banker and adviser to the Government of Malaysia and regulate the country's credit situation...
. However, the government continues to not internalized the Ringgit. The government stated that the Ringgit will be internationalized once it is ready.
Bank Negara Malaysia
Bank Negara Malaysia
Bank Negara Malaysia is the Malaysian central bank. Established on January 26, 1959 as the Bank Negara Malaya, its main purpose was to issue currency, act as banker and adviser to the Government of Malaysia and regulate the country's credit situation...
for the time being, uses interest rate targeting. The Overnight Policy Rate
Overnight Policy Rate
Overnight Policy Rate is an overnight interest rate set by Bank Negara Malaysia used for monetary policy direction. It is the target rate for the day-to-day liquidity operations of the BNM. Overnight Policy Rate is the interest rate at which a depository institution lends immediately available...
(OPR) is their policy instrument, and is used to guide the short term interbank rates which will hopefully influence inflation and economic growth.
Affirmative action
Tun Abdul Razak, who was then the Prime Minister, implemented the affirmative actionAffirmative action
Affirmative action refers to policies that take factors including "race, color, religion, gender, sexual orientation or national origin" into consideration in order to benefit an underrepresented group, usually as a means to counter the effects of a history of discrimination.-Origins:The term...
policy named as New Economic Policy soon after May 13 Incident
May 13 Incident
The 13 May Incident is a term for the Sino-Malay sectarian violences in Kuala Lumpur , Malaysia, which began on 13 May 1969...
in 1969. Prior to the incident, the poverty rates among Malays were extremely high (at 65%) as was discontent between races, particularly towards the Chinese, who controlled 34% of the economy at the time. The Chinese minority still accounts for 70 percent of the country's market capitalization.
Through NEP, Bumiputera quotas are placed in housing developments, scholarship admission and also for ownership of publicly listed companies. The quota system has been relaxed recently since the March 8, 2008 General election. Bumiputera equity requirement for publicly listed companies has been relaxed since 12 November 2008 by allowing those companies to remove the quota once after IPO has been done. Further liberalization in the retail sector is expected to remove the present 30% Bumiputera listing requirements. According to the Secretary-General of Ministry of Domestic Trade and Consumer Affairs Datuk Mohd Zain Mohd Dom said, the amendments is reflective of Malaysia "moving towards progressive liberalisation"
The Malaysian New Economic Policy
Malaysian New Economic Policy
The Malaysian New Economic Policy , was an ambitious and controversial socio-economic restructuring affirmative action program launched by the Malaysian government in 1971 under the then Prime Minister Tun Abdul Razak. The NEP ended in 1990, and was succeeded by the National Development Policy in...
was created in 1971 with the aim of bringing Malays a 30% share of the economy of Malaysia and eradicating poverty amongst Malays, primarily through encouraging enterprise ownership by Bumiputeras. After 30 years of the program, the NEP had somewhat met some of its goals. Bumiputera ownership increased to 18.9% in 2004 against 2.4% in 1970 and poverty decreased to 8.3% in 2004 against 64.8% in the 1970s.
The NEP is accused of creating an oligarchy
Oligarchy
Oligarchy is a form of power structure in which power effectively rests with an elite class distinguished by royalty, wealth, family ties, commercial, and/or military legitimacy...
, and creating a 'subsidy mentality'. Political parties such as Parti Keadilan Rakyat
Parti Keadilan Rakyat
The People's Justice Party , often known simply as KeADILan) is a centrist political party in Malaysia formed in 2003 by a merger of the National Justice Party and the older Malaysian People's Party...
and Democratic Action Party
Democratic Action Party
The Democratic Action Party, or DAP is a secular, multi-racial, social democratic Malaysian political party.The DAP is one of the three major opposition parties in Malaysia, along with the PKR and PAS, that are seen as electable alternatives to the Barisan Nasional coalition of parties...
have proposed a new policy which will be equal for every Malaysian, regardless of race. When the Democratic Action Party was elected in the state of Penang
Penang
Penang is a state in Malaysia and the name of its constituent island, located on the northwest coast of Peninsular Malaysia by the Strait of Malacca. It is bordered by Kedah in the north and east, and Perak in the south. Penang is the second smallest Malaysian state in area after Perlis, and the...
in 2008, it announced that it will do away with the NEP, claiming that it "... breeds nepotism
Nepotism
Nepotism is favoritism granted to relatives regardless of merit. The word nepotism is from the Latin word nepos, nepotis , from which modern Romanian nepot and Italian nipote, "nephew" or "grandchild" are also descended....
, corruption
Political corruption
Political corruption is the use of legislated powers by government officials for illegitimate private gain. Misuse of government power for other purposes, such as repression of political opponents and general police brutality, is not considered political corruption. Neither are illegal acts by...
and systemic inefficiency".
On April 21, 2009, the prime minister Najib Tun Razak
Najib Tun Razak
Dato' Sri Haji Mohd Najib bin Tun Haji Abdul Razak is the sixth, and since 2009, Prime Minister of Malaysia. He previously held the post of Deputy Prime Minister from 7 January 2004 until he succeeded Tun Abdullah Ahmad Badawi as Prime Minister on 3 April 2009. Najib is President of the United...
has announce liberalisation of 27 services sub-sector by abolishing the 30% bumiputera requirement. The move is seen as the government efforts to increase investment the service sector of the economy. According to the premier, many more sectors of the economy will be liberalized. On June 30, 2009, the premier announces further liberation moves including the dismantling of the Bumiputera equity quotas and repealing the guidelines of the Foreign Investment Committee, which was responsible to monitor foreign shareholding in Malaysian companies. However, any Malaysian companies that wishes to list in Malaysia would still need to offer 50 percent of public shareholding spread to Bumiputera investors.
Subsidies and price controls
- See also Gas subsidies
The Malaysian government subsidizes and controls prices on a lot of essential items to keep the prices low. Prices of items such as palm oil cooking oil, petrol, flour, bread, rice and other essentials have been kept under market prices to keep cost of living low. In 2008, the government announced that it has spent RM40.1 billion in 2007 in subsidies to keep prices leveled. As of 2009, 22 per cent of government expenditures were subsidies, with petrol subsidies alone taking up 12 per cent.
Smuggling and hoarding, which leads to shortages, is a prominent problem in Malaysia due to the subsidies. For example, cooking oil is subsidised for domestic use only. This situation creates an environment where industrial players hoard domestic cooking oil for industrial use. During shortage time, such as the January 2008 cooking oil crisis, the government imposed a 5 kg limit for each purchase to relief domestic demand. However, the limited purchase has created more panic buying, which prompt the Government to negotiate with cooking oil manufacturers to increase their production capacity, and the situation reverted to normal within one week. Another example is when vehicles in Thailand
Thailand
Thailand , officially the Kingdom of Thailand , formerly known as Siam , is a country located at the centre of the Indochina peninsula and Southeast Asia. It is bordered to the north by Burma and Laos, to the east by Laos and Cambodia, to the south by the Gulf of Thailand and Malaysia, and to the...
come to Malaysia to smuggle cheap petrol and diesel out of the country. The government also looking into restructuring the fuel subsidy so that the selected needy group will get the subsidy. The government is considering removing subsidies on diesel for general consumers while maintaining subsidies for suitable groups, such as those involved in public transport.
