Background Notes: Malaysia, October 1998 
Released by the Bureau of East Asian and Pacific Affairs
U.S. Department of State

Official Name: Malaysia

PROFILE

Geography

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

People

Nationality: Noun and adjective--Malaysian(s).
Population: 21.7 million (1997).
Annual growth rate: 2.3%.
Ethnic groups: Malay 47%, Chinese 25%, Indigenous 11%, Indian 7%, 
non-Malaysian citizens 7%, others 3%.
Religions: Islam, Buddhism, Confucianism, Taoism, Hinduism, 
Sikhism, Christianity, Baha'i faith.
Languages: Malay, Cantonese, Hokkienese, Mandarin Chinese, 
English, Tamil, indigenous.
Education: Years compulsory--9. Attendance--99% (primary), 82% 
(secondary). Literacy--93% (1998).
Health: Infant mortality rate--9.7/1,000 (1997). Life expectancy: 
Female--73.5 years, Male--68.9 years (1997).
Work force: 8.6 million. Manufacturing--22.1%; community, social, 
and personal services (includes government)--21.0%; trade and 
tourism--19.2%; agriculture--18.3%; construction--9.0%; finance--
5.1%; transportation and communications--4.5%; utilities--0.5%; 
mining and petroleum--0.3%.

Government

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 the federal territory (capital). 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 192-member 
House of Representatives (elected from single-member districts). 
Judicial--Federal Court, Court of Appeals, high courts, 
magistrates courts, sessions courts, and juvenile courts.
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 Se-Islam Malaysia (PAS); Parti Bersatu 
Sabah (PBS). 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 (1997)

GNP: $93.6 billion.
Annual real growth rate: 7.8% (Growth in the first half of 1998--
4.8%).
Per capita income: $4,540.
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: Exports--$79 billion: electronics, electrical products, 
palm oil, petroleum, liquid natural gas, apparel, timber and 
logs, plywood and veneer, natural rubber. Major markets--
Singapore 20%, U.S. 14%, Japan 12%. Imports--$79 billion: 
machinery, chemicals, manufactured goods, fuels and lubricants. 
Major suppliers--Japan 22%, U.S. 17%, Singapore 13%.

PEOPLE

Malaysia's population of 21.7 million (1997 -- estimated) 
continues to grow at a rate of 2.3% per annum; about 35% of the 
population is under the age of 15.

Malaysia's population comprised many ethnic groups, with the 
politically dominant Malays comprising a plurality. By 
Constitutional definition, all Malays are Muslim. More than a 
quarter of the population is Chinese. They have historically 
played an important role in trade and business.

Malaysians of Indian descent comprise about 7% of the population 
and includes Hindus, Muslims, Buddhists and Christians. About 85% 
of the Indian community is Tamil.

Non-Malay indigenous groups make up more than half of Sarawak's 
population and about 66% of Sabah's. 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.

HISTORY

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 establish, public services were extended, and 
large-scale 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 Peninsular 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 small-scale communist 
insurgency that began in the mid-1960s in Sarawak also ended with 
the signing of a peace accord in October 1990.

GOVERNMENT

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 192 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, Minister of Finance, and Minister of Home 
Affairs--Dato' Seri Dr. Mahathir bin Mohamad
Foreign Minister--Dato' Seri Abdullah bin Haji Ahmad Badawi
Ambassador to the U.S.--Dato' Dali Mahmud Hashim
Ambassador to the UN-- Dato' Hamsy 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 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.

POLITICAL CONDITIONS

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 1995, 
the most recent general election, the Barisan Nasional was 
returned with an overwhelming majority, winning 162 out of the 
192 parliamentary seats. In addition to the federal government, 
Barisan Nasional has also held power continuously in most state 
governments, though an Islamic opposition party now controls the 
state of Kelantan. In August 1998, Prime Minister Mahathir sacked 
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. In September, the government 
detained Anwar and many of his supporters without trial under the 
Internal Security Act. Anwar and most of his associates were 
later released from ISA detention though Anwar remained 
imprisoned pending trial on criminal charges. Peaceful public 
demonstrations on behalf of Anwar continued after his arrest. 
Anwar's ouster and prosecution will affect UMNO party elections 
scheduled for 1999 and Malaysia's general elections, which must 
be held before April 2000.

ECONOMY

After a decade of sustained economic growth, during which real 
GDP grew by more than 8% annually, Malaysia's economy in the 
second half of 1998 was in recession. GDP will contract by an 
estimated 4.8% for the year. Malaysia since July 1997 has been 
buffeted by the economic and financial downturn that began with 
the Thai financial crisis in July 1997 and quickly spread 
throughout the region and now the globe. By August 1998, the 
Malaysian ringgit had lost 40% of its value and the Kuala Lumpur 
stock exchange had lost 60% of its capitalization.

