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 You are in: Out of Date Releases > Previous Editions of Background Notes > Out of Date Background Notes: M

Malaysia (10/01)

For the most current version of this Note, see Background Notes A-Z.



Area: 329,749 sq. km. (127,316 sq. mi.); slightly larger than New Mexico. Cities: Capital--Kuala Lumpur. Other cities--Penang, Ipoh, Malacca, Johor Baru, Kuching, Kota Kinabalu.
Terrain: Coastal plains and interior, jungle-covered mountains. The South China Sea separates peninsular Malaysia from East Malaysia on Borneo (400 mi.).
Climate: Tropical.

Nationality: Noun and adjective--Malaysian(s).
Population (2000): 23.3 million.
Annual growth rate: 2.4%.
Ethnic groups: Malay 47%, Chinese 24%, Indigenous 11%, Indian 7%, non-Malaysian citizens 7%, others 4%.
Religions: Islam, Buddhism, Confucianism, Taoism, Christianity, Hinduism, Sikhism, Baha'i faith.
Languages: Malay, Cantonese, Hokkien, Mandarin Chinese, English, Tamil, indigenous.
Education: Years compulsory--9. Attendance--99% (primary), 82% (secondary). Literacy (1999)--94%.
Health: Infant mortality rate (1999)--7.9/1,000. Life expectancy (2000)--female 75 yrs., male 70.2 yrs.
Work force (9.6 million, 2000): Manufacturing--27.6%; services (includes government)--20.2%; trade and tourism--17.1%; agriculture--15.2%; construction--8.2%; finance--5.5%; transportation and communications--5.0%; utilities--0.8%; mining and petroleum--0.4%.

Type: Federal parliamentary democracy with a constitutional monarch. Independence: August 31, 1957. (Malaya, what is now peninsular Malaysia, became independent in 1957. In 1963 Malaya, Sabah, Sarawak, and Singapore formed Malaysia. Singapore became an independent country in 1965.).
Constitution: 1957.
Subdivisions: 13 states and three federal territories (Kuala Lumpur, Labuan Island, Putrajaya federal administrative territory). Each state has an assembly and government headed by a chief minister. Nine of these states have hereditary rulers, generally titled "sultans," while the remaining four have appointed governors in counterpart positions.
Branches: Executive--Yang di-Pertuan Agong ("paramount ruler," who is head of state and customarily referred to as the king and has ceremonial duties), prime minister (head of government), cabinet. Legislative--bicameral parliament, comprising 69-member Senate (26 elected by the 13 state assemblies, 43 appointed by the king on the prime minister's recommendation) and 193-member House of Representatives (elected from single-member districts). Judicial--Federal Court, Court of Appeals, high courts, magistrate's courts, session's courts, and juvenile courts. Syariah courts hear cases on certain matters involving Muslims only. Political parties: Barisan Nasional (National Front)--a coalition comprising the United Malays National Organization (UMNO) and 13 other parties, most of which are ethnically based; Democratic Action Party (DAP); Parti Islam Semalaysia (PAS); Parti Bersatu Sabah (PBS); Parti KeADILan. There are more than 30 registered political parties, including the foregoing, not all of which are represented in the federal parliament. Suffrage: Universal adult.

Economy (2000)
GNP: $82 billion.
Annual real GDP growth rate: 8.3%.
Per capita income: $3,500.
Natural resources: Petroleum, liquefied natural gas (LNG), tin, minerals. Agriculture: Products--palm oil, rubber, timber, cocoa, rice, tropical fruit, fish, coconut.
Industry: Types--electronics, electrical products, chemicals, food and beverages, metal and machine products, apparel.
Trade: Merchandise exports--$98.2 billion: electronics, electrical products, palm oil, petroleum, liquid natural gas, apparel, timber and logs, plywood and veneer, natural rubber. Major markets--U.S. 20.5%, Singapore 18.4%, Japan 13.1%. Merchandise imports--$82.2 billion: machinery, chemicals, manufactured goods, fuels, and lubricants. Major suppliers--U.S. 16.6%, Japan 21.1%, Singapore 14.3%.

Malaysia's population of 23.3 million (2000) continues to grow at a rate of 2.4% per annum; about 33% of the population is under the age of 15. Malaysia's population comprises many ethnic groups, with the politically dominant Malays comprising a plurality. By constitutional definition, all Malays are Muslim. About a quarter of the population is Chinese who have 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. About 85% of the Indian community is Tamil.

