Economic Overview
Malaysia is one of South East Asia's more successful economies and one of UK Trade and Investment's High Growth Markets. Recent GDP growth has raised per capita income to US$6,721 in 2007 (close to double that in PPP terms based on 2009 estimates), transforming a commodities-based economy into one with a large, export-orientated manufacturing sector.
Apart from a minor blip during the financial crisis of 1997-1998 the economy has continued to grow robustly since then: most recently by 6.3% in 2007 and 4.6% in 2008. Nowadays the services sector (rising to nearly 46.6% of GDP in 2007) is increasingly important; while both commodities (palm oil and rubber) and oil and gas remain substantial sectors and benefited from record high prices in 2008.
Since the Asian financial crisis, Malaysia has made good progress in reforming its banking and financial system. Local banks have been consolidated and there is phased liberalisation to allow greater competition. Malaysia has developed its Islamic Finance capability and is now a major hub in the Asia Pacific region.
The Government has also progressively dismantled the exchange and other controls imposed during the Asia Crisis - including abandoning the Ringgit peg to the dollar in July 2005 in favour of a managed float.
The chief economic reform challenges facing Malaysia now are to improve the performance of Government Linked Companies (which still account for a large part of the economy); to achieve further progress in corporate governance and transparency, and to move up the value chain in response to the economic challenge posed by China and other low-cost manufacturing economies.
The administration has made some changes to improve financial and political accountability, and is seeking to improve Malaysian competitiveness in sectors such as biotechnology.
Opportunities
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Malaysia is one of the fastest growing economies in the region. GDP growth in 2007 was a healthy 6.3%, although this dropped to 4.6% in 2008 at the global economic downturn began to bite. Current estimates for 2009 put the growth figures at between –1% and +1%. Per capita income is estimated to reach US$13,300 in Purchasing Power Parity terms in 2009. Opportunities exist for UK companies in various sectors, including:
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Top ten UK exports to Malaysia (£ thousands)
1. Electrical Machinery, apparatus and appliances 128,574
2. Road Vehicles 42,065
3. Other Transport equipment 38,413
4. Professional, scientific and control instruments 32,020
5. Power generating machinery and equipment 28,857
6. General industrial machinery and equipment 20,954
7. Office machine and ADP equipment 19,723
8. Iron and steel 16,377
9. Metal ores and metal scrap 16,067
10. Specialised industrial machinery 15,838
Top ten UK imports from Malaysia
1. Electrical machinery, apparatus and appliances 263,177
2. Office machines and ADP equipment 207,174
3. Telecommunications and sound recording and reproducing apparatus 119,111
4. Miscellaneous manufactured article 67,822
5. Furniture (bedding, mattresses, supports, cushions) 65,706
6. Articles of apparel and clothing accessories 61,879
7. Cork and wood manufacturers (excl. furniture) 30,339
8. Other transport equipment 24,951
9. Professional, scientific and control instruments 23,248
10. Feeding stuff for animals 21,487
| Top Export Partners:
US 18.8% Singapore 18% Japan 10.1% China 6.7% Hong Kong 6% Thailand 4.8% |
Top Import Partners:
Japan 16.1% US 14.6% Singapore 11.2% China 9.9% Thailand 5.5% Taiwan 5.5% South Korea 5% Germany 4.5% Indonesia 4% |
UK relations and investment
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The relations between the UK and Malaysia are well developed and provide a solid foundation for the positive trade links between the two countries. The countries organise regular official visits and business missions to improve and establish new trade links. The successful relationship lies in the areas of trade, investment, and education. Over 11,000 Malaysian students are studying at numerous UK universities, and over 20,000 are studying for British degrees at Malaysian universities. The English language is an important connection between the two countries and is used widely throughout Malaysia. The British Council has offices and English teaching centres in Kuala Lumpa and education promotion centres in Sabah and Sarawak. UK commercial ties with Malaysia are strong. Close historical and educational links, a familiar commercial and legal framework and the widespread use of English are all conducive to a vibrant business relationship.
Leading UK companies are increasingly becoming situated in Malaysia, and Britain is now one of Malaysia’s largest investors. Company names include Shell, BP, Tesco, Jardines, Hanson, Glaxo Smithkline, and Dyson. Also in December 2004, Rolls-Royce won a £215 million order to supply engines for Malaysian Airlines. Traditionally, Britain has been a leading investor in Malaysia, with estimated cumulative investments of over £20 billion over the last 30 years. Malaysia’s rapid development, strategic location and political and social stability have continued to make it an attractive place for British investment.
