An Analysis Of The Malaysian Economy Economics Essay

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Fixed exchange rates

1 Ringgit = 100 sen

Fiscal twelvemonth

Calendar twelvemonth

Trade administrations

APEC, ASEAN, IOR-ARC, WTO

Statisticss

GDP

$ 381.1 billion ( 2009 est. )

Rank: 30

GDP growing

-2.2 % ( 2009 est. )

GDP per capita

$ 14,800 ( 2009 est. )

GDP by sector

agribusiness: 10.1 % industry: 42.3 % services: 47.6 % ( 2009 est. )

Inflation ( CPI )

0.4 % ( 2009 est. )

Population

below poorness line

3.5 % ( 2007 est. )

Labour force

by business

agribusiness: ( 13 % ) , industry: ( 36 % ) , services: ( 51 % ) ( 2005 )

Unemployment

5 % ( 2009 est. )

Main industries

Peninsular Malaysia – gum elastic and palm oil processing and fabrication, light fabricating industry, electronics, Sn excavation and smelting, logging and treating lumber, touristry, crude oil production and refinement, logging

Ease of Making Business Rank

21st [ 1 ]

External

Exports

$ 156.4 billion ( 2009 est. )

Export goods

electronic equipment, crude oil and liquefied natural gas, wood and wood merchandises, palm oil, gum elastic, fabrics, chemicals

Main export spouses

Singapore 13.9 % , China 12.2 % , United States 10.9 % , Japan 9.8 % , Thailand 5.4 % , Hong Kong 5.2 % ( 2009 est. )

Imports

$ 119.5 billion ( 2009 est. )

Import goods

electronics, machinery, crude oil merchandises, plastics, vehicles, Fe and steel merchandises, chemicals

Main import spouses

China 13.9 % , Japan 12.5 % , Singapore 11.1 % , Thailand 6 % , Indonesia 5.3 % , South Korea 4.6 % , Taiwan 4.2 % , Germany 4.2 % ( 2009 est. )

Gross external debt

N/A

Public fundss

Grosss

$ 61.6 billion ( 2009 est. )

Expenses

$ 60.72 billion ( 2009 est. )

Economic assistance

$ 31.6 million ( 2005 )

Foreign militias

$ 98.02 billion ( 31 December 2009 est. )

Main informations beginning: CIA World Fact Book

All values, unless otherwise stated, are in US dollars

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The Economy of Malaysia is a turning and comparatively unfastened state-oriented and freshly industrialised market economic system. [ 2 ] [ 3 ] The province plays a important but worsening function in steering economic activity through macroeconomic programs. In 2007, the economic system of Malaysia was the 3rd largest economic system in South East Asia and 29th largest economic system in the universe by buying power para with gross domestic merchandise for 2008 of $ 222 billion [ 4 ] with a growing rate of 5 % to 7 % since 2007 [ 5 ] In 2009, GDP per capita ( PPP ) of Malaysia stands at US $ 14,900. [ 6 ] In 2009, the nominal GDP was US $ 383.6 billion, and the nominal per capital GDP was US $ 8,100. [ 7 ]

The Southeast Asiatic state experienced an economic roar and underwent rapid development during the late twentieth century and has a GDP per capita of $ 14,800, being considered a freshly industrialised state. [ 8 ] [ 9 ] On the income distribution, there are 5.8 million families in 2007. Of that, 8.6 % have an monthly income below RM1,000, 29.4 % had between RM1,000 and RM2,000, while 19.8 % earned between RM2,001 and RM3,000 ; 12.9 % of the families earned between RM3,001 and RM4,000 and 8.6 % between RM4,001 and RM5,000. Finally, around 15.8 % of the families have an income of between RM5,001 and RM10,000 and 4.9 % have an income of RM10,000 and supra. [ 10 ]

As one of three states that control the Strait of Malacca, international trade plays a big function in its economic system. [ 11 ] At one clip, it was the largest manufacturer of Sn, gum elastic and palm oil in the universe. [ 12 ] Manufacturing has a big influence in the state ‘s economic system. Malaysia is the universe ‘s largest Islamic banking and fiscal centre.

Background

Early on and colonial history

The Malay Peninsula and so Southeast Asia has been a centre for trade for centuries. Assorted points such as porcelain and spice were actively traded even before Malacca and Singapore rose to prominence. The Malacca Sultanate controlled the Straits of Malacca from its initiation in 1402 to the 1511 invasion by Portugal. All the trade in the Straits, and particularly the spices from the Celebes and the Moluccas, moved under its protection and through its markets. [ 14 ]

In the seventeenth century, porcelain and spices were found in several Malay provinces and were actively traded. Large sedimentations of Sn were found in several Malay provinces. Subsequently, as the British started to take over as decision makers of Malaya, gum elastic and palm oil trees were introduced for commercial intents. Alternatively of trusting on the local Malays as a beginning of labor, the British brought in Chinese and Indians to work in the mines and plantations and supply professional expertness. Although many of them returned to their several place states after their in agreement term of office ended, some remained in Malaysia and settled for good. Over clip, Malaya became the universe ‘s largest manufacturer of Sn, gum elastic, and palm oil. These three trade goods along with other natural stuffs steadfastly set Malaysia ‘s economic pacing good into the mid-20th century. As Malaya moved towards independency, the authorities began implementing economic five-year programs, get downing with the First Malayan Five Year Plan in 1955. Upon the constitution of Malaysia, the programs were re-titled and renumbered, get downing with the First Malaysia Plan in 1965.

