CAPITAL: Kuala Lumpur

FLAG: The national flag consists of 14 alternating horizontal stripes, of which 7 are red and 7 white; a gold 14-pointed star and crescent appear on a blue field in the upper left corner.

ANTHEM: Negara Ku (My Country).

MONETARY UNIT: The Malaysian ringgit (m$), or dollar, is divided into 100 sen, or cents. There are coins of 1, 5, 10, 20, and 50 sens and 1 ringgit, and notes of 1, 5, 10, 20, 100, 500, and 1,000 ringgits. m$1 = us$0.26455 (or us$1 = m$3.78) as of 2005.

WEIGHTS AND MEASURES: The metric system became the legal standard in 1982, but some British weights and measures and local units also are in use.

HOLIDAYS: National Day, 31 August; Christmas, 25 December. Movable holidays include Vesak Day, Birthday of His Majesty the Yang di-Pertuan Agong, Hari Raya Puasa, Hari Raya Haji, the 1st of Muharram (Muslim New Year), Milad an-Nabi, Dewali, Thaipusam, and the Chinese New Year. Individual states celebrate the birthdays of their rulers and other holidays observed by native ethnic groups.

TIME: 7 pm = noon GMT.


Situated in Southeast Asia, Malaysia, with an area of 329,750 sq km (127,317 sq mi), consists of two noncontiguous areas: peninsular Malaysia (formerly West Malaysia), on the Asian mainland, and the states of Sarawak and Sabah, known together as East Malaysia, on the island of Borneo. Comparatively, the area occupied by Malaysia is slightly larger than the state of New Mexico. Peninsular Malaysia, protruding southward from the mainland of Asia, comprises an area of 131,587 sq km (50,806 sq mi), extending 748 km (465 mi) sse-nnw and 322 km (200 mi) ene-wsw. It is bordered on the n by Thailand, on the e by the South China Sea, on the s by the Strait of Johore, and on the w by the Strait of Malacca and the Andaman Sea, with a total boundary length of 2,068 km (1,285 mi).

Sarawak, covering an area of 124,449 sq km (48,050 sq mi), on the northwest coast of Borneo, extends 679 km (422 mi) nne-ssw and 254 km (158 mi) ese-wnw. It is bounded by Brunei on the n, Sabah on the ne, Indonesia on the e and S, and the South China Sea on the w. Sarawak's total boundary length is 2,621 km (1,629 mi). Situated at the northern end of Borneo, Sabah has an area of 74,398 sq km (28,725 sq mi), with a length of 412 km (256 mi) ew and a width of 328 km (204 mi) ns. To the n is the Balabac Strait, to the ne the Sulu Sea, to the se the Celebes Sea, to the s Indonesia, to the sw Sarawak, and to the w the South China Sea, with a total boundary length of 2,008 km (1,248 mi). the total boundary length of Malaysia is 7,344 km (4,563 mi), of which 4,675 km (2,905 mi) is coastline.

Malaysia claims several atolls of the Spratly Island group in the South China Sea. The claim, in a region where oil is suspected, is disputed by China, the Philippines, Taiwan, and Vietnam. Malaysia's capital city, Kuala Lumpur, is located in the western part of peninsular Malaysia.


Four-fifths of peninsular Malaysia is covered by rain forest and swamp. The northern regions are divided by a series of mountain ranges that rise abruptly from the wide, flat coastal plains. The highest peaks, Gunong Tahan (Mt. Tahan2,187 m/7,174 ft) and Gunong Korbu (2,183 m/7,162 ft), are in the north central region. The main watershed follows a mountain range about 80 km (50 mi) inland, roughly parallel to the west coast. the rivers flowing to the east, south, and west of this range are swift and have cut some deep gorges, but on reaching the coastal plains they become sluggish. The western coastal plain contains most of the country's population and the main seaports, George Town (on the offshore Pulau Pinang) and Kelang (formerly Port Swettenham). The eastern coastal plain is mostly jungle and lightly settled. It is subject to heavy storms from the South China Sea and lacks natural harbors.

