Malaysia

Malaysia's population of 23.3 million (2000) continues to grow at a rate of 2.4% per annum; about 33% of the population is under the age of 15. Malaysia's population comprises many ethnic groups, with the politically dominant Malays comprising a plurality. By constitutional definition, all Malays are Muslim. About a quarter of the population is Chinese who have 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. About 85% of the Indian community is Tamil.

Non-Malay indigenous groups make up more than half of the Borneo state of Sarawak's population and about 66% of the Borneo state of Sabah's population. 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.

Warning to steer clear near a transmission tower.

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 established, public services were extended, and largescale 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 Peninsula 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.

Fruit and Vegetable market on the Malaysian border town of Kota Bharu.

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 smallscale communist insurgency that began in the mid-1960s in Sarawak also ended with the signing of a peace accord in October 1990.

The Malaysian economy rebounded from a sharp recession in 1998 when real GDP contracted by 7.4% in 1998. The economy grew 6.1% in 1999 and a strong 8.3% in 2000, led by rapid growth in exports, particularly of electronics and electrical products, to the United States, Malaysia's principal trade and investment partner. When the U.S. economy began to slow in late 2000, Malaysian exports declined, and the Malaysian economy slowed dramatically. Though the government introduced two fiscal stimulus packages in 2001, equal to U.S.$1.9 billion, most analysts predict growth of under 1% for the year. Since September 1998, the Malaysian ringgit has been pegged at an exchange rate of RM3.8/U.S.$1.0.

Malaysia remains an important trading partner for the United States. In 2000, bilateral trade between the U.S. and Malaysia totaled U.S.$36.6 billion. U.S. exports to Malaysia were $11 billion, and U.S. imports from Malaysia were $25.6 billion in that year. Malaysia was the United States' 11th-largest trading partner and its 17th-largest export market. During the first half of 2001, U.S. exports to Malaysia totaled $4.9 billion while the United States imported $11 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 33% in 2000, while agriculture and mining, which together had accounted for 42.7% of GDP in 1970, dropped to 8.4% and 6.9%, respectively, in 1999. 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.

The Malaysian Government encourages Foreign Direct Investment (FDI), and the United States continues to be the largest investor in Malaysia. In 2000, the Malaysian Government approved U.S.$1.97 billion in new manufacturing investment by U.S. companies, with the bulk n the electronics and electrical sectors. The cumulative value of U.S. private investment in Malaysia 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.

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.