On January 2010, the government announce dual price structure for fuel, based on citizenship. Foreigners are expected to pay market price for fuel while citizens will have subsidy allocations based to engine capacity. The dual pricing structure is expected to begin on May 1, 2010.
The government has considered to remove the subsidies but a formal plan had yet to materialized as of 2007. In 2008, the government is considering to remove price controls on construction materials such as cement
Cement
In the most general sense of the word, a cement is a binder, a substance that sets and hardens independently, and can bind other materials together. The word "cement" traces to the Romans, who used the term opus caementicium to describe masonry resembling modern concrete that was made from crushed...
and steel
Steel
Steel is an alloy that consists mostly of iron and has a carbon content between 0.2% and 2.1% by weight, depending on the grade. Carbon is the most common alloying material for iron, but various other alloying elements are used, such as manganese, chromium, vanadium, and tungsten...
bars while banning exports to ensure steady supply. The government is experimenting with the idea through allowing Sabah
Sabah
Sabah is one of 13 member states of Malaysia. It is located on the northern portion of the island of Borneo. It is the second largest state in the country after Sarawak, which it borders on its southwest. It also shares a border with the province of East Kalimantan of Indonesia in the south...
and Sarawak
Sarawak
Sarawak is one of two Malaysian states on the island of Borneo. Known as Bumi Kenyalang , Sarawak is situated on the north-west of the island. It is the largest state in Malaysia followed by Sabah, the second largest state located to the North- East.The administrative capital is Kuching, which...
construction players to import steel and cement since February 2008. The government then, on May 12, 2008 removed ceiling prices on steel bars and billets and removed import duties on selected items under HS Code 7214.10 110 and 7214.20 910, which do not fully cover steel bars use by the construction industry. The government then further liberalized the cement industry by abolishing ceiling prices on June 5, 2008.
Another strategic item which is heavily subsidized but moving towards a market based approach is Natural Gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
which is used in the industrial sector. Beginning July 1, 2008, the government is expected to reduce the gas subsidy 5% to 10% per annum over 11 years, in which the gas price will reflect market price.
Sovereign wealth funds
The government owns and operates several sovereign wealth fundSovereign wealth fund
A sovereign wealth fund is a state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals or other financial instruments. Sovereign wealth funds invest globally. Some of them have grabbed attention making bad investments in several Wall Street financial...
s that invests in local companies and also foreign companies. One such funds are Khazanah Nasional
Khazanah Nasional
Khazanah Nasional Berhad is the investment holding arm of the Government of Malaysia entrusted to hold and manage the commercial assets of the government and to undertake strategic investments. Khazanah was incorporated under the Companies Act 1965 on 3 September 1993 as a public limited company...
Berhad which was established in 1993. Its objective is to help shape selected strategic industries in Malaysia and develop those investment for the benefit of Malaysia. The fund invest in major companies in Malaysia such as Proton Holdings in the automotive sector, CIMB
CIMB
CIMB Group CIMB Group is a regional universal bank operating in high growth economies in ASEAN. CIMB Group has the widest retail branch network across the region and is an indigenous ASEAN investment bank....
in the banking sector, Pharmaniaga in the medical sector, UEM Group
UEM Group
United Engineers Malaysia Berhad or UEM Group is a Malaysian company of Engineering and Constructions, Township and Property Development, Expressways and Asset Facilities Management....
in the construction sector, Telekom Malaysia
Telekom Malaysia
Telekom Malaysia Berhad , DBA TM, is the largest integrated solutions provider in Malaysia, and one of Asia's leading communications companies, with a market capitalisation of RM13.9 billion and a workforce of 26,629 employees. Established as the Telecommunications Department of Malaya in 1946, it...
in the communications industry and many other companies in many other industries. It is estimated that the fund size of Khazanah Nasional stands at around US$19 billion.
Another fund that is owned by the Malaysian government is the Employees Provident Fund
Employees Provident Fund
The Employees Provident Fund also known Malay as Kumpulan Wang Simpanan Pekerja is a Malaysian government agency under the Ministry of Finance. It manages the compulsory savings plan and retirement planning for legally employed workers in Malaysia...
which is claimed to be the fourth largest state run pension fund in Asia. Like Khazanah Nasional
Khazanah Nasional
Khazanah Nasional Berhad is the investment holding arm of the Government of Malaysia entrusted to hold and manage the commercial assets of the government and to undertake strategic investments. Khazanah was incorporated under the Companies Act 1965 on 3 September 1993 as a public limited company...
, the EPF invests and sometimes owns several major companies in Malaysia such as RHB Bank
RHB Bank
RHB Bank Berhad is a bank based in Kuala Lumpur, Malaysia. It specializes in commercial banking, corporate and investment banking and international banking services...
. EPF investment is diversified over a number of sectors but almost 40% of their investment are in the services sector. Fund size in 2007 is estimated at US$100 billion.
Permodalan Nasional Berhad is a major fund manager controlled by the Malaysian Government. It offers capital guaranteed mutual funds such as Amanah Saham Bumiputera and Amanah Saham Wawasan 2020 which are open only to Malaysian and in some cases, Bumiputeras. As of April 2008, it manages MYR
Myr
The symbol myr was formerly used in English-language geology, and remains as the standard usage in astronomy, as a unit of one million years.It is an abbreviation for 'million years' and lower case is used in geology, while upper case is used in astronomy....
120 billion of funds (36 billion USD), of which MYR76 million is unit trust funds. The fund manager is a sizable investor in strategic companies such as MMC Corporation Berhad, Maxis Communications Berhad and TM International Berhad among others.
Other than federal government funds, some states have created their own investment authority to manage state-owned sovereign wealth funds. First of such funds are launched by the state of Terengganu
Terengganu
Terengganu is a sultanate and constitutive state of federal Malaysia. The state is also known by its Arabic honorific, Darul Iman...
through the establishment of Terengganu Investment Authority in December 2008. It initial fund size will be around USD 3 billion and derived from its oil royalties.
Government influence
Although the federal government promotes private enterprise and ownership in the economy, the economic direction of the country is heavily influenced by the government though five years development plans since independence. The economy is also influenced by the government through agencies such as the Economic Planning Unit and government-linked wealth funds such as Khazanah NasionalKhazanah Nasional
Khazanah Nasional Berhad is the investment holding arm of the Government of Malaysia entrusted to hold and manage the commercial assets of the government and to undertake strategic investments. Khazanah was incorporated under the Companies Act 1965 on 3 September 1993 as a public limited company...
