Economy of Malaysia: Difference between revisions

Economy of Malaysia
	Kuala Lumpur, financial centre of Malaysia.
Currency	Ringgit
Fiscal year	Calendar year
Trade organisations	APEC, ASEAN, IOR-ARC, WTO
Statistics
GDP	$800.169 billion (PPP 2015 est.) ; $375.633 billion (Nominal 2015 est.)
GDP growth	6.0% (2014)
GDP per capita	$25,833.204 (PPP, 2015 est.) ; $12,127.206 (nominal, 2015 est.)
GDP by sector	agriculture: 11.2% industry: 40.6% services: 48.1% (2013 est.)
Inflation (CPI)	3.3%(Aug 2014)
Population below poverty line	1.7% (2012 est.)
Gini coefficient	43.1 (2009 est.)
Labour force	13.19 million (2013 est.)
Labour force by occupation	agriculture: (11.1%), industry: (36%), services: (53.5%) (2012 est.)
Unemployment	3.1% (2013 est.)
Main industries	Peninsular Malaysia – rubber and palm oil processing and manufacturing, light manufacturing, pharmaceuticals, medical technology, electronics, tin mining and smelting, logging, timber processing; Sabah – logging, petroleum production; Sarawak – agriculture processing, petroleum production and refining, logging
External
Exports	$230.7 billion (2013 est.)
Export goods	electrical & electronic products, palm oil, liquefied natural gas, petroleum, chemicals, machinery, optical & scientific equipment, manufactures of metal, rubber, wood and wood products
Main export partners	Singapore 13.6% ; China 12.6% ; Japan 11.8% ; United States 8.7% ; Thailand 5.4% ; Hong Kong 4.3% ; India 4.2% ; Australia 4.1% (2012 est.)
Imports	$192.9 billion (2013 est.)
Import goods	electrical & electronic products, machinery, chemicals, petroleum, plastics, vehicles, manufactures of metal, iron and steel products
Main import partners	China 15.1% ; Singapore 13.3% ; Japan 10.3% ; United States 8.1% ; Thailand 6.0% ; Indonesia 5.1% ; South Korea 4.1% (2012 est.)
FDI stock	$77.4 billion (31 December 2010 est.)
Gross external debt	$100.1 billion (31 December 2013 est.)
Public finances
Government debt	53% of GDP (2012 est.)
Revenues	$65.72 billion (2013 est.)
Expenses	$79.4 billion (2013 est.)
Economic aid	$31.6 million (2005 est.)
Credit rating	Standard & Poor's:; A+ (Domestic); A- (Foreign); A+ (T&C Assessment); Outlook: Stable; Moody's:; A3; Outlook: Stable; Fitch:; A-; Outlook: Negative;
Foreign reserves	US$139.651 billion (May 2013)
	Main data source: CIA World Fact Book ; All values, unless otherwise stated, are in US dollars.

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Malaysia has a newly industrialised market economy, which is relatively open and state-oriented. Malaysia's GDP is the third largest in Southeast Asia, after the much more populous Indonesia and Thailand, and also the third highest by GDP per capita values, after the city-states of Singapore and Brunei.^[11]^[12] The state plays a significant, but declining role in guiding economic activity through macroeconomic plans. Malaysia's economy in 2014-2015 was one of the most competitive in Asia, ranking 6th in Asia and 20th in the world, higher than countries like Australia, France and South Korea.^[13]

Background

In 2014, Malaysia's economy grew 6%, the second highest growth in ASEAN behind Philippines' growth of 6.1%.^[2]The economy of Malaysia (GDP PPP) in 2014 was $746.821 billion, the third largest in ASEAN behind more populous Indonesia and Thailand and the 28th largest in the world.^[14] In 2009, the PPP GDP was US$383.6 billion, about half the 2014 amount, and the PPP per capita GDP was US$8,100, about one third the 2014 amount. .^[15]

The Southeast Asian country experienced an economic boom and underwent rapid development during the late 20th century and has GDP per capita (nominal) of US$11,062.043 in 2014, to be considered a newly industrialised country.^[3]^[16]^[17]

In 2014, the Household Income Survey undertaken by the government indicated that there were 7 million households in Malaysia, with an average of 4.3 members in each household. The average household income of Malaysia increased by 18% to RM5,900 a month, compared to RM5,000 in 2012.

As one of three countries that control the Strait of Malacca, international trade plays a large role in Malaysia's economy.^[18] At one time, it was the largest producer of tin, rubber and palm oil in the world.^[19] Manufacturing has a large influence in the country's economy, accounting for over 40% of the GDP.^[20] Malaysia is also the world's largest Islamic banking and financial centre.

Since it was formed in 1963, Malaysia's economic performance has been one of Asia's best. Real gross domestic product (GDP) grew by an average of 6.5% per year from 1957 to 2005. Performance peaked in the early 1980s through the mid-1990s, as the economy experienced sustained rapid growth averaging almost 8% annually. High levels of foreign and domestic private investment played a significant role as the economy diversified and modernised. Once heavily dependent on primary products such as rubber and tin, Malaysia today is a middle-income country with a multi-sector economy based on services and manufacturing. Malaysia is one of the world's largest exporters of semiconductor components and devices, electrical goods, solar panels, and information and communication technology (ICT) products.^[21]

Malaysia's capital market crossed the RM2 trillion threshold for the first time at the end of 2010. The capital market had achieved an annual compounded growth rate of 11% from RM717bil in 2000 due to rapid economic expansion and strong regulatory oversight that underpinned investor confidence in the Malaysian capital market.^[22]

In 1991, former Prime Minister of Malaysia, Mahathir bin Mohamad outlined his ideal, Vision 2020 in which Malaysia would become a self-sufficient industrialised nation by 2020.^[23] Tan Sri Nor Mohamed, a government minister, said Malaysia could attain developed country status in 2018 if the country's growth remains constant or increases.^[24]

According to a report of HSBC, Malaysia will become the world's 21st largest economy by 2050, with a GDP of $1.2 trillion (Year 2000 dollars) and a GDP per capita of $29,247 (Year 2000 dollars). The report also says "The electronic equipment, petroleum, and liquefied natural gas producer will see a substantial increase in income per capita. Malaysian life expectancy, relatively high level of schooling, and above average fertility rate will help in its rapid expansion." Viktor Shvets, the managing director of Credit Suisse, has said "Malaysia has all the right ingredients to become a developed nation."^[25]

Economic policies

Like many other independent nations, Malaysia's economic policies were shaped by various events in the nation's history since independence.

Monetary policy

Prior to the 1997 Asian Financial Crisis, the Malaysian ringgit was an internationalised currency, which was freely traded around the world. Just before the crisis, the Ringgit was traded RM2.50 at the dollar. Due to speculative activities, the Ringgit fell to as much as RM4.10 to the dollar in matter of weeks. Bank Negara Malaysia, the nation's central bank, decided to impose capital controls to prevent the outflow of the Ringgit in the open market. The Ringgit is not traded internationally; a traveller needs to declare to the central bank if taking out more than RM10,000 out of the country and the Ringgit itself was pegged at RM3.80 to the US dollar.

The fixed exchange rate was abandoned in favour of the floating exchange rate in July 2005, hours after China announced the same move.^[26] At this point, the Ringgit was still not internationalised. The Ringgit continued to strengthen to 3.18 to the dollar by March 2008. Meanwhile, many aspects of capital control have been slowly relaxed by Bank Negara Malaysia. However, the government continues to not internalise the Ringgit. The government stated that the Ringgit will be internationalised once it is ready.^[27]

Bank Negara Malaysia for the time being, uses interest rate targeting. The Overnight Policy Rate (OPR) is their policy instrument, and is used to guide the short term interbank rates which will hopefully influence inflation and economic growth.

Affirmative action

Tun Abdul Razak, who was then the Prime Minister, implemented the affirmative action policy named as New Economic Policy soon after May 13 Incident in 1969.^[28] Prior to the incident, the poverty rates among Malays were extremely high (at 65%) as was discontent between races, particularly towards the Chinese, who controlled 34% of the economy at the time.^[29]^[30] The Chinese minority still accounts for 70 percent of the country's market capitalisation.^[31]

Through NEP, Bumiputera quotas are placed in housing developments, scholarship admission and also for ownership of publicly listed companies. The quota system has been relaxed recently since the 8 March 2008 General election. Bumiputera equity requirement for publicly listed companies has been relaxed since 12 November 2008 by allowing those companies to remove the quota once after IPO has been done.^[32] Further liberalisation in the retail sector is expected to remove the present 30% Bumiputera listing requirements. According to the Secretary-General of Ministry of Domestic Trade and Consumer Affairs Datuk Mohd Zain Mohd Dom said, the amendments is reflective of Malaysia "moving towards progressive liberalisation"^[33]

The Malaysian New Economic Policy was created in 1971 with the aim of bringing Malays a 30% share of the economy of Malaysia and eradicating poverty amongst Malays, primarily through encouraging enterprise ownership by Bumiputeras. After 30 years of the program, the NEP had somewhat met some of its goals. Bumiputera ownership increased to 18.9% in 2004 against 2.4% in 1970 and poverty decreased to 8.3% in 2004 against 64.8% in the 1970s.^[29]^[34]^[35]

The NEP is accused of creating an oligarchy, and creating a 'subsidy mentality'.^[36] Political parties such as Parti Keadilan Rakyat and Democratic Action Party have proposed a new policy which will be equal for every Malaysian, regardless of race.^[37] When the Democratic Action Party was elected in the state of Penang in 2008, it announced that it will do away with the NEP, claiming that it "... breeds nepotism, corruption and systemic inefficiency".^[38]

On 21 April 2009, the prime minister Najib Tun Razak has announced the liberalisation of 27 services sub-sector by abolishing the 30% bumiputera requirement. The move is seen as the government efforts to increase investment in the service sector of the economy. According to the premier, many more sectors of the economy will be liberalised.^[39] On 30 June 2009, the premier announces further liberation moves including the dismantling of the Bumiputera equity quotas and repealing the guidelines of the Foreign Investment Committee, which was responsible to monitor foreign shareholding in Malaysian companies. However, any Malaysian companies that wishes to list in Malaysia would still need to offer 50 percent of public shareholding spread to Bumiputera investors.^[40]

Subsidies and price controls

The Malaysian government subsidises and controls prices on a lot of essential items to keep the prices low. Prices of items such as palm oil, cooking oil, petrol, flour, bread, rice and other essentials have been kept under market prices to keep cost of living low. .^[41] As of 2009, 22 per cent of government expenditures were subsidies, with petrol subsidies alone taking up 12 per cent.^[42]

Since 2010, the government has been gradually reforming Malaysia's subsidy system, via a series of reductions in subsidies for fuel and sugar. As a result, in December 2014, the government officially ended all fuel subsidies, taking advantage of low oil prices at the time, potentially saving the government almost RM20 billion ringgit (US$5.97 billion) annually.^[43] The reduction of subsidies are planned over a three- to five-year period to strengthen government finances and improve economic efficiency

Sovereign wealth funds

The government owns and operates several sovereign wealth funds that invests in local companies and also foreign companies. One such funds are Khazanah Nasional Berhad which was established in 1993.^[44] Its objective is to help shape selected strategic industries in Malaysia and develop those investment for the benefit of Malaysia.^[45] 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 construction sector, Telekom Malaysia in the communications industry and many other companies in many other industries.^[46] It is estimated that the fund size of Khazanah Nasional stands at around US$19 billion.^[44]

Another fund that is owned by the Malaysian government is the Employees Provident Fund which is claimed to be the fourth largest state run pension fund in Asia.^[47] Like Khazanah Nasional, the EPF invests and sometimes owns several major companies in Malaysia such as RHB Bank.^[47] EPF investment is diversified over a number of sectors but almost 40% of their investment are in the services sector.^[48] Fund size in 2007 is estimated at US$100 billion.^[49]

Permodalan Nasional Berhad is a major fund manager controlled by the Malaysian Government. It offers capital guaranteed mutual funds such as Amanah Saham Bumiputera and Amanah Saham Wawasan 2020 which are open only to Malaysian and in some cases, Bumiputeras.^[50] As of April 2008, it manages MYR120 billion of funds (36 billion USD), of which MYR76 million is unit trust funds.^[51] The fund manager is a sizeable investor in strategic companies such as MMC Corporation Berhad,^[52] Maxis Communications Berhad^[53] and TM International Berhad^[54] among others.