Sarawak consists of an alluvial and swampy coastal plain, an area of rolling country interspersed with mountain ranges, and a mountainous interior. Rain forests cover the greater part of Sarawak. Many of the rivers are navigable. Sabah is split in two by the Crocker Mountains, which extend north and south some 48 km (30 mi) inland from the west coast, rising to over 4,101 m (13,455 ft) at Mt. Kinabalu, the highest point in Malaysia. Most of the interior is covered with tropical forest, while the western coastal area consists of alluvial flats making up the main rubber and rice land.


The climate of peninsular Malaysia is equatorial, characterized by fairly high but uniform temperatures (2331°c/7388°f) throughout the year, high humidity, and copious rainfall averaging about 250 cm/100 in annually. There are seasonal variations in rainfall, with the heaviest rains from October to December or January; except for a few mountain areas, the most abundant rainfall is in the eastern coastal region, where it averages over 300 cm (120 in) per year. Elsewhere the annual average is 200300 cm (80120 in), the northwestern and southwestern regions having the least rainfall. The nights are usually cool because of the nearby seas. the climate of East Malaysia is relatively cool for an area so near the equator.


About 59% of Malaysia consists of tropical rain forest. In peninsular Malaysia, camphor, ebony, sandalwood, teak, and many varieties of palm trees abound. Rain forest fauna includes seladang (Malayan bison), deer, wild pigs, tree shrews, honey bears, forest cats, civets, monkeys, crocodiles, lizards, and snakes. the seladang weighs about a ton and is the largest wild ox in the world. An immense variety of insects, particularly butterflies, and some over 250 species of birds are found.

On Sabah and Sarawak, lowland forests contain some 400 species of tall dipterocarps (hardwoods) and semihardwoods; fig trees abound, attracting small mammals and birds; and groves are formed by the extensive aerial roots of warangen (a sacred tree to indigenous peoples). As altitude increases, herbaceous plantsbuttercups, violets, and valerianbecome more numerous, until moss-covered evergreen forests are reached at elevations of 1,5201,830 m (5,0006,000 ft). Butterflies, brilliantly colored birds of paradise, and a great wealth of other insect and bird species inhabit the two states.

As of 2002, there were at least 300 species of mammals and over 15,500 species of plants throughout the country.


The Environmental Quality Act of 1974 and other environmental laws are administered by the Division of Environment of the Ministry of Science, Technology, and Environment. Discharge of untreated sewage has contaminated the nation's water; the most heavily polluted areas are along the west coast. Malaysia's water pollution problem also extends to its rivers, of which 40% are polluted. The nation has about 580 cu km of water with 76% of annual withdrawals used for farming and 13% used for industrial activity. Discharge of oil by vessels in Malaysian waters is prohibited. Malaysia's cities have produced an average of 1.5 million tons of solid waste per year.

Clean-air legislation limiting industrial and automobile emissions was adopted in 1978. However, air pollution from both of these sources is still a problem. In the mid-1990s, Malaysia ranked among 50 nations with the world's highest industrial carbon dioxide emissions, which totaled 70.5 million metric tons per year, a per capita level of 3.74 metric tons per year. In 2000, total carbon dioxide emissions were 144 million metric tons.

Of Malaysia's total land area, 59% is tropical rain forest. Malaysia has the world's fifth-most-extensive mangrove area, which total over a half a million hectares (over 1.2 million acres). the country's forests are threatened by commercial interests. In 2003, about 5.7% of the total land area was protected, including two natural UNESCO World Heritage Sites and five Ramsar wetland sites.