Berhad, Employees Provident Fund
Employees Provident Fund
The Employees Provident Fund also known Malay as Kumpulan Wang Simpanan Pekerja is a Malaysian government agency under the Ministry of Finance. It manages the compulsory savings plan and retirement planning for legally employed workers in Malaysia...
and Pemodalan Nasional Berhad
Pemodalan Nasional Berhad
Permodalan Nasional Berhad is Malaysia's biggest fund management company. The main headquarters is located at Jalan Tun Razak, Kuala Lumpur near Tabung Haji building. PNB is the parent company for Amanah Saham Nasional Berhad which operates a number of unit trust schemes, and is a wholly owned...
.
The government's development plans, called the Malaysian Plan, currently the Ninth Malaysia Plan
Ninth Malaysia Plan
Ninth Malaysian Plan abbreviated as '9MP', is a comprehensive blueprint prepared by the Economic Planning Unit of the Prime Minister's Department and the Finance Ministry of Malaysia with approval by the Cabinet of Malaysia to allocate the national budget from the year 2006 to 2010 to all...
, started in 1950 during the British colonial rule. The plans were largely centered around accelerating the growth of the economy by selectively investing in selective sectors of the economy and building infrastructure to support said sectors. For example, in the current national plan, three sectors - agriculture
Agriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...
, manufacturing
Manufacturing
Manufacturing is the use of machines, tools and labor to produce goods for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale...
and services, will receive special attention to promote the transition to high value-added activities in the respective areas. Other than the generalized plans like the Ninth Malaysia Plan, the government also have a development plan that are targeted to improve the manufacturing sector which is called the Industrial Master Plan. Currently, the plan is called the Third Industrial Master Plan (IMP3) which covers a period from 2006 to 2020. The industrial plans aim to make Malaysia a major trading nation and build up the country's economy and human capital.
Economic Planning Unit , established in 1961 was instrumental in steering Malaysia to recovery from the 1997 Asian Financial Crisis. The unit is an agency under the Prime Minister's Department responsible for steering Malaysia's socio-economic development towards achieving a developed-nation status by the year 2020 through various measures such as preparing policies and strategies for socio-economic development, prepare medium and long term plans for the government and most importantly, advise the government on economic issues.
Government-linked investment vehicles such as Khazanah Nasional
Khazanah Nasional
Khazanah Nasional Berhad is the investment holding arm of the Government of Malaysia entrusted to hold and manage the commercial assets of the government and to undertake strategic investments. Khazanah was incorporated under the Companies Act 1965 on 3 September 1993 as a public limited company...
Berhad, Employees Provident Fund
Employees Provident Fund
The Employees Provident Fund also known Malay as Kumpulan Wang Simpanan Pekerja is a Malaysian government agency under the Ministry of Finance. It manages the compulsory savings plan and retirement planning for legally employed workers in Malaysia...
and Pemodalan Nasional Berhad
Pemodalan Nasional Berhad
Permodalan Nasional Berhad is Malaysia's biggest fund management company. The main headquarters is located at Jalan Tun Razak, Kuala Lumpur near Tabung Haji building. PNB is the parent company for Amanah Saham Nasional Berhad which operates a number of unit trust schemes, and is a wholly owned...
invest and sometimes own major companies in major sectors of the Malaysian economy. For example, Khanazah Nasional is a major shareholder in Proton Holdings, an automaker and CIMB
CIMB
CIMB Group CIMB Group is a regional universal bank operating in high growth economies in ASEAN. CIMB Group has the widest retail branch network across the region and is an indigenous ASEAN investment bank....
banking group in the financial sector. The government, however, is keen to sell stakes in their companies such as Malaysia Airlines
Malaysia Airlines
Malaysian Airline System Berhad , DBA Malaysia Airlines , is the government-owned flag carrier of Malaysia. Malaysia Airlines operates flights from its home base, Kuala Lumpur International Airport, and its eastern hub in Kota Kinabalu. It has its headquarters on the grounds of Sultan Abdul Aziz...
to let the companies remain globally competitive
Currency
The only legal tender in Malaysia is the Malaysian RinggitMalaysian ringgit
The Malaysian ringgit is the currency of Malaysia. It is divided into 100 sen...
. As of 20 March 2008, the Ringgit is traded at MYR
Myr
The symbol myr was formerly used in English-language geology, and remains as the standard usage in astronomy, as a unit of one million years.It is an abbreviation for 'million years' and lower case is used in geology, while upper case is used in astronomy....
3.18 at the US dollar. The Ringgit has not been internationalised since September 1998, an effect due to the 1997 Asian Financial Crisis in which the central bank impose capital controls on the currency. As a part of series of capital controls, the currency was pegged between September 1998 to 21 July 2005 at MYR 3.80 to the dollar. In recent years, Bank Negara Malaysia
Bank Negara Malaysia
Bank Negara Malaysia is the Malaysian central bank. Established on January 26, 1959 as the Bank Negara Malaya, its main purpose was to issue currency, act as banker and adviser to the Government of Malaysia and regulate the country's credit situation...
beginning to relax certain rules to the capital controls although the currency itself is still not traded internationally yet. According to the Bank Governor, the Ringgit will be internationalised when it's ready.
On September 2010, in an interview with CNBC
CNBC
CNBC is a satellite and cable television business news channel in the U.S., owned and operated by NBCUniversal. The network and its international spinoffs cover business headlines and provide live coverage of financial markets. The combined reach of CNBC and its siblings is 390 million viewers...
, Dato' Seri Najib Tun Razak
Najib Tun Razak
Dato' Sri Haji Mohd Najib bin Tun Haji Abdul Razak is the sixth, and since 2009, Prime Minister of Malaysia. He previously held the post of Deputy Prime Minister from 7 January 2004 until he succeeded Tun Abdullah Ahmad Badawi as Prime Minister on 3 April 2009. Najib is President of the United...
, which is the Prime Minister of Malaysia and also the Finance Minister said that the government is open to open up the Ringgit to off shore trading if the move will help the economy. He further added that before such a move to be made, it will ensure that rules and regulation will be in place so the currency will not be abused.
Natural resources
Tin
Tin is a chemical element with the symbol Sn and atomic number 50. It is a main group metal in group 14 of the periodic table. Tin shows chemical similarity to both neighboring group 14 elements, germanium and lead and has two possible oxidation states, +2 and the slightly more stable +4...
