Malaysia at a glance

Capital: Kuala Lumpur
Population: 25,715,819
Government Type: Constitutional monarchy
GDP: $397.5 billion
Imports: $156.2 billion f.o.b.
Exports: $195.7 billion f.o.b.

Malaysia’s multi-racial society contains many ethnic groups, with Malays comprising a majority of just over 50%. By constitutional definition, all Malays are Muslim. About a quarter of the population is ethnic Chinese, a group which historically played an important role in trade and business. Malaysians of Indian descent comprise about 7% of the population and include Hindus, Muslims, Buddhists, and Christians. Non-Malay indigenous groups make up approximately 11% of the population.

Population density is highest in peninsular Malaysia, home to some 20 million of the country’s 27 million inhabitants. The remaining 7 million live on the Malaysian portion of the island of Borneo, in the large but less densely-populated states of Sabah and Sarawak. More than half of Sarawak’s residents and about two-thirds of Sabah’s are from indigenous groups.

U.S. - Malaysian Relations

The United States and Malaysia share a diverse and expanding partnership. Economic ties are robust. The United States is Malaysia’s largest trading partner, and Malaysia is the 16th-largest trading partner of the United States. Annual two-way trade amounts to $44 billion. The United States and Malaysia launched negotiations for a bilateral free trade agreement (FTA) in June 2006, but an agreement has not yet been concluded.

The United States is the largest foreign investor in Malaysia on a cumulative basis. American companies are particularly active in the energy, electronics, and manufacturing sectors. The U.S. direct investment position in Malaysia for 2007 was $15.7 billion.

The United States and Malaysia cooperate closely on security matters, including counter-terrorism, maritime domain awareness, and regional stability. The relationship between the military forces of the two nations is also strong, with numerous exchanges, training, joint exercises, and visits. The United States and Malaysia signed a Mutual Legal Assistance Treaty (MLAT) in July 2006 during the visit to Kuala Lumpur by Secretary of State Condoleezza Rice.

Foreign Relations

Regional cooperation is a cornerstone of Malaysia’s foreign policy. It was a founding member of the Association of Southeast Asian Nations (ASEAN) and served as the group’s chair most recently in 2005–2006. It hosted the ASEAN Summit and East Asia Summit in December 2005, as well as the ASEAN Ministerial and the ASEAN Regional Forum in July 2006.

Malaysia is an active member of the Asia Pacific Economic Cooperation (APEC) forum, the Organization of the Islamic Conference (OIC), the Non-Aligned Movement (NAM), and the United Nations. It was chair of the OIC until March 2008 and has also chaired the NAM.

Malaysia is a frequent contributor to UN and other peacekeeping and stabilization missions, including recent deployments to Lebanon, East Timor, the Philippines, Indonesia, Pakistan, Sierra Leone, and Kosovo.

Economy

Since it became independent, 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 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 devices, electrical goods, and information and communication technology (ICT) products.

The government continues to actively manage the economy.  Malaysia’s New Economic Policy (NEP), first established in 1971, was a 10-year plan that sought to rectify a situation whereby ethnic Malays and indigenous peoples (”bumiputera”), who comprised nearly 60% of the population, held less than 3% of the nation’s wealth. Policy makers implemented a complex network of racial preferences intended to promote the acquisition of economic assets by bumiputera. In 1981, when the racial preferences were set to expire, the government extended the NEP for another 10 years, stating that its goals had not been achieved. The policies again were extended in 1991 and in 2001.

The Malaysian economy went into sharp recession in 1997-1998 during the Asian financial crisis, which affected countries throughout the region, including South Korea, Indonesia, and Thailand. Malaysia’s GDP decreased by more than 7% in 1998. Malaysia narrowly avoided a return to recession in 2001 when its economy was negatively affected by the bursting of the dot-com bubble (which hurt the ICT sector) and slow growth or recession in many of its important export markets.