After generally following the IMF prescription of tight fiscal 
and monetary policies, Malaysia on September 1 announced a series 
of capital and currency controls designed to insulate Malaysia's 
economy from the effects of the global financial crisis. The new 
measures include fixing the exchange rate at 3.8 ringgit to the 
U.S. dollar (it had been trading at about RM 4.2/USD 1); ending 
the free convertibility of the ringgit but requiring Central Bank 
authorization for all exchange transactions; and ending the flow 
of short-term "hot money" into and out of Malaysia. With the 
ringgit protected from speculative pressures, the Malaysian 
Government has lowered interest rates to encourage business 
activity.

Malaysia remains an important trading partner for the United 
States. In 1997, two-way bilateral trade totaled US$28 billion, 
with U.S. exports totaling US$10 billion and imports from 
Malaysia totaling US$18 billion. Malaysia was the United States' 
11th-largest trading partner and its 16th-largest export market. 
In 1997, the United States became Malaysia's largest trading 
partner.

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 80s through the mid-90s , the economy experienced a period 
of broad diversification and sustained rapid growth averaging 
almost 8% annually. By 1997, nominal per capita GNP had reached 
$4,816. 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 35.7% in 1997, while 
agriculture and mining, which together had accounted for 42.7% of 
GDP in 1970, dropped to 18.5% in 1997.

Despite the toll taken by the global financial crisis, most 
market analysts and economists remain generally positive about 
Malaysia's long-term prospects, especially if the Malaysian 
government uses this opportunity to undertake financial sector 
reform.

Manufacturing accounts for 35.7% of GDP (1997). Major products 
include electronic components (Malaysia is the world's largest 
exporter of semiconductor devices), electrical goods, and 
appliances.

The government encourages foreign direct investment, particularly 
in the manufacturing sector. In 1997, U.S. became the largest 
investor in Malaysia, surpassing Japan. Germany and Taiwan rank 
third and fourth, respectively. The cumulative value of U.S. 
private investment in Malaysia probably 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.

Malaysia's New Economic Policy (NEP), first established in 1971, 
seeks 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 "bumiputras" in Bahasa 
Malaysia). Rapid growth through the mid-90s made it possible to 
expand the share of the economy for bumiputras 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 bumiputra 
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.

DEFENSE

Malaysia has undertaken a major program to expand and modernize 
its armed forces, with significant procurement of state of the 
art equipment, including FA-18's and MIG fighters. Budgetary 
constraints imposed by the financial crisis have slowed 
procurement. In August, 1998 Malaysia suspended its participation 
in the Five Power Defense Arrangement with the United Kingdom, 
Australia, New Zealand, and Singapore. In October 1998 the 
Defense Minister announced a major review of defense policy 
(including participation in the Five Power Defense Arrangement) 
to ensure that the country's defense needs will be met into the 
next century.

FOREIGN RELATIONS

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 close, 
cordial 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 is also a member of APEC, and will host the 
1998 APEC Leader's Meeting. Malaysia maintains diplomatic 
relations with North Korea.

International Affiliations: 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.

U.S.-MALAYSIAN RELATIONS

The United States has maintained friendly relations with Malaysia 
since its independence in 1957. The U.S. and Malaysia have a 
solid record of cooperation in many areas including trade and 
investment, counter-terrorism, and counter-narcotics. In 1997 the 
United States was Malaysia's top trading partner and leading 
investor. The United States also has supported Malaysia's defense 
efforts by providing for Malaysian participation in U.S. military 
education training programs and purchases of equipment under the 
foreign military sales program.

Cultural and educational exchanges have been another fruitful 
area of cooperation. Malaysians studying in the U.S., now 
numbering about 14,000, still represent one of the largest 
foreign student groups enrolled in American colleges and 
universities. The United States has taken several steps to assist 
Malaysian students in the U.S. through the uncertainties of the 
recent economic downturn.

Trade and Investment

The general economic outlook for Malaysia remains uncertain in 
view of the regional economic slump. 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 dramatic braking of economic growth, however, 
will effect U.S. export opportunities. Nevertheless, 
opportunities will remain strong in priority areas of 
development, including high technology fields, industrial 
automation, medical products and services, education/distance 
learning, and the environment. Of particular interest is the 
ongoing development of the Multimedia Supercorridor, Malaysia's 
effort to create Asia's version of Silicon Valley. Malaysia, a 
member of the World Trade Organization, has few restraints on 
trade in goods. Its service sector, however, remains protected, 
particularly in financial services.