Other than federal government funds, some states have created their own investment authority to manage state-owned sovereign wealth funds. First of such funds are launched by the state of Terengganu through the establishment of Terengganu Investment Authority in December 2008. It initial fund size will be around US$3 billion and derived from its oil royalties.^[55]

Government influence

Although the federal government promotes private enterprise and ownership in the economy, the economic direction of the country is heavily influenced by the government though five years development plans since independence. The economy is also influenced by the government through agencies such as the Economic Planning Unit and government-linked wealth funds such as Khazanah Nasional Berhad, Employees Provident Fund and Pemodalan Nasional Berhad.

The government's development plans, called the Malaysian Plan, currently the Ninth Malaysia Plan, started in 1950 during the British colonial rule.^[56] The plans were largely centred around accelerating the growth of the economy by selectively investing in selective sectors of the economy and building infrastructure to support said sectors.^[56] For example, in the current national plan, three sectors – agriculture, manufacturing and services, will receive special attention to promote the transition to high value-added activities in the respective areas.^[57] Other than the generalised plans like the Ninth Malaysia Plan, the government also have a development plan that are targeted to improve the manufacturing sector which is called the Industrial Master Plan. Currently, the plan is called the Third Industrial Master Plan (IMP3) which covers a period from 2006 to 2020. The industrial plans aim to make Malaysia a major trading nation and build up the country's economy and human capital.^[58]

Economic Planning Unit (Malay: Unit Perancang Ekonomi), established in 1961^[59] was instrumental in steering Malaysia to recovery from the 1997 Asian Financial Crisis. The unit is an agency under the Prime Minister's Department responsible for steering Malaysia's socio-economic development towards achieving a developed-nation status by the year 2020 through various measures such as preparing policies and strategies for socio-economic development, prepare medium and long term plans for the government and most importantly, advise the government on economic issues.^[60]

Government-linked investment vehicles such as Khazanah Nasional Berhad, Employees Provident Fund and Pemodalan Nasional Berhad invest and sometimes own major companies in major sectors of the Malaysian economy. For example, Khanazah Nasional is a major shareholder in Proton Holdings, an automaker and CIMB banking group in the financial sector.^[61] The government, however, is keen to sell stakes in their companies such as Malaysia Airlines to let the companies remain globally competitive^[62]

Currency

The only legal tender in Malaysia is the Malaysian Ringgit. As of 18 November 2014, the Ringgit is traded at MYR 3.35 at the US dollar.^[63] The Ringgit has not been internationalised since September 1998, an effect due to the 1997 Asian Financial Crisis in which the central bank impose capital controls on the currency.^[64] As a part of series of capital controls, the currency was pegged between September 1998 to 21 July 2005 at MYR 3.80 to the dollar.^[65] In recent years, Bank Negara Malaysia beginning to relax certain rules to the capital controls although the currency itself is still not traded internationally yet. According to the Bank Governor, the Ringgit will be internationalised when it's ready.^[66]

On September 2010, in an interview with CNBC, Dato' Seri Najib Tun Razak, which is the Prime Minister of Malaysia and also the Finance Minister said that the government is open to open up the Ringgit to off shore trading if the move will help the economy. He further added that before such a move to be made, it will ensure that rules and regulation will be in place so the currency will not be abused.^[67]

Natural resources

Malaysia is well-endowed with natural resources in areas such as agriculture, forestry and minerals. It is an exporter of natural and agricultural resources, the most valuable exported resource being petroleum.^[21] At one time, it was the largest producer of tin, rubber and palm oil in the world.^[68] In terms of agriculture, Malaysia is one of the top exporters of natural rubber and palm oil, which together with sawn logs and sawn timber, cocoa, pepper, pineapple and tobacco dominate the growth of the sector. Palm oil is also a major generator of foreign exchange. ^{[citation needed]}

Logging only began to make a substantial contribution to the economy during the nineteenth century. Today, an estimated 59% of Malaysia remains forested. ^{[citation needed]} The rapid expansion of the timber industry, particularly after the 1960s, has brought about a serious erosion problem in the country's forest resources. ^{[citation needed]}

In addition, substantial areas are being silviculturally treated and reforestation of degraded forest land is also being carried out. The Malaysian government provide plans for the enrichment of some 312.30 square kilometres (120.5 sq mi) of land with rattan under natural forest conditions and in rubber plantations as an inter crop. ^{[citation needed]} To further enrich forest resources, fast-growing timber species such as meranti tembaga, merawan and sesenduk are also being planted. At the same time, the cultivation of high-value trees like teak and other trees for pulp and paper are also encouraged. Rubber, once the mainstay of the Malaysian economy, has been largely replaced by oil palm as Malaysia's leading agricultural export. As of 2014^[update] Malaysia produces 60% of the world's supply of rubber gloves.^[69]

Tin and petroleum are the two main mineral resources that are of major significance in the Malaysian economy. Malaysia was once the world's largest producer of tin until the collapse of the tin market in the early 1980s. ^{[citation needed]} In the 19th and 20th century, tin played a predominant role in the Malaysian economy. It was only in 1972 that petroleum and natural gas took over from tin as the mainstay of the mineral extraction sector. Meanwhile, the contribution by tin has declined. Petroleum and natural gas discoveries in oil fields off Sabah, Sarawak and Terengganu have contributed much to the Malaysian economy. Oil and gas resources are managed by Petronas, the state controlled oil company which forms production sharing contracts with other players like Exxon-Mobil and Royal Dutch Shell to explore oil fields in Malaysia. Other minerals of some importance or significance include copper, bauxite, iron-ore and coal together with industrial minerals like clay, kaolin, silica, limestone, barite, phosphates and dimension stones such as granite as well as marble blocks and slabs. Small quantities of gold are produced. ^{[citation needed]}

Malaysia's broad and shallow continental shelf consists of several deep water prospective areas. Malaysia has 500,000 km² available for oil and gas exploration. 51 of the 70 producing fields in Malaysia are oil fields. In January 2004, Malaysia's oil reserves were estimated to be 4.84 billion barrels (769,000,000 m³), while natural gas reserves stood at 87 trillion standard cubic feet (2,460 km³). The country produces about 0.00075 billion barrels (119,000 m³) barrels of crude oil every day and 2.20 trillion standard cubic feet (60 km³) of natural gas condensates per year.^[70] In 2004, Minister in the Prime Minister's Department, Mustapa Mohamed, revealed that Malaysia's oil reserves stood at 4.84 billion barrels (769,000,000 m³) while natural gas reserves increased to 89 trillion cubic feet (2,500 km³). This was an increase of 7.2%.^{[citation needed]} As of 1 January 2007, Petronas reported that oil and gas reserve in Malaysia amounted to 20.18 billion barrels (3.208×10⁹ m³) equivalent.^[71] In January 2008, the Malaysian natural gas reserves holds up to 14,670,000,000 barrels (2.332×10⁹ m³) of oil equivalent.^[72] As of January 2009, Malaysia has proven oil reserves of up to 4 billion barrels (640×10^⁶ m³).^[73]

The government estimates that at current production rates Malaysia will be able to produce oil up to 18 years and gas for 35 years. In 2004, Malaysia is ranked 24th in terms of world oil reserves and 13th for gas. 56% of the oil reserves exist in the Peninsula while 19% exist in East Malaysia. The government collects oil royalties of which 5% are passed to the states and the rest retained by the federal government.^[74]

Other minerals of some importance or significance include copper, bauxite, iron-ore and coal together with industrial minerals like clay, kaolin, silica, limestone, barite, phosphates and dimension stones such as granite as well as marble blocks and slabs. Small quantities of gold are produced.

Business environment

According to a June 2013 report by the World Bank, Malaysia ranks 6th in Ease of doing business. Malaysia's strengths in the rank includes getting credit (rank 1st), protecting investors (ranked 4th) and doing trade across borders (ranked 5th).^[75] Weaknesses include dealing with construction permits (ranked 43rd). The study ranks 189 countries in all aspect of doing business.^[76] In the investor protection category of the survey, Malaysia had scored a perfect 10 for the extent of disclosure, nine for director liability and seven for shareholder suits. Malaysia is behind Singapore, Hong Kong and New Zealand in investor protection category of the survey.^[77]

The government is moving towards a more business friendly environment by setting up a special task force to facilitate business called PEMUDAH, which means "simplifier" in Malay.^[78] Highlights includes easing restrictions and requirement to hire expatriates, shorten time to do land transfers and increasing the limit of sugar storage (a controlled item in Malaysia) for companies.^[79] The Government aims to be in the top 10 in the Ease of doing business survey before 2010 to attract even more foreign investors.^[80]

The efforts of PEMUDAH is beginning to show fruits as their ranking improved to number 20 in 2009, with marked improvement in four areas: getting credit; dealing with construction permits; paying taxes; and enforcing contracts.^[81]

External trade

Malaysia's largest trading partner is China. Malaysia has been China's top trading partner within ASEAN for five years in a row since 2008.^[82] The two-way trade volume between China and Malaysia in 2013 reached $106 billion, making Malaysia China's third-largest trade partner in Asia, just behind Japan and South Korea and eighth largest overall.^[83] On 31 May 2014, during Najib Razak's visit to China where he was welcomed by China's Premier Li Keqiang, China and Malaysia pledged to increase bilateral trade to US$160 billion by 2017. They also agreed to upgrade economic and financial cooperation, especially in the production of halal food, water processing and railway construction.^[84]

Malaysia's second largest trading partner is Singapore and Malaysia is Singapore's biggest trading partner, with bilateral trade totalling roughly $91 billion US dollars in 2012, accounting for over a fifth of total trade within ASEAN. ^[85]^[86]

Malaysia is an important trading partner for the United States. In 1999, two-way bilateral trade between the US and Malaysia totalled US$30.5 billion, with US exports to Malaysia totalling US$9.1 billion and US imports from Malaysia increasing to US$21.4 billion. Malaysia was the United States' 10th-largest trading partner and its 12th-largest export market. During the first half of 2000, US exports totalled US$5 billion, while US imports from Malaysia reached US$11.6 billion.

