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Malaysia (07/14/10)


July 14, 2010

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For the most current version of this Note, see Background Notes A-Z.

PROFILE

Geography
Area: 329,748 sq. km. (127,315 sq. mi.); slightly larger than New Mexico.
Cities: Capital--Kuala Lumpur. Other cities--Penang, Ipoh, Malacca, Johor Baru, Shah Alam, Klang, Kuching, Kota Kinabalu, Kota Baru, Kuala Terengganu, Miri, Petaling Jaya.
Terrain: Coastal plains and interior, jungle-covered mountains. The South China Sea separates peninsular Malaysia from East Malaysia on Borneo.
Climate: Tropical.

People
Nationality: Noun and adjective--Malaysian(s).
Population (2009): 28.3 million.
Annual growth rate: 2.0%.
Ethnic groups: Malay 53.3%, Chinese 26.0%, indigenous 11.8%, Indian 7.7%, others 1.2%.
Religions: Islam (60.4%), Buddhism (19.2%), Christianity (9.1%), Hinduism (6.3%), other/none (5.0%).
Languages: Bahasa Melayu (official), Chinese (various dialects), English, Tamil, indigenous.
Education: Years compulsory--6. Attendance--90.1% (primary), 60.0% (secondary). Literacy--93.5%.
Health: Infant mortality rate (2007)--6.7/1,000. Life expectancy (2007)--female 76.4 yrs., male 71.9 yrs.
Work force (10.89 million, 2007): Services--57%; industry--28% (manufacturing--19%, mining and construction--9%); agriculture--15%.

Government
Type: Federal parliamentary democracy with a constitutional monarch.
Independence: August 31, 1957. (Malaya, which is now peninsular Malaysia, became independent in 1957. In 1963 Malaya, Sabah, Sarawak, and Singapore formed Malaysia. Singapore became an independent country in 1965.)
Constitution: 1957.
Subdivisions: 13 states and three federal territories (Kuala Lumpur, Labuan Island, Putrajaya federal administrative territory). Each state has an assembly and government headed by a chief minister. Nine of these states have hereditary rulers, generally titled "sultans," while the remaining four have appointed governors in counterpart positions.
Branches: Executive--Yang di-Pertuan Agong (head of state and customarily referred to as the king; has ceremonial duties), prime minister (head of government), cabinet. Legislative--bicameral parliament, comprising 70-member Senate (26 elected by the 13 state assemblies, 44 appointed by the king on the prime minister's recommendation) and 222-member House of Representatives (elected from single-member districts). Judicial--Federal Court, Court of Appeals, high courts, session's courts, magistrate's courts, and juvenile courts. Sharia courts hear cases on certain matters involving Muslims only.
Political parties: Barisan Nasional (National Front)--a coalition comprising the United Malays National Organization (UMNO) and 12 other parties, most of which are ethnically based; Democratic Action Party (DAP); Parti Islam se Malaysia (PAS); Parti Keadilan Rakyat Malaysia (PKR). There are more than 30 registered political parties, including the foregoing, not all of which are represented in the federal parliament.
Suffrage: Universal adult (voting age 21).

Economy (2009)
Nominal GDP: $191.5 billion.
Annual real GDP growth rate: 5.9% (2006); 6.3% (2007); 4.6% (2008); -1.7% (2009).
Nominal per capita income (GNI): $ 6,897.
Natural resources: Petroleum, liquefied natural gas (LNG), tin, minerals.
Agricultural products: Palm oil, rubber, timber, cocoa, rice, tropical fruit, fish, coconut.
Industry: Types--electronics, electrical products, chemicals, food and beverages, metal and machine products, apparel.
Trade: Merchandise exports--$1167.7 billion: electronic products, manufactured goods, petroleum, palm oil, liquid natural gas, apparel, timber, rubber. Major markets-- Singapore 14.0%, China 12.2%, U.S. 11.0%, Japan 9.8%. Merchandise imports--$131.8 billion: electronic products, machinery, chemicals, manufactured goods, petroleum products. Major suppliers-- China 14.0%, Japan 12.5%, U.S. 11.2%, Singapore 11.1%.

PEOPLE
Malaysia's multi-racial society contains many ethnic groups. Malays comprise a majority of just over 50%. By constitutional definition, all Malays are Muslim. About a quarter of the population is ethnic Chinese, a group which historically played an important role in trade and business. Malaysians of Indian descent comprise about 7% of the population and include Hindus, Muslims, Buddhists, and Christians. Non-Malay indigenous groups combine to make up approximately 11% of the population.