Non-Malay indigenous groups make up more than half of the Borneo state of Sarawak's population and about 66% of the Borneo state of Sabah's population. They are divided into dozens of ethnic groups, but they share some general patterns of living and culture. Until the 20th century, most practiced traditional beliefs, but many have become Christian or Muslim. The "other" category includes Malaysians of, inter alia, European and Middle Eastern descent. Population distribution is uneven, with some 15 million residents concentrated in the lowlands of Peninsular Malaysia, an area slightly smaller than the State of Michigan.

In the first century AD, two far-flung but related events helped stimulate Malaysia's emergence in international trade in the ancient world. At that time, India had two principal sources of gold and other metals: the Roman Empire and China. The overland route from China was cut by marauding Huns, and at about the same time, the Roman Emperor Vespasian cut off shipments of gold to India. As a result, India sent large and seaworthy ships, with crews reported to have numbered in the hundreds, to Southeast Asia, including the Malayan Peninsula, to seek alternative sources. In the centuries that followed, rich Malaysian tin deposits assumed great significance in Indian Ocean trade, and the region prospered. As maritime trade among Middle Eastern, Indian, and Chinese ports flourished, the peninsula benefited from its location as well as from development of its diverse resources, including tropical woods and spices. Malay ships became prominent in that trade, and Malay ports served as transshipment centers. Indian trade brought Indian culture, economy, religion, and politics, with historic results for what is now Malaysia.

The early Buddhist Malay kingdom of Srivijaya, based at what is now Palembang, Sumatra, dominated much of the Malay Peninsula from the 9th to the 13th centuries AD. The powerful Hindu kingdom of Majapahit, based on Java, gained control of the Malay Peninsula in the 14th century. Conversion of the Malays to Islam, beginning in the early 14th century, accelerated with the rise of the state of Malacca under the rule of a Muslim prince in the 15th century. Malacca was a major regional entrepot, where Chinese, Arab, Malay, and Indian merchants traded precious goods. Drawn by this rich trade, a Portuguese fleet conquered Malacca in 1511, marking the beginning of European expansion in Southeast Asia. The Dutch ousted the Portuguese from Malacca in 1641 and, in 1795, were themselves replaced by the British, who had occupied Penang in 1786.

In 1826, the British settlements of Malacca, Penang, and Singapore were combined to form the Colony of the Straits Settlements. From these strong points, in the 19th and early 20th centuries, the British established protectorates over the Malay sultanates on the peninsula. Four of these states were consolidated in 1895 as the Federated Malay States.

During British control, a well-ordered system of public administration was established, public services were extended, and largescale rubber and tin production was developed. This control was interrupted by the Japanese invasion and occupation from 1942 to 1945 during World War II.

Popular sentiment for independence swelled during and after the war and, in 1957, the Federation of Malaysia, established from the British-ruled territories of Peninsula Malaysia in 1948, negotiated independence from the United Kingdom under the leadership of Tunku Abdul Rahman, who became the first prime minister. The British colonies of Singapore, Sarawak, and Sabah (called North Borneo) joined the Federation to form Malaysia on September 16, 1963.

Singapore withdrew from the Federation on August 9, 1965, and became an independent republic. Neighboring Indonesia objected to the formation of Malaysia and pursued a program of economic, political, diplomatic, and military "confrontation" against the new country, which ended only after the fall of Indonesia's President Sukarno in 1966.

Following World War II, local communists, nearly all Chinese, launched a long, bitter insurgency, prompting the imposition of a state of emergency in 1948 (later lifted in 1960). Small bands of guerrillas remained in bases along the rugged border with southern Thailand, occasionally entering northern Malaysia. These guerrillas finally signed a peace accord with the Malaysian Government in December 1989. A separate smallscale communist insurgency that began in the mid-1960s in Sarawak also ended with the signing of a peace accord in October 1990.

Malaysia is a constitutional monarchy, nominally headed by the Yang di-Pertuan Agong ("paramount ruler"), customarily referred to as the king. Kings are elected for 5-year terms from among the nine sultans of the peninsular Malaysian states. The king also is the leader of the Islamic faith in Malaysia.

Executive power is vested in the cabinet led by the prime minister; the Malaysian constitution stipulates that the prime minister must be a member of the lower house of parliament who, in the opinion of the Yang di-Pertuan Agong, commands a majority in parliament. The cabinet is chosen from among members of both houses of parliament and is responsible to that body.

The bicameral parliament consists of the Senate (Dewan Negara) and the House of Representatives (Dewan Rakyat). All 69 Senate members sit for 6-year terms; 26 are elected by the 13 state assemblies, and 43 are appointed by the king. Representatives of the House are elected from single-member districts by universal adult suffrage. The 193 members of the House of Representatives are elected to maximum terms of 5 years. Legislative power is divided between federal and state legislatures.