, rubber
Rubber
Natural rubber, also called India rubber or caoutchouc, is an elastomer that was originally derived from latex, a milky colloid produced by some plants. The plants would be ‘tapped’, that is, an incision made into the bark of the tree and the sticky, milk colored latex sap collected and refined...
and palm oil
Palm oil
Palm oil, coconut oil and palm kernel oil are edible plant oils derived from the fruits of palm trees. Palm oil is extracted from the pulp of the fruit of the oil palm Elaeis guineensis; palm kernel oil is derived from the kernel of the oil palm and coconut oil is derived from the kernel of the...
in the world. In terms of agriculture, Malaysia is one of the top exporters of natural rubber
Rubber
Natural rubber, also called India rubber or caoutchouc, is an elastomer that was originally derived from latex, a milky colloid produced by some plants. The plants would be ‘tapped’, that is, an incision made into the bark of the tree and the sticky, milk colored latex sap collected and refined...
and palm oil
Palm oil
Palm oil, coconut oil and palm kernel oil are edible plant oils derived from the fruits of palm trees. Palm oil is extracted from the pulp of the fruit of the oil palm Elaeis guineensis; palm kernel oil is derived from the kernel of the oil palm and coconut oil is derived from the kernel of the...
, which together with sawn logs and sawn timber, cocoa, pepper
Black pepper
Black pepper is a flowering vine in the family Piperaceae, cultivated for its fruit, which is usually dried and used as a spice and seasoning. The fruit, known as a peppercorn when dried, is approximately in diameter, dark red when fully mature, and, like all drupes, contains a single seed...
, pineapple
Pineapple
Pineapple is the common name for a tropical plant and its edible fruit, which is actually a multiple fruit consisting of coalesced berries. It was given the name pineapple due to its resemblance to a pine cone. The pineapple is by far the most economically important plant in the Bromeliaceae...
and tobacco
Tobacco
Tobacco is an agricultural product processed from the leaves of plants in the genus Nicotiana. It can be consumed, used as a pesticide and, in the form of nicotine tartrate, used in some medicines...
dominate the growth of the sector. Palm oil is also a major generator of foreign exchange.
Regarding forestry resources, it is noted that logging
Logging
Logging is the cutting, skidding, on-site processing, and loading of trees or logs onto trucks.In forestry, the term logging is sometimes used in a narrow sense concerning the logistics of moving wood from the stump to somewhere outside the forest, usually a sawmill or a lumber yard...
only began to make a substantial contribution to the economy during the nineteenth century. Today, an estimated 59% of Malaysia remains forested. The rapid expansion of the timber industry, particularly after the 1960s, has brought about a serious erosion problem in the country's forest resources. However, in line with the Government's commitment to protect the environment and the ecological system, forestry resources are being managed on a sustainable basis and accordingly the rate of tree felling has been on the decline.
In addition, substantial areas are being silviculturally
Silviculture
Silviculture is the practice of controlling the establishment, growth, composition, health, and quality of forests to meet diverse needs and values. The name comes from the Latin silvi- + culture...
treated and reforestation of degraded forest land is also being carried out. The Malaysian government provide plans for the enrichment of some 312.30 square kilometres (120.5 sq mi) of land with rattan
Rattan
Rattan is the name for the roughly 600 species of palms in the tribe Calameae, native to tropical regions of Africa, Asia and Australasia.- Structure :...
under natural forest conditions and in rubber plantations as an inter crop. To further enrich forest resources, fast-growing timber species such as meranti tembaga, merawan and sesenduk are also being planted. At the same time, the cultivation of high-value trees like teak
Teak
Teak is the common name for the tropical hardwood tree species Tectona grandis and its wood products. Tectona grandis is native to south and southeast Asia, mainly India, Indonesia, Malaysia, and Burma, but is naturalized and cultivated in many countries, including those in Africa and the...
and other trees for pulp and paper are also encouraged. Rubber, once the mainstay of the Malaysian economy, has been largely replaced by oil palm as Malaysia's leading agricultural export.
Tin
Tin
Tin is a chemical element with the symbol Sn and atomic number 50. It is a main group metal in group 14 of the periodic table. Tin shows chemical similarity to both neighboring group 14 elements, germanium and lead and has two possible oxidation states, +2 and the slightly more stable +4...
and petroleum
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
are the two main mineral resources that are of major significance in the Malaysian economy. Malaysia was once the world's largest producer of tin until the collapse of the tin market in the early 1980s. In the 19th and 20th century, tin played a predominant role in the Malaysian economy. It was only in 1972 that petroleum and natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
took over from tin as the mainstay of the mineral extraction sector. Meanwhile, the contribution by tin has declined. Petroleum
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
and natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
discoveries in oil field
Oil field
An oil field is a region with an abundance of oil wells extracting petroleum from below ground. Because the oil reservoirs typically extend over a large area, possibly several hundred kilometres across, full exploitation entails multiple wells scattered across the area...
s off Sabah, Sarawak and Terengganu have contributed much to the Malaysian economy. Oil and gas resources are managed by Petronas
Petronas
PETRONAS, short for Petroliam Nasional Berhad, is a Malaysian oil and gas company that was founded on August 17, 1974. Wholly owned by the Government of Malaysia, the corporation is vested with the entire oil and gas resources in Malaysia and is entrusted with the responsibility of developing and...
, the state controlled oil company which forms production sharing contracts with other players like Exxon-Mobil and Royal Dutch Shell
Royal Dutch Shell
Royal Dutch Shell plc , commonly known as Shell, is a global oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the fifth-largest company in the world according to a composite measure by Forbes magazine and one of the six...
to explore oil fields in Malaysia. Other minerals of some importance or significance include copper, bauxite, iron-ore and coal
Coal
Coal is a combustible black or brownish-black sedimentary rock usually occurring in rock strata in layers or veins called coal beds or coal seams. The harder forms, such as anthracite coal, can be regarded as metamorphic rock because of later exposure to elevated temperature and pressure...
together with industrial minerals like clay, kaolin, silica, limestone
Limestone
Limestone is a sedimentary rock composed largely of the minerals calcite and aragonite, which are different crystal forms of calcium carbonate . Many limestones are composed from skeletal fragments of marine organisms such as coral or foraminifera....
, barite
Barite
Baryte, or barite, is a mineral consisting of barium sulfate. The baryte group consists of baryte, celestine, anglesite and anhydrite. Baryte itself is generally white or colorless, and is the main source of barium...
, phosphates and dimension stones such as granite
Granite
Granite is a common and widely occurring type of intrusive, felsic, igneous rock. Granite usually has a medium- to coarse-grained texture. Occasionally some individual crystals are larger than the groundmass, in which case the texture is known as porphyritic. A granitic rock with a porphyritic...
as well as marble blocks and slabs. Small quantities of gold are produced.
