Malaysia is a federal constitutional monarchy in Southeast Asia, consisting of thirteen states and three federal territories. The capital city is Kuala Lumpur, while Putrajaya is the seat of the federal government. Malaysia’s course of history has been dictated by its strategic position at one of the world’s major crossroads, and a place of cohabitation and interaction of a wide array of races, religions and traditions. The present day Federation of Malaysia came into existence only in 1965, when Sarawak and Sabah joined the federation.

In 2010 the population exceeded 27.5 million. The population of Malaysia consists of many ethnic groups. Malays make up 50.4% of the population, whereas 23.7% of the population is of Chinese descent, while those of Indian descent comprise 7.1% of the population.

Politics and Administration

Since independence, Malaysia has adopted the political system of a parliamentary democracy. The political scene has been characterized by an extraordinary degree of political stability and continuity through a holistic national coalition of political parties. The political leadership of the country has been focusing on two key long-term goals: cementing national unity and economic development with equity. While national unity remains elusive, the highly successful industrialization drive (since the mid-1980’s) has turned the country into one of the world’s most important trading nations. Apart from this, Malaysia’s economic performance and fundamentals are strong; its social development is exemplary among developing countries.

Malaysia's legal system is based on English Common Law. Malaysia's foreign policy is based on the principle of neutrality and maintaining peaceful relations with all countries, regardless of their political system. Economic relations and incentives play a major role in shaping foreign affairs. Furthermore, Malaysia seeks to develop relations with other countries in the region and portray itself as a progressive Islamic nation

Economy - Overview[1]

According to Bożyk, Malaysia is a considerably open state-oriented, newly industrialized market economy.[2] Its 2009 GDP amounted to US$ 207,400 billion, which made it the 3^rd largest economy in Southeast Asia and the 29^th largest economy in the world by purchasing power parity.[3]

Regarding GDP composition, Malaysia has a diversified and rapidly expanding manufacturing sector which accounts for 35% of the GDP.[4] By the 1990s, it became the world’s third-largest producer of integrated circuits and domestic appliances. Agriculture contributesa tenth of GDP, whereas the flourishing service industry – thanks to Malaysia’s status as a key tourism destination – is Malaysia’s major growth engine: It generates half (49.7%) of GDP.[5] Since independence, Malaysia has had one of the best economic records in Asia, with an annual growth in GDP of 6.5% for almost 50 years. This growth rate is “one of the fastest and steadiest in the global scenario.”[6]

In the 1980s, Malaysia transformed from a “protected low income supplier of raw materials to a middle income emerging multi-sector market economy.”[7] Economic growth is attributed to – as Mohammed Ariff puts it – the fact that “trade is the lifeblood of the Malaysian economy and foreign direct investment its backbone.”[8] Ever since, following Tan Juay Miang of the Singapore Economic Development Board, “Malaysia has adopted an export-led, foreign investment driven growth strategy. It chiefly relies on Multinational Companies (MNCs) to develop export-oriented industries in the non-resource based sector.”[9] This outward looking, investment-based growth strategy has brought Malaysia sustainable economic progress.

For more information about Malaysia’s Economy, please see our PDF “Malaysia’s Economy at a Glance”.

[1] Adapted from: Gruetzmacher, P. (2011). An Assessment of Malaysia’s Political Management of Trade and Investment by European  Multinational Companies. Kuala Lumpur: University Malaya.

[2] Bożyk, P. (2006). Newly Industrialized Countries:Globalization and the transformation of foreign economic policy. Unknown: Ashgate Publishing Ltd. (p. 164).

[3] The CIA World Fact Book.(2010). Economy of Malaysia. Accessed on March 24, 2011 from https://www.cia.gov/library/publications/the-world-factbook/geos/my.html

[4] Malaysia‘s Economic Sectors. Accessed on August 16, 2010 from http://www.nationsencyclopedia.com/economies/Asia-and-the-Pacific/Malaysia-ECONOMIC-SECTORS.html#ixzz0wkiISBDd

[5]The CIA World Fact Book.(2010). Economy of Malaysia. Accessed on March 24, 2011 from https://www.cia.gov/library/publications/the-world-factbook/geos/my.html.

[6]Economy Watch.(2010). Malaysia Economic Development. Accessed on January 21^st, 2011 from http://www.economywatch.com/economic-development/malaysia.html

[7]NationsEncyclopedia.(2011). Economic Development in Malaysia. Accessed on January 21, 2011 from http://www.nationsencyclopedia.com/Asia-and-Oceania/Malaysia-ECONOMIC-DEVELOPMENT.html

[8]Mohammed Ariff. (2007). Economic Openness, Volatility and Resilience: Malaysian perspectives. Kuala Lumpur: Malaysian Institute of Economic Research. (p. 23).

[9]Natarajan, S. and Tan, Juay Miang. (1992). The Impact of MNC Investments on Malaysia, Singapore and Thailand. Singapore: ASEAN Economic Research Unit, Institute of Southeast Asian Studies. (p. 7).