Background Notes: Malaysia, October 1998
Released by the Bureau of East Asian and Pacific Affairs
U.S. Department of State
Official Name: Malaysia
Area: 329,749 sq. km. (127,316 sq. mi.); slightly larger than New Mexico.
Cities: Capital--Kuala Lumpur. Other cities--Penang, Ipoh, Malacca, Johore Bahru, Kuching, Kota Kinabalu.
Terrain: Coastal plains and interior, jungle-covered mountains. The South China Sea separates peninsular Malaysia from East Malaysia on Borneo (400 miles).
Nationality: Noun and adjective--Malaysian(s).
Population: 21.7 million (1997).
Annual growth rate: 2.3%.
Ethnic groups: Malay 47%, Chinese 25%, Indigenous 11%, Indian 7%, non-Malaysian citizens 7%, others 3%.
Religions: Islam, Buddhism, Confucianism, Taoism, Hinduism, Sikhism, Christianity, Baha'i faith.
Languages: Malay, Cantonese, Hokkienese, Mandarin Chinese, English, Tamil, indigenous.
Education: Years compulsory--9. Attendance--99% (primary), 82% (secondary). Literacy--93% (1998).
Health: Infant mortality rate--9.7/1,000 (1997). Life expectancy: Female--73.5 years, Male--68.9 years (1997).
Work force: 8.6 million. Manufacturing--22.1%; community, social, and personal services (includes government)--21.0%; trade and tourism--19.2%; agriculture--18.3%; construction--9.0%; finance--5.1%; transportation and communications--4.5%; utilities--0.5%; mining and petroleum--0.3%.
Type: Federal parliamentary democracy with a constitutional monarch.
Independence: August 31, 1957. (Malaya, what is now peninsular Malaysia, became independent in 1957. In 1963 Malaya, Sabah, Sarawak, and Singapore formed Malaysia. Singapore became an independent country in 1965.)
Subdivisions: 13 states and the federal territory (capital). Each state has an assembly and government headed by a chief minister. Nine of these states have hereditary rulers, generally titled "sultans," while the remaining four have appointed governors in counterpart positions.
Branches: Executive--Yang di-Pertuan Agong ("paramount ruler," who is head of state and customarily referred to as the king and has ceremonial duties), prime minister (head of government), cabinet. Legislative--bicameral parliament, comprising 69-member Senate (26 elected by the 13 state assemblies, 43 appointed by the king on the Prime Minister's recommendation) and 192-member House of Representatives (elected from single-member districts). Judicial--Federal Court, Court of Appeals, high courts, magistrates courts, sessions courts, and juvenile courts.
Political parties: Barisan Nasional (National Front)--a coalition comprising the United Malays National Organization (UMNO) and 13 other parties, most of which are ethnically based; Democratic Action Party (DAP); Parti Se-Islam Malaysia (PAS); Parti Bersatu Sabah (PBS). There are more than 30 registered political parties, including the foregoing, not all of which are represented in the federal parliament.
Suffrage: Universal adult.
GNP: $93.6 billion.
Annual real growth rate: 7.8% (Growth in the first half of 1998--4.8%).
Per capita income: $4,540.
Natural resources: Petroleum, liquefied natural gas (LNG), tin, minerals.
Agriculture: Products--palm oil, rubber, timber, cocoa, rice, tropical fruit, fish, coconut.
Industry: Types--electronics, electrical products, chemicals, food and beverages, metal and machine products, apparel.
Trade: Exports--$79 billion: electronics, electrical products, palm oil, petroleum, liquid natural gas, apparel, timber and logs, plywood and veneer, natural rubber. Major markets--Singapore 20%, U.S. 14%, Japan 12%. Imports--$79 billion: machinery, chemicals, manufactured goods, fuels and lubricants. Major suppliers--Japan 22%, U.S. 17%, Singapore 13%.
Malaysia's population of 21.7 million (1997 -- estimated) continues to grow at a rate of 2.3% per annum; about 35% of the population is under the age of 15.
Malaysia's population comprised many ethnic groups, with the politically dominant Malays comprising a plurality. By Constitutional definition, all Malays are Muslim. More than a quarter of the population is Chinese. They have historically played an important role in trade and business.
Malaysians of Indian descent comprise about 7% of the population and includes Hindus, Muslims, Buddhists and Christians. About 85% of the Indian community is Tamil.