The Malaysian Government encourages Foreign Direct Investment (FDI). According to Malaysian statistics, in 1999, the US ranked first among all countries in approved FDI in Malaysia's manufacturing sector with approved new manufacturing investments totalling RM5.2 billion (US$1.37 billion). Principal US investment approved by the Malaysian Investment Development Authority (MIDA) was concentrated in the chemicals, electronics, and electrical sectors. The cumulative value of US private investment in Malaysia exceeded $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. ^{[citation needed]}

Free trade efforts

Malaysia is a member of the ASEAN Free Trade Area which was established in 1992 to promote trade among ASEAN members. Most tariffs among the first generation member states were scrapped in 2007. ASEAN itself is increasingly playing a large role in free trade negotiation on behalf of its members. ASEAN as a group hopes to establish a free trade agreement with the European Union by 2009.^[87]

The Malaysian Government is negotiating free trade deals with Australia, Chile and India,^[88] but has suspended negotiation of free trade deal with United States indefinitely after eight rounds of negotiation. Malaysia is seeking membership into the Trans Pacific Partnership, a regional trade pact between the United States and countries in the Pacific Rim.^[89] As of October 2010, TPP members has agree to allow Malaysia to join as a full negotiation member of the group. Malaysia will join the third round of negotiations in Brunei.^[90]^[91]^[92]

Officials have expressed desire for free trade agreements their ASEAN members Singapore and Thailand. The Malaysian Trade Ministry released a statement in Vietnam saying that the FTA "has the potential to increase trade, investment cross flows and economic cooperation between the two countries. The agreement would also serve to make Chile a gateway for Malaysia's exports to the Latin American market."^[93]

Malaysia signed a Japan-Malaysia Economic Partnership Agreement with Japan on 13 December 2005.^[94] This leads to a Free trade agreement which was in effect from 13 July 2006 and expected to be fully realised in 2016.^[95] The agreement itself is an extension of an FTA between ASEAN and Japan, which is called Asean-Japan Comprehensive Economic Partnership.^[96]

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 tariffs on 140 lines while Pakistan will cut 124 lines. Most tariffs and duty is expected to be eliminated by 2012.^[97]

On 26 October 2009, Malaysia and New Zealand signed a bilateral Free Trade Agreement. New Zealand will cut tariffs on 99.5 percent of goods sent to Malaysia beginning 2010. This agreement itself is an extension of the ASEAN-Australia-New Zealand Free Trade Agreement.^[98]

Other 'economic areas' showing an interest in establishing free-trade agreements with Malaysia are the European Union and Hong Kong. However, before any talks can be initiated regarding new FTAs, Joint Economic Co-operation deals need to be concluded. International Trade and Industry Minister, Tan Sri Muhyiddin Yassin has expressed the hope that talks will be concluded by the end of 2008.^[99]

Foreign direct investment

Malaysia received RM46.1 billion foreign direct investment (FDI), which was all time high, for the whole of 2008. The foreign investments accounted for 73.4 percent of the total investments of RM62.8 billion approved for 2008.

The Minister of International Trade and Industry, Datuk Mustapa Mohamed announced that there was a sharp reduction in FDI and Malaysia only received RM4.2 billion FDI, about 78% reduction, for the first five months of 2009.^[100]

On the other hand, FDI in other Asean countries has grown rapidly overtaking Malaysia in recent years.

According to A.T Kearney, a global management consulting firm, Malaysia was ranked 15th in the 2014 Foreign Direct Investment Confidence Index, 9th in 2012, 16th in 2007 and 21st in 2010. The index assesses the impact of political, economic and regulatory changes on the FDI intentions and preferences of the leaders of top companies around the world. ^[101]^[102]

Rank 2007	Rank 2010	Rank 2012	Rank 2014	Country	FDI Confidence Index
3	2	4	1	United States	2.16
1	1	1	2	China	1.95
–	9	20	3	Canada	1.93
4	10	8	4	United Kingdom	1.91
6	4	3	5	Brazil	1.91
10	5	5	6	Germany	1.84
5	3	2	7	India	1.81
11	7	6	8	Australia	1.76
7	24	7	9	Singapore	1.75
8	13	17	10	France	1.74
20	11	15	11	United Arab Emirates	1.74
19	8	–	12	Mexico	1.72
18	–	11	13	South Africa	1.70
–	–	22	14	Switzerland	1.68
16	21	10	15	Malaysia	1.65
–	–	-	16	Sweden	1.64
–	–	–	17	Chile	1.64
-	–	24	18	Spain	1.63
–	–	21	19	Japan	1.62
-	-	-	20	Italy	1.61
12	–	16	21	Belgium	1.61
6	6	23	22	Netherlands	1.61
–	–	18	23	Denmark	1.61
13	–	19	24	Turkey	1.60
18	23	13	25	Indonesia	1.60

Sectors

Industry

Malaysia industrial sector accounts for 48.1 percent of total GDP or 63.4 billion US dollars. The industrial output is ranked 32nd in the world. The industrial sector is regulated and promoted by Malaysia Industrial Development Authority.^[103] International trade, facilitated by the adjacent Strait of Malacca shipping route and manufacturing are both key sectors of the country's economy.^[104]^[105]^[106] Manufacturing has a large influence in the country's economy,^[107] although Malaysia's economic structure is moving away from it.^[108]

Malaysia has 17 companies that rank in the Forbes Global 2000 ranking for 2014.^[109]

World Rank	Company	Industry	Revenue (billion $)	Profits (billion $)	Assets (billion $)	Market Value (billion $)
326	Maybank	Banking	9.7	2.1	171.1	26.3
443	Tenaga Nasional	Utilities	12	1.6	31.3	20.7
460	CIMB Group Holdings	Banking	6.8	1.4	113.2	18.1
585	Public Bank Berhad	Banking	4.6	1.3	93.3	20.6
598	Sime Darby	Conglomerates	14.4	1.1	15.2	17.1
861	Axiata Group	Telecommunications Services	5.8	0.8	13.3	17.7
915	Genting	Hotels, Restaurants & Leisure	5.6	0.6	21.8	11.4
1052	RHB Capital	Banking	3.0	0.6	58.3	6.6
1062	Petronas Chemical	Oil & Gas Operations	4.8	1	8.5	16.7
1121	AMMB Holdings	Banking	2.6	0.5	40	6.6
1246	Hong Leong Financial Group	Banking	2.5	0.5	56	5.1
1276	MISC Berhad	Transportation	2.8	0.7	12.3	9.4
1308	Petronas Gas	Oil & Gas Operations	1.2	0.7	4	14.7
1333	YTL	Utilities	6.3	0.5	18.5	4.9
1344	Maxis	Telecommunications Services	2.9	0.6	5.3	16
1481	Petronas Dagangan	Oil & Gas Operations	10.3	0.3	3.1	9.3
1567	IOI Group	Food, Drink & Tobacco	3.9	0.5	7.8	9.3

Finance and banking

Finance and Banking sector in Malaysia is regulated by Bank Negara Malaysia. The central bank limits foreign participation through licensing limits. The central bank launched a Financial Sector Master plan in 2001 to revamp the finance sector following the Asian Financial Crisis. The master plan calls for emphasis on Islamic Banking,^[110] of which Malaysia has become a centre of. Malaysia has the highest number of female workers in Islamic banking.^[111]

Maybank is Asia-Pacific's largest Islamic banking service provider with US$6.4 billion (RM22.48 billion) Syariah-compliant assets.^[112] Malaysia also accounts for two-thirds of global $82.2 billion sukuk market in 2007.^[113] Khazanah Nasional owns the largest retakaful company in the world, ACR Retakaful Holdings Limited, with capital base amounting to 300 million US Dollars.^[114]

A quarterly report 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).^[115]

In April 2009, the government announce new licenses will be issued for investment banking Islamic banking, takaful and insurance business between 2009 to 2011. It also announced that the threshold foreign equity ownership has been raised from 49% to 70% and allowed foreign banks to open up new branches and micro-credit facilities. This move was done as an attempt to put Malaysia in as centre for Islamic banking and also to liberalise the financial sector.^[116]

Oil and gas

Malaysia has a vibrant oil and gas industry. The national oil company, Petronas, provides about 40% of the federal budget in taxes, dividends and royalties.^[117] The oil company ranked 121 in Fortune Global 500 list of companies in 2007. It also ranked 18 in the industry of the same list.^[118] The company has ove up to the rank by being 95th in 2008 in terms of revenue and 8th most profitable company in the world and the most profitable in Asia.^[119]^[120] Since inception in 1974, Petronas have paid the government RM 403.3 billion, with RM 67.6 billion in 2008. The payment represents a 44% of the 2008 federal government revenue.^[121]

Petronas is also the custodian of oil and gas reserves for Malaysia. Hence, all oil and gas activities are regulated by Petronas. Malaysia encourages foreign oil company participation through production sharing contracts, in which significant amount of oil will be given away to the foreign oil company until it reaches a production milestone. Currently, many major oil companies such as ExxonMobil, Royal Dutch Shell, Nippon Oil, and Murphy Oil are involved in such contracts.^[122] As a result, 40% of oil fields in Malaysia are developed.^[123]

Malaysia and Thailand has a wedge shaped area 150 km from Kota Bharu, Kelantan and 260 km from the shores of Songkhla, Thailand which is jointly developed by Petronas and its Thailand counterpart. The area, which is called Malaysia-Thailand Joint Development Area, has 4.5 trillion cubic feet (130 km³) of proven reserves.^[124]

Tourism

In an effort to diversify the economy and make Malaysia's economy less dependent on exported goods, the government has pushed to increase tourism in Malaysia. As a result tourism has become Malaysia's third largest source of income from foreign exchange.^[125] The majority of Malaysia's tourists come from its bordering country, Singapore. In 1999, Malaysia launched a worldwide marketing campaign called "Malaysia, Truly Asia" which was largely successful in bringing in over 7.4 million tourists.^[126] In recent years tourism has been threatened by the negative effects of the growing industrial economy, with large amounts of air and water pollution along with deforestation affecting tourism.^[127]

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.^[128] Tourism Malaysia aims to market Malaysia as a premier destination of excellence in the region.^{[citation needed]}

Science and technology

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 also have science departments. Training in scientific areas was promoted during the 1970s and 1980s. From 1987–1997 research and development used 0.24% of GNP, and in 1998 high-tech exports made up 54% of Malaysia's manufactured exports.^[129] The country is one of the world's largest exporters of semiconductor devices, electrical goods, and information and communication technology products.^[21]

In 2002 the Malaysian National Space Agency (Angkasa) was formed to deal with all of Malaysia's activities in space, and to promote space education and space experiments. It is focused on developing the "RazakSAT" satellite, which is a remote sensing satellite with CCD cameras.^[130] 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 part of a multi-billion dollar purchase of 18 Russian Sukhoi Su-30MKM fighter jets by the Royal Malaysian Air Force.^[131]

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 try to promote this sector and its competitiveness, actively marketing the defence industry. One way it does this is through the Langkawi International Maritime and Aerospace Exhibition, one of the largest defence and civil showcases in the Asia Pacific, regularly attended by over 500 companies.^[132] The Malaysian Armed Forces relies heavily on local military technology and high-tech weapons systems designed and manufactured by foreign countries.