According to a 2006 report issued by the International Union for Conservation of Nature and Natural Resources (IUCN), threatened species included 50 types of mammals, 40 species of birds, 21 types of reptiles, 45 species of amphibians, 34 species of fish, 17 types of mollusks, 2 species of other invertebrates, and 683 species of plants. Threatened species in Malaysia include the orangutan, tiger, Asian elephant, Malayan tapir, Sumatran rhinoceros, Singapore roundleaf horseshoe bat, four species of turtle (green sea, hawksbill, olive ridley, and leatherback), and two species of crocodile (false gavial and Siamese). At least three species have become extinct, including the double-banded argus.


The population of Malaysia in 2005 was estimated by the United Nations (UN) at 26,121,000, which placed it at number 44 in population among the 193 nations of the world. In 2005, approximately 5% of the population was over 65 years of age, with another 33% of the population under 15 years of age. There were 103 males for every 100 females in the country. According to the UN, the annual population rate of change for 200510 was expected to be 2.1%, a rate the government viewed as satisfactory. The projected population for the year 2025 was 36,058,000. The population density was 79 per sq km (205 per sq mi).

The UN estimated that 62% of the population lived in urban areas in 2005, and that urban areas were growing at an annual rate of 2.60%. The capital city, Kuala Lumpur, had a population of 1,352,000 in that year.


Not until British economic enterprise first attracted foreign labor after 1800 did large-scale Chinese, Indian, and Malaysian migration (nonnative Indonesians and Borneans) take place. the early migrants were transients: in 1921, only 20.3% of the Chinese and 11.9% of the Indians were Malayan-born. However, migration data for subsequent years show a general tendency toward permanent settlement by these nonindigenous portions of the population. The percentages of the total Chinese population reporting Malaysia as their birthplace were 29.1%, 62.5%, and 74.4% for the years 1931, 1947, and 1957, respectively; the percentages of Indians reporting their birthplace as Malaysia were 21.1%, 51.4%, and 64.6% for the same respective years. By 1953, the Malays were a minority in their own territory. The government enacted legislation restricting further immigration, and by 1968 the Malays formed slightly more than 50% of the population. Regulations that took effect in 1968 concerning passports and border crossings between Malaysia and Indonesia and between Malaysia and the Philippines were also intended to restrict immigration. Between 1975 and 1996, Malaysia hosted more than 250,000 Indo-Chinese refugees and permitted the local integration of some 45,000 Filipino refugees in Sabah. Between 1975 and 1989, more than 250,000 Vietnamese refugees found asylum in Malaysia; the vast majority subsequently migrated to other countries.

In 2000 there were 1,392,000 migrants living in Malaysia, including 50,500 refugees. In 2004 persons of concern to the United Nations High Commissioner for Refugees (UNHCR) numbered 97,538. Refugees from Indonesia and Myanmar numbered 24,905, and asylum seekers, also from Indonesia and Myanmar, numbered 10,322. Others of concern numbered 63,311, including 57,197 Filipino Muslims, most residing in Sabah and Kuala Lumper.

According to Migration News, in 2005 there were about 1.5 million legal foreign workers in Malaysia, most from Indonesia, Bangladesh, India, and the Philippines, and another million unauthorized foreigners. Foreigners were about one-fourth of the total labor force of 10.5 million. Under government amnesty programs for unauthorized foreigners some 500,000 and 220,000 undocumented workers left in mid-2002 and in December 2004. In addition, between October 2004 and February 2005 another 380,000 unauthorized foreigner left or were expelled. Employers then claimed a shortage of workers on plantations and in construction. The government resumed the practice of permitting entrants on tourist visas to work if they found a job. In July 2005 the government declared that the 60,000 refugees in the country would be allowed to work.

The net migration rate in 200004 was an estimated zero migrants per 1,000. This rate does not reflect the unknown number of illegal immigrants, including large numbers from Indonesia and smaller numbers from the Philippines, Bangladesh, Myanmar (Burma), China, and India. The government views the immigration level as too high, but the emigration level as satisfactory.