Non-Malay indigenous groups make up more than half of Sarawak's population and about 66% of Sabah's. They are divided into dozens of ethnic groups but they share some general patterns of living and culture. Until the 20th century, most practiced traditional beliefs, but many have become Christian or Muslim.
The "other" category includes Malaysians of, inter alia, European and Middle Eastern descent.
Population distribution is uneven, with some 15 million residents concentrated in the lowlands of Peninsular Malaysia, an area slightly smaller than the state of Michigan.
In the first century AD, two far-flung but related events helped stimulate Malaysia's emergence in international trade in the ancient world. At that time, India had two principal sources of gold and other metals: the Roman Empire and China. The overland route from China was cut by marauding Huns, and at about the same time, the Roman Emperor Vespasian cut off shipments of gold to India. As a result, India sent large and seaworthy ships, with crews reported to have numbered in the hundreds, to Southeast Asia, including the Malayan Peninsula, to seek alternative sources. In the centuries that followed, rich Malaysian tin deposits assumed great significance in Indian Ocean trade, and the region prospered. As maritime trade among Middle Eastern, Indian, and Chinese ports flourished, the peninsula benefited from its location as well as from development of its diverse resources, including tropical woods and spices. Malay ships became prominent in that trade, and Malay ports served as transshipment centers. Indian trade brought Indian culture, economy, religion, and politics, with historic results for what is now Malaysia.
The early Buddhist Malay kingdom of Srivijaya, based at what is now Palembang, Sumatra, dominated much of the Malay Peninsula from the 9th to the 13th centuries AD. The powerful Hindu kingdom of Majapahit, based on Java, gained control of the Malay Peninsula in the 14th century. Conversion of the Malays to Islam, beginning in the early 14th century, accelerated with the rise of the state of Malacca under the rule of a Muslim prince in the 15th century.
Malacca was a major regional entrepot, where Chinese, Arab, Malay, and Indian merchants traded precious goods. Drawn by this rich trade, a Portuguese fleet conquered Malacca in 1511, marking the beginning of European expansion in Southeast Asia. The Dutch ousted the Portuguese from Malacca in 1641 and, in 1795, were themselves replaced by the British, who had occupied Penang in 1786.
In 1826, the British settlements of Malacca, Penang, and Singapore were combined to form the Colony of the Straits Settlements. From these strong points, in the 19th and early 20th centuries, the British established protectorates over the Malay sultanates on the peninsula. Four of these states were consolidated in 1895 as the Federated Malay States.
During British control, a well-ordered system of public administration was establish, public services were extended, and large-scale rubber and tin production was developed. This control was interrupted by the Japanese invasion and occupation from 1942 to 1945 during World War II.
Popular sentiment for independence swelled during and after the war and, in 1957, the Federation of Malaysia, established from the British-ruled territories of Peninsular Malaysia in 1948, negotiated independence from the United Kingdom under the leadership of Tunku Abdul Rahman, who became the first prime minister. The British colonies of Singapore, Sarawak, and Sabah (called North Borneo) joined the Federation to form Malaysia on September 16, 1963. Singapore withdrew from the Federation on August 9, 1965 and became an independent republic. Neighboring Indonesia objected to the formation of Malaysia and pursued a program of economic, political, diplomatic, and military "confrontation" against the new country, which ended only after the fall of Indonesia's President Sukarno in 1966.
Following World War II, local communists, nearly all Chinese, launched a long, bitter insurgency, prompting the imposition of a state of emergency in 1948 (later lifted in 1960). Small bands of guerrillas remained in bases along the rugged border with southern Thailand, occasionally entering northern Malaysia. These guerrillas finally signed a peace accord with the Malaysian Government in December 1989. A separate small-scale communist insurgency that began in the mid-1960s in Sarawak also ended with the signing of a peace accord in October 1990.
Malaysia is a constitutional monarchy, nominally headed by the Yang di-Pertuan Agong ("paramount ruler"), customarily referred to as the king. Kings are elected for 5-year terms from among the nine sultans of the peninsular Malaysian states. The king also is the leader of the Islamic faith in Malaysia.
Executive power is vested in the cabinet led by the prime minister; the Malaysian constitution stipulates that the prime minister must be a member of the lower house of parliament who, in the opinion of the Yang di-Pertuan Agong, commands a majority in parliament. The cabinet is chosen from among members of both houses of parliament and is responsible to that body.