Others

Knowledge-based services are expanding in Malaysia.^[108] Malaysia is being promoted as a destination for Medical tourism, regionally and internationally.^[133]

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External links

Mahathir bin Mohamad's interview with the PBS series "Commanding Heights" on the subject of East Asian economic development.
Key Statistics for Malaysia^{[dead link]}
Economic Outlook by Economist Intelligence Unit
Banking in Malaysia
World Bank Summary Trade Statistics Malaysia
Tariffs applied by Malaysia as provided by ITC's Market Access Map, an online database of customs tariffs and market requirements.
Malaysia Largest Online Price Comparison Web Site

[auto-1] "Report for Selected Countries and Subjects". Retrieved 26 October 2014.

[auto1-2] "Malaysia's GDP grows 6 percent in 2014". Retrieved 12 February 2014.

[cia.gov-3] "The World Factbook". Retrieved 3 March 2015.

[4] "Export Partners of Malaysia". The World Factbook. 2012. Retrieved 23 July 2013.

[5] "Import Partners of Malaysia". The World Factbook. 2012. Retrieved 23 July 2013.

[6] "World Economic Outlook Database, October 2012". Retrieved 26 October 2014.

[7] "Sovereigns rating list". Standard & Poor's. Retrieved 26 May 2011.

[guardian-8] Rogers, Simon; Sedghi, Ami (15 April 2011). "How Fitch, Moody's and S&P rate each country's credit rating". The Guardian. London. Retrieved 31 May 2011.

[9] "Anwar: Fitch downgrade will cost M'sia BILLIONS in extra costs, aggravate Ringgit slide". Malaysia Chronicle. 13 August 2013. Retrieved 7 October 2013.

[10] "International Reserves and Foreign Currency Liquidity - MALAYSIA". Retrieved 3 March 2015.

[11] Boulton, WilliaM; Pecht, Michael; Tucker, William; Wennberg, Sam (May 1997). "Electronics Manufacturing in the Pacific Rim, World Technology Evaluation Center, Chapter 4: Malaysia". Wtec.org. Retrieved 1 November 2010.

[12] "Malaysia, A Statist Economy". Infernalramblings.com. Retrieved 1 November 2010.

[13] "WEF". Retrieved 13 February 2015.

[14] "Report for Selected Countries and Subjects (Malaysia)". International Monetary Fund. Retrieved 19 October 2014.

[15] "COUNTRY COMPARISON :: GDP (PURCHASING POWER PARITY)". CIA. Retrieved 26 October 2010.

[Globalization-16] Paweł Bożyk (2006). "Newly Industrialized Countries". Globalization and the Transformation of Foreign Economic Policy. Ashgate Publishing, Ltd. p. 164. ISBN 0-7546-4638-6.

[Principles-17] N. Gregory Mankiw (2007). Principles of Economics (4th ed.). ISBN 0-324-22472-9.

[18] The Prime Minister's Office. The Security of the Straits of Malacca and its implications to the Southeast Asia regional security^{[dead link]}. Retrieved 26 November 2007.

[19] American University. Tin Mining in Malaysia^{[dead link]}. Retrieved 14 November 2007.

[20] Bank Negara. BNM National Summary Data Page. Retrieved 8 November 2007

[state.gov-21] "Malaysia". State.gov. 14 July 2010. Retrieved 14 September 2010.

[22] Mills, Greg (18 March 2011). "Malaysia's capital market crosses RM2tril". TheStar Business.

[Mahathir's_Speech-23] Mahathir Bin Mohamad (17 November 2008). "The Way Forward". Prime Minister's Office.

[24] Malaysia may be developed nation by 2018, says minister

[25] Wong Wei-Shen (7 May 2012). "Malaysia got what it takes to be developed nation". The Star. Archived from the original on 3 July 2014. Retrieved 25 June 2013. {{cite web}}: Unknown parameter |deadurl= ignored (|url-status= suggested) (help)

[26] "22-07-2005: Ringgit depeg not likely to have immediate impact on sovereign, banks, corporates". The Edge.

[27] Liau Y-Sing (19 March 2007). "Malaysia says offshore ringgit trade not needed". Reuters.

[28] "EPU:New Economic Policy". Economic Planning Unit, Prime Ministers Department Malaysia. Retrieved 28 July 2008.

[econ_stats_1970-29] "Jabatan Penerangan Rakyat: Dasar Ekonomy Baru" (in Malay). Ministry of Information Malaysia. Archived from the original on 23 June 2008. Retrieved 28 July 2008.

[30] Jomo K.S. (1 September 2004). "The New Economic Policy and Interethnic Relations in Malaysia". United Nations Research Institute for Social Development. Retrieved 28 July 2008.

[31] Chau, Amy. "Minority rule, majority hate". Asia Times. Retrieved 15 November 2010.

[32] Sharmila Ganapathy (13 November 2008). "Govt relaxes bumiputera quota for public-listed companies". The Edge.

[33] Vasantha Ganesan (16 February 2009). "New retail ruling soon". Business Times.

[34] "Govt reaffirms Bumiputra corporate equity ownership at 18.9%". The Sun, Prime Minister's Department. 13 November 2006. Retrieved 30 July 2008.^{[dead link]}

[35] Dr. Richard Leete (27 November 2007), Ending Poverty and Rising Inequality in Malaysia (PDF), United Nations Development Program, p. 4, retrieved 30 July 2008 ^{[dead link]}

[36] Thomas Fuller (5 January 2001). "Criticism of 30-Year-Old Affirmative-Action Policy Grows in Malaysia".

[37] Anwar Ibrahim. "A Malaysian Economic Adgenda" (PDF). Parti Keadilan Rakyat. Retrieved 28 July 2008. ^{[dead link]}

[38] Niluksi Koswanage (11 March 2008). "Malaysia opposition takes aim at affirmative action". Reuters.

[39] "Bumi proviso removed to rope in more investments, says Najib". The Star. 22 April 2009.

[40] "Foreign ownership in stockbroking firms raised to 70pc". New Straits Time. Bernama. 30 June 2009.^{[dead link]}

[41] "Malaysia 2007 fuel subsidies at RM40b: PM".^{[dead link]}

[42] Economic numbers bode well for M'sia. Business Times. 22 September 2009

[43] "Establishment Post". Retrieved 4 April 2015.

[khazanah_size-44] "Sovereign Wealth Fund Acquisitions and Other Foreign Government Investments in the United States: Assessing the Economic and National Security Implications" (PDF).

[45] "Khazanah Nasional Berhad: About". Khazanah Nasional.

[46] "Khazanah Nasional: Portfolio". Khazanah Nasional Berhad.

[epf_overseas-47] "EPF to double overseas investments". Business Times.^{[dead link]}

[48] "EPF's Investment Income Increases To RM3.6 Billion in Q2". Kumpulan Wang Simpanan Pekerja.^{[dead link]}

[49] "EPF's Fund Size Rises To RM312 Billion". Kumpulan Wang Simpanan Pekerja.^{[dead link]}

[50] "Eligibility to Invest". Amanah Saham Nasional Berhad. Retrieved 9 June 2008.

[51] "PNB targets 10% growth in fund size this year". The Star. 10 April 2008. Retrieved 9 June 2008.

[52] "Shareholder Listing". Retrieved 9 June 2008.

[53] "List of 30 Largest Shareholders" (PDF). Maxis.^{[dead link]}

[54] "About TM International: Shareholding Structure". TM International Berhad. Retrieved 9 June 2008.

[55] "Terengganu Investment Authority". Sovereign Wealth Funds News. 28 December 2008. Retrieved 15 May 2009.

[planbook-56] Asan Ali Golam. "Growth, Structural Change, and Regional Inequality in Malaysia". p. 67.

[57] "Investment in Malaysia". Innovasjon Norge.^{[dead link]}

[58] "Highlights of IMP3". Ministry of International Trade and Industry. Retrieved 15 April 2008. ^{[dead link]}

[59] "Economic Planning Unit History". Economic Planning Unit.

[60] "About Economic Planning Unit". Economic Planning Unit.

[61] "Khanazah Nasional portfolio companies". Khazanah Nasional.

[62] "Government keen to sell stake in Malaysia Airlines, says CEO". Associated Press.

[63] "Money Roundup by Business Times". Business Times.^{[dead link]}

[64] Ethan Kaplan and Dani Rodrik. "Did the Malaysia Capital Controls Work?" (PDF).^{[dead link]}

[65] "Malaysia's Economic Growth Moderating But Improvement in Second Half Expected" (PDF). Asian Strategy & Leadership Institute.

[66] "Malaysia may liberalize ringgit if forex market 'vibrant'". Reuters.

[67] Rupe Damodaron (13 September 2010). "All eyes on ringgit after PM's remarks". Business Times Malaysia.^{[dead link]}

[68] "TED Case Studies: MALAYTIN: Historical Tin Mining in Malaysia". American.edu. Retrieved 27 October 2010.^{[dead link]}

[69] "Ebola outbreak: Malaysia sends W Africa medical gloves". BBC News. Retrieved 15 September 2014.

[70] "Mission Statement: Oil and Gas Equipment and Services Trade Mission – Kuala Lumpur, Singapore, Hanoi". International Trade Administration. Retrieved 8 September 2010.

[71] "Petronas 1H profit up 7.7% to RM26.6b". Retrieved 26 October 2014.

[72] "Malaysian Natural Gas Reserves". Gas Malaysia. Retrieved 21 June 2010.

[73] "Oil". U.S. Energy Information Administration. Retrieved 21 June 2010. {{cite web}}: |first= missing |last= (help)^{[dead link]}

[74] "Oil royalty rate is outdated, govt told". Daily Express.

[75] "Ranking of economies - Doing Business - World Bank Group". Retrieved 26 October 2014.

