A safe choice: Abundant natural resources and strong human development scores help the growth story continue

As well as being home to rolling hills, lush forests and a rich tropical coastline, Malaysia is blessed with plentiful hydrocarbons reserves and a well-educated, multilingual population. Such credentials continue to keep the country in good stead, with priorities centred on preparing it for the inception of the ASEAN Economic Community in 2015 and steering the policy framework toward more inclusive political representation.

Population

According to the country’s Department of Statistics (DoS), Malaysia’s population reached 29.95m in 2013, with an average growth rate of 1.45% between 2012 and 2013. Life expectancy numbers have improved significantly over the last 40 years, with an average of 72.6 years for males and 77.2 years for females as of 2013. Projections show that these numbers should reach 78 years for males and 83 years for females by 2040. Males outnumber females by a ratio of 106:100 at birth, and the crude birth and infant mortality rates (per 1000 births) stand at 17.2 and 6.6, respectively. A further breakdown of the demographics shows that 26% of the population is aged under 14, with 68.5% aged 15-64 and 5.5% aged over 65.

One key trend is that between 2010 and 2014, Malaysians aged over 65 are expected to put a far greater burden on government coffers, with state expenditure on this segment of the population due to go up three-fold, as per DoS figures. Shortly after the country reaches “developed nation status” in 2020 (which it is on course to achieve) as part of the national development plan, Vision 2020, Malaysia will become an “ageing population”, with more than 7.1% of the population expected to be aged 65 years and older.

Based on the results of the 2010 National Census, the most recent figures available at the time of publication, the Bumiputera (consisting of both ethnic Malays and other indigenous groups) comprise 67.4% of the country’s population. Chinese (24.6%), Indian (7.3%) and other (0.7%) ethnic groups make up the rest of the total. Of the 28.3m population recorded in 2010, non-Malaysian citizens accounted for approximately 8.2%.

Looking ahead, the current trend suggests that the population will rise to 38.6m by 2040, with ethnic Malays due to number 20.9m, or 54.1%, of the overall population, followed by other Bumiputera at 5.2m (13.4%), Chinese at 7.1m (18.4%) and Indians at 2.3m (5.9%). The number of non-Malaysian citizens, meanwhile, is set to jump to 2.7m (7%), while the amalgamation of other ethnicities will go up slightly to 477,000 (0.8%).

Geography & Climate

Malaysia consists of 13 states across a total land area of 330,000 sq km. While 11 states are in Peninsular Malaysia, which is situated to the south of Thailand, the two states of Sabah and Sarawak are located to the east on the northern portion of the island of Borneo. Eastern Malaysia is separated from the peninsula by the South China Sea, and both Sabah and Sarawak share their borders with Indonesia and Brunei Darussalam. Located on the southeast of the peninsula, the capital of Kuala Lumpur is roughly 300 km from Singapore. Peninsular Malaysia is divided into west and east by the Titiwangsa Mountains.

Due to the diverse terrain and close proximity to the equator, Malaysia’s climate can vary. The country is characterised by tropical conditions, including high year-round temperatures, as well as high humidity and frequent downpours during the rainy season. Average temperatures are at around 27 °C, while average rainfall is 250 cm per year. The dry season usually takes place from June to September, while the rainy season arrives between December and March. In early 2014, unseasonably dry weather led to droughts throughout Peninsular Malaysia, raising concerns about the pace of climate change in the region. With sea levels rising globally, Malaysia, which has a high coastline-to-total-area ratio, remains at risk of flooding in the future.

Language & Culture

“Malaysia Truly Asia”, the country’s longstanding tourism slogan, reflects who Malaysians are – an amalgamation of ethnicities, religions, culture and languages. Malaysians encompass Malays, who are the majority, followed by the Chinese, Indians and aborigines such as Iban, Kadazan and other minorities, such as the Peranakan and Eurasian. Indeed, the culture of Malaysia is a fusion of various traditions passed down from many generations with some that are relatively new. While the majority of Malaysians practice Islam, the nation’s official religion, freedom of worship is guaranteed under the constitution, and the population includes Buddhists, Taoists, Hindus, Christians and Sikhs, as well as animist religions still practiced by some indigenous tribes. The country’s official language is Bahasa Malaysia, however, English is widely used, as it was the administrative language of the British colonialists. Several Indian and Chinese languages are also spoken, as well as Thai and indigenous languages such as Tamil and Iban. As the country has become more integrated into the global economy, English has become more important in the education system and has emerged as the lingua franca of the business community. Moreover, it is often used at official functions and speeches, and at business conferences.

Economic Composition

The national economy is built around global trade, with export revenues in 2013 equal to 83% of GDP, according to the DoS. GDP per capita is the highest in South-east Asia, with the exception of smaller countries like Singapore and Brunei Darussalam, reaching $10,548 in 2013, based on a GDP of RM984.45bn ($307.25bn) and a population of almost 30m. That compares to a GDP per capita of $5674 in neighbouring Thailand and $3509 in Indonesia, according to the IMF. However, Malaysia is still a long way from catching up with the developed countries of East Asia, such as South Korea and Taiwan, which have a GDP per capita of $24,329 and $20,930, respectively.

