Background Notes: Malaysia, October 1998
Released by the Bureau of East Asian and Pacific Affairs
U.S. Department of State
Official Name: Malaysia
Area: 329,749 sq. km. (127,316 sq. mi.); slightly larger than New
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).
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%.
Type: Federal parliamentary democracy with a constitutional
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.)
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
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
Suffrage: Universal adult.
GNP: $93.6 billion.
Annual real growth rate: 7.8% (Growth in the first half of 1998--
Per capita income: $4,540.
Natural resources: Petroleum, liquefied natural gas (LNG), tin,
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%.
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.
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
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
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.
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
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.
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.
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
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
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
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
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
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
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
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.
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
Political Counselor--Jeff Lunstead
Economic Counselor--Chris Marut
Commercial Counselor--Michael Hand
Public Affairs Officer (USIS)--Charles Barclay
Agricultural Counselor--Abdullah Saleh
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
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Trips for Travelers publication series, which contain information
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Emergency information concerning Americans traveling abroad may
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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
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to travelers also may be obtained before your departure from a
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Further Electronic Information
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National Trade Data Bank (NTDB). Operated by the U.S. Department
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