[76] "Economy Rankings". The World Bank. Retrieved 4 October 2012.

[77] "Malaysia ranks 4th for investor protection". Business Times.^{[dead link]}

[78] Permudah Background^{[dead link]}

[79] Permudah Highlights^{[dead link]}

[80] Malaysia targets to be in top 10 in World Bank survey^{[dead link]}

[81] "Malaysia ranks 20th in the world for ease of doing business, reveals World Bank report". New Straits Time. 10 September 2008.^{[dead link]}

[open-82] Cite error: The named reference open was invoked but never defined (see the help page).

[83] ttp://www.chinadaily.com.cn/business/2014-01/21/content_17247588.htm

[84] ttp://www.chinadaily.com.cn/business/2014-06/01/content_17556223.htm

[85] "Speeches by Prime Minister Lee Hsien Loong and Malaysian Prime Minister Najib Tun Razak at the official dinner at the Istana on 22 May 2009". Retrieved 26 October 2014.

[86] ttp://www.singstat.gov.sg/statistics/visualising_data/visualiser/trade/trade.html

[87] "EU hopes to wrap up FTA with Asean by end-2009". Business Times.^{[dead link]}

[88] Rupa Damodaran. "Malaysia to take proactive approach to FTAs". Business Times. Retrieved 28 April 2008. ^{[dead link]}

[89] Rupa Damodaran (31 July 2010). "Malaysia seeks TPP members' nod to join pact". Business Times Malaysia.^{[dead link]}

[90] "Trans-Pacific Partnership talks to include KL". Business Times Malaysia. 6 October 2010.^{[dead link]}

[91] "Progress Continues in Trans-Pacific Partnership Talks - Office of the United States Trade Representative". Retrieved 26 October 2014.

[92] "Trans-Pacific Partnership (TPP): 19th Round of Negotiations Set for Bandar Seri Begawan, Brunei—August 23–30, 2013 - Office of the United States Trade Representative". Retrieved 26 October 2014.

[FTA-93] Malaysia, Chile to start free trade talks Channel NewsAsia

[94] "Japan-Malaysia Economic Partnership Agreement". Retrieved 26 October 2014.

[95] "Japan, Malaysia FTA takes effect". Retrieved 26 October 2014.

[96] Hamisah Hamid. "Malaysia expects investment influx". Business Times. Retrieved 15 April 2008. ^{[dead link]}

[97] "Malaysia Business & Finance News, Stock Updates - The Star Online". Retrieved 3 March 2015.

[98] "Malaysia – New Zealand Free Trade Agreement, NZ Ministry of Foreign Affairs".

[99] Mohd Arshi Mat Daud (25 July 2008). "Europe and Hong Kong keen on FTA with Malaysia". Bernama / New Straits Times. Retrieved 25 July 2008. ^{[dead link]}

[100] "Bernama news: RM4.2 Billion of FDI From Jan–May in 2009".

[101] "2012 Top 25 Foreign Direct Investment (FDI) Confidence Index Countries". 1-million-dollar-blog. 8 December 2011. Retrieved 3 March 2015.