Post-independence

In the 1970s, Malaysia began to copy the four Asiatic Tiger economic systems ( Republic of Korea ( South Korea ) , Republic of China ( Taiwan ) , so British Crown Colony of Hong Kong and the Republic of Singapore ) and committed itself to a passage from being reliant on excavation and agribusiness to an economic system that depends more on fabrication. In the 1970s, the preponderantly excavation and agricultural based Malayan economic system began a passage towards a more multi-sector economic system. Since the 1980s the industrial sector has led Malaysia ‘s growing. [ 15 ] High degrees of investing played a important function in this. [ 16 ] With Nipponese investing, heavy industries flourished and in a affair of old ages, Malayan exports became the state ‘s primary growing engine. Malaysia systematically achieved more than 7 % GDP growing along with low rising prices in the 1980s and the 1990s.

Central planning has been a major factor in the Malayan economic system, as authorities outgo was frequently used to excite the economic system. Since 1955, with the beginning of the First Malayan Five Year Plan, the authorities has used these programs to step in in the economic system to accomplish such ends as redistribution of wealth and investing in, for case, substructure undertakings.

A bequest of the British colonial system was the division of Malaysians into three groups harmonizing to ethnicity. The Malays were concentrated in their traditional small towns, concentrating chiefly on agricultural activities, while the Chinese dominated Malayan commercialism. Educated Indians took up professional functions such as those of physicians or attorneies, while the less better-off worked the plantations. [ 19 ] [ 20 ] The Reid Commission which drafted the Malayan Constitution made a proviso for limited affirmatory action through Article 153, which gave the Malays particular privileges, such as 60 % of university entryway ( quota ) . However, after the May 13 incident of racial rioting in the federal capital of Kuala Lumpur, the authorities initiated more aggressive programmes aimed at actively set uping a Malay entrepreneurial category through direct intercession in the economic system, aimed at relieving poorness. This was done with the controversial New Economic Policy ( NEP ) . [ 21 ] Its chief aim was the riddance of the association of race with economic map, and the first five-year program to get down implementing the NEP was the Second Malaysia Plan. The success or failure of the NEP is the topic of much argument, although it was officially retired in 1990 and replaced by the National Development Policy ( NDP ) . Recently much argument has surfaced one time once more refering the consequences and relevancy of the NEP. Some have argued that the NEP has so successfully created a Middle/Upper Class of Malay business people and professionals.

Despite some betterment in the economic power of Malays in general, the Malayan authorities maintains a policy of favoritism that favours cultural Malayans over other races-including discriminatory intervention in employment, instruction, scholarships, concern, entree to cheaper lodging and assisted nest eggs. This particular intervention has sparked enviousness and bitterness amongst non-Malays. [ 22 ] The cultural Chinese control of the locally owned sector of the state ‘s economic system has been ceded mostly in favor of the bumiputra/Malays in many indispensable or strategic industries such as crude oil retailing, transit, agribusiness and car fabrication.

Current GDP per capita grew 31 % in the Sixties and an astonishing 358 % in the Seventies, but this proved unsustainable and growing scaled back aggressively to 36 % in the Eighties. It rose once more to 59 % in the Nineties led chiefly by export-oriented industries. [ 23 ] The rate of poorness in Malaysia besides fell dramatically over the old ages. However, its hasty bead has been questioned by critics who suggest that the poorness line has been drawn at an unreasonably low degree. [ 24 ] The rapid economic roar led to a assortment of supply jobs. Labour deficits shortly resulted in an inflow of 1000000s of foreign workers, many illegal. Cash-rich PLCs and pool of Bankss eager to profit from increased and rapid development began big substructure undertakings.

As of 2006, the most recent five twelvemonth program is the Ninth Malaysia Plan. The five twelvemonth programs have been criticised for resembling the cardinal planning of Soviet communism ; the five-year clip frame has been attacked for being deficient in covering with short-run crises and long-run tendencies. [ 25 ] The effectivity of the programs has besides been disputed ; at the beginning of 2005, the last twelvemonth of the Eighth Malaysia Plan, about 80 % of the financess allocated under the program had non been disbursed.