Principal U.S. Embassy Officials

Ambassador--John R. Malott
DCM--Anna Borg
Political Counselor--Jeff Lunstead
Economic Counselor--Chris Marut
Commercial Counselor--Michael Hand
Public Affairs Officer (USIS)--Charles Barclay
Agricultural Counselor--Abdullah Saleh
Consul--Hugh Williams

The U.S. Embassy in Malaysia is located at 376 Jalan Tun Razak, 
50400 Kuala Lumpur (tel. 60-3-248-9011  fax  60-3-242-2207).

TRAVEL AND BUSINESS INFORMATION

The U.S. Department of State's Consular Information Program 
provides Travel Warnings and Consular Information Sheets. Travel 
Warnings are issued when the State Department recommends that 
Americans avoid travel to a certain country. Consular Information 
Sheets exist for all countries and include information on 
immigration practices, currency regulations, health conditions, 
areas of instability, crime and security, political disturbances, 
and the addresses of the U.S. posts in the country. Public 
Announcements are issued as a means to disseminate information 
quickly about terrorist threats and other relatively short-term 
conditions overseas which pose significant risks to the security 
of American travelers. Free copies of this information are 
available by calling the Bureau of Consular Affairs at 202-647-
5225 or via the fax-on-demand system: 202-647-3000. Travel 
Warnings and Consular Information Sheets also are available on 
the Consular Affairs Internet home page: http://travel.state.gov 
and the Consular Affairs Bulletin Board (CABB). To access CABB, 
dial the modem number: 301-946-4400 (it will accommodate up to 
33,600 bps), set terminal communications program to N-8-1(no 
parity, 8 bits, 1 stop bit); and terminal emulation to VT100. The 
login is travel and the password is info. (Note: Lower case is 
required). The CABB also carries international security 
information from the Overseas Security Advisory Council and 
Department's Bureau of Diplomatic Security. Consular Affairs 
Trips for Travelers publication series, which contain information 
on obtaining passports and planning a safe trip abroad, can be 
purchased from the Superintendent of Documents, U.S. Government 
Printing Office, P.O. Box 371954, Pittsburgh, PA 15250-7954; 
telephone: 202-512-1800; fax 202-512-2250.

Emergency information concerning Americans traveling abroad may 
be obtained from the Office of Overseas Citizens Services at 
(202) 647-5225. For after-hours emergencies, Sundays and 
holidays, call 202-647-4000.

Passport Services information can be obtained by calling the 24-
hour, 7-day a week automated system ($.35 per minute) or live 
operators 8 a.m. to 8 p.m. (EST) Monday-Friday ($1.05 per 
minute). The number is 1-900-225-5674 (TDD: 1-900-225-7778). 
Major credit card users (for a flat rate of $4.95) may call 1-
888-362-8668 (TDD: 1-888-498-3648).

Travelers can check the latest health information with the U.S. 
Centers for Disease Control and Prevention in Atlanta, Georgia. A 
hotline at 877-FYI-TRIP (877-394-8747) and a web site at 
http://www.cdc.gov/travel/index.htm give the most recent health 
advisories, immunization recommendations or requirements, and 
advice on food and drinking water safety for regions and 
countries. A booklet entitled Health Information for 
International Travel (HHS publication number CDC-95-8280) is 
available from the U.S. Government Printing Office, Washington, 
DC 20402, tel. (202) 512-1800.

Information on travel conditions, visa requirements, currency and 
customs regulations, legal holidays, and other items of interest 
to travelers also may be obtained before your departure from a 
country's embassy and/or consulates in the U.S. (for this 
country, see "Principal Government Officials" listing in this 
publication).

U.S. citizens who are long-term visitors or traveling in 
dangerous areas are encouraged to register at the U.S. embassy 
upon arrival in a country (see "Principal U.S. Embassy Officials" 
listing in this publication). This may help family members 
contact you in case of an emergency.

Further Electronic Information

Department of State Foreign Affairs Network. Available on the 
Internet, DOSFAN provides timely, global access to official U.S. 
foreign policy information. Updated daily, DOSFAN includes 
Background Notes; Dispatch, the official magazine of U.S. foreign 
policy; daily press briefings; Country Commercial Guides; 
directories of key officers of foreign service posts; etc. 
DOSFAN's World Wide Web site is at http://www.state.gov.

U.S. Foreign Affairs on CD-ROM (USFAC). Published on an annual 
basis by the U.S. Department of State, USFAC archives information 
on the Department of State Foreign Affairs Network, and includes 
an array of official foreign policy information from 1990 to the 
present. Contact the Superintendent of Documents, U.S. Government 
Printing Office, P.O. Box 371954, Pittsburgh, PA 15250-7954. To 
order, call (202) 512-1800 or fax (202) 512-2250.

National Trade Data Bank (NTDB). Operated by the U.S. Department 
of Commerce, the NTDB contains a wealth of trade-related 
information. It is available on the Internet (www.stat-usa.gov) 
and on CD-ROM. Call the NTDB Help-Line at (202) 482-1986 for more 
information.

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