[102] Foreign Direct Investment Confidence Index – A.T. Kearney

[103] MIDA. "Functions of MIDA". Retrieved 5 May 2008.^{[dead link]}

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 }}
-[[Malaysia]] has a [[newly industrialised country|newly industrialised]] [[market economy]], which is relatively [[open economy|open]] and state-oriented.<ref>{{cite web|last = Boulton | first = WilliaM |last2 = Pecht |first2 = Michael |last3 = Tucker |first3 = William |last4 = Wennberg |first4 = Sam |url=http://www.wtec.org/loyola/em/04_07.htm |title=Electronics Manufacturing in the Pacific Rim, World Technology Evaluation Center, Chapter 4: Malaysia |publisher=Wtec.org |date=May 1997 |accessdate=1 November 2010}}</ref><ref>{{cite web|url=http://www.infernalramblings.com/articles/Malaysian_Economy/436/ |title=Malaysia, A Statist Economy |publisher=Infernalramblings.com |accessdate=1 November 2010}}</ref> The state plays a significant, but declining role in guiding economic activity through macroeconomic plans. Malaysia's economy in 2014-2015 was one of the most competitive in Asia, ranking 6th in Asia and 20th in the world, higher than countries like [[Australia]], [[France]] and [[South Korea]].<ref>{{cite web | url=http://reports.weforum.org/global-competitiveness-report-2014-2015/rankings/ | title=WEF | accessdate=13 February 2015}}</ref> In 2014, Malaysia's economy grew 6%, the second highest growth in ASEAN behind Philippines' growth of 6.1%.<ref name="auto1"/>The economy of Malaysia (GDP PPP) in 2014 was $746.821&nbsp;billion, the third largest in ASEAN behind more populous [[Indonesia]] and [[Thailand]] and the [[List of countries by GDP (PPP)|28th largest in the world]].<ref>{{cite web|url=http://www.imf.org/external/pubs/ft/weo/2014/02/weodata/weorept.aspx?sy=2012&ey=2019&scsm=1&ssd=1&sort=country&ds=.&br=1&pr1.x=15&pr1.y=5&c=548&s=NGDPD%2CNGDPDPC%2CPPPGDP%2CPPPPC&grp=0&a=|title=Report for Selected Countries and Subjects (Malaysia)|publisher=International Monetary Fund|accessdate=19 October 2014}}</ref> In 2009, the PPP GDP was US$383.6 billion, about half the 2014 amount, and the PPP per capita GDP was US$8,100, about one third the 2014 amount. .<ref>{{cite web|url=https://www.cia.gov/library/publications/the-world-factbook/rankorder/2001rank.html |title=COUNTRY COMPARISON :: GDP (PURCHASING POWER PARITY) |publisher=CIA |accessdate=26 October 2010}}</ref>
+[[Malaysia]] has a [[newly industrialised country|newly industrialised]] [[market economy]], which is relatively [[open economy|open]] and state-oriented. Malaysia's GDP is the third largest in [[Southeast Asia]], after the much more populous [[Indonesia]] and [[Thailand]], and also the third highest by GDP per capita values, after the [[City states|city-states]] of [[Singapore]] and [[Brunei]].<ref>{{cite web|last = Boulton | first = WilliaM |last2 = Pecht |first2 = Michael |last3 = Tucker |first3 = William |last4 = Wennberg |first4 = Sam |url=http://www.wtec.org/loyola/em/04_07.htm |title=Electronics Manufacturing in the Pacific Rim, World Technology Evaluation Center, Chapter 4: Malaysia |publisher=Wtec.org |date=May 1997 |accessdate=1 November 2010}}</ref><ref>{{cite web|url=http://www.infernalramblings.com/articles/Malaysian_Economy/436/ |title=Malaysia, A Statist Economy |publisher=Infernalramblings.com |accessdate=1 November 2010}}</ref> The state plays a significant, but declining role in guiding economic activity through macroeconomic plans. Malaysia's economy in 2014-2015 was one of the most competitive in Asia, ranking 6th in Asia and 20th in the world, higher than countries like [[Australia]], [[France]] and [[South Korea]].<ref>{{cite web | url=http://reports.weforum.org/global-competitiveness-report-2014-2015/rankings/ | title=WEF | accessdate=13 February 2015}}</ref>
+==Background==
-The Southeast Asian country experienced an economic boom and underwent rapid development during the late 20th century and has GDP per capita (nominal) of US$11,062.043 today, to be considered a [[newly industrialised country]].<ref name="cia.gov"/><ref name="Globalization">{{cite book|title=Globalization and the Transformation of Foreign Economic Policy|author=Paweł Bożyk|chapter=Newly Industrialized Countries|page=164|publisher=Ashgate Publishing, Ltd|year=2006|isbn=0-7546-4638-6}}</ref><ref name=Principles>{{cite book|title=Principles of Economics|author=N. Gregory Mankiw|year=2007|edition=4th|isbn=0-324-22472-9}}</ref> On the income distribution, there are 5.8 million households in 2007. Of that, 8.6% have a 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 households earned between RM3,001 and RM4,000 and 8.6% between RM4,001 and RM5,000. Finally, around 15.8% of the households have an income of between RM5,001 and RM10,000 and 4.9% have an income of RM10,000 and above.<ref>{{cite news| title= Half of M'sian households earn below RM3,000 a month| url= http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_af703730-cb73c03a-1b092820-e338574e| work=The Edge| accessdate=10 July 2008| date=10 July 2008| author=Pauline Puah |archiveurl = http://web.archive.org/web/20080711130341/http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_af703730-cb73c03a-1b092820-e338574e <!-- Bot retrieved archive --> |archivedate = 11 July 2008}}</ref>
+{{see also|Economic history of Malaysia}}
+In 2014, Malaysia's economy grew 6%, the second highest growth in ASEAN behind Philippines' growth of 6.1%.<ref name="auto1"/>The economy of Malaysia (GDP PPP) in 2014 was $746.821&nbsp;billion, the third largest in ASEAN behind more populous [[Indonesia]] and [[Thailand]] and the [[List of countries by GDP (PPP)|28th largest in the world]].<ref>{{cite web|url=http://www.imf.org/external/pubs/ft/weo/2014/02/weodata/weorept.aspx?sy=2012&ey=2019&scsm=1&ssd=1&sort=country&ds=.&br=1&pr1.x=15&pr1.y=5&c=548&s=NGDPD%2CNGDPDPC%2CPPPGDP%2CPPPPC&grp=0&a=|title=Report for Selected Countries and Subjects (Malaysia)|publisher=International Monetary Fund|accessdate=19 October 2014}}</ref> In 2009, the PPP GDP was US$383.6 billion, about half the 2014 amount, and the PPP per capita GDP was US$8,100, about one third the 2014 amount. .<ref>{{cite web|url=https://www.cia.gov/library/publications/the-world-factbook/rankorder/2001rank.html |title=COUNTRY COMPARISON :: GDP (PURCHASING POWER PARITY) |publisher=CIA |accessdate=26 October 2010}}</ref>
+The Southeast Asian country experienced an economic boom and underwent rapid development during the late 20th century and has GDP per capita (nominal) of US$11,062.043 in 2014, to be considered a [[newly industrialised country]].<ref name="cia.gov"/><ref name="Globalization">{{cite book|title=Globalization and the Transformation of Foreign Economic Policy|author=Paweł Bożyk|chapter=Newly Industrialized Countries|page=164|publisher=Ashgate Publishing, Ltd|year=2006|isbn=0-7546-4638-6}}</ref><ref name=Principles>{{cite book|title=Principles of Economics|author=N. Gregory Mankiw|year=2007|edition=4th|isbn=0-324-22472-9}}</ref>
+In 2014, the Household Income Survey undertaken by the government indicated that there were 7 million households in Malaysia, with an average of 4.3 members in each household. The average household income of Malaysia increased by 18% to RM5,900 a month, compared to RM5,000 in 2012.
-As one of three countries that control the [[Strait of Malacca]], international trade plays a large role in its economy.<ref>The Prime Minister's Office. [http://www.pmo.gov.my/WebNotesApp/tpmmain.nsf/10542456114e04a748256c36001576f6/09ee4377fd049191482572aa00144782?OpenDocument The Security of the Straits of Malacca and its implications to the Southeast Asia regional security]{{dead link|date=September 2013}}. Retrieved 26 November 2007.</ref> At one time, it was the largest producer of [[tin]], rubber and [[palm oil]] in the world.<ref>[[American University]]. [http://www.american.edu/TED/tin.htm Tin Mining in Malaysia]{{dead link|date=September 2013}}. Retrieved 14 November 2007.</ref>
+As one of three countries that control the [[Strait of Malacca]], international trade plays a large role in Malaysia's economy.<ref>The Prime Minister's Office. [http://www.pmo.gov.my/WebNotesApp/tpmmain.nsf/10542456114e04a748256c36001576f6/09ee4377fd049191482572aa00144782?OpenDocument The Security of the Straits of Malacca and its implications to the Southeast Asia regional security]{{dead link|date=September 2013}}. Retrieved 26 November 2007.</ref> At one time, it was the largest producer of [[tin]], rubber and [[palm oil]] in the world.<ref>[[American University]]. [http://www.american.edu/TED/tin.htm Tin Mining in Malaysia]{{dead link|date=September 2013}}. Retrieved 14 November 2007.</ref>
-Manufacturing has a large influence in the country's economy.<ref>[[Bank Negara Malaysia|Bank Negara]]. [http://www.bnm.gov.my/index.php?ch=111 BNM National Summary Data Page]. Retrieved 8 November 2007</ref> Malaysia is the world's largest Islamic banking and financial centre.
+Manufacturing has a large influence in the country's economy, accounting for over 40% of the GDP.<ref>[[Bank Negara Malaysia|Bank Negara]]. [http://www.bnm.gov.my/index.php?ch=111 BNM National Summary Data Page]. Retrieved 8 November 2007</ref> Malaysia is also the world's largest Islamic banking and financial centre.
 Since it [[Malaysia Agreement|was formed]] in 1963, Malaysia's economic performance has been one of Asia's best. Real gross domestic product (GDP) grew by an average of 6.5% per year from 1957 to 2005. Performance peaked in the early 1980s through the mid-1990s, as the economy experienced sustained rapid growth averaging almost 8% annually. High levels of foreign and domestic private investment played a significant role as the economy diversified and modernised. Once heavily dependent on primary products such as rubber and tin, Malaysia today is a middle-income country with a multi-sector economy based on services and manufacturing. Malaysia is one of the world's largest exporters of semiconductor components and devices, electrical goods, solar panels, and information and communication technology ([[Information and communication technologies|ICT]]) products.<ref name="state.gov">{{cite web|url=http://www.state.gov/r/pa/ei/bgn/2777.htm |title=Malaysia |publisher=State.gov |date=14 July 2010 |accessdate=14 September 2010}}</ref>
@@ Line 61: / Line 67: @@
 According to a report of [[HSBC]], Malaysia will become the world's 21st largest economy by 2050, with a GDP of $1.2 trillion (Year 2000 dollars) and a GDP per capita  of $29,247 (Year 2000 dollars).  The report also says "The electronic equipment, petroleum, and liquefied natural gas producer will see a substantial increase in income per capita. Malaysian life expectancy, relatively high level of schooling, and above average fertility rate will help in its rapid expansion." Viktor Shvets, the managing director of [[Credit Suisse]], has said "Malaysia has all the right ingredients to become a developed nation."<ref>{{cite web|url=http://thestar.com.my/news/story.asp?file=/2012/5/7/business/11241892&sec=|title=Malaysia got what it takes to be developed nation|author=Wong Wei-Shen|publisher=The Star|date=7 May 2012|accessdate=25 June 2013|archiveurl=http://web.archive.org/web/20140703075343/http://www.thestar.com.my/story.aspx/?file=%2f2012%2f5%2f7%2fbusiness%2f11241892&sec=|archivedate=3 July 2014|deadurl=no}}</ref>
-==Background==
-===Early and colonial history===
-The [[Malay Peninsula]] and indeed Southeast Asia has been a centre for trade for centuries. Various items such as [[porcelain]] and spice were actively traded even before [[Sultanate of Malacca|Malacca]] and Singapore rose to prominence. The Malacca Sultanate controlled the [[Straits of Malacca]] from its founding in 1402 to the 1511 invasion by Portugal. All the trade in the Straits, and especially the [[spices]] from the [[Sulawesi|Celebes]] and the [[Maluku Islands|Moluccas]], moved under its protection and through its markets.<ref>{{cite news| title=Islam and the Sultanate of Malacca 1402–1511 | url= http://www.ualberta.ca/~vmitchel/rev7.html| accessdate=23 July 2008}}</ref>
-In the 17th century, [[porcelain]] and spices were found in several [[Malay states]] and were actively traded. Large deposits of [[tin]] were found in several [[Malay states]]. Later, as the [[British Empire|British]] started to take over as administrators of [[British Malaya|Malaya]], rubber and palm oil trees were introduced for commercial purposes. {{cn|date=August 2014}} Instead of relying on the local Malays as a source of labour, the British brought in Chinese and Indians to work in the mines and plantations and provide professional expertise. Although many of them returned to their respective home countries after their agreed tenure ended, some remained in Malaysia and settled permanently. {{cn|date=August 2014}} These three commodities along with other raw materials firmly set Malaysia's economic tempo well into the mid-20th century. As Malaya moved towards independence, the government began implementing economic five-year plans, beginning with the [[First Malayan Five Year Plan]] in 1955. Upon the establishment of Malaysia, the plans were re-titled and renumbered, beginning with the [[First Malaysia Plan]] in 1965.
-===Post-independence===
-In the 1970 s, Malaysia began to imitate the four [[Four Asian Tigers|Asian Tiger]] economies (South Korea, Taiwan, the then British Crown Colony of Hong Kong, and Singapore) and committed itself to a transition from being reliant on mining and agriculture to an economy that depends more on manufacturing. In the 1970s, the predominantly mining and agricultural based Malaysian economy began a transition towards a more multi-sector economy. Since the 1980s the industrial sector has led Malaysia's growth.{{citation needed|date=January 2012}} High levels of investment played a significant role in this.<ref name="state.gov"/> With Japanese investment, heavy industries flourished and in a matter of years, Malaysian exports became the country's primary growth engine.{{Citation needed|date=May 2009}} Malaysia consistently achieved more than 7% GDP growth along with low inflation in the 1980s and the 1990s.<ref>{{cite web|url=http://www.123independenceday.com/malaysia/economy.html|title=Economy of Malaysia|publisher=123independenceday.com|accessdate=21 June 2010}}</ref>
-Central planning has been a major factor in the Malaysian economy, as government expenditure was often used to stimulate the economy. Since 1955, with the commencement of the [[First Malayan Five Year Plan]], the government has used these plans to intervene in the economy to achieve such goals as redistribution of wealth and investment in, for instance, infrastructure projects.<ref>{{cite news|last=Salleh |first=Awang |url=http://kampusmudah.com/index.php/blog/101-malaysian-economy |title=The Impact of Technological Development On the Political, Economic and Social Life In Malaysia  |publisher=Universiti Utara Malaysia|date= 6 December 1985}}</ref>
-A legacy of the British colonial system was the division of Malaysians into three groups according to ethnicity. The Malays were concentrated in their traditional villages, focusing mainly on agricultural activities, while the Chinese dominated Malaysian commerce. Educated Indians took up professional roles such as those of doctors or lawyers, while the less better-off worked the plantations.<ref>Abdullah, Asma & Pedersen, Paul B. (2003). ''Understanding Multicultural Malaysia'', p. 44. Pearson Malaysia. ISBN 983-2639-21-2.</ref><ref>Rashid, Rehman (1993). ''A Malaysian Journey'', p. 28. Self-published. ISBN 983-99819-1-9.</ref> Chinese businesses in Malaysia developed as part of the larger [[bamboo network]], a network of [[overseas Chinese]] businesses operating in the markets of Southeast Asia that share common family and cultural ties.<ref name="Weidenbaum">{{cite book|author=Murray L Weidenbaum|title=The Bamboo Network: How Expatriate Chinese Entrepreneurs are Creating a New Economic Superpower in Asia|url=http://books.google.com/books?id=pcRlgZttsMUC|date=1 January 1996|publisher=Martin Kessler Books, Free Press|isbn=978-0-684-82289-1|pages=4–8}}</ref> The [[Reid Commission]] which drafted the [[Malaysian Constitution]] made a provision for limited [[affirmative action]] through [[Article 153]], which gave the Malays special privileges, such as 60% of university entrance (quota). However, after the [[May 13 incident]] of racial rioting in the federal capital of [[Kuala Lumpur]], the government initiated more aggressive programmes aimed at actively establishing a Malay entrepreneurial class through direct intervention in the economy, aimed at alleviating poverty. This was done with the controversial [[Malaysian New Economic Policy|New Economic Policy]] (NEP).<ref name="New Economic Policy">[[Jomo Kwame Sundaram]]. [[United Nations Research Institute For Social Development|UNRISD]] [http://www.unrisd.org/80256B3C005BCCF9/(httpPublications)/A20E9AD6E5BA919780256B6D0057896B?OpenDocument&panel=seriespapers The New Economic Policy and Interethnic Relations in Malaysia].</ref> Its main objective was the elimination of the association of race with economic function, and the first five-year plan to begin implementing the NEP was the [[Second Malaysia Plan]]. The success or failure of the NEP is the subject of much debate, although it was officially retired in 1990 and replaced by the [[National Development Policy]] (NDP).
-Current GDP per capita grew 31% in the Sixties and 358% in the Seventies, but this proved unsustainable and growth scaled back sharply to 36% in the Eighties. It rose again to 59% in the Nineties led primarily by export-oriented industries.<ref>{{cite news| url=http://earthtrends.wri.org/text/economics-business/variable-638.html | title=Economics, Business, and the Environment – GDP: GDP per capita, current US dollars| publisher= Earth Trends}}{{dead link|date=September 2013}}</ref> This increase in GDP was brought about due to a shift from the traditional agricultural and resource based economy to one based on manufactured goods. From 1988 to 1996, Malaysia's economy expanded at 8 per cent, the second fastest after China, resulting in manufactured goods such as microchips and semiconductors making up 80 per cent of exports. Per capita income doubled from 1990 to 1996<!--to US$3900 of 1996 value-->. Infrastructure projects were greatly increased in this time. Other countries looked to Malaysia at the time as an example for economic reform.<ref name="Bound for Glory">{{cite news|author=Anthony Spaeth |archiveurl=http://web.archive.org/web/20090317235536/http://www.time.com/time/asia/2003/mahathir/mahathir961209.html |archivedate=17 March 2009 |url=http://www.time.com/time/asia/2003/mahathir/mahathir961209.html |title=Bound for Glory |work=Time |date=9 December 1996 |accessdate=23 August 2011}}</ref>
-The rate of [[poverty in Malaysia]] also fell dramatically over the years. However, its precipitous drop has been questioned by critics who suggest that the poverty line has been drawn at an unreasonably low level.<ref>{{cite book |last=Musa |first=M. Bakri |title=Towards A Competitive Malaysia |year=2007 |publisher=Strategic Information and Research Development Centre |location=Petaling Jaya |isbn=978-983-3782-20-8|page=124 }}</ref> The rapid economic boom led to a variety of supply problems. Labour shortages soon resulted in an influx of millions of foreign workers, many illegal. Cash-rich [[public limited company|PLCs]] and consortia of banks eager to benefit from increased and rapid development began large infrastructure projects. {{cn|date=August 2014}}
-===Tiger economy===