Tiger economic system

Macro-economic tendency

This is a chart of tendency of gross domestic merchandise of Malaysia at market monetary values [ 27 ] estimated by the International Monetary Fund with figures in 1000000s of Malayan Ringgit.

For buying power para comparings, the US Dollar is exchanged at 1.70 Ringgit merely. Average rewards were $ 6.95 per manhour in 2009.

From 1988 to 1997, the economic system experienced a period of wide variegation and sustained rapid growing averaging 9 % yearly.

By 1999, nominal per capita GDP had reached $ 3,238. New foreign and domestic investing played a important function in the transmutation of Malaysia ‘s economic system. Manufacturing grew from 13.9 % of GDP in 1970 to 30 % in 1999, while agribusiness and excavation which together had accounted for 42.7 % of GDP in 1970, dropped to 9.3 % and 7.3 % , severally, in 1999. Manufacturing accounted for 30 % of GDP ( 1999 ) . Major merchandises include electronic constituents – Malaya is one of the universe ‘s largest exporters of semiconducting material devices – electrical goods and contraptions.

During the same period, the authorities tried to eliminate poorness with a controversial race-conscious positive plan called New Economic Policy ( NEP ) . First established in 1971 following race public violences, normally known in Malaysia as the May 13 Incident, it sought to eliminate poorness and stop the designation of economic map with ethnicity. In peculiar, it was designed to better the distribution of wealth among the state ‘s population.. The NEP apparently ended in 1991, nevertheless the policies persist in the signifier of other programmes such as the National Development Policy. The policies are enforced overtly through race-based quotas for low-priced lodging units, university arrangement, concern equity ownership, etc.

Rapid growing was achieved partially through denationalization of inefficient province owned endeavors, therefore subjecting them to commercial force per unit areas and coercing them to better use their resources. Many trades were done behind closed doors and set through instead rapidly. In one illustration Khazanah Nasional alienated portions in DRB Hicom to Mega Consolidated. This led to such trades being labelled mega undertakings.

Foreign financess were attracted to put doing the local money market and Bourse liquid. This created chance for local concerns to raise capital on the KLSE, and carry out substructure development in countries like telecommunications, main roads and power coevals to run into constrictions caused by rapid industrialization. An intense labour deficit created employment for 1000000s of foreign workers. Subsequent events show that more than 50 % were illegal.

The inflow of foreign investing led to the KLSE Composite index trading above 1,300 in 1994 and the Ringgit trading above 2.5 in 1997. At assorted times the KLSE was the most active exchange in the universe, with trading volume transcending even the NYSE. The stock market capitalization of listed companies in Malaysia was valued at $ 181,236 million in 2005 by the World Bank. [ 28 ]

Some of the more seeable undertakings from that period are Putrajaya, a new international airdrome ( Kuala Lumpur International Airport ) , a hydroelectric dike ( Bakun dike ) , the Petronas Towers and the Multimedia Super Corridor. Proposals that were finally canceled include the 95A km Sumatra-Malaysia span ( would hold been universe ‘s longest ) , the Mega International Sea and Air port on rescued land in Kedah ( would hold been universe ‘s biggest ) and the KL Linear City ( would hold been the universe ‘s longest promenade and the universe ‘s first metropolis built over a river ) .

Concerns were raised during the clip about the sustainability of the rapid growing and the ballooning current history. The mainstream sentiment prevalent at that clip was that the shortage was impermanent and would change by reversal one time imported equipment started bring forthing for export. In malice of that, steps were taken to chair growing particularly when it threatened to overheat into the dual figures. The chief mark was plus monetary values, and limitations were farther tightened on foreign ownership of local assets. Exposure of local Bankss to existent estate loans were besides capped at 20 % .

As was widely expected, the current history shortage did narrow steadily, twelvemonth to twelvemonth, from 9 % to 5 % of GDP.

Malaya has the largest operational stock of industrial automatons in the Muslim universe.

Economic policies

Like many other independent states, Malaysia ‘s economic policies were shaped by assorted events in the state ‘s history since independency.

Monetary policy

Prior to the 1997 Asiatic Financial Crisis, the Malayan ringgit was an internationalized currency, which was freely traded around the universe. Just before the crisis, the Ringgit was traded RM2.50 at the dollar. Due to bad activities, the Ringgit fell every bit much as RM4.10 to the dollar in affair of hebdomads. Bank Negara Malaysia, the state ‘s cardinal Bankss decided to enforce capital controls to forestall the escape of the Ringgit in the unfastened market. The Ringgit is non traded internationally, a traveller needs to declare to the cardinal bank if taking out more than RM10,000 out of the state and the Ringgit itself was pegged at RM3.80 to the US dollar.

