Malaysia - Economy

Economy

Malaysia is a relatively open state-oriented and newly industrialised market economy. The state plays a significant but declining role in guiding economic activity through macroeconomic plans. Malaysia has had one of the best economic records in Asia, with GDP growing an average 6.5 per cent annually from 1957 to 2005. In 2011 the GDP (PPP) was about $450 billion, the 3rd largest economy in ASEAN and 29th largest in the world.

In the 1970s, the predominantly mining and agricultural-based economy began a transition towards a more multi-sector economy. Since the 1980s the industrial sector has led Malaysia's growth. High levels of investment played a significant role in this. The economy recovered from the 1997 Asian Financial Crisis sooner than neighbouring countries, and has since recovered to the levels of the pre-crisis era with a GDP per capita of $14,800. Inequalities exist between different ethnic groups. The Chinese make up about one-third of the population but accounts for 70 per cent of the country's market capitalisation.

International trade, facilitated by the adjacent Strait of Malacca shipping route, and manufacturing are key sectors of the country's economy. Malaysia is an exporter of natural and agricultural resources, the most valuable exported resource being petroleum. At one time, it was the largest producer of tin, rubber and palm oil in the world. Manufacturing has a large influence in the country's economy, although Malaysia’s economic structure has been moving away from it. Malaysia remains one of the world's largest producers of palm oil.

In an effort to diversify the economy and make it less dependent on exported goods, the government has pushed to increase tourism to Malaysia. As a result, tourism has become Malaysia’s third largest source of income from foreign exchange, although it is threatened by the negative effects of the growing industrial economy, with large amounts of air and water pollution along with deforestation affecting tourism. The country has developed into a centre of Islamic banking, and is the country with the highest numbers of female workers in that industry. Knowledge-based services are also expanding.

Science policies in Malaysia are regulated by the Ministry of Science, Technology, and Innovation. The country is one of the world's largest exporters of semiconductor devices, electrical goods, and information and communication technology products. Malaysia began developing its own space programme in 2002, and in 2006 Russia agreed to transport one Malaysian to the International Space Station as part of a multi-billion dollar purchase of 18 Russian Sukhoi Su-30MKM fighter jets by the Royal Malaysian Air Force. In an effort to create a self-reliant defensive ability and support national development, Malaysia privatised some of its military facilities in the 1970s. This has created a defence industry, which in 1999 was brought under the Malaysia Defence Industry Council. The government continues to promote this sector and its competitiveness, actively marketing the defence industry.