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Malaysia is located in southeastern Asia on a peninsula bordering Thailand to the north, the northern one-third of the island of Borneo bordering Indonesia, Brunei, and the South China Sea, south of Vietnam. The country is slightly larger than New Mexico. The capitol of Malaysia is Kuala Lumpur.

Great Britain established colonies and protectorates in the area of current Malaysia during the late 18th and 19th centuries. During World War II Malaysia was occupied by Japan from 1942 to 1945. In 1948, the Federation of Malaya was formed on the Malay peninsula, which became independent in 1957. Malaysia joined the United Nations on September 17 of that year. The present day Federation of Malaysia was formed with the merger of the former British colonies of the East Malaysian states of Sabah and Sarawak on the northern coast of Borneo; Singapore joined Malaya in 1963. The first years of Malaysia were volatile; there was a communist insurgency, a confrontation from Indonesia, Filipino claims to Sabah, and Singapore’s expulsion from the federation in 1965. From 1981 until 2003, under the longest-serving prime minister, Mahathir bin Mohamad, Malaysia successfully diversified its economy by reducing its dependence on exports of raw materials and expanding into manufacturing, services, and tourism.

Some of Malaysia’s natural resources include tin, petroleum, timber, copper, iron ore, natural gas, and bauxite. Its estimated population in 2008 was approximately 27 million. The dominant religion is Islam, followed by Buddhism and Hinduism. The country’s official language is Bahasa Malaysia.

Government

The government of Malaysia is a constitutional monarchy, and the heads of the states are either hereditary sultans or appointed governors. The constitution was ratified on August 31, 1957, and has been amended many times since. The most recent amendment to the constitution was in 2007. The position of the king is largely ceremonial; the current king is Sultan Mizan Zainal Abidin, who has acted in that capacity since December 13, 2006.

The cabinet is appointed by the prime minister from among the members of Parliament with consent of the king. Kings are elected for five-year terms by and from the hereditary rulers of nine of the states. The last election was held on November, 3 2006 and the next will be held in 2011. The prime minister is selected from the house of representatives. When the legislative elections have concluded, the leader who commands the support of the majority of members in the house becomes prime minister. It has been tradition since independence that the leader of the UMNO party becomes prime minister.

The bicameral Parliament or Parlimen consists of the house of representatives, known as Dewan Rakyat, and the senate, which is known as Dewan Negara. This upper house contains 70 seats, with 44 appointed by the king and 26 elected by 13 state legislatures. These senators serve three-year terms with a limit of two terms. The house of representatives or Dewan Rakyat is made up of 222 seats. The members are elected by popular vote to serve five-year maximum terms. Elections for the house of representatives were held on March 8, 2008, and are also scheduled for June 2013. Citizens must be 21 years of age or older in order to vote.

There are a variety of sharia and civil courts in Malaysia. Civil courts include the federal court, court of appeal, high court of Malaya on peninsular Malaysia, and the high court of Sabah and Sarawak in the states of Borneo (judges appointed by the king on the advice of the prime minister). Sharia courts include sharia appeal court, sharia high court, and sharia subordinate courts at the state level, and deal with religious and family matters such as custody, divorce, and inheritance, but only for Muslims. Decisions of sharia courts cannot be appealed to civil courts.

Economy

Malaysia today is an emerging multi-sector economy. However, in the 1970s it was a producer of raw materials. When Prime Minister Abdullah Badawi came into office in 2003, he tried to shift the Malaysian economy farther up the value-added production chain in several ways. Foremost, he attracted investments in high-technology industries, medical technology, and pharmaceuticals, which has largely contributed to the nation’s successful diversification strategy. Electronics exports remain a significant driver of the economy, but the government is continuing efforts to boost domestic demand to wean the economy off of its dependence on exports. Malaysia profited from the higher world energy prices of 2008 since it is an oil and gas exporter. However, the rising cost of domestic gasoline and diesel fuel forced Kuala Lumpur to reduce government subsidies.

The country was hit hard by the Asian Currency Crisis in 1996–97 but recovered by 2000. Inflationary pressures began to build in 2007 and in 2008 inflation stood at nearly 6 percent, even though Malaysia “unpegged” the ringgit from the US dollar in 2005 and the currency appreciated 6 percent per year against the dollar 2006–08. This has helped to hold down the price of imports.

The government presented its five-year national development agenda in April 2006 through the Ninth Malaysia Plan, which outlined the national budget for 2006–10. Prime Minister Abdullah unveiled a series of development plans for several regions of Malaysia that have faced the challenge of attracting business investment. Under Prime Minister Abdullah’s leadership real gross domestic product (GDP) growth has averaged about 6 percent per year, but regions outside of Kuala Lumpur and the manufacturing hub of Penang have not seen such gains.