The fixed alteration rate was abandoned to drifting exchange rate in July 2005, hours after People ‘s Republic of China announced the same move. [ 32 ] At this point, the Ringgit is still non internationalized. The Ringgit continue to beef up to 3.18 to the dollar in March 2008. Meanwhile, many facet of the capital control has been easy relaxed by Bank Negara Malaysia. However, the authorities continues to non internalise the Ringgit. The authorities stated that the Ringgit will be internationalized once it is ready. [ 33 ]

Bank Negara Malaysia for the clip being, uses involvement rate aiming. The OPR ( Nightlong Policy Rate ) is their policy instrument, and is used to steer the short term interbank rates which will hopefully act upon rising prices and economic growing.

Subsidies and monetary value controls

The Malayan authorities subsidizes and controls monetary values on a batch of indispensable points to maintain the monetary values low. Monetary values of points such as palm oil cookery oil, gasoline, flour, staff of life, rice and other necessities have been kept under market monetary values to maintain cost of populating low. In 2008, the authorities announced that it has spent RM40.1 billion in 2007 in subsidies to maintain monetary values leveled. [ 47 ] As of 2009, 22 per cent of authorities outgos were subsidies, with gasoline subsidies entirely taking up 12 per cent. [ 48 ]

Smuggling and billboard, which leads to deficits, is a outstanding job in Malaysia due to the subsidies. For illustration, cooking oil is subsidised for domestic usage merely. This state of affairs creates an environment where industrial participants hoard domestic cookery oil for industrial usage. During shortage clip, such as the January 2008 cooking oil crisis, the authorities imposed a 5A kilogram bound for each purchase to relief domestic demand. However, the limited purchase has created more panic purchasing, which prompt the Government to negociate with cooking oil makers to increase their production capacity, and the state of affairs reverted to normal within one hebdomad. [ 49 ] Another illustration is when vehicles in Thailand come to Malaysia to smuggle inexpensive gasoline and Diesel out of the state. The authorities besides looking into reconstituting the fuel subsidy so that the selected needy group will acquire the subsidy. The authorities is sing taking subsidies on Diesel for general consumers while keeping subsidies for suited groups, such as those involved in public conveyance. [ 50 ]

On January 2010, the authorities announce double monetary value construction for fuel, based on citizenship. Foreigners are expected to pay market monetary value for fuel while citizens will hold subsidy allotments based to engine capacity. The double pricing construction is expected to get down on May 1, 2010. [ 51 ]

The authorities has considered to take the subsidies but a formal program had yet to materialized as of 2007. [ 52 ] In 2008, the authorities is sing to take monetary value controls on building stuffs such as cement and steel bars while censoring exports to guarantee steady supply. [ 53 ] The authorities is experimenting with the thought through leting Sabah and Sarawak building participants to import steel and cement since February 2008. [ 54 ] The authorities so, on May 12, 2008 removed ceiling monetary values on steel bars and notes and removed import responsibilities on selected points under HS Code 7214.10 110 and 7214.20 910, which do non to the full cover steel bars use by the building industry. [ 55 ] The authorities so farther liberalized the cement industry by get rid ofing ceiling monetary values on June 5, 2008. [ 56 ]

Another strategic point which is to a great extent subsidized but traveling towards a market based attack is Natural Gas which is used in the industrial sector. Get downing July 1, 2008, the authorities is expected to cut down the gas subsidy 5 % to 10 % per annum over 11 old ages, in which the gas monetary value will reflect market monetary value.

Sovereign wealth financess

The authorities owns and operates several autonomous wealth financess that invests in local companies and besides foreign companies. One such financess are Khazanah Nasional Berhad which was established in 1993. [ 58 ] Its aim is to assist form selected strategic industries in Malaysia and develop those investing for the benefit of Malaysia. [ 59 ] The fund invest in major companies in Malaysia such as Proton Holdings in the automotive sector, CIMB in the banking sector, Pharmaniaga in the medical sector, UEM Group in the building sector, Telekom Malaysia in the communications industry and many other companies in many other industries. [ 60 ] It is estimated that the fund size of Khazanah Nasional stands at around US $ 19 billion. [ 58 ]

Another fund that is owned by the Malayan authorities is the Employees Provident Fund which is claimed to be the 4th largest province run pension fund in Asia. [ 61 ] Like Khazanah Nasional, the EPF invests and sometimes owns several major companies in Malaysia such as RHB Bank. [ 61 ] EPF investing is diversified over a figure of sectors but about 40 % of their investing are in the services sector. [ 62 ] Fund size in 2007 is estimated at US $ 100 billion. [ 63 ]

Permodalan Nasional Berhad is a major fund director controlled by the Malayan Government. It offers capital guaranteed common financess such as Amanah Saham Bumiputera and Amanah Saham Wawasan 2020 which are unfastened merely to Malaysian and in some instances, Bumiputeras. [ 64 ] As of April 2008, it manages MYR120 billion of financess ( 36 billion USD ) , of which MYR76 million is unit trust financess. [ 65 ] The fund director is a ample investor in strategic companies such as MMC Corporation Berhad, [ 66 ] Maxis Communications Berhad and TM International Berhad among others.