Population density is highest in peninsular Malaysia, home to some 20 million of the country's 28 million inhabitants. The rest live on the Malaysian portion of the island of Borneo in the large but less densely-populated states of Sabah and Sarawak. More than half of Sarawak's residents and about two-thirds of Sabah's are from indigenous groups.

HISTORY
The early Buddhist Malay kingdom of Srivijaya, based at what is now Palembang, Sumatra, dominated much of the Malay peninsula from the 9th to the 13th centuries AD. The powerful Hindu kingdom of Majapahit, based on Java, gained control of the Malay peninsula in the 14th century. Conversion of the Malays to Islam, beginning in the early 14th century, accelerated with the rise of the state of Malacca under the rule of a Muslim prince in the 15th century. Malacca was a major regional commercial center, where Chinese, Arab, Malay, and Indian merchants traded precious goods.

Drawn by this rich trade, a Portuguese fleet conquered Malacca in 1511, marking the beginning of European expansion in Southeast Asia. The Dutch ousted the Portuguese from Malacca in 1641. The British obtained the island of Penang in 1786 and temporarily controlled Malacca with Dutch acquiescence from 1795 to 1818 to prevent it from falling to the French during the Napoleonic war. The British gained lasting possession of Malacca from the Dutch in 1824, through the Anglo-Dutch treaty, in exchange for territory on the island of Sumatra in what is today Indonesia.

In 1826, the British settlements of Malacca, Penang, and Singapore were combined to form the Colony of the Straits Settlements. From these strongholds, in the 19th and early 20th centuries the British established protectorates over the Malay sultanates on the peninsula. During their rule the British developed large-scale rubber and tin production and established a system of public administration. British control was interrupted by World War II and the Japanese occupation from 1941 to 1945.

Popular sentiment for independence swelled during and after the war. The territories of peninsular Malaysia joined together to form the Federation of Malaya in 1948 and eventually negotiated independence from the British in 1957. Tunku Abdul Rahman became the first prime minister. In 1963 the British colonies of Singapore, Sarawak, and Sabah joined the Federation, which was renamed Malaysia. Singapore's membership was short-lived, however; it left in 1965 and became an independent republic.

Neighboring Indonesia objected to the formation of Malaysia and began a program of economic, political, diplomatic, and military "confrontation" against the new country in 1963, which ended only after the fall of Indonesia's President Sukarno in 1966. Internally, local communists, nearly all Chinese, carried out a long, bitter insurgency both before and after independence, prompting the imposition of a state of emergency from 1948 to 1960. Small bands of guerrillas remained in bases along the rugged border with southern Thailand, occasionally entering northern Malaysia. These guerrillas finally signed a peace accord with the Malaysian Government in December 1989. A separate, small-scale communist insurgency that began in the mid-1960s in Sarawak also ended with the signing of a peace accord in October 1990.

GOVERNMENT
Malaysia is a constitutional monarchy, nominally headed by the Yang di-Pertuan Agong, customarily referred to as the king. The king is elected for 5-year terms from among the nine sultans of the peninsular Malaysian states. The king also is the leader of the Islamic faith in Malaysia.

Executive power is vested in the cabinet led by the prime minister; the Malaysian constitution stipulates that the prime minister must be a member of the lower house of parliament who, in the opinion of the Yang di-Pertuan Agong, commands a majority in parliament. The cabinet is chosen from among members of both houses of parliament and is responsible to that body.

The bicameral parliament consists of the Senate (Dewan Negara) and the House of Representatives (Dewan Rakyat). All 70 Senate members sit for 3-year terms, which are normally extended for an additional 3 years; 26 are elected by the 13 state assemblies, and 44 are appointed by the king following the prime minister's recommendation. Representatives of the House are elected from single-member districts by universal adult suffrage. The 222 members of the House of Representatives are elected to parliamentary terms lasting up to 5 years. Legislative power is divided between federal and state legislatures.

The Malaysian legal system is based on English common law. The Federal Court reviews decisions referred from the Court of Appeal; it has original jurisdiction in constitutional matters and in disputes between states or between the federal government and a state. Peninsular Malaysia and the East Malaysian states of Sabah and Sarawak each have a high court.

The federal government has authority over external affairs, defense, internal security, justice (except civil law cases among Malays or other Muslims and other indigenous peoples, adjudicated under Islamic and traditional law), federal citizenship, finance, commerce, industry, communications, transportation, and other matters.

Principal Government Officials
Prime Minister--Dato' Sri Mohd Najib bin Tun Haji Razak
Foreign Minister--Datuk Anifah Haji Aman
Ambassador to the U.S.--Dato' Sri Jamaludin Jarjis
Ambassador to the UN--Datuk Hamidon bin Ali

Malaysia maintains an embassy in the U.S. at 3516 International Court NW, Washington, DC 20008, tel. (202) 572-9700; a Consulate General at 550 South Hope Street, Suite 400, Los Angeles, CA 90071, tel. (213) 892-1238; and a Consulate General at 313 East 43rd Street, New York City, NY 10017, tel. (212) 490-2722/23.