Malaysia's broad and shallow continental shelf
Continental shelf
The continental shelf is the extended perimeter of each continent and associated coastal plain. Much of the shelf was exposed during glacial periods, but is now submerged under relatively shallow seas and gulfs, and was similarly submerged during other interglacial periods. The continental margin,...
consists of several deep water prospective areas. Malaysia has 500,000 km2 available for oil and gas exploration. 51 of the 70 producing fields in Malaysia are oil field
Oil field
An oil field is a region with an abundance of oil wells extracting petroleum from below ground. Because the oil reservoirs typically extend over a large area, possibly several hundred kilometres across, full exploitation entails multiple wells scattered across the area...
s. In January 2004, Malaysia's oil reserves
Oil reserves
The total estimated amount of oil in an oil reservoir, including both producible and non-producible oil, is called oil in place. However, because of reservoir characteristics and limitations in petroleum extraction technologies, only a fraction of this oil can be brought to the surface, and it is...
were estimated to be 4.84 Goilbbl, while natural gas reserves stood at 87 trillion standard cubic feet (2,460 km3). The country produces about 0.00075 Goilbbl barrels of crude oil every day and 2.20 trillion standard cubic feet (60 km3) of natural gas condensate
Natural gas condensate
Natural-gas condensate is a low-density mixture of hydrocarbon liquids that are present as gaseous components in the raw natural gas produced from many natural gas fields....
s per year. In 2004, Minister in the Prime Minister's Department, Mustapa Mohamed
Mustapa Mohamed
Dato Sri Mustapa bin Mohamed is a Malaysian politician. He is the Minister for International Trade and Industry in the Barisan Nasional coalition government and is the Member of the Parliament of Malaysia for the seat of Jeli in Kelantan, representing the United Malay National Organisation.Mustapa...
, revealed that Malaysia's oil reserves stood at 4.84 Goilbbl while natural gas reserves increased to 89 trillion cubic feet (2,500 km³). This was an increase of 7.2%. As of January 1, 2007, Petronas
Petronas
PETRONAS, short for Petroliam Nasional Berhad, is a Malaysian oil and gas company that was founded on August 17, 1974. Wholly owned by the Government of Malaysia, the corporation is vested with the entire oil and gas resources in Malaysia and is entrusted with the responsibility of developing and...
reported that oil and gas reserve in Malaysia amounted to 20.18 Goilbbl equivalent. In January 2008, the Malaysian natural gas reserves holds up to 14670000000 barrels (2,332,343,617,650 l) of oil equivalent. As of January 2009, Malaysia has proven oil reserves of up to 4 Goilbbl.
The government estimates that at current production rates Malaysia will be able to produce oil up to 18 years and gas for 35 years. In 2004, Malaysia is ranked 24th in terms of world oil reserves and 13th for gas. 56% of the oil reserves exist in the Peninsula while 19% exist in East Malaysia. The government collects oil royalties of which 5% are passed to the states and the rest retained by the federal government.
Other minerals of some importance or significance include copper, bauxite, iron-ore and coal together with industrial minerals like clay, kaolin, silica, limestone, barite, phosphates and dimension stones such as granite as well as marble blocks and slabs. Small quantities of gold
Gold
Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...
are produced.
Business environment
According to World Bank, Malaysia ranks 24th in Ease of doing business. Malaysia's strengths in the rank includes getting credit (rank 3rd), protecting investor (ranked 4th) and doing trade across borders (ranked 21st). Weaknesses include dealing with licenses (ranked 105th). The study ranks 178 countries in all aspect of doing business. In the investor protection category of the survey, Malaysia had scored a perfect 10 for the extent of disclosure, nine for director liability and seven for shareholder suits. Malaysia is behind Singapore, Hong KongHong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
and New Zealand in investor protection category of the survey.
The government is moving towards a more business friendly environment by setting up a special task force to facilitate business called PEMUDAH, which means "simplifier" in Malay. Highlights includes easing restrictions and requirement to hire expatriates, shorten time to do land transfers and increasing the limit of sugar storage (a controlled item in Malaysia) for companies. The Government aims to be in the top 10 in the Ease of doing business survey before 2010 in order to attract even more foreign investors.
The efforts of PEMUDAH is beginning to show fruits as their ranking improved to number 20 in 2009, with marked improvement in four areas: getting credit; dealing with construction permits; paying taxes; and enforcing contracts.
External trade
The Malaysian Government encourages Foreign Direct Investment
Foreign direct investment
Foreign direct investment or foreign investment refers to the net inflows of investment to acquire a lasting management interest in an enterprise operating in an economy other than that of the investor.. It is the sum of equity capital,other long-term capital, and short-term capital as shown in...
(FDI). According to Malaysian statistics, in 1999, the U.S. ranked first among all countries in approved FDI in Malaysia's manufacturing sector with approved new manufacturing investments totaling RM5.2 billion (US$1.37 billion). Principal U.S. investment approved by the Malaysian Investment Development Authority (MIDA) was concentrated in the chemicals, electronics, and electrical sectors. The cumulative value of U.S. private investment in Malaysia exceeded $10 billion, 60% of which is in the oil and gas and petrochemical sectors with the rest in manufacturing, especially semiconductors and other electronic products.
In the first six months of 2007, Malaysia's total trade increased by 2.2% to RM522.38 billion, compared with RM511.11 billion in the same period of 2006.
Free trade efforts
Malaysia is a member of the ASEAN Free Trade AreaASEAN Free Trade Area
ASEAN Free Trade Area is a trade bloc agreement by the Association of Southeast Asian Nations supporting local manufacturing in all ASEAN countries....
which was established in 1992 to promote trade among ASEAN members. Most tariffs among the first generation member states were scrapped in 2007. ASEAN itself is increasingly playing a large role in free trade negotiation on behalf of its members. ASEAN as a group hopes to establish a free trade agreement with the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
by 2009.
The Malaysian Government is negotiating free trade deals with Australia, Chile
Chile
Chile ,officially the Republic of Chile , is a country in South America occupying a long, narrow coastal strip between the Andes mountains to the east and the Pacific Ocean to the west. It borders Peru to the north, Bolivia to the northeast, Argentina to the east, and the Drake Passage in the far...
and India, but has suspended negotiation of free trade deal with United States indefinitely after eight rounds of negotiation. Malaysia is seeking membership into the Trans Pacific Partnership, a regional trade pact between the United States and countries in the Pacific Rim. As of October 2010, TPP members has agree to allow Malaysia to join as a full negotiation member of the group. Malaysia will join the third round of negotiations in Brunei.
Officials have expressed desire for free trade agreements their ASEAN members Singapore and Thailand. The Malaysian Trade Ministry released a statement in Vietnam
Vietnam
Vietnam – sometimes spelled Viet Nam , officially the Socialist Republic of Vietnam – is the easternmost country on the Indochina Peninsula in Southeast Asia. It is bordered by China to the north, Laos to the northwest, Cambodia to the southwest, and the South China Sea –...
saying that the FTA "has the potential to increase trade, investment cross flows and economic cooperation between the two countries. The agreement would also serve to make Chile a gateway for Malaysia's exports to the Latin American market."
