Malaysia Economy  

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MALAYSIA
GDP: $308.8 billion.
Annual real GDP growth rate: 5.5%.
Per capita (GDP) income: $12,700.

Budget: Income .............. $31.63 billion
Expenditure ... $37 billion

Main Crops:
Peninsular Malaysia—rubber, palm oil, rice; Sabah—subsistence crops, rubber, timber, coconuts, rice; Sarawak—rubber, pepper; timber.

Natural Resources:
Tin, petroleum, timber, copper, iron ore, natural gas, bauxite.

Major Industries: Rubber and oil palm processing and manufacturing, light manufacturing industry, electronics, tin mining and smelting,
logging and processing timber; Sabah—logging, petroleum production; Sarawak—agriculture processing, petroleum production and refining, logging.

NATIONAL GNP
The Malaysian economy maintained its momentum growing 5.2% in 2003, after expanding 4.1% in 2002. In 2001, real GDP grew an anemic 0.3% due to global uncertainties. The better than expected expansion in 2003 was fueled primarily by the manufacturing sector, particularly the electronics and chemical industries. The recovery of the global electronics sector boosted Malaysian exports to the U.S., Malaysia’s principal trade and investment partner. The consensus among public and private sector analysts is that the economy will continue to grow by at least 6.0% to 6.5% in 2004, on strong domestic demand and global growth in major countries and regional economies but with reservations on continued high oil prices. Although Malaysia is a net exporter of oil, the significant and rapid hike in oil prices has increased the government’s burden on oil subsidies to the domestic consumers. The government has maintained the Malaysian ringgit pegged at an exchange rate of RM3.8/U.S.$1.0 since September 1998.

Malaysia remains an important trading partner for the United States. In 2003, bilateral trade between the United States and Malaysia totaled U.S.$36.4 billion. U.S. exports to Malaysia were $10.9 billion, and U.S. imports from Malaysia were $25.4 billion in that year. Malaysia was the United States' 10th-largest trading partner and its 16th-largest export market. During the first 6 months of 2004, U.S. exports to Malaysia totaled $5.5 billion while the United States imported $13 billion from Malaysia.

Malaysia successfully developed from a commodity-based economy to one focused on manufacturing. Today the Government of Malaysia seeks to make the leap to a knowledge-based economy. At independence, Malaysia inherited an economy dominated by two commodities--rubber and tin. In the 40 years thereafter, Malaysia's economic record had been one of Asia's best. From the early 1980s through the mid-1990s, the economy experienced a period of broad diversification and sustained rapid growth averaging almost 8% annually. New foreign and domestic investment played a significant role in the transformation of Malaysia's economy. Manufacturing grew from 13.9% of GDP in 1970 to 30.9 % in 2003, while agriculture and mining, which together had accounted for 42.7% of GDP in 1970, dropped to 8.4% and 7.2 %, respectively, in 2003. Malaysia is one of the world's largest exporters of semiconductor devices, electrical goods, and appliances, and the government has ambitious plans to make Malaysia a leading producer and developer of high-tech products, including software. Malaysia is a major destination for outsourcing after China and India.

The Malaysian Government encourages Foreign Direct Investment (FDI), and the United States continues to be one of the largest sources of new investment in Malaysia. In 2003, the Malaysian Government approved U.S. $574 million in new manufacturing investment by U.S. companies, with the bulk in the electronics and electrical sectors. The cumulative value of U.S. private investment in Malaysia exceeds $20 billion, 60% of which is in the oil and gas and petrochemical sectors with the rest in manufacturing, especially semiconductors and other electronic products, according to an American Chamber of Commerce 2003 survey.

The Government of Malaysia has taken an active role in guiding the nation's economic development. Malaysia's New Economic Policy (NEP), first established in 1971, sought to eradicate poverty and end the identification of economic function with ethnicity. In particular, it was designed to enhance the economic standing of ethnic Malays and other indigenous peoples (collectively known as "bumiputeras" in Bahasa Malaysia). Rapid growth through the mid-1990s made it possible to expand the share of the economy for bumiputeras without reducing the economic attainment of other groups. One controversial NEP goal was to alter the pattern of ownership of corporate equity in Malaysia, with the government providing funds to purchase foreign-owned shareholdings on behalf of the bumiputera population. In June 1991, after the NEP expired, the government unveiled its National Development Policy, which contained many of the NEP's goals, although without specific equity targets and timetables. In April 2001, the government released a new plan, the "National Vision Policy," to guide development over the period 2001-10. The National Vision Policy targets education for budget increases and seeks to refocus the economy toward higher-technology production. In 2004, the government announced plans to revamp the government-linked corporations (GLCs) targeting to improve performance and gradually reduce the state’s stakes in them