In July 2005, the government removed the 7-year-old peg linking the ringgit’s value to the U.S. dollar at an exchange rate of RM 3.8/US$1.00. The dollar peg was replaced by a managed float against an undisclosed basket of currencies. The new exchange rate policy was designed to keep the ringgit more broadly stable and to avoid uncertain currency swings that could harm exports.

The Malaysian financial system has exhibited noteworthy resilience to the 2008 global financial crisis. Malaysian banks are well capitalized and have no measurable exposure to the U.S. sub-prime market. The central bank maintains high levels of foreign exchange reserves and a conservative regulatory environment, having prohibited some of the riskier assets in vogue elsewhere. However, decreasing demand in the United States and elsewhere is taking a toll on Malaysian exports, resulting in slower economic growth going forward.

Best Export Opportunities

Malaysia has become a high-tech competitive nation, where services and manufacturing now account for 86% of the country’s GDP. The National Association of Manufacturers reports that Malaysia is the 10th largest export market for U.S. manufactured goods.

There are increasing opportunities in the telecommunications market. In its efforts to become an industrialized nation by year 2020 and realizing the importance of broadband as the backbone of a knowledge economy, the Malaysian government is targeting 50% household penetration by 2010 using a mixture of fixed, mobile, and satellite technologies. This will include a 10-year high-speed broadband project worth US$3.2 billion, to commence in 2009. The push for broadband penetration and the network expansion of 3G and WiMAX players will create a large demand for telecommunication products and solutions. Infrastructure spending by telecommunication companies is expected to be more than US$1.14 billion (RM4 billion) per annum for 2009 to 2010.

For further information on these and other export opportunities, please visit the Best Export Opportunities section of the Official Export Guide’s Malaysia Country Profile.

Banking & Foreign Investment

The government took a number of measures to strengthen Malaysia’s banking system following the regional financial crisis in the late 1990s. The banking system remains the largest financial intermediary in the country, with total assets standing at US$364 billion (RM 1.2 trillion), as of December 2007. The Central Bank licenses and regulates businesses such as commercial banking, investment banking, Islamic banking, and money brokering.

The Government of Malaysia encourages foreign direct investment by providing a number of incentives, particularly in export-oriented high-tech industries and “back office” service operations. Inflows of FDI to Malaysia increased by 38.9% from US$6.4 billion in 2006 to US$8.4 llion in 2007, according to the UN Conference on Trade and Development (UNCTAD).

More detailed information can be found in the Trade Finance and Investment sections of the Official Export Guide’s Malaysia country profile.

Transportation

Malaysia’s central location in the Asia-Pacific region makes it an excellent gateway to Asia and the ASEAN markets. Air cargo facilities are well developed at the five international airports — the Kuala Lumpur International Airport (KLIA), Penang International Airport and Langkawi International Airport in Peninsular Malaysia, Kota Kinabalu International Airport in Sabah, and Kuching International Airport in Sarawak. Kuala Lumpur International Airport (KLIA) is the nation’s largest, located 50 kilometers south of Kuala Lumpur. Cargo import and export procedures are fully automated at KLIA.

Kuala Lumpur is served by a number of international airlines, though no U.S. airlines fly to Malaysia directly. Additional international connections are available via Singapore, from which there is a joint Malaysian Airlines/Singapore Airlines air shuttle service. Direct flights to Singapore are available from the United States, Europe, the Middle East, and Asia. Within Malaysia, the national airline — Malaysian Airlines (MAS) — provides frequent service to all major cities, as does low-cost competitor Air Asia.

Peninsular Malaysia’s network of well-maintained highways link major growth centers to seaports and airports throughout the peninsula and provide an efficient means of transportation for goods. To complement these highways, a Kuala Lumpur-Bangkok rail service known as the ASEAN Rail Express (ARX) has been initiated. The long-term aim is to expand it to become the Trans-Asia Rail Link, which will include Singapore, Vietnam, Cambodia, Laos and Myanmar before ending up in Kunming, China. Local transportation rates can be found on the Malaysian Industrial Development Authority’s Web site.

Map of Malaysia

Free photos courtesy of bigfoto.com.