The Malaysian legal system is based on English common law. The Federal Court reviews decisions referred from the Court of Appeals; it has original jurisdiction in constitutional matters and in disputes between states or between the federal government and a state. Peninsular Malaysia and the East Malaysian states of Sabah and Sarawak each have a high court.

The federal government has authority over external affairs, defense, internal security, justice (except civil law cases among Malays or other Muslims and other indigenous peoples, adjudicated under Islamic and traditional law), federal citizenship, finance, commerce, industry, communications, transportation, and other matters.

Principal Government Officials
Prime Minister--Dato' Seri Dr. Mahathir bin Mohamad
Foreign Minister--Datuk Seri Syed Hamid Albar
Ambassador to the U.S.--Dato' Ghazzali Sheikh Abdul Khalid
Ambassador to the UN--Dato' Hasmy bin Agam

Malaysia maintains an embassy in the U.S. at 2401 Massachusetts Ave. NW, Washington, DC 20008, tel. (202) 328-2700; a Consulate General in the Los Angeles World Trade Center, 350 South Figueroa Street, Los Angeles, CA, tel. (213) 621-2991; and a Consulate General at 140 E. 45th Street, New York, NY 10017, tel. (212) 490-2722.

Malaysia's predominant political party, the United Malays National Organization (UMNO), has held power in coalition with other parties since Malaya's independence in 1957. In 1973, an alliance of communally based parties was replaced with a broader coalition--the Barisan Nasional--composed of 14 parties. In early September 1998, Prime Minister Mahathir dismissed Deputy Prime Minister Anwar Ibrahim and accused Anwar of immoral and corrupt conduct.

Anwar said his ouster actually owed to political differences and led a series of demonstrations advocating political reforms. Later in September, Anwar was arrested, beaten while in prison, and charged with corruption and sodomy. In April 1999, he was convicted of four counts of corruption and sentenced to 6 years in prison. In August 2000, Anwar was convicted of one count of sodomy and sentenced to 9 years to run consecutively after his earlier 6-year sentence.

Both trials were viewed by domestic and international observers as politically motivated. In the November 1999 general election, the Barisan Nasional was returned to power with three-fourths of the parliamentary seats, but UMNO's seats dropped from 94 to 72. The opposition Barisan Alternatif coalition, led by the Islamic Party of Malaysia (PAS), increased its seats to 42. PAS retained control of the state of Kelantan and won the additional state of Terengganu.

The Malaysian economy rebounded from a sharp recession in 1998 when real GDP contracted by 7.4% in 1998. The economy grew 6.1% in 1999 and a strong 8.3% in 2000, led by rapid growth in exports, particularly of electronics and electrical products, to the United States, Malaysia's principal trade and investment partner. When the U.S. economy began to slow in late 2000, Malaysian exports declined, and the Malaysian economy slowed dramatically. Though the government introduced two fiscal stimulus packages in 2001, equal to U.S.$1.9 billion, most analysts predict growth of under 1% for the year. Since September 1998, the Malaysian ringgit has been pegged at an exchange rate of RM3.8/U.S.$1.0.

Malaysia remains an important trading partner for the United States. In 2000, bilateral trade between the U.S. and Malaysia totaled U.S.$36.6 billion. U.S. exports to Malaysia were $11 billion, and U.S. imports from Malaysia were $25.6 billion in that year. Malaysia was the United States' 11th-largest trading partner and its 17th-largest export market. During the first half of 2001, U.S. exports to Malaysia totaled $4.9 billion while the United States imported $11 billion from Malaysia.

Malaysia successfully developed from a commodity-based economy to one focused on manufacturing. Today the Government of Malaysia seeks to make the leap to a knowledge-based economy. At independence, Malaysia inherited an economy dominated by two commodities--rubber and tin. In the 40 years thereafter, Malaysia's economic record had been one of Asia's best. From the early 1980s through the mid-1990s, the economy experienced a period of broad diversification and sustained rapid growth averaging almost 8% annually. New foreign and domestic investment played a significant role in the transformation of Malaysia's economy. Manufacturing grew from 13.9% of GDP in 1970 to 33% in 2000, while agriculture and mining, which together had accounted for 42.7% of GDP in 1970, dropped to 8.4% and 6.9%, respectively, in 1999. Malaysia is one of the world's largest exporters of semiconductor devices--electrical goods, and appliances, and the government has ambitious plans to make Malaysia a leading producer, and developer, of high-tech products, including software.

The Malaysian Government encourages Foreign Direct Investment (FDI), and the United States continues to be the largest investor in Malaysia. In 2000, the Malaysian Government approved U.S.$1.97 billion in new manufacturing investment by U.S. companies, with the bulk n the electronics and electrical sectors. The cumulative value of U.S. private investment in Malaysia exceeds $10 billion, 60% of which is in the oil and gas and petrochemical sectors with the rest in manufacturing, especially semiconductors and other electronic products.