Led by the nationalist United Malays National Organisation since the late 1940s, economic policy has traditionally blended free markets, aggressive recruitment of foreign investment and a permissive attitude towards low-cost immigrant labour. Prime Minister Najib Razak, a former economist, has steered the country in a more fiscally conservative and economically liberal direction with the Economic Transformation Programme (ETP), which was launched in 2010 (see Economy chapter).

Education

In recent years the government has dedicated 20% to 25% of its budget to education. Due to high state spending, progressive policies and economic growth, educational indicators have improved during this time. From 1990 to 2010, (optional) pre-school participation among children aged four and five rose from 25% to 72%, and adult literacy went up from 82% in 1990 to 93.1% in 2014, with plans under way to push this figure to 100% by 2016 (see Education chapter).

Given the government’s focus on creating a more innovative and knowledgeable society, education has become a focal point for policymakers.

The focus is on boosting enrolment in early childhood education and on bringing up the number of postgraduate degree holders, especially in fields related to science and technology, with steadily increasing private sector participation. The language of instruction has been contentious in recent years; Chinese and, to a lesser extent, Indian Malaysians have developed an extensive network of private schools from primary to tertiary education to maintain their cultures and languages, although these schools are becoming increasingly popular among ethnic Malays as well.

National Resources

Malaysia has long benefitted from an abundance of natural resources such as tin, rubber, timber and palm oil. It was tin mining that first attracted Western attention to the Malay states, while colonial British planters transformed the country’s arable land into rubber and oil plantations. Although Malaysia remains a primary exporter of rubber and palm oil, its tin mining is no longer a significant industry. Malaysia produces 39% of the world’s palm oil and 44% of its exports, and increasing global demand for the commodity bodes well for the industry. Though arable land is restricted to protect the environment, Malaysian plantations also cultivate cocoa, timber, pepper, pineapple and sugar cane. Copper, iron ore and bauxite are also present, and rice paddies dot the northern areas of the peninsula, although the country does import a large amount of the crop to satisfy demand.

Figures from the government-linked group Malaysia Petroleum Resources Corporation indicate that the country’s hydrocarbons reserves stand at 28.35bn barrels of oil equivalent (boe), with average production at 730,000 boe per day. National oil reserves are located almost entirely offshore, mostly in the South China Sea off Sabah and Sarawak, and current investment is in deep-sea exploration and production and enhanced oil recovery techniques designed to extend the life of the country’s older reserves. Malaysia is also intensifying research and development in renewable energy with a growing focus on biogas (methane) derived from the heavy biomass output of the palm oil industry.

Attractiveness

An important external ranking shaping foreign investment decisions is the World Bank’s “Ease of Doing Business” report. The annual study covers 189 economies and focuses on topics such as starting a business, registering property, enforcing contracts and, most recently, getting electricity.

Malaysia has once again seen its stock rise, moving up to sixth position in 2014 from eighth a year earlier. The country is ranked second to Singapore among ASEAN countries, with the latter taking the top spot for the eighth year in a row. The most notable improvements in Malaysia’s 2014 report, however, include dealing with construction permits (up 56 spots), getting electricity (up seven) and starting a business (up three).

Recent times too have seen the government push hard for a greater role for the private sector in the country’s development, with the Government Transformation Programme and ETP both aiming to boost transparency and accountability as well as sustainable growth. The overall aim of these plans is to elevate Malaysia to become a high-income country by 2020.

Achieving this goal, however, poses many challenges, with the political field no exception. Keeping the country’s different ethnicities and faith communities together in a workable social contract has always been one of the challenges. Balancing the impact of changing times with the need for continuity and respect for traditions is another. Yet Malaysians have long demonstrated their capacity for consensus and peaceful change, with the future likely to see the same path and similarly impressive results.

History 

Indigenous Malays are believed to have begun arriving from south-western China around 10,000 BCE. As early as the first century CE Malaysia began developing through shipping and trading – industries that heavily influenced the settlement of the Malay Archipelago. Traders from India brought Hindu and Buddhist practices to the peninsula, and Islam was introduced via Muslim merchants travelling through the Strait of Malacca. Due to its strategic location along major trading routes, the Islamic city-state of Malacca flourished until the Portuguese invaded in 1511, beginning four centuries of European rule. Johor was the last area to remain independent from European administration, coming under British control in 1916. During the Second World War, Malaysia was invaded by Japan; however, this brief occupation ended in 1945 when British rule was restored. In 1948 Malaysia was granted semi-autonomous status. However, the emergence of a communist insurgency in the region made it difficult for the British to retain control. Responding to these and other pressures, the UK officially withdrew in 1957, and Abdul Rahman Putra Al Haj was named the country’s first prime minister. After becoming prime minister in 1981, Mahathir Mohamad began implementing a liberal economic reform programme that included privatising several state-owned industries, with the economy expanding rapidly in the 1980s and 1990s, though growth temporarily stalled due to the Asian financial crisis of 1997-98. After winning elections in 2004, Abdullah Badawi implemented a historic free trade agreement with Japan. In 2009 Najib Razak was appointed the country’s sixth prime minister as the leader of the National Front coalition government. In 2013 his party maintained its position in the closest election yet, with 60% of parliamentary seats and 47.38% of the popular vote. The country is a constitutional monarchy, a parliamentary democracy and a federal state.