POLITICAL CONDITIONS
Malaysia's predominant political party, the United Malays National Organization (UMNO), has held power in coalition with other parties continuously since independence in 1957. The UMNO coalition's share of the vote declined in national elections held in May 1969, after which riots broke out in Kuala Lumpur and elsewhere, mainly between Malays and ethnic Chinese. Several hundred people were killed or injured. The government declared a state of emergency and suspended all parliamentary activities.

In the years that followed, Malaysia undertook several initiatives that became integral parts of its socioeconomic model. The New Economic Policy (NEP), launched in 1971, contained a series of affirmative action policies designed to benefit Malays and certain indigenous groups (together known as bumiputera or "sons of the soil"). The constitution was amended to limit dissent against the specially-protected and sensitive portions of the constitution pertaining to the social contract. The government identified intercommunal harmony as one of its official goals. The previous alliance of communally based parties was replaced with a broader coalition--the Barisan Nasional (BN) or National Front. The BN won large majorities in the 1974 federal and state elections.

Mahathir Mohamad was Prime Minister between 1981 and 2003, leading UMNO and BN to successive election victories. Mahathir emphasized economic development during his tenure, in particular the export sector, as well as large-scale infrastructure projects. Mahathir attributed the success of the Asian tiger economies to the "Asian values" of its people, which he believed were superior to those of the West. Mahathir sharply criticized the International Monetary Fund (IMF), international financiers such as George Soros, and Western governments during the sharp economic and financial crisis that affected Asia in 1997-1998, and denied that the downturn was due to the failures of corruption and "crony capitalism."

The end of Mahathir's tenure was marred by a falling out with his deputy and presumed successor, Anwar Ibrahim. In September 1998, Mahathir dismissed Anwar and accused him of immoral and corrupt conduct. Although Anwar was convicted on both charges in 1999 and 2000, the trials were viewed as seriously flawed. Malaysia's Federal Court eventually freed Anwar after overturning his immoral conduct conviction in September 2004.

Mahathir stepped down as Prime Minister in October 2003 after 22 years in power, and his successor, Deputy Prime Minister Abdullah Ahmad Badawi, was sworn into office. Abdullah called elections and won an overwhelming victory in March 2004. Abdullah, an Islamic scholar, promoted the concept of "Islam Hadhari" or "civilizational Islam," emphasizing the importance of education, social harmony, and economic progress. His relationship with Mahathir eventually soured, with Mahathir expressing regret at supporting Abdullah to be his successor.

Malaysia held national elections in March 2008. UMNO and its coalition allies in the BN won a simple majority of the seats in the national parliament, but for the first time in history failed to gain the two-thirds majority necessary to amend the constitution. A loose coalition of opposition parties, called the Pakatan Rakyat or People's Alliance, led by Anwar Ibrahim, won 82 of 222 seats in parliament and took control of the state-level assemblies in five of Malaysia's thirteen states. However, in February 2009 the opposition Alliance lost control of one of the states through defections of its assembly members to the BN.. In Parliament, several opposition members of Parliament also defected to the BN , bringing down the opposition strength to 79 members while the BN representation increased to 143 members. Prime Minister Abdullah, taking responsibility for his party’s poor showing in the March 2008 general election, stepped down as Prime Minister in a carefully timed transfer of power to his deputy, Najib Tun Razak, in April 2009.

ECONOMY
Since it became independent, Malaysia's economic record 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 investment played a significant role as the economy diversified and modernized. 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 devices, electrical goods, and information and communication technology (ICT) products.

The government continues to actively manage the economy. Malaysia's New Economic Policy (NEP), first established in 1971, was a 10-year plan that sought to rectify a situation whereby ethnic Malays and indigenous peoples (“bumiputera”), who comprised nearly 60% of the population, held less than 3% of the nation’s wealth. Policy makers implemented a complex network of racial preferences intended to promote the acquisition of economic assets by bumiputera. In 1981 when the racial preferences were set to expire, the government extended the NEP for another 10 years, stating that its goals had not been achieved. The policies again were extended in 1991 and in 2001. The Malaysian Government plans to release a new economic model in 2010 which will modify and in some cases eliminate NEP measures in an effort to stimulate higher levels of investment and GDP growth over the next decade.

