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Malaysia - Overview

Contents extracted from the comprehensive atlas of international trade by Export Entreprises

Introduction

Capital:: Kuala Lumpur
Area:: 331 km2
Total Population:: 29.240
Annual growth rate:: 2.00%
Density:: 89.00/km2
Urban population:: 73%
Population of Kuala Lumpur (5.470), Kelang (630), Johor Bahru (630), Ipoh (570), Petaling Jaya (440)
Official language: Malay
Other languages spoken: The Chinese speak Cantonese, Hakka and Hokkien. Most Indians speak Tamil. English is an inter-ethnic link, especially in the middle classes. The Dayaks use many dialects.
Business language: English
Ethnic Origins:: Malays 50.4%, Chinese 23.7%, Natives 11%, Indians 7.1%, Others 7.8%.
Beliefs: Muslims 52.7%, Buddhists 16.7%, Christians 6.8%, Hindus 6.7%, Others 17.1%.
Telephone codes:
To make a call from: 0
To make a call to: +60
Internet suffix:: .my
Type of State::
 Federal state with constitutional elective monarchy. 13 states which enjoy a fair amount of federal decentralization.
Type of economy::
Upper-middle-income economy, Emerging Financial Market
A country specialized in the export of electronic goods and components.

Economic overview

After reducing strongly under the influence fo the global crisis, growth rate recovered as early as 2010 (7.2%), driven by the dynamic private consumption and the improvement in domestic investment. In 2013, growth was estimated to reach 4.7%, driven by private investment and an improvement in foreign trade. For 2014 outlook predicts a growth of around 4.5-5.5% because of the impact of inflation on household consumption and a weak global recovery.

Malaysia has the highest debt levels in the region, with spending increasing faster than GDP and the budgetary deficit has been worsening, mainly due to the need of compensating the weakness of private investment and also because the public debt has highly increased.  To face this problem, the government has launched a program to perform a progressive revision of subventions in order to reduce its expenditures. The objective is to bring the budget deficit to 3% of GDP by 2015.  In addition, the "New Economic Model" (NEM) intended to promote innovation and to increase production profits, was launched together with the tenth five-year plan (2011-2015). The objective of this plan is to double per capita income by 2020. The 2014 budget is trying to reduce the deficit and debt. The aim is to balance the budget by 2020 and maintain debt under 55% of the GDP. The budget involves a programme of remittances, bonuses and welfare aid; a reduction of income tax; an increase of property taxation; measures to simplify access to affordable housing; the introduction of a VAT in 2015; reduction of subsidies; and infrastructure projects.

Malaysia has one of the highest living standards in South-East Asia and a very low unemployment rate (3%).  However, the objective of NEM is to double the income per capita from now until 2020.  Despite the government's long-term efforts to improve the economic situation of native Malays, the population of Chinese origin continues to maintain its traditional dominance.

Main industries

Agriculture employs around 13.5% of Malaysians and contributes to 12% of the GDP. Malaysia ranks amongst the world's main producers of palm oil, cocoa, and rubber. The country is also one of the main exporters of tropical wood. Malaysia has successfully developed its economy based on raw materials (the export of rubber and tin, significant reserves of oil and gas, copper and bauxite).

Industry contributes to around 40% of the GDP.  Malaysia is one of the world's largest exporters of semi-conductor devices, electrical goods and appliances, and the government has ambitious plans to make of Malaysia the main producer and developer of high-tech products, including software. Malaysia is a major outsourcing destination for components manufacturing after China and India. The country has attracted significant foreign investments which have played a major role in the transformation of Malaysia's economy.

The tertiary sector accounts for nearly half of the GDP, which is due mainly to the tourism sector. Malaysia has become one of South-East Asia's major tourist destinations and it is currently the 9th largest tourist destination in the world.

Foreign trade overview

Malaysia is well known for its openness to international trade. Foreign trade represents 166.5% of the country’s GDP (WTO, 2010-2012).

The trade balance is structurally positive. However, the surplus has been declining because exports are growing less rapidly than importas and the prices of the country's exports (palm oil, gas, rubber) are continuing to decline. The surplus decreased from 96b RM in 2012 to 70.6b RM in 2013. Exports should improve in 2014. 

The country mainly exports electric and electronic equipment, machinery, mineral fuels and hydrocarbons, animal and vegetable oils and fats, wood and charcoal. The country mainly imports electric and electronic equipment, machinery, fuels and oils, plastic products, iron and steel. Its main trade partners are the United States, Singapore and Japan, followed by China and the European Union.

FDI

According to the UNCTAD 2013 World Investment Report, Malaysia is the fifth largest recipient of FDI inflows in East and Southeast Asia. In 2013, FDI flows exceeded their previous record levels of 2011, reaching 38.8b RM. The benefits were felt by the manufacturing, services and energy sectors.

The authorities want to make Malaysia into a gate to the ASEAN market and the country offers various incentives to foreign companies, notably the status of pioneer company and tax reductions associated to the investment. The country benefits from a high-skilled and English speaking workforce.  However, the government maintains a large discretionary power for authorizing investment projects and uses it to obtain the maximum profit from foreign participation and demands agreements that are advantageous in matters of transferring technologies or creating joint ventures.

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