Other than federal authorities financess, some provinces have created their ain investing authorization to pull off state-owned crowned head wealth financess. First of such financess are launched by the province of Terengganu through the constitution of Terengganu Investment Authority in December 2008. It initial fund size will be around USD 3 billion and derived from its oil royalties.

Government influence

Although the federal authorities promotes private endeavor and ownership in the economic system, the economic way of the state is to a great extent influenced by the authorities though five old ages development programs since independency. The economic system is besides influenced by the authorities through bureaus such as the Economic Planning Unit and government-linked wealth financess such as Khazanah Nasional Berhad, Employees Provident Fund and Pemodalan Nasional Berhad.

The authorities ‘s development programs, called the Malayan Plan, presently the Ninth Malaysia Plan, started in 1950 during the British colonial regulation. [ 70 ] The programs were mostly centered around speed uping the growing of the economic system by selectively puting in selective sectors of the economic system and edifice substructure to support said sectors. [ 70 ] For illustration, in the current national program, three sectors – agribusiness, fabrication and services, will have particular attending to advance the passage to high value-added activities in the several countries. [ 71 ] Other than the generalised programs like the Ninth Malaysia Plan, the authorities besides have a development program that are targeted to better the fabrication sector which is called the Industrial Master Plan. Presently, the program is called the Third Industrial Master Plan ( IMP3 ) which covers a period from 2006 to 2020. The industrial programs aim to do Malaysia a major trading state and construct up the state ‘s economic system and human capital. [ 72 ]

Economic Planning Unit ( Malay: Unit Perancang Ekonomi ) , established in 1961 [ 73 ] was instrumental in maneuvering Malaysia to recovery from the 1997 Asiatic Financial Crisis. The unit is an bureau under the Prime Minister ‘s Department responsible for maneuvering Malaysia ‘s socio-economic development towards accomplishing a developed-nation position by the twelvemonth 2020 through assorted steps such as fixing policies and schemes for socio-economic development, prepare medium and long term programs for the authorities and most significantly, rede the authorities on economic issues. [ 74 ]

Government-linked investing vehicles such as Khazanah Nasional Berhad, Employees Provident Fund and Pemodalan Nasional Berhad invest and sometimes ain major companies in major sectors of the Malayan economic system. For illustration, Khanazah Nasional is a major stockholder in Proton Holdings, an car manufacturer and CIMB banking group in the fiscal sector. [ 75 ] The authorities, nevertheless, is acute to sell bets in their companies such as Malaysia Airlines to allow the companies remain globally competitory.

Currency system

Ringgit

The lone legal stamp in Malaysia is the Malayan Ringgit. As of 20 March 2008, the Ringgit is traded at MYR 3.18 at the US dollar. [ 77 ] The Ringgit was non internationalised since September 1998, an consequence due to the 1997 Asiatic Financial Crisis in which the cardinal bank impose capital controls on the currency. [ 78 ] As a portion of series of capital controls, the currency was pegged between September 1998 to 21 July 2005 at MYR 3.80 to the dollar. [ 79 ] In recent old ages, Bank Negara Malaysia get downing to loosen up certain regulations to the capital controls although the currency itself is still non traded internationally yet. Harmonizing to the Bank Governor, the Ringgit will be internationalised when it ‘s ready. [ 80 ]

On September 2010, in an interview with CNBC, Dato ‘ Seri Najib Tun Razak, which is the Prime Minister of Malaysia and besides the Finance Minister said that the authorities is unfastened to open up the Ringgit to murder shore trading if the move will assist the economic system. He farther added that before such a move to be made, it will guarantee that regulations and ordinance will be in topographic point so the currency will non be abused.

Natural resources

Malaysia is bosomy with natural resources in countries such as agribusiness, forestry and minerals. It is an exporter of natural and agricultural resources, the most valuable exported resource being crude oil. [ 16 ] At one clip, it was the largest manufacturer of Sn, gum elastic and palm oil in the universe. [ 82 ] In footings of agribusiness, Malaysia is one of the top exporters of natural gum elastic and palm oil, which together with sawn logs and sawn lumber, chocolate, Piper nigrum, Ananas comosus and baccy dominate the growing of the sector. Palm oil is besides a major generator of foreign exchange.

Sing forestry resources, it is noted that logging merely began to do a significant part to the economic system during the 19th century. Today, an estimated 59 % of Malaysia remains forested. The rapid enlargement of the lumber industry, peculiarly after the 1960s, has brought about a serious eroding job in the state ‘s forest resources. However, in line with the Government ‘s committedness to protect the environment and the ecological system, forestry resources are being managed on a sustainable footing and consequently the rate of tree felling has been on the diminution.