Malaysia signed a Japan-Malaysia Economic Partnership Agreement with Japan on 13 December 2005. This leads to a Free trade agreement which was in effect from 13 July 2006 and expected to be fully realized in 2016. The agreement itself is an extension of an FTA between ASEAN and Japan, which is called Asean-Japan Comprehensive Economic Partnership.
On 8 November 2007, Malaysian and Pakistan signed a bilateral Free Trade Agreement which will come in force on 1 January 2008. Malaysia will cut tariffs on 140 lines while Pakistan will cut 124 lines. Most tariffs and duty is expected to be eliminated by 2012.
On 26 October 2009, Malaysia and New Zealand signed a bilateral Free Trade Agreement. New Zealand will cut tariffs on 99.5 percent of goods sent to Malaysia beginning 2010. This agreement itself is an extension of the ASEAN-Australia-New Zealand Free Trade Agreement.
Other 'economic areas' showing an interest in establishing free-trade agreements with Malaysia are the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
and Hong Kong
Hong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
. However, before any talks can be initiated regarding new FTAs, Joint Economic Co-operation deals need to be concluded. International Trade and Industry Minister, Tan Sri Muhyiddin Yassin
Muhyiddin Yassin
Tan Sri Muhyiddin bin Yassin is a Malaysian politician and the current Deputy Prime Minister and the Minister of Education. He is also the Deputy President of the United Malays National Organisation , the main component party of the ruling Barisan Nasional coalition.Muhyiddin grew up in the state...
has expressed the hope that talks will be concluded by the end of 2008.
Foreign direct investment
Malaysia received RM46.1 billion foreign direct investment (FDI), which was all time high, for the whole of 2008. The foreign investments accounted for 73.4 percent of the total investments of RM62.8 billion approved for 2008.The Minister of International Trade and Industry, Datuk Mustapa Mohamed announced that there was a sharp reduction in FDI and Malaysia only received RM4.2 billion FDI, about 78% reduction, for the first five months of 2009.
On the other hand, FDI in other Asean countries has grown rapidly. Malaysia was very much ahead of Vietnam on attracting FDI. Now it has to compete with the latter for the FDI.
Industry
Malaysia industrial sector accounts for 48.1 percent of total GDP or 63.4 billion US dollars. The industrial output is ranked 32nd in the world. The industrial sector is regulated and promoted by Malaysia Industrial Development Authority. International trade, facilitated by the adjacent Strait of MalaccaStrait of Malacca
The Strait of Malacca is a narrow, stretch of water between the Malay Peninsula and the Indonesian island of Sumatra. It is named after the Malacca Sultanate that ruled over the archipelago between 1414 to 1511.-Extent:...
shipping route and manufacturing are both key sectors of the country's economy. Manufacturing has a large influence in the country's economy, although Malaysia’s economic structure is moving away from it.
Malaysia has 18 companies that rank in the Forbes Global 2000
Forbes Global 2000
The Forbes Global 2000 is an annual ranking of the top 2000 public companies in the world by Forbes magazine. The ranking is based on a mix of four metrics: sales, profit, assets and market value...
ranking for 2009.
| World Rank | Company | Industry | Revenue (billion $) | Profits (billion $) | Assets (billion $) | Market Value (billion $) |
|---|---|---|---|---|---|---|
| 493 | CIMB CIMB CIMB Group CIMB Group is a regional universal bank operating in high growth economies in ASEAN. CIMB Group has the widest retail branch network across the region and is an indigenous ASEAN investment bank.... Group Holdings |
Banking | 4.24 | 0.82 | 70.14 | 14.05 |
| 599 | Sime Darby Sime Darby Sime Darby is Malaysia's leading multinational conglomerate involved in five core sectors: plantations, property, industrial, motors and energy & utilities, with a growing presence in healthcare... |
Conglomerates | 8.82 | 0.65 | 9.92 | 15.27 |
| 642 | Public Bank Public Bank Public Bank Berhad is a bank based in Malaysia. Public Bank is currently the biggest domestic bank in Malaysia by shareholders' funds. It focuses on retail customers and small to medium sized enterprises. The bank was founded in 1966 by Teh Hong Piow, the then general manager of Malayan Banking... |
Banking | 2.75 | 0.74 | 63.27 | 11.52 |
| 706 | Maybank Maybank Maybank , a trade name for Malayan Banking Berhad is the largest bank and financial group in Malaysia, with significant banking operations in Singapore, Indonesia and the Philippines. The bank also has large interests in Islamic banking through Maybank Islamic Berhad and insurance via its Etiqa... |
Banking | 4.63 | 0.20 | 87.98 | 14.70 |
| 709 | Tenaga Nasional Tenaga Nasional Tenaga Nasional Berhad is the largest Electric utility company in Malaysia and also the largest power company in Southeast Asia with MYR 69.8 billion worth of assets. It serves over seven million customers throughout Peninsular Malaysia and also the eastern state of Sabah through Sabah Electricity... |
Utilities | 8.17 | 0.26 | 20.26 | 10.21 |
| 904 | Axiata Group Axiata Group Berhad Axiata Group Berhad , DBA Axiata , is one of the leading telecommunication companies in Asia.- The Group :... |
Telecommunications Services | 3.83 | 0.48 | 10.80 | 9.71 |
| 907 | MISC Berhad MISC Berhad MISC Berhad was incorporated in 1968 as Malaysia International Shipping Corporation Berhad and is the leading international shipping line of Malaysia. In September 2005 Malaysia International Shipping Corporation Berhad adopted its present corporate identity and changed its name to MISC Berhad... |
Transportation | 4.33 | 0.39 | 10.08 | 10.66 |
| 1179 | Genting Genting Group Genting Group is an Asian conglomerate. It comprises four listed entities Genting Group is an Asian conglomerate. It comprises four listed entities Genting Group is an Asian conglomerate. It comprises four listed entities (namely holding company Genting Berhad (MYX:3182) and its member companies... |
Hotels, Restaurants & Leisure | 2.60 | 0.31 | 12.68 | 6.81 |
| 1192 | RHB Capital RHB Bank RHB Bank Berhad is a bank based in Kuala Lumpur, Malaysia. It specializes in commercial banking, corporate and investment banking and international banking services... |
Banking | 1.57 | 0.35 | 33.49 | 3.49 |
| 1205 | Maxis Maxis Maxis is an American company founded as an independent video game developer in 1987. It is currently a subsidiary of Electronic Arts . Maxis is the creator of one of the best-selling computer games of all time, The Sims and its first sequel, The Sims 2... |
Telecommunications Services | 2.22 | 0.46 | 5.17 | 12.08 |