-====Macro-economic trend====
-This is a chart of trend of gross domestic product of Malaysia at market prices<ref>{{cite news | url =http://www.imf.org/external/pubs/ft/weo/2006/01/data/dbcselm.cfm?G=2001 | title= World Economic Outlook Database}}</ref> estimated by the International Monetary Fund with figures in millions of Malaysian Ringgit.
-{| class="toccolours sortable" border="1" cellpadding="3" style="border-collapse:collapse; width:40em"
-|-
-! Year || GDP<br>(in millions) 35567980|| Exchange<br>(1 USD to MYR) || Inflation Index<br>(2005=100) || Nominal Per Capita GDP<br>(as % of USA) || PPP Per Capita GDP<br>(as % of USA)
-|-
-| style="text-align:center;"|'''1980''' || style="text-align:right;"|54,285 || style="text-align:center;"|2.17 || style="text-align:center;"|47 || style="text-align:center;"|14.78||19.19
-|-
-| style="text-align:center;"|'''1985''' || style="text-align:right;"|78,890 || style="text-align:center;"|2.48 || style="text-align:center;"|60 || style="text-align:center;"|11.44||19.33
-|-
-| style="text-align:center;"|'''1990''' || style="text-align:right;"|119,082 || style="text-align:center;"|2.70 || style="text-align:center;"|65 || style="text-align:center;"|10.47||20.87
-|-
-| style="text-align:center;"|'''1995''' || style="text-align:right;"|222,473 || style="text-align:center;"|2.50 || style="text-align:center;"|79 || style="text-align:center;"|15.69||27.02
-|-
-| style="text-align:center;"|'''2000''' || style="text-align:right;"|343,216 || style="text-align:center;"|3.80 || style="text-align:center;"|92 || style="text-align:center;"|11.47||26.01
-|-
-| style="text-align:center;"|'''2005''' || style="text-align:right;"|494,544 || style="text-align:center;"|3.78 || style="text-align:center;"|100 || style="text-align:center;"|12.67||26.67
-|-
-| style="text-align:center;"|'''2010''' || style="text-align:right;"|765,966 || style="text-align:center;"|3.04 || style="text-align:center;"|113 || style="text-align:center;"|17.81||31.03
-|}
-For purchasing power parity comparisons, the US Dollar is exchanged at 1.71 Ringgit only. Mean wages were $6.95 per manhour in 2009.
-From 1988 to 1997, the economy experienced a period of broad diversification and sustained rapid growth averaging 9% annually. {{cn|date=January 2015}}
-By 1999, nominal per capita GDP had reached $3,238. 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 30% in 1999, while agriculture and mining which together had accounted for 42.7% of GDP in 1970, dropped to 9.3% and 7.3%, respectively, in 1999. {{cn|date=January 2015}} Manufacturing accounted for 30% of GDP (1999). Major products include electronic components – Malaysia is one of the world's largest exporters of [[semiconductor devices]] – electrical goods and appliances. {{cn|date=January 2015}}
-During the same period, the government tried to eradicate poverty with a controversial race-conscious positive program called [[New Economic Policy (Malaysia)|New Economic Policy]] (NEP). First established in 1971 following race riots, commonly known in Malaysia as the [[May 13 Incident]], it sought to eradicate poverty and end the identification of economic function with ethnicity. In particular, it was designed to improve the distribution of wealth among the country's population.. The NEP ostensibly ended in 1991.
-The influx of foreign investment led to the [[Bursa Malaysia|KLSE]] [[index (economics)|Composite index]] trading above 1,300 in 1994 and the Ringgit trading above 2.5 in 1997. At various times the KLSE was the most active exchange in the world, with trading volume exceeding even the [[New York Stock Exchange|NYSE]]. The stock [[market capitalisation]] of listed companies in Malaysia was valued at $181,236 million in 2005 by the [[World Bank]].<ref>[http://web.worldbank.org/WBSITE/EXTERNAL/DATASTATISTICS/0,,contentMDK:20394793~menuPK:1192714~pagePK:64133150~piPK:64133175~theSitePK:239419,00.html Data – Finance<!-- Bot generated title -->]{{dead link|date=September 2013}}</ref>
-Some of the more visible projects from that period are [[Putrajaya]], a new international airport ([[Kuala Lumpur International Airport]]), a [[hydroelectric dam]] (Bakun dam), the [[Petronas Towers]] and the [[Multimedia Super Corridor]]. Proposals that were eventually cancelled include the 95&nbsp;km [[Sumatra]]–Malaysia bridge (would have been world's longest), the Mega International Sea and Air port on reclaimed land in [[Kedah]] (would have been world's biggest) and the KL Linear City (would have been the world's longest mall and the world's first city built over a river).
-Concerns were raised during the time about the sustainability of the rapid growth and the ballooning current account. The mainstream opinion prevalent at that time was that the deficit was temporary and would reverse once imported equipment started producing for export. In spite of that, measures were taken to moderate growth especially when it threatened to overheat into the double digits. The main target was asset prices, and restrictions were further tightened on foreign ownership of local assets. Exposure of local banks to real estate loans were also capped at 20%.
-As was widely expected, the current account deficit did narrow steadily, year to year, from 9% to 5% of GDP.
-Malaysia has the largest operational stock of [[industrial robot]]s in the [[Muslim world]].<ref>[http://www.ifrstat.org/downloads/2006_Executive_Summary(1).pdf]{{dead link|date=September 2013}}</ref>
-===Asian financial crisis and recovery===
-{{further|Asian financial crisis}}
-The year 1997 saw drastic changes in Malaysia. There was speculative short-selling of the Malaysian currency, the [[ringgit]]. [[Foreign direct investment]] fell at an alarming rate and, as capital flowed out of the country, the value of the ringgit dropped from MYR 2.50 per USD to, at one point, MYR 4.80 per USD.The [[Kuala Lumpur Stock Exchange]]'s composite index fell from approximately 1300 to nearly merely 400 points in a few short weeks. After the controversial sacking of finance minister [[Anwar Ibrahim]], a National Economic Action Council was formed to deal with the monetary crisis. [[Bank Negara Malaysia|Bank Negara]] imposed [[capital control]]s and [[fixed exchange rate|pegged]] the Malaysian ringgit at 3.80 to the US dollar. In addition, it also fully suspended the trading of CLOB (Central Limit Order Book) counters, indefinitely freezing approximately US$4.47 billion worth of shares and affecting 172,000 investors, most of them Singaporeans.<ref>{{cite web|url=http://www.atimes.com/se-asia/BI02Ae05.html|title=INVESTMENT IN MALAYSIA|work=Asia Times|accessdate=10 December 2012}}</ref><ref>{{cite news|url=http://www.nytimes.com/2000/01/01/business/international-business-malaysia-extends-deadline-in-singapore-exchange-dispute.html|title=INTERNATIONAL BUSINESS; Malaysia Extends Deadline in Singapore Exchange Dispute|work=The New York Times|accessdate=10 December 2012|date=1 January 2000}}</ref><ref>{{cite news|url=http://www.economist.com/node/221572|title=Malaysia's stockmarket; Daylight Robbery|work=The Economist|accessdate=10 December 2012|date=10 July 1999}}</ref>
-Malaysia refused economic aid packages from the [[International Monetary Fund]] (IMF) and the World Bank, surprising many analysts. {{citation needed|date=February 2014}}  By refusing aid and thus the conditions attached thereof from the IMF, Malaysia was not affected to the same degree in the Asian Financial Crisis as Indonesia, Thailand, and the Philippines.
-Regardless, the GDP suffered a sharp 7.5% contraction in 1998. It however rebounded to grow by 5.6% in 1999. {{cn|date=January 2015}}
-To rejuvenate the economy, massive government spending was made and Malaysia continuously recorded budget deficits in the years that followed. Economic recovery has been led by strong growth in exports, particularly of electronics and electrical products, to the United States, Malaysia's principal trade and investment partner. Inflationary pressures remained benign, and, as a result, [[Bank Negara Malaysia]], the central bank, had been able to follow a low interest rate policy. The Malaysian 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.<ref name=autogenerated2>{{Cite book|title=Globalization and the Transformation of Foreign Economic Policy|author=Paweł Bożyk|chapter=Newly Industrialized Countries|page=164|publisher=Ashgate Publishing, Ltd|year=2006|isbn=0-7546-4638-6}}</ref><ref name=autogenerated1>{{Cite book|title=Principles of Economics|author=N. Gregory Mankiw|year=2007|edition=4th|isbn=0-324-22472-9}}</ref>
-The post Y2K slump of 2001 did not affect Malaysia as much as other countries. {{cn|date=June 2014}}
-The [[fixed exchange rate]] was abandoned on 21 July 2005 in favour of a managed [[floating exchange rate|floating system]] within an hour of China announcing the same move.<ref name="Investor's Business and Financial Journal">{{cite web|url=http://www.jang.com.pk/thenews/investors/dec2007/mktre.htm|title=Global Economy Malaysia|first=Investor's Business and Financial Journal|publisher=[[Jang Group of Newspapers]]|accessdate=21 June 2010}}</ref> In the same week, the ringgit strengthened a percent against various major currencies and was expected to appreciate further. As of December 2005, however, expectations of further appreciation were muted as [[capital flight]] exceeded US$10 billion.<ref name="Investor's Business and Financial Journal" /> According to Bank Negara's published figures, Malaysia's foreign exchange reserves increased steadily since the initial capital flight, from US$75.2 billion as at 15 July 2005 (just before the peg was removed) to peak at $125.7 billion as at 31 July 2008, a few months before the global credit crisis that started in September 2008. As at 29 May 2009, the reserves stood at $88.3 billion. In spite of the large positive current account surplus, foreign reserves have started to fall at a rapid rate. Official statistics released in March 2006, confirmed [[capital flight]] of more than US$10 billion. However, as of the 4th fiscal year, a surge of FDI has pushed the KLSE above 1200 points, and is expected to strengthen to pre 1997 levels. {{cn|date=January 2015}}
-In September 2005, Sir Howard J. Davies, director of the [[London School of Economics]], at a meeting in Kuala Lumpur, cautioned Malaysian officials that if they want a flexible capital market, they will have to lift the ban on short-selling put into effect during the crisis. In March 2006, Malaysia removed the ban on short selling.<ref>[[Financial Times]]. ''[http://news.ft.com/cms/s/3659eba2-ba91-11da-980d-0000779e2340.html Malaysia relaxes short-selling ban]''. Retrieved 28 March 2006.</ref> It is interesting to note that some of the measures taken by the Malaysian government in response to the Asian crisis, such as the ban on short selling, were swiftly adopted by the very countries that had previously been critical of the Malaysian response.
-Regardless of cause and effect claims, rejuvenation of the economy also coincided with massive government spending and budget deficits in the years that followed the crisis. Later, Malaysia enjoyed faster economic recovery compared to its neighbours. The country has recovered to the levels of the pre-crisis era&nbsp;– as an example, the KLCI Composite Index hit an all-time high of 1,386 on 20 June 2007 which is approximately 100 points higher than the pre-crisis record of 1,275 in 1993. {{cn|date=January 2015}} While the pace of development today is not as rapid, it is seen to be more sustainable. Although the controls and economic housekeeping may or may not have been the principal reasons for recovery, there is no doubt that the banking sector has become more resilient to external shocks. The current account has also settled into a structural surplus, providing a cushion to capital flight. Asset prices are generally back to their pre-crisis heights, despite the effects of the global financial crisis. As of 21 May 2007, the Ringgit touched a nine-year high record at 3.39 against the US dollar. Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz says the Ringgit moves up on its own merit and in line with the Malaysian economy and not in tandem with the Chinese Yuan. Malaysia has shown the ability to absorb the crude oil price increases and most economies have shown high resilience in absorbing higher energy prices. Malaysia is the world's largest Islamic banking and financial centre. <ref>{{cite web|url=http://www.investasian.com/2013/12/11/malaysia-invest/|title=Country Profile: Malaysia|work=InvestAsian|accessdate=10 February 2015}}</ref>
 ==Economic policies==
@@ Line 166: / Line 92: @@
 ===Subsidies and price controls===
-:''See also'' [[Petrol prices#Malaysia|Gas subsidies]]
+{{See also|Petrol prices#Malaysia}}
+{{See also|Subsidy reform in Malaysia}}
-The Malaysian government subsidises and controls prices on a lot of essential items to keep the prices low. Prices of items such as palm oil cooking oil, petrol, flour, bread, rice and other essentials have been kept under market prices to keep cost of living low. In 2008, the government announced that it has spent RM40.1 billion in 2007 in subsidies to keep prices levelled.<ref>{{cite news| url=http://www.bt.com.bn/en/international_business/2008/02/25/malaysia_2007_fuel_subsidies_at_rm40b_pm| title=Malaysia 2007 fuel subsidies at RM40b: PM}}{{dead link|date=September 2013}}</ref> As of 2009, 22 per cent of government expenditures were subsidies, with petrol subsidies alone taking up 12 per cent.<ref>Economic numbers bode well for M'sia. Business Times. 22 September 2009</ref>
+The Malaysian government subsidises and controls prices on a lot of essential items to keep the prices low. Prices of items such as palm oil, cooking oil, petrol, flour, bread, rice and other essentials have been kept under market prices to keep cost of living low. .<ref>{{cite news| url=http://www.bt.com.bn/en/international_business/2008/02/25/malaysia_2007_fuel_subsidies_at_rm40b_pm| title=Malaysia 2007 fuel subsidies at RM40b: PM}}{{dead link|date=September 2013}}</ref> As of 2009, 22 per cent of government expenditures were subsidies, with petrol subsidies alone taking up 12 per cent.<ref>Economic numbers bode well for M'sia. Business Times. 22 September 2009</ref>
-Smuggling and hoarding, which leads to shortages, is a prominent problem in Malaysia due to the subsidies. For example, cooking oil is subsidised for domestic use only. This situation creates an environment where industrial players hoard domestic cooking oil for industrial use. During shortage time, such as the January 2008 cooking oil crisis, the government imposed a 5&nbsp;kg limit for each purchase to relief domestic demand. However, the limited purchase has created more panic buying, which prompt the Government to negotiate with cooking oil manufacturers to increase their production capacity, and the situation reverted to normal within one week.<ref>{{cite news| author=MAZWIN NIK ANIS et al.| title=5kg buying limit on cooking oil| url=http://thestar.com.my/news/story.asp?file=/2008/1/5/nation/19925382&sec=nation |work=The Star}}</ref> Another example is when vehicles in [[Thailand]] come to Malaysia to smuggle cheap petrol and [[Diesel fuel|diesel]] out of the country. The government also looking into restructuring the fuel subsidy so that the selected needy group will get the subsidy. The government is considering removing subsidies on [[Diesel fuel|diesel]] for general consumers while maintaining subsidies for suitable groups, such as those involved in public transport.<ref>{{cite news| title= Subsidy on diesel to go first, says Shahrir| url=http://thestar.com.my/news/story.asp?file=/2008/4/25/nation/21060846&sec=nation| work=The Star| author=Teh Eng Hock| accessdate=25 April 2008}}</ref>
-On January 2010, the government announce dual price structure for fuel, based on citizenship. Foreigners are expected to pay market price for fuel while citizens will have subsidy allocations based to engine capacity. The dual pricing structure is expected to begin on 1 May 2010.<ref>{{cite news| title= Two price structures for petrol from May 1| url= http://thestar.com.my/news/story.asp?file=/2010/1/7/nation/20100107160536&sec=nation| work=The Star}}</ref>
-The government has considered to remove the subsidies but a formal plan had yet to materialised as of 2007.<ref>{{cite news | author=MUSTAPA MOHAMED | title=Time To Let Go of Subsidy Crutch| url=http://www.neac.gov.my/index.php?ch=62&pg=145&ac=1311| work=The Star}}</ref> In 2008, the government is considering to remove price controls on construction materials such as cement and steel bars while banning exports to ensure steady supply.<ref>{{cite news| title=Builders all for scrapping price controls| work=The Star| accessdate=26 March 2008| url= http://thestar.com.my/news/story.asp?file=/2008/3/26/nation/20750079&sec=nation}}</ref> The government is experimenting with the idea through allowing [[Sabah]] and [[Sarawak]] construction players to import steel and cement since February 2008.<ref>{{cite news| title =Steel products not necessarily cheaper| author=Chong Jin Hun | url=http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_4ac27991-cb73c03a-36306800-216ed5e8| work=The Edge| accessdate=14 April 2008 |archiveurl = http://web.archive.org/web/20080415093001/http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_4ac27991-cb73c03a-36306800-216ed5e8 <!-- Bot retrieved archive --> |archivedate = 15 April 2008}}</ref> The government then, on 12 May 2008 removed ceiling prices on steel bars and billets and removed import duties on selected items under HS Code 7214.10 110 and 7214.20 910, which do not fully cover steel bars use by the construction industry.<ref>{{cite news| title=Malaysia to scrap ceiling price on steel bars, billets|url=http://www.btimes.com.my/Current_News/BTIMES/Friday/Latest/20080509182014/Article/index_html| work=Business Times| date=9 May 2008| accessdate=9 May 2008}} {{Dead link|date=October 2010|bot=H3llBot}}</ref> The government then further liberalised the cement industry by abolishing ceiling prices on 5 June 2008.<ref>{{cite news| title= No ceiling price for cement from Thursday| url=http://www.btimes.com.my/Current_News/BTIMES/Tuesday/Nation/simen02.xml/Article/| work=Business Times| accessdate=3 June 2008| date=3 June 2008}} {{Dead link|date=October 2010|bot=H3llBot}}</ref>
+Since 2010, the government has been gradually reforming Malaysia's subsidy system, via a series of reductions in subsidies for fuel and sugar. As a result, in December 2014, the government officially ended all fuel subsidies, taking advantage of low oil prices at the time, potentially saving the government almost RM20 billion ringgit (US$5.97 billion) annually.<ref>{{cite web | url=http://www.establishmentpost.com/malaysias-fuel-subsidy-removal-unpopular-necessary/ | title=Establishment Post | accessdate=4 April 2015}}</ref> The reduction of subsidies are planned over a three- to five-year period to strengthen government finances and improve economic efficiency
-Another strategic item which is heavily subsidised but moving towards a market based approach is natural gas which is used in the industrial sector. Beginning 1 July 2008, the government is expected to reduce the gas subsidy 5% to 10% per annum over 11 years, in which the gas price will reflect market price.<ref>{{cite news| title=Industries get 70% discount on gas| url= http://biz.thestar.com.my/news/story.asp?file=/2008/7/11/business/20080711155527&sec=business| author= Sim Leoi Leoi| work=The Star| accessdate=11 July 2008| date=11 July 2008}}</ref>
 ===Sovereign wealth funds===