The bicameral parliament consists of the Senate (Dewan Negara) and the House of Representatives (Dewan Rakyat). All 69 Senate members sit for 6-year terms; 26 are elected by the 13 state assemblies, and 43 are appointed by the king. Representatives of the House are elected from single-member districts by universal adult suffrage. The 192 members of the House of Representatives are elected to maximum terms of 5 years. Legislative power is divided between federal and state legislatures.
The Malaysian legal system is based on English common law. The Federal Court reviews decisions referred from the Court of Appeals; it has original jurisdiction in constitutional matters and in disputes between states or between the federal government and a state. Peninsular Malaysia and the East Malaysian states of Sabah and Sarawak each have a high court.
The federal government has authority over external affairs, defense, internal security, justice (except civil law cases among Malays or other Muslims and other indigenous peoples, adjudicated under Islamic and traditional law), federal citizenship, finance, commerce, industry, communications, transportation, and other matters.
Principal Government Officials
Prime Minister, Minister of Finance, and Minister of Home Affairs--Dato' Seri Dr. Mahathir bin Mohamad
Foreign Minister--Dato' Seri Abdullah bin Haji Ahmad Badawi
Ambassador to the U.S.--Dato' Dali Mahmud Hashim
Ambassador to the UN-- Dato' Hamsy bin Agam
Malaysia maintains an embassy in the U.S. at 2401 Massachusetts Ave. NW, Washington, DC 20008, tel. (202) 328-2700; a Consulate General in the World Trade Center, 350 South Figueroa Street, Los Angeles, CA, tel. (213) 621-2991; and a Consulate General at 140 E 45th Street, New York, NY 10017, tel. (212) 490-2722.
Malaysia's predominant political party, the United Malays National Organization (UMNO), has held power in coalition with other parties since Malaya's independence in 1957. In 1973, an alliance of communally based parties was replaced with a broader coalition--the Barisan Nasional--composed of 14 parties. In 1995, the most recent general election, the Barisan Nasional was returned with an overwhelming majority, winning 162 out of the 192 parliamentary seats. In addition to the federal government, Barisan Nasional has also held power continuously in most state governments, though an Islamic opposition party now controls the state of Kelantan. In August 1998, Prime Minister Mahathir sacked Deputy Prime Minister Anwar Ibrahim and accused Anwar of immoral and corrupt conduct. Anwar said his ouster actually owed to political differences and led a series of demonstrations advocating political reforms. In September, the government detained Anwar and many of his supporters without trial under the Internal Security Act. Anwar and most of his associates were later released from ISA detention though Anwar remained imprisoned pending trial on criminal charges. Peaceful public demonstrations on behalf of Anwar continued after his arrest. Anwar's ouster and prosecution will affect UMNO party elections scheduled for 1999 and Malaysia's general elections, which must be held before April 2000.
After a decade of sustained economic growth, during which real GDP grew by more than 8% annually, Malaysia's economy in the second half of 1998 was in recession. GDP will contract by an estimated 4.8% for the year. Malaysia since July 1997 has been buffeted by the economic and financial downturn that began with the Thai financial crisis in July 1997 and quickly spread throughout the region and now the globe. By August 1998, the Malaysian ringgit had lost 40% of its value and the Kuala Lumpur stock exchange had lost 60% of its capitalization.
After generally following the IMF prescription of tight fiscal and monetary policies, Malaysia on September 1 announced a series of capital and currency controls designed to insulate Malaysia's economy from the effects of the global financial crisis. The new measures include fixing the exchange rate at 3.8 ringgit to the U.S. dollar (it had been trading at about RM 4.2/USD 1); ending the free convertibility of the ringgit but requiring Central Bank authorization for all exchange transactions; and ending the flow of short-term "hot money" into and out of Malaysia. With the ringgit protected from speculative pressures, the Malaysian Government has lowered interest rates to encourage business activity.
Malaysia remains an important trading partner for the United States. In 1997, two-way bilateral trade totaled US$28 billion, with U.S. exports totaling US$10 billion and imports from Malaysia totaling US$18 billion. Malaysia was the United States' 11th-largest trading partner and its 16th-largest export market. In 1997, the United States became Malaysia's largest trading partner.
At independence, Malaysia inherited an economy dominated by two commodities -- rubber and tin. In the 40 years thereafter, Malaysia's economic record had been one of Asia's best. From the early 80s through the mid-90s , the economy experienced a period of broad diversification and sustained rapid growth averaging almost 8% annually. By 1997, nominal per capita GNP had reached $4,816. New foreign and domestic investment played a significant role in the transformation of Malaysia's economy. Manufacturing grew from 13.9% of GDP in 1970 to 35.7% in 1997, while agriculture and mining, which together had accounted for 42.7% of GDP in 1970, dropped to 18.5% in 1997.