| 1224 | IOI Group IOI Group IOI Corporation Berhad commonly referred to as IOI, was incorporated on 31 October 1969 as Industrial Oxygen Incorporated Sdn Bhd. IOI is one of Malaysia's biggest conglomerates that started off from industrial gas manufacturing. It ventured into property development in 1982, followed by oil palm... |
Food, Drink & Tobacco | 4.15 | 0.28 | 4.53 | 10.78 |
| 1292 | AMMB Holdings AmBank AMMB Holdings is currently the fifth largest banking group in Malaysia, with more than 200 branches and their outlets , providing individuals and businesses with a range of financial services and products.AmBank Group was founded in 1975 as Arab-Malaysian Development Bank, by Merchant Banking... |
Banking | 1.45 | 0.24 | 24.56 | 4.42 |
| 1485 | PPB Group Perlis Plantations Bhd PPB Group Berhad is a diversified company which was incorporated in November 1968, and its business beginning with cultivating sugar cane and to extract, process and market sugar... |
Food, Drink & Tobacco | 0.57 | 0.46 | 3.82 | 5.60 |
| 1501 | YTL | Utilities | 2.53 | 0.24 | 12.92 | 4.16 |
| 1613 | Hong Leong Financial Group | Banking | 1.08 | 0.18 | 24.54 | 2.39 |
| 1643 | PLUS Expressways | Transportation | 0.93 | 0.35 | 5.36 | 5.11 |
| 1755 | Petronas Petronas PETRONAS, short for Petroliam Nasional Berhad, is a Malaysian oil and gas company that was founded on August 17, 1974. Wholly owned by the Government of Malaysia, the corporation is vested with the entire oil and gas resources in Malaysia and is entrusted with the responsibility of developing and... Gas |
Oil & Gas Operations | 0.94 | 0.25 | 2.76 | 5.70 |
| 1987 | Petronas Petronas PETRONAS, short for Petroliam Nasional Berhad, is a Malaysian oil and gas company that was founded on August 17, 1974. Wholly owned by the Government of Malaysia, the corporation is vested with the entire oil and gas resources in Malaysia and is entrusted with the responsibility of developing and... Dagangan |
Oil & Gas Operations | 60.69 | 11 | 1.81 | 2.63 |
Finance and banking
Finance and Banking sector in Malaysia is regulated by Bank Negara MalaysiaBank Negara Malaysia
Bank Negara Malaysia is the Malaysian central bank. Established on January 26, 1959 as the Bank Negara Malaya, its main purpose was to issue currency, act as banker and adviser to the Government of Malaysia and regulate the country's credit situation...
. The central bank limits foreign participation through licensing limits. The central bank launched a Financial Sector Master plan in 2001 to revamp the finance sector following the Asian Financial Crisis. The master plan calls for emphasis on Islamic Banking, of which Malaysia has become a centre of. Malaysia has the highest number of female workers in Islamic banking.
Maybank
Maybank
Maybank , a trade name for Malayan Banking Berhad is the largest bank and financial group in Malaysia, with significant banking operations in Singapore, Indonesia and the Philippines. The bank also has large interests in Islamic banking through Maybank Islamic Berhad and insurance via its Etiqa...
is Asia-Pacific's largest Islamic banking service provider with US$6.4 billion (RM22.48 billion) Syariah-compliant assets. Malaysia also accounts for two thirds of global $82.2 billion sukuk
Sukuk
Sukuk is the Arabic name for financial certificates, but commonly refers to the Islamic equivalent of bonds. Since fixed income, interest bearing bonds are not permissible in Islam, Sukuk securities are structured to comply with the Islamic law and its investment principles, which prohibits the...
market in 2007. Khazanah Nasional
Khazanah Nasional
Khazanah Nasional Berhad is the investment holding arm of the Government of Malaysia entrusted to hold and manage the commercial assets of the government and to undertake strategic investments. Khazanah was incorporated under the Companies Act 1965 on 3 September 1993 as a public limited company...
owns the largest retakaful
Takaful
Takaful is an Islamic insurance concept which is grounded in Islamic muamalat , observing the rules and regulations of Islamic law. This concept has been practised in various forms for over 1400 years...
company in the world, ACR Retakaful Holdings Limited
Private company limited by shares
A private company limited by shares, usually called a private limited company , is a type of company incorporated under the laws of England and Wales, Scotland, that of certain Commonwealth countries and the Republic of Ireland...
, with capital base amounting to 300 million US Dollars.
A quarterly report prepared by the Economist Intelligence Unit
Economist Intelligence Unit
The Economist Intelligence Unit is part of the Economist Group.It is a research and advisory company providing country, industry and management analysis worldwide and incorporates the former Business International Corporation, a U.S. company acquired by the parent organization in 1986...
on behalf of Barclays Wealth
Barclays Wealth
Barclays Wealth is a UK wealth manager providing international and private banking, advisory, fiduciary services, investment management and, through Barclays Stockbrokers, brokerage....
in 2007 estimated that there were 48,000 dollar millionaires in Malaysia (over twice that of China).
In April 2009, the government announce new licenses will be issued for investment banking Islamic banking
Islamic banking
Islamic banking is banking or banking activity that is consistent with the principles of Islamic law and its practical application through the development of Islamic economics. Sharia prohibits the fixed or floating payment or acceptance of specific interest or fees for loans of money...
, takaful
Takaful
Takaful is an Islamic insurance concept which is grounded in Islamic muamalat , observing the rules and regulations of Islamic law. This concept has been practised in various forms for over 1400 years...
and insurance business between 2009 to 2011. It also announced that the threshold foreign equity ownership has been raised from 49% to 70% and allowed foreign banks to open up new branches and micro-credit facilities. This move was done as an attempt to put Malaysia in as center for Islamic banking and also to liberalize the financial sector.
Oil and gas
Malaysia has a vibrant oil and gas industry. The national oil company, Petronas, provides 32% of the federal budget in taxes, dividends and royalties. The oil company ranked 121 in Fortune Global 500Fortune Global 500
The Fortune Global 500 is a ranking of the top 500 corporations worldwide as measured by revenue. The list is compiled and published annually by Fortune magazine....
list of companies in 2007. It also ranked 18 in the industry of the same list. The company has ove up to the rank by being 95th in 2008 in terms of revenue and 8th most profitable company in the world and the most profitable in Asia. Since inception in 1974, Petronas have paid the government RM 403.3 billion, with RM 67.6 billion in 2008. The payment represents a 44% of the 2008 federal government revenue.