The Malaysian economy went into sharp recession in 1997-1998 during the Asian financial crisis, which affected countries throughout the region, including South Korea, Indonesia, and Thailand. Malaysia's GDP contracted by more than 7% in 1998. Malaysia narrowly avoided a return to recession in 2001 when its economy was negatively impacted by the bursting of the dot-com bubble (which hurt the ICT sector) and slow growth or recession in many of its important export markets. The global financial crisis threw Malaysia into recession again in 2009, and the government expects a contraction in GDP of around 3% for the year. Economists expect Malaysia to return to a positive growth path in 2010.

In July 2005, the government removed the 7-year-old peg linking the ringgit's value to the U.S. dollar at an exchange rate of RM 3.8/U.S. $1.0. The dollar peg was replaced by a managed float against an undisclosed basket of currencies. The new exchange rate policy was designed to keep the ringgit more broadly stable and to avoid uncertain currency swings which could harm exports.

The Malaysian financial system exhibited noteworthy resilience to the 2008 global financial crisis. Malaysian banks are well capitalized and have no measurable exposure to the U.S. sub-prime market. The central bank maintains a conservative regulatory environment, having prohibited some of the riskier assets in vogue elsewhere. However, decreasing demand in the U.S. and elsewhere is taking a toll on Malaysian exports, resulting in negative GDP growth for 2009 with recovery expected in 2010.

FOREIGN RELATIONS
Regional cooperation is a cornerstone of Malaysia's foreign policy. It was a founding member of the Association of Southeast Asian Nations (ASEAN) and served as the group's chair most recently in 2005-2006. It hosted the ASEAN Summit and East Asia Summit in December 2005, as well as the ASEAN Ministerial and the ASEAN Regional Forum in July 2006.

Malaysia is an active member of the Asia Pacific Economic Cooperation (APEC) forum, the Organization of the Islamic Conference (OIC), the Non-Aligned Movement (NAM), and the United Nations. It was chair of the OIC until March 2008 and has also chaired the NAM.

Malaysia is a frequent contributor to UN and other peacekeeping and stabilization missions, including recent deployments to Lebanon, Timor-Leste, Philippines, Indonesia, Pakistan, Sierra Leone, Sudan, West Sahara, Nepal and Kosovo.
U.S.-MALAYSIAN RELATIONS
The United States and Malaysia share a diverse and expanding partnership. Economic ties are robust. The United States is Malaysia's largest trading partner and Malaysia is the sixteenth-largest trading partner of the U.S. Annual two-way trade amounts to $44 billion. The United States and Malaysia launched negotiations for a bilateral free trade agreement (FTA) in June 2006.

The United States is the largest foreign investor in Malaysia on a cumulative basis. American companies are particularly active in the energy, electronics, and manufacturing sectors. The U.S. direct investment position in Malaysia for 2007 was $15.7 billion.

The United States and Malaysia cooperate closely on security matters, including counterterrorism, maritime domain awareness, and regional stability. The relationship between the U.S. and Malaysian militaries is also strong with numerous exchanges, training, joint exercises, and visits. The U.S. and Malaysia signed a Mutual Legal Assistance Treaty (MLAT) in July 2006 during the visit to Kuala Lumpur by Secretary of State Condoleezza Rice.

The United States and Malaysia have a long history of people-to-people exchanges. Well over 100,000 Malaysians have studied in the U.S. At any one time there are over 7,000 Malaysians studying at U.S. universities. Last year approximately 130 Malaysians took part in U.S. Government-sponsored exchange programs for professional development and study. Each year, about 50 Americans travel to Malaysia under U.S. Government auspices to share their experience as visiting academics or speakers.

There are approximately 1,500 alumni of the International Visitor Leadership Program (IVLP) and 2,000 from the Fulbright, Humphrey, Eisenhower, and Youth Exchange for Study (YES) programs. Prominent Malaysian alumni include federal ministers, deputy ministers, and members of parliament from both the ruling party and opposition parties. At least four current and past chief ministers (state governors) are alumni, and former Prime Minister Mahathir is an alumnus of a 1973 program. These alumni have used their educations to create a stronger Malaysian society and have built enduring understanding between Malaysia and America. Their contributions to Malaysian society will continue for many years to come.

Principal U.S. Embassy Officials
Ambassador--vacant
Chargé d’Affaires--Robert G. Rapson
Political Counselor--Brian D. McFeeters
Economic Counselor--vacant
Commercial Counselor--Nasir A. Abbasi
Public Affairs Officer-- Scott M. Rauland
Agricultural Attache--David W. Cottrell
Consul General--Charles J. Wintheiser

The U.S. Embassy in Malaysia is located at 376 Jalan Tun Razak, 50400 Kuala Lumpur (tel. 60-3-2168-5000, fax 60-3-2142-2207).



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