In add-on, significant countries are being silviculturally treated and re-afforestation of debauched wood land is besides being carried out. The Malayan authorities provide programs for the enrichment of some 312.30 square kilometers ( 120.5A sqA myocardial infarction ) of land with Calamus rotang under natural wood conditions and in gum elastic plantations as an inter harvest. To farther enrich forest resources, aggressive lumber species such as meranti tembaga, merawan and sesenduk are besides being planted. At the same clip, the cultivation of high-value trees like teak and other trees for mush and paper are besides encouraged. Rubber, one time the pillar of the Malayan economic system, has been mostly replaced by oil thenar as Malaysia ‘s prima agricultural export.

Tin and crude oil are the two chief mineral resources that are of major significance in the Malayan economic system. Malaysia was one time the universe ‘s largest manufacturer of Sn until the prostration of the Sn market in the early 1980s. In the 19th and twentieth century, Sn played a prevailing function in the Malayan economic system. It was merely in 1972 that crude oil and natural gas took over from Sn as the pillar of the mineral extraction sector. Meanwhile, the part by Sn has declined. Petroleum and natural gas finds in oil Fieldss off Sabah, Sarawak and Terengganu have contributed much to the Malayan economic system. Oil and gas resources are managed by Petronas, the province controlled oil company which forms production sharing contracts with other participants like Exxon-Mobil and Royal Dutch Shell to research oil Fieldss in Malaysia. Other minerals of some importance or significance include Cu, bauxite, iron-ore and coal together with industrial minerals like clay, china clay, silicon oxide, limestone, heavy spar, phosphates and dimension rocks such as granite every bit good as marble blocks and slabs. Small measures of gold are produced.

Malaysia ‘s wide and shallow continental shelf consists of several deep H2O prospective countries. Malaysia has 500,000A km2 available for oil and gas geographic expedition. 51 of the 70 bring forthing Fieldss in Malaysia are oil Fieldss. In January 2004, Malaysia ‘s oil militias were estimated to be 4.84A billion barrels ( 769,000,000 M3 ) , while natural gas militias stood at 87 trillion standard three-dimensional pess ( 2,460A km3 ) . The state produces about 0.00075A billion barrels ( 119,000 M3 ) barrels of petroleum oil every twenty-four hours and 2.20 trillion standard three-dimensional pess ( 60A km3 ) of natural gas condensates per twelvemonth. [ 83 ] In 2004, Minister in the Prime Minister ‘s Department, Mustapa Mohamed, revealed that Malaysia ‘s oil militias stood at 4.84A billion barrels ( 769,000,000 M3 ) while natural gas militias increased to 89 trillion three-dimensional pess ( 2,500A kmA? ) . This was an addition of 7.2 % . As of January 1, 2007, Petronas reported that oil and gas modesty in Malaysia amounted to 20.18A billion barrels ( 3.208A-109 M3 ) equivalent. [ 84 ] In January 2008, the Malayan natural gas militias holds up to 14,670,000,000A barrels ( 2.332A-109 M3 ) of oil equivalent. As of January 2009, Malaysia has proven oil militias of up to 4A billion barrels ( 640A-10^6A M3 ) .

The authorities estimates that at current production rates Malaysia will be able to bring forth oil up to 18 old ages and gas for 35 old ages. In 2004, Malaysia is graded twenty-fourth in footings of universe oil militias and 13th for gas. 56 % of the oil militias exist in the Peninsula while 19 % exist in East Malaysia. The authorities collects oil royalties of which 5 % are passed to the provinces and the remainder retained by the federal authorities.

Other minerals of some importance or significance include Cu, bauxite, iron-ore and coal together with industrial minerals like clay, china clay, silicon oxide, limestone, heavy spar, phosphates and dimension rocks such as granite every bit good as marble blocks and slabs. Small measures of gold are produced.

External trade

Malaysia is an of import trading spouse for the United States. In 1999, bipartisan bilateral trade between the U.S. and Malaysia totaled U.S. $ 30.5 billion, with U.S. exports to Malaysia numbering U.S. $ 9.1 billion and U.S. imports from Malaysia increasing to U.S. $ 21.4 billion. Malaya was the United States ‘ 10th-largest trading spouse and its 12th-largest export market. During the first half of 2000, U.S. exports totaled U.S. $ 5 billion, while U.S. imports from Malaysia reached U.S. $ 11.6 billion.

The Malayan Government encourages Foreign Direct Investment ( FDI ) . Harmonizing to Malayan statistics, in 1999, the U.S. ranked first among all states in sanctioned FDI in Malaysia ‘s fabrication sector with sanctioned new fabricating investings numbering RM5.2 billion ( US $ 1.37 billion ) . Principal U.S. investing approved by the Malayan Investment Development Authority ( MIDA ) was concentrated in the chemicals, electronics, and electrical sectors. The cumulative value of U.S. private investing in Malaysia exceeded $ 10 billion, 60 % of which is in the oil and gas and petrochemical sectors with the remainder in fabrication, particularly semiconducting materials and other electronic merchandises.