v t e Economy of Malaysia
History	1997 Asian financial crisis Tiger Cub Economies Impact of the COVID-19 pandemic
Currency	Central Bank of Malaysia Malaysian ringgit
Banking and Finance	Kuala Lumpur Stock Exchange Islamic Banking Payments Network Malaysia (PayNet) Overnight Policy Rate
Government agencies	Employees Provident Fund Energy Commission of Malaysia Federal Land Development Authority Khazanah Nasional Permodalan Nasional Berhad Malaysian Industrial Development Authority
Corridors and Regions	East Coast Economic Region (ECER) Iskandar Malaysia (IM) Labuan International Business and Financial Centre (Labuan IBFC) Northern Corridor Economic Region (NCER) Malaysia International Islamic Financial Centre (Kuala Lumpur) Port Klang Free Zone (PKFZ) South Perak Region (WPS) Sabah Development Corridor (SDC) Sarawak Corridor of Renewable Energy (SCORE)
Economic blueprint	Vision 2020 Shared Prosperity Vision 2030 National Transformation 2050 (defunct)
Economic co-operation	BIMP-EAGA Indonesia–Malaysia–Singapore Growth Triangle Indonesia–Malaysia–Thailand Growth Triangle
Policies and Programs	Malaysian New Economic Policy (NEP) National Development Policy (NDP) New Economic Model (NEM) Government Transformation Programme (GTP) Economic Transformation Programme (ETP)
Agreements	Malaysia–European Union Free Trade Agreement Malaysia–New Zealand Free Trade Agreement Malaysia–United States Free Trade Agreement Regional Comprehensive Economic Partnership (RCEP) Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
Industries	Ports Transport Tourism Postal Agriculture Palm oil production Automotive
Other topics	List of Malaysia states by GDP List of Malaysian states and municipalities by exports Poverty in Malaysia Goods and services tax in Malaysia Bamboo network Subsidy reform in Malaysia
Category