Petronas is also the custodian of oil and gas reserves for Malaysia. Hence, all oil and gas activities are regulated by Petronas. Malaysia encourages foreign oil company participation through production sharing contracts, in which significant amount of oil will be given away to the foreign oil company until it reaches a production milestone. Currently, many major oil companies such as ExxonMobil
ExxonMobil
Exxon Mobil Corporation or ExxonMobil, is an American multinational oil and gas corporation. It is a direct descendant of John D. Rockefeller's Standard Oil company, and was formed on November 30, 1999, by the merger of Exxon and Mobil. Its headquarters are in Irving, Texas...
, Royal Dutch Shell
Royal Dutch Shell
Royal Dutch Shell plc , commonly known as Shell, is a global oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the fifth-largest company in the world according to a composite measure by Forbes magazine and one of the six...
, Nippon Oil
Nippon Oil
The , or NOC or Shin-Nisseki is a Japanese petroleum company. Its businesses include the exploration, importation, and refining of crude oil; the manufacture and sale of petroleum products, including fuels and lubricants; and other energy-related activities.Its products are sold under the brand...
, and Murphy Oil
Murphy Oil
Murphy Oil Corporation is an international oil and gas company, founded in 1944 as C.H. Murphy & Co by Charle H Murphy Sr., that conducts business through various operating subsidiaries. Murphy produces oil and/or natural gas in the United States, Canada, Malaysia, the United Kingdom and Republic...
are involved in such contracts. As a result, 40% of oil fields in Malaysia are developed.
Malaysia and Thailand has a wedge shaped area 150 km from Kota Bharu
Kota Bharu
Kota Bharu is a city in Malaysia, is the state capital and Royal City of Kelantan. It is also the name of the territory in which Kota Bharu City is situated. The name means 'new city' or 'new castle/fort' in Malay. Kota Bharu is situated in the northeastern part of Peninsular Malaysia, and lies...
, Kelantan
Kelantan
Kelantan is a state of Malaysia. The capital and royal seat is Kota Bharu. The Arabic honorific of the state is Darul Naim, ....
and 260 km from the shores of Songkhla
Songkhla
Songkhla is a city in the Songkhla Province of southern Thailand, near the border with Malaysia. As of 2006 it had a population of 75,048...
, Thailand which is jointly developed by Petronas
Petronas
PETRONAS, short for Petroliam Nasional Berhad, is a Malaysian oil and gas company that was founded on August 17, 1974. Wholly owned by the Government of Malaysia, the corporation is vested with the entire oil and gas resources in Malaysia and is entrusted with the responsibility of developing and...
and its Thailand counterpart. The area, which is called Malaysia-Thailand Joint Development Area, has 4.5 Tcuft of proven reserves.
Tourism
Tourism in Malaysia
Malaysia is a country in South-East Asia, located partly on a peninsula of the Asian mainland and partly on the northern third of the island of Borneo. West Malaysia shares a border with Thailand, is connected by a causeway and a bridge to the island state of Singapore, and has coastlines on the...
. As a result tourism has become Malaysia’s third largest source of income from foreign exchange, although it is threatened by the negative effects of the growing industrial economy, with large amounts of air and water pollution along with deforestation affecting tourism. The majority of Malaysia's tourists come from its bordering country, Singapore. In 1999, Malaysia launched a worldwide marketing campaign called “Malaysia, Truly Asia” which was largely successful in bringing in over 7.4 million tourists. In recent years tourism has been threatened by the negative effects of the growing industrial economy, with large amounts of air and water pollution along with deforestation affecting tourism.
The Ministry of Culture, Arts and Tourism (MOCAT) was established in 1987 under which the TDC was incorporated. TDC existed from 1972 to 1992, when it became the Malaysia Tourism Promotion Board (MTPB), through the Malaysia Tourism Promotion Board Act, 1992. Tourism Malaysia
Tourism Malaysia
Tourism Malaysia or Malaysia Tourism Promotion Board is an agency under the Ministry of Tourism, Malaysia.Tourism Malaysia or formerly known as the Tourist Development Corporation of Malaysia , was established on 10 August, 1972...
aims to market Malaysia as a premier destination of excellence in the region.
Science and technology
In 2002 the Malaysian National Space Agency (Angkasa) was formed to deal with all of Malaysia's activities in space, and to promote space education and space experiments. It is focused on developing the "RazakSAT" satellite, which is a remote sensing satellite with CCD cameras. In early 2006, Sheikh Muszaphar Shukor
Sheikh Muszaphar Shukor
Sheikh Muszaphar Shukor is a Malaysian orthopaedic surgeon and was the first Malaysian to go into space. He was launched to the International Space Station aboard Soyuz TMA-11 with the Expedition 16 crew on October 10, 2007...
and three other finalists were selected for the Angkasawan spaceflight programme. This programme came about when Russia agreed to transport one Malaysian to the International Space Station
International Space Station
The International Space Station is a habitable, artificial satellite in low Earth orbit. The ISS follows the Salyut, Almaz, Cosmos, Skylab, and Mir space stations, as the 11th space station launched, not including the Genesis I and II prototypes...
as part of a multi-billion dollar purchase of 18 Russian Sukhoi Su-30MKM fighter jets by the Royal Malaysian Air Force.
In an effort to create a self-reliant defensive ability and support national development Malaysia privatised some of its military facilities in the 1970s. This has created a defence industry, which in 1999 was brought under the Malaysia Defence Industry Council
Malaysia Defence Industry Council
The Malaysia Defence Industry Council , formed in 1999, is tasked with coordinating the orderly development of the Malaysia Defence Industry Sector. It is chaired by the Malaysian Minister of Defence, and involves 56 members from the private sector as well as from the Government...
. The government continues to try to promote this sector and its competitiveness, actively marketing the defence industry. One way it does this is through the Langkawi International Maritime and Aerospace Exhibition, one of the largest defence and civil showcases in the Asia Pacific, regularly attended by over 500 companies. The Malaysian Armed Forces relies heavily on local military technology and high-tech weapons systems designed and manufactured by foreign countries.
Others
Knowledge-based services are expanding in Malaysia. Malaysia is being promoted as a destination for Medical tourism, regionally and internationally.See also
- Islamic banking in MalaysiaIslamic banking in MalaysiaIslamic banking in Malaysia began in September 1963 when Perbadanan Wang Simpanan Bakal-Bakal Haji was established. PWSBH was set up as an institution for Muslims to save for their Hajj expenses...
- Poverty in MalaysiaPoverty in MalaysiaPoverty in Malaysia is a controversial economic issue. The definition of poverty and the poverty line for Malaysians has been disputed, and government policies to address poverty such as the Malaysian New Economic Policy have been met with political protest....
- List of Malaysia states by GDP
External links
- Mahathir bin Mohamad's interview with the PBS series "Commanding Heights" on the subject of East Asian economic development.
- Key Statistics for Malaysia
- Economic Outlook by Economist Intelligence Unit
- http://www.matrade.gov.my/matrade/matradeMedia072007.htm