So has the development of projects such as the Multimedia Super Corridor (MSC) and Iskandar Malaysia in Johor. The continuing development – and, we hope, gradual liberalisation – of the local services sector and of Malaysia’s position as a regional base should help bolster this trend. |
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International Trade Relations
Malaysia is actively involved in maintaining and developing international relations. It focuses a large proportion of its resources on ASEAN, of which it became a member in July 2005; Malaysia is a popular host for a number of international summits, including the ASEAN summit and East Asia summit in December 2005. The countries large Muslim population (55% of the total population) places the country in the position of being an important Islamic representative; Malaysia sees itself as a leader of the Islamic community.
Human Rights
Basic principles of Malaysia’s human rights that are preserved in the Federal Constitution are the right to life, freedom of movement, freedom of speech, assembly and association, freedom of religion and rights concerning education. Since the 1990’s Malaysia has been a dynamic member of the United Nations Commission on Human Rights (UNCHR). Tan Sri Musa, as leader of the Malaysian delegation to the UNCHR, first initiated the concept of Malaysia developing is own independent Human Rights institute. Specific departments were set up to deal more efficiently with the development of human rights, education, law reform, social and cultural rights, and complaints and enquiries are among some of the departments established within the human rights Commission.
Assistance
The World Bank is providing Malaysia with technical assistance and develops, with each country it deals with, a Country Assistance Strategy (CAS); this is a an action plan to help the country reduce poverty and promote economic development. The World Bank provides loans, grants, active projects and advisory assistance, among other services. In 2005 the bank provided the Southeast Asian region with US $2.9billion ($1bn interest-free IDA loans and $1.8bn in low interest loans). These funds are used by the country to buy goods, equipment and to obtain technical services.
Political History
| Like other Southeast Asia countries, Malaysia has seen different occupation since the 19th century. Its is interaction with so many different foreign powers can be partially attributed to its strategic position in between the South China Sea and the Indian Ocean. The eventual product that would build the basis for Malaysian independence was called the Federation of Malaya, which achieved independence in 1957 under its first Prime Minister, Tunku Abdul Rahman. Further changes occur and the Federation of Malaya evolves to encompass more areas previously under British colonial rule. Once Malaysia achieves independence the country needs to develop its own culture and ethnic balance. It also has to tackle immediate hostility from its neighbour, Indonesia. Relations, especially between these two countries, are healed due to the establishment of the ASEAN, of which Malaysia is a founding member. |  |
Timeline
1826 Malacca, Penang, and Singapore form the Colony of Straits Settlements.
1942-1945 The Japanese occupy Malaysia during the Second World War.
1948 The Malayan territories that are under British rule unify to establish the Federation of Malaya.
1957 Federation of Malaya becomes totally independent from Britain, with Tunku Abdul Rahman as their first Prime Minister.
1963 The Federation of Malaya expands to form the Federation of Malaysia as British colonies of Sabah, Sarawak and Singapore join. (Malaysia immediately faces hostility from Indonesia)
1965 Singapore withdraws itself from Malaysia that is now reduced to 13 states.
1967 The hostility between Malaysia and Indonesia that had been known as the period of ‘Confrontation’ begins to subside and improve thereafter. The ASEAN is founded in 1968, which helps to further improve relations between the two countries.
1969 There are inter-racial riots staged in the country as Malays begin to become frustrated by the economic success of the ethnic Chinese. These riots lead to the induction of the 20-year New Economic Policy (NEP), its aim is to help alleviate the cause of frustrations by enhancing Malays economic positions.
1971-present The country has now started to experience rapid economic growth.
1981 Dr Mahathir Mohamad becomes Prime Minister.
1997 The Asian financial crisis strikes the region and halts the rapid period of economic growth the country has seen since 1971.
1998 Prime Minister sacks his deputy, Anwar Ibrahim on charges of sexual misconduct and he is later charged in 2000 and sentenced to nine years in prison which is added onto a six year jail sentence he receives in 1999 for corruption.
2001 There are more ethnic clashes and dozens are arrested after tension erupts between Malays and ethnic Indians.
2003 Mahathir Mohamad steps down as Prime Minister after 22years in office. Abdullah Ahmad Badawi takes over as Prime Minister.
2004 In December the Tsunami disaster hits Malaysia and many people lose their lives.
Current Government
Prime Minister: Datuk Seri Najib Razak
Deputy Prime Minister – Muhyiddin Yassin
Foreign Minister - Anifah Aman
Finance Minister – Ahmad Husni Hanadzlah