In the first six months of 2007, Malaysia ‘s entire trade increased by 2.2 % to RM522.38 billion, compared with RM511.11 billion in the same period of 2006.

Free trade attempts

Malaysia is a member of the ASEAN Free Trade Area which was established in 1992 to advance trade among ASEAN members. Most duties among the first coevals member provinces were scrapped in 2007. ASEAN itself is progressively playing a big function in free trade dialogue on behalf of its members. ASEAN as a group hopes to set up a free trade understanding with the European Union by 2009.

The Malayan Government is negociating free trade trades with Australia, Chile and India, [ 95 ] but has suspended dialogue of free trade trade with United States indefinitely after eight unit of ammunitions of dialogue. Malaysia is seeking rank into the Trans Pacific Partnership, a regional trade treaty between the United States and states in the Pacific Rim. [ 96 ] As of October 2010, TPP members has agree to let Malaysia to fall in as a full dialogue member of the group. Malaysia will fall in the 3rd unit of ammunition of dialogues in Brunei.

Officials have expressed desire for free trade understandings their ASEAN members Singapore and Thailand. The Malayan Trade Ministry released a statement in Vietnam stating that the FTA “ has the possible to increase trade, investing cross flows and economic cooperation between the two states. The understanding would besides function to do Chile a gateway for Malaysia ‘s exports to the Latin American market. ”

Malaysia signed a Japan-Malaysia Economic Partnership Agreement with Japan on 13 December 2005. [ 99 ] This leads to a Free trade understanding which was in consequence from 13 July 2006 and expected to be to the full realized in 2016. [ 100 ] The understanding itself is an extension of an FTA between ASEAN and Japan, which is called Asean-Japan Comprehensive Economic Partnership.

On 8 November 2007, Malaysian and Pakistan signed a bilateral Free Trade Agreement which will come in force on 1 January 2008. Malaysia will cut duties on 140 lines while Pakistan will cut 124 lines. Most duties and responsibility is expected to be eliminated by 2012.

On 26 October 2009, Malaysia and New Zealand signed a bilateral Free Trade Agreement. New Zealand will cut duties on 99.5 per centum of goods sent to Malaysia get downing 2010. This understanding itself is an extension of the ASEAN-Australia-New Zealand Free Trade Agreement. Other ‘economic countries ‘ demoing an involvement in set uping free-trade understandings with Malaysia are the European Union and Hong Kong. However, before any negotiations can be initiated sing new FTAs, Joint Economic Co-operation trades need to be concluded. International Trade and Industry Minister, Tan Sri Muhyiddin Yassin has expressed the hope that negotiations will be concluded by the terminal of 2008.

Foreign direct investing

Malaysia received RM46.1 billion foreign direct investing ( FDI ) , which was all clip high, for the whole of 2008. The foreign investings accounted for 73.4 per centum of the entire investings of RM62.8 billion approved for 2008.

The Minister of International Trade and Industry, Datuk Mustapa Mohamed announced that there was a crisp decrease in FDI and Malaysia merely received RM4.2 billion FDI, approximately 78 % decrease, for the first five months of 2009.

On the other manus, FDI in other Asean states has grown quickly. Malaysia was really much in front of Vietnam on pulling FDI. Now it has to vie with the latter for the FDI.

Sectors

Industry

Malaysia industrial sector histories for 48.1 per centum of entire GDP or 63.4 billion US dollars. The industrial end product is ranked 32nd in the universe. The industrial sector is regulated and promoted by Malaysia Industrial Development Authority. International trade, facilitated by the next Strait of Malacca transporting path and fabrication are both cardinal sectors of the state ‘s economic system. Manufacturing has a big influence in the state ‘s economic system, although Malaysia ‘s economic construction is traveling off from it. Malaysia has 18 companies that rank in the Forbes Global 2000 ranking for 2009.

Finance and banking

Finance and Banking sector in Malaysia is regulated by Bank Negara Malaysia. The cardinal bank bounds foreign engagement through licencing bounds. The cardinal bank launched a Financial Sector Master program in 2001 to revamp the finance sector following the Asiatic Financial Crisis. The maestro program calls for accent on Islamic Banking, [ 114 ] of which Malaysia has become a Centre of. Malaysia has the highest figure of female workers in Islamic banking.

Maybank is Asia-Pacific ‘s largest Islamic banking service supplier with US $ 6.4 billion ( RM22.48 billion ) Syariah-compliant assets. Malaysia besides accounts for two tierces of planetary $ 82.2 billion sukuk market in 2007. [ 117 ] Khazanah Nasional owns the largest retakaful company in the universe, ACR Retakaful Holdings Limited, with capital base amounting to 300 million US Dollars.

A quarterly study prepared by the Economist Intelligence Unit on behalf of Barclays Wealth in 2007 estimated that there were 48,000 dollar millionaires in Malaysia ( over twice that of China ) .