The Government of Malaysia has taken an active role in guiding the nation's economic development. Malaysia's New Economic Policy (NEP), first established in 1971, sought to eradicate poverty and end the identification of economic function with ethnicity. In particular, it was designed to enhance the economic standing of ethnic Malays and other indigenous peoples (collectively known as "bumiputeras" in Bahasa Malaysia). Rapid growth through the mid-1990s made it possible to expand the share of the economy for bumiputeras without reducing the economic attainment of other groups. One controversial NEP goal was to alter the pattern of ownership of corporate equity in Malaysia, with the government providing funds to purchase foreign-owned shareholdings on behalf of the bumiputera population. In June 1991, after the NEP expired, the government unveiled its National Development Policy, which contained many of the NEP's goals, although without specific equity targets and timetables. In April 2001, the government released a new plan, the "National Vision Policy," to guide development over the period 2001-10. The National Vision Policy targets education for budget increases and seeks to refocus the economy toward higher-technology production.

In the early 1990s, Malaysia undertook a major program to expand and modernize its armed forces. This included procurement of F/A-18 and C-130 aircraft from the U.S. However, budgetary constraints imposed by the 1997 financial crisis slowed military procurement. The recent economic recovery may lead to relaxation of budgetary constraints on the resumption of major weapons purchases. In October 2000 the Defense Minister announced a review of national defense and security policy to bring it up to date. This review will address new security threats that have emerged in the form of low intensity conflicts, such as the kidnapping of Malaysians and foreigners from resort islands located off the East Malaysian state of Sabah.

As a founding member of the Association of Southeast Asian Nations (ASEAN--established 1967), Malaysia views regional cooperation as the cornerstone of its foreign policy. Malaysia was a leading advocate of expanding ASEAN's membership to include Laos, Vietnam, and Burma, arguing that "constructive engagement" with these countries, especially Burma, will help bring political and economic changes. In world affairs, Malaysia maintains cooperative relations with the United States, the European Union, and Japan. Malaysia is an active member of the Commonwealth, the UN, the Organization of Islamic Conference, and the Non-Aligned Movement. Malaysia also is a member of APEC and hosted the 1998 Leaders' Meeting. Malaysia maintains diplomatic relations with North Korea. Malaysia's international affiliations include the UN and many of its specialized agencies, including UNESCO; World Bank, International Monetary Fund, International Atomic Energy Agency; General Agreement on Tariffs and Trade; Association of Southeast Asian Nations; Asian Development Bank; Five-Power Defense Arrangement; South-South Commission (G-15); Asia-Pacific Economic Cooperation (APEC); Commonwealth; Non-Aligned Movement; Organization of Islamic Conference; and INTELSAT.

The United States has maintained friendly relations with Malaysia since its independence in 1957. Despite sometimes strident rhetoric, the U.S. and Malaysia have a record of cooperation in many areas, including trade and investment, defense, counter-terrorism, and counter-narcotics.

Cultural and educational exchanges have been another fruitful area of cooperation. Malaysians studying in the U.S., now numbering about 9,000, represent one of the largest foreign student groups enrolled in American colleges and universities.

Trade and Investment
Malaysia's economic recovery, which began in 1999, appears likely to continue apace into 2001, albeit moderated by the global economic slowdown. The U.S. is currently Malaysia's largest trading partner and largest investor. Malaysia possesses abundant resources and land, a well-educated work force, adequate infrastructure, and a relatively stable political environment. The return of economic growth should boost U.S. exports, particularly in priority areas of development, including high-technology fields, industrial automation, medical products and services, education/distance learning, and the environment. Of particular interest to the Malaysian Government is the development of the Multimedia Super Corridor (MSC), Malaysia's effort to create a Silicon Valley in Asia. Malaysia, a member of the World Trade Organization (WTO), has few restraints on trade goods. Its service sector, however, remains protected, particularly in financial services.

Principal U.S. Embassy Officials
Ambassador--Marie T. Huhtala
DCM--Robert C. Reis, Jr.
Political Counselor--James F. Entwistle
Economic Counselor--Robin K. McClellan
Commercial Counselor--William Zarit
Public Affairs Officer--Karl Stoltz
Agricultural Counselor--Bernadette Borris
Consul--Sylvia D. Johnson

The U.S. Embassy in Malaysia is located at 376 Jalan Tun Razak, 50400 Kuala Lumpur (tel. 60-3-2168-5000, fax 60-3-2142-2207).

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