Despite the toll taken by the global financial crisis, most market analysts and economists remain generally positive about Malaysia's long-term prospects, especially if the Malaysian government uses this opportunity to undertake financial sector reform.
Manufacturing accounts for 35.7% of GDP (1997). Major products include electronic components (Malaysia is the world's largest exporter of semiconductor devices), electrical goods, and appliances.
The government encourages foreign direct investment, particularly in the manufacturing sector. In 1997, U.S. became the largest investor in Malaysia, surpassing Japan. Germany and Taiwan rank third and fourth, respectively. The cumulative value of U.S. private investment in Malaysia probably exceeds $10 billion, 60% of which is in the oil and gas and petrochemical sectors with the rest in manufacturing, especially semiconductors and other electronic products.
Malaysia's New Economic Policy (NEP), first established in 1971, seeks to eradicate poverty and end the identification of economic function with ethnicity. In particular, it was designed to enhance the economic standing of ethnic Malays and other indigenous peoples (collectively known as "bumiputras" in Bahasa Malaysia). Rapid growth through the mid-90s made it possible to expand the share of the economy for bumiputras without reducing the economic attainment of other groups. One controversial NEP goal was to alter the pattern of ownership of corporate equity in Malaysia, with the government providing funds to purchase foreign-owned shareholdings on behalf of the bumiputra population. In June 1991, after the NEP expired, the government unveiled its National Development Policy, which contained many of the NEP's goals, although without specific equity targets and timetables.
Malaysia has undertaken a major program to expand and modernize its armed forces, with significant procurement of state of the art equipment, including FA-18's and MIG fighters. Budgetary constraints imposed by the financial crisis have slowed procurement. In August, 1998 Malaysia suspended its participation in the Five Power Defense Arrangement with the United Kingdom, Australia, New Zealand, and Singapore. In October 1998 the Defense Minister announced a major review of defense policy (including participation in the Five Power Defense Arrangement) to ensure that the country's defense needs will be met into the next century.
As a founding member of the Association of Southeast Asian Nations (ASEAN -- established 1967), Malaysia views regional cooperation as the cornerstone of its foreign policy. Malaysia was a leading advocate of expanding ASEAN's membership to include Laos, Vietnam, and Burma, arguing that "constructive engagement" with these countries, especially Burma, will help bring political and economic changes. In world affairs, Malaysia maintains close, cordial relations with the United States, the European Union, and Japan. Malaysia is an active member of the Commonwealth, the UN, the Organization of Islamic Conference, and the Non-Aligned Movement. Malaysia is also a member of APEC, and will host the 1998 APEC Leader's Meeting. Malaysia maintains diplomatic relations with North Korea.
International Affiliations: UN and many of its specialized agencies, including UNESCO; World Bank, International Monetary Fund, International Atomic Energy Agency; General Agreement on Tariffs and Trade; Association of Southeast Asian Nations; Asian Development Bank; Five-Power Defense Arrangement; South-South Commission (G-15); Asia-Pacific Economic Cooperation (APEC); Commonwealth; Non-Aligned Movement; Organization of Islamic Conference; and INTELSAT.
The United States has maintained friendly relations with Malaysia since its independence in 1957. The U.S. and Malaysia have a solid record of cooperation in many areas including trade and investment, counter-terrorism, and counter-narcotics. In 1997 the United States was Malaysia's top trading partner and leading investor. The United States also has supported Malaysia's defense efforts by providing for Malaysian participation in U.S. military education training programs and purchases of equipment under the foreign military sales program.
Cultural and educational exchanges have been another fruitful area of cooperation. Malaysians studying in the U.S., now numbering about 14,000, still represent one of the largest foreign student groups enrolled in American colleges and universities. The United States has taken several steps to assist Malaysian students in the U.S. through the uncertainties of the recent economic downturn.