In April 2009, the authorities announce new licences will be issued for investing banking Islamic banking, takaful and insurance concern between 2009 to 2011. It besides announced that the threshold foreign equity ownership has been raised from 49 % to 70 % and allowed foreign Bankss to open up new subdivisions and micro-credit installations. This move was done as an effort to set Malaysia in every bit centre for Islamic banking and besides to liberalise the fiscal sector.

Oil and gas

Malaysia has a vivacious oil and gas industry. The national oil company, Petronas, provides 32 % of the federal budget in revenue enhancements, dividends and royalties. The oil company ranked 121 in Fortune Global 500 list of companies in 2007. It besides ranked 18 in the industry of the same list. [ 122 ] The company has ove up to the rank by being 95th in 2008 in footings of gross and 8th most profitable company in the universe and the most profitable in Asia. Since origin in 1974, Petronas have paid the authorities RM 403.3 billion, with RM 67.6 billion in 2008. The payment represents a 44 % of the 2008 federal authorities gross.

Petronas is besides the keeper of oil and gas militias for Malaysia. Hence, all oil and gas activities are regulated by Petronas. Malaysia encourages foreign oil company engagement through production sharing contracts, in which important sum of oil will be given off to the foreign oil company until it reaches a production milepost. Currently, many major oil companies such as ExxonMobil, Royal Dutch Shell, Nippon Oil, and Murphy Oil are involved in such contracts. [ 126 ] As a consequence, 40 % of oil Fieldss in Malaysia are developed.

Malaysia and Thailand has a cuneus shaped country 150A kilometer from Kota Bharu, Kelantan and 260A kilometer from the shores of Songkhla, Thailand which is jointly developed by Petronas and its Thailand opposite number. The country, which is called Malaysia-Thailand Joint Development Area, has 4.5 trillion three-dimensional pess ( 130 km3 ) of proved militias.

Tourism

In an attempt to diversify the economic system and do Malaysia ‘s economic system less dependent on exported goods, the authorities has pushed to increase touristry in Malaysia. As a consequence touristry has become Malaysia ‘s 3rd largest beginning of income from foreign exchange, although it is threatened by the negative effects of the turning industrial economic system, with big sums of air and H2O pollution along with deforestation impacting touristry. [ 129 ] The bulk of Malaysia ‘s tourers come from its surrounding state, Singapore. In 1999, Malaysia launched a worldwide selling run called “ Malaysia, Truly Asia ” which was mostly successful in conveying in over 7.4 million tourers. [ 130 ] In recent old ages touristry has been threatened by the negative effects of the turning industrial economic system, with big sums of air and H2O pollution along with deforestation impacting touristry.

The Ministry of Culture, Arts and Tourism ( MOCAT ) was established in 1987 under which the TDC was incorporated. TDC existed from 1972 to 1992, when it became the Malaysia Tourism Promotion Board ( MTPB ) , through the Malaysia Tourism Promotion Board Act, 1992. Tourism Malaysia aims to market Malaysia as a premier finish of excellence in the part.

Science and engineering

Science Policy in Malaysia is regulated by the Ministry of Science, Technology, and Environment. Other ministries, such as the Ministry of Agriculture and the Ministry of Health besides have scientific discipline sections. Training in scientific countries was promoted during the 1970s and 1980s. From 1987-1997 research and development used 0.24 % of GNP, and in 1998 hi-tech exports made up 54 % of Malaysia ‘s manufactured exports.

In 2002 the Malaysian National Space Agency ( Angkasa ) was formed to cover with all of Malaysia ‘s activities in infinite, and to advance infinite instruction and infinite experiments. It is focused on developing the “ RazakSAT ” orbiter, which is a distant feeling orbiter with CCD cameras. [ 134 ] In early 2006, Sheikh Muszaphar Shukor and three other finalists were selected for the Angkasawan spaceflight programme. This programme came about when Russia agreed to transport one Malaysian to the International Space Station as portion of a multi-billion dollar purchase of 18 Russian Sukhoi Su-30MKM combatant jets by the Royal Malaysian Air Force.

In an attempt to make a autonomous defensive ability and support national development Malaysia privatised some of its military installations in the 1970s. This has created a defense mechanism industry, which in 1999 was brought under the Malaysia Defence Industry Council. The authorities continues to seek and advance this sector and its fight, actively marketing the defense mechanism industry. [ 135 ] One manner it does this is through the Langkawi International Maritime and Aerospace Exhibition, one of the largest defense mechanism and civil show windows in the Asia Pacific, on a regular basis attended by over 500 companies. [ 135 ] The Malaysian Armed Forces relies to a great extent on local military engineering and hi-tech arms systems designed and manufactured by foreign states.

Others

Knowledge-based services are spread outing in Malaysia. Malaysia is being promoted as a finish for Medical touristry, regionally and internationally.