The Malaysian central bank has maintained healthy foreign exchange reserves and the regulatory regime has limited Malaysia’s exposure to riskier financial instruments and the global financial crises. So while these steps may spare Malaysia some of the brunt of the economic financial crisis that began in 2008, decreasing worldwide demand for consumer goods is expected to hurt economic growth.

Malaysia’s estimated Purchasing Power Parity per capita for 2008 was $15,700. Purchasing Power Parity in general for 2008 was $397.5 billion (estimated). The GDP composition by sectors is as follows: agriculture, 9.7 percent; industry, 44.6 percent; services, 45.7 percent. The estimated unemployment rate for 2008 was 3.7 percent, but that rate was expected to rise as demand for consumer goods decreases. Estimated public debt for 2008 was about 43 percent and the federal budget had a deficit of approximately $10 billion.

In terms of agriculture products, peninsular Malaysia primarily produces rubber, palm oil, cocoa, and rice. The Sabah region primarily produces subsistence crops, rubber, timber, coconuts, and rice and the Sarawak area produces rubber, pepper, and timber.

In terms of industries, peninsular Malaysia hosts rubber and palm oil processing and manufacturing, light manufacturing, electronics, tin mining and smelting, logging, and timber processing. Sabah hosts logging and petroleum production and Sarawak hosts agriculture processing, petroleum production, and refining, and logging.

Sabah and Sarawak are located in the Eastern portion of Malaysia. Some major ports and terminals are Bintulu, Johor Bahru, Kuantan, Labuan, George Town (Penang), Port Kelang, Tanjung and Pelepas.

The Strait of Malacca and South China Sea are the principal bodies of water surrounding Malaysia and are high-risk areas for piracy and armed robbery of ships. There have been numerous reports of commercial vessels that have been attacked and hijacked both at anchor and while underway. The vessels that are hijacked are often disguised and their cargo is diverted to ports in east Asia. Their crews are usually murdered or cast adrift.

Regional Issues

Malaysia is one of several nations that have asserted sovereignty over the Spratly Islands. China, the Philippines, Taiwan, and Vietnam have also asserted sovereignty over these islands in question. In 2002 the “Declaration on the Conduct of Parties in the South China Sea” eased tensions between the nations over the Spratly Islands, but it is not legally binding. In March 2005 a joint accord among the national oil companies of China, the Philippines, and Vietnam was established regarding marine seismic activities in the Spratly Islands. However, Malaysia was not a party to the accord.

Other disputes continue over deliveries of fresh water to Singapore and Singapore’s land reclamation, bridge construction, and maritime boundaries in the Johor and Singapore Straits. The International Court of Justice has even gotten involved and held public hearings in 2007 in response to the Memorials and Countermemorials filed by the parties in 2003 and 2005 over sovereignty of Pedra Branca Island/ Pulau Batu Puteh, Middle Rocks, and South Ledge. The Court awarded Ligitan and Sipadan Islands, also claimed by Indonesia and the Philippines, to Malaysia but left maritime boundary and sovereignty of Unarang rock in the hydrocarbon-rich Celebes Sea in dispute. In September 2008 Brunei and Malaysia agreed to resolve their offshore and deepwater seabed dispute, resume hydrocarbon exploration, and renounce any territorial claims on land.

Malaysia is a major center in human trafficking of women and children for the purpose of commercial sexual exploitation, and men, women, and children for forced labor. Those who migrate willingly from south and southeast Asia to work usually go to Malaysia, and some are essentially involuntary servants of Malaysian employers in the domestic, agricultural, construction, plantation, and industrial sectors. Malaysia enacted ant trafficking legislation to combat this problem in July 2007, but it did not take action against exploitative employers or labor traffickers. Additionally, the government had not ratified the 2000 UN Trafficking in Persons (TIP) Protocol as of 2008.

Bibliography:

James S. Ang, Financial Development and Economic Growth in Malaysia (Routledge, 2008);
CIA, “Malaysia,” World Factbook, www.cia.gov (cited February 2009);
Federation of International Trade Associations, “Malaysia Information,” www.fita.org (cited March 2009);
Ruzita Jusoh and John Parnell, “Competitive Strategy and Competitive Performance Measurement in the Strategy Malaysian Context: An Exploratory Study,” Management Decision (v.46/1–2, 2008);
Malaysia Ninth Economic Development Plan 2005–2010 Handbook (International Business Publications USA, 2008);
Mohamed Ariff Syed Mohamed, Capital Markets in Malaysia: Corporate Finance, Investment Management, Banking and Corporate Governance (McGraw-Hill Malaysia, 2008);
Joan M. Nelson, Jacob Meerman, and Abdul Rahman Embong, Globalization & National Autonomy: The Experience of Malaysia (Institute of Southeast Asian Studies, 2008);
Jeff Tan, Privatization in Malaysia: Regulation, Rent-Seeking and Policy Failure (Routledge, 2008);
Tuck Cheong Tang and Hock Tsen Wong, Malaysia’s International Trade Issues: An Impressionistic View (Pelanduk Publications, 2008).

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