Trade and Investment
The general economic outlook for Malaysia remains uncertain in view of the regional economic slump. The U.S. is currently Malaysia's largest trading partner and largest investor. Malaysia possesses abundant resources and land, a well-educated work force, adequate infrastructure, and a relatively stable political environment. The dramatic braking of economic growth, however, will effect U.S. export opportunities. Nevertheless, opportunities will remain strong in priority areas of development, including high technology fields, industrial automation, medical products and services, education/distance learning, and the environment. Of particular interest is the ongoing development of the Multimedia Supercorridor, Malaysia's effort to create Asia's version of Silicon Valley. Malaysia, a member of the World Trade Organization, has few restraints on trade in goods. Its service sector, however, remains protected, particularly in financial services.
Principal U.S. Embassy Officials
Ambassador--John R. Malott
Political Counselor--Jeff Lunstead
Economic Counselor--Chris Marut
Commercial Counselor--Michael Hand
Public Affairs Officer (USIS)--Charles Barclay
Agricultural Counselor--Abdullah Saleh
The U.S. Embassy in Malaysia is located at 376 Jalan Tun Razak, 50400 Kuala Lumpur (tel. 60-3-248-9011 fax 60-3-242-2207).
TRAVEL AND BUSINESS INFORMATION
The U.S. Department of State's Consular Information Program provides Travel Warnings and Consular Information Sheets. Travel Warnings are issued when the State Department recommends that Americans avoid travel to a certain country. Consular Information Sheets exist for all countries and include information on immigration practices, currency regulations, health conditions, areas of instability, crime and security, political disturbances, and the addresses of the U.S. posts in the country. Public Announcements are issued as a means to disseminate information quickly about terrorist threats and other relatively short-term conditions overseas which pose significant risks to the security of American travelers. Free copies of this information are available by calling the Bureau of Consular Affairs at 202-647-5225 or via the fax-on-demand system: 202-647-3000. Travel Warnings and Consular Information Sheets also are available on the Consular Affairs Internet home page: http://travel.state.gov and the Consular Affairs Bulletin Board (CABB). To access CABB, dial the modem number: 301-946-4400 (it will accommodate up to 33,600 bps), set terminal communications program to N-8-1(no parity, 8 bits, 1 stop bit); and terminal emulation to VT100. The login is travel and the password is info. (Note: Lower case is required). The CABB also carries international security information from the Overseas Security Advisory Council and Department's Bureau of Diplomatic Security. Consular Affairs Trips for Travelers publication series, which contain information on obtaining passports and planning a safe trip abroad, can be purchased from the Superintendent of Documents, U.S. Government Printing Office, P.O. Box 371954, Pittsburgh, PA 15250-7954; telephone: 202-512-1800; fax 202-512-2250.
Emergency information concerning Americans traveling abroad may be obtained from the Office of Overseas Citizens Services at (202) 647-5225. For after-hours emergencies, Sundays and holidays, call 202-647-4000.
Passport Services information can be obtained by calling the 24-hour, 7-day a week automated system ($.35 per minute) or live operators 8 a.m. to 8 p.m. (EST) Monday-Friday ($1.05 per minute). The number is 1-900-225-5674 (TDD: 1-900-225-7778). Major credit card users (for a flat rate of $4.95) may call 1-888-362-8668 (TDD: 1-888-498-3648).
Travelers can check the latest health information with the U.S. Centers for Disease Control and Prevention in Atlanta, Georgia. A hotline at 877-FYI-TRIP (877-394-8747) and a web site at http://www.cdc.gov/travel/index.htm give the most recent health advisories, immunization recommendations or requirements, and advice on food and drinking water safety for regions and countries. A booklet entitled Health Information for International Travel (HHS publication number CDC-95-8280) is available from the U.S. Government Printing Office, Washington, DC 20402, tel. (202) 512-1800.
Information on travel conditions, visa requirements, currency and customs regulations, legal holidays, and other items of interest to travelers also may be obtained before your departure from a country's embassy and/or consulates in the U.S. (for this country, see "Principal Government Officials" listing in this publication).
U.S. citizens who are long-term visitors or traveling in dangerous areas are encouraged to register at the U.S. embassy upon arrival in a country (see "Principal U.S. Embassy Officials" listing in this publication). This may help family members contact you in case of an emergency.
Further Electronic Information
Department of State Foreign Affairs Network. Available on the Internet, DOSFAN provides timely, global access to official U.S. foreign policy information. Updated daily, DOSFAN includes Background Notes; Dispatch, the official magazine of U.S. foreign policy; daily press briefings; Country Commercial Guides; directories of key officers of foreign service posts; etc. DOSFAN's World Wide Web site is at http://www.state.gov.
U.S. Foreign Affairs on CD-ROM (USFAC). Published on an ann