The population of Malaysia consists of three main ethnic groupsMalays, Chinese, and peoples of the South Asian subcontinent. Collectively, indigenous groups are known as Bumiputras ("sons of the soil"). Estimates for 2004 reported the following distribution: Malays, 50.4%; Chinese, 23.7%; Bumiputras, 11%; Indians, 7.1%; and other groups, 7.8%. Malays predominate in the rural areas, while the Chinese are concentrated in urban and mining areas, where they control much of the nation's wealth; enmity between Malays and Chinese has occasionally erupted into violence. The non-Malay indigenous groups on the peninsula, collectively called the Orang Asli (aborigines), number about 147,000; they represent the poorest group of people in the country.

Non-Malay indigenous tribes constitute about half of Sarawak's residents; the largest indigenous group consists of the Sea Dayaks, or Ibans, followed by the Land Dayaks, or Bidayuh. the majority of Sabah's population consists of indigenous peoples, principally Kadazans, Bajaus, and Muruts. The balance is dominated by Chinese.


Bahasa Malaysia, or Malay, is the national language and the lingua franca of all Malaysia. The traditional Bahasa Malaysia script is Jawi, which derives from Arabic script, but Rumi, based on the Roman alphabet, is officially used in government, education, and business. English is widely employed in government and commerce and is a compulsory subject in all schools. Chinese (notably the Mandarin, Cantonese, Hokkien, Hakka, Hainan, and Foochow dialects), Tamil, Telugu, Malalalam, Punjabi, and Thai are spoken. In addition, in East Malaysia several indigenous languages are spoken, the largest of which are Iban and Kadazan. Most Malaysians are bilingual or multilingual.


In Malaysia, religious lines generally follow ethnic lines. Almost all Malays are Muslims; most Indians are Hindus, with a substantial minority of Muslims, Sikhs, and Parsees; and most Chinese are Confucian Buddhists, with a minority Muslim representation. Christianity has won some adherents among the Chinese and Indians. The indigenous peoples of Sabah and Sarawak are still largely animist, although many have become Christian. Shamanism is also practiced on East Malaysia.

According to a 2000 government census, about 60% of the population were Muslim, 19% Buddhist, 9% Christian, and 6% Hindu. About 3% practiced Confucianism, Taoism, or other traditional Chinese religions. Other faiths include animism, Sikhism, and Baha'ism.

Islam is the official religion and the head of state, the yang dipertuan agong, is also the national leader of the Islamic faith. While the constitution guarantees freedom to profess, practice, and propagate other religions, in practice religious practices of groups other than other than Sunni Muslims are restricted. Proselytizing of Muslims to non-Muslim religions is prohibited. the Malaysian Consultative Council of Buddhism, Christianity, Hinduism, and Sikhism is an interfaith organization promoting mutual understanding and peace between religions. the Malaysian Council of Churches and the Christian Federation of Malaysia serve a similar purpose. The National Human Rights Commission has also worked to promote dialogue between faiths. Certain Christian, Muslim, and Hindu holidays are recognized as national holidays.


In 2002, the highway system of Malaysia consisted of 64,672 km (40,187 mi) of roads, of which 40,707 km (25,295 mi) were paved, including 1,192 km (741 mi) of expressways. The major highways on peninsular Malaysia run northsouth along the east and west coasts. Eastwest links connect George Town and Kota Baharu in the north and Kuala Lumpur and Kuantan farther south. As of 1991, (according to the Malaysian Highway Authority) the EastWest Highway (Federal Route 2) crossing peninsular Malaysia, as well as the Klang Valley Expressway connecting Kuala Lumpur to Port Klang were completed. The 924-km (574-mi) NorthSouth Highway along the west coast of peninsular Malaysia connects Thailand and Singapore. In 2003, registered vehicles included 5,590,000 automobiles and 1,142,000 commercial vehicles.

Malaysia's railway system as of 2004 consisted of 1,890 km (1,176 mi) of standard and narrow gauge railroads, of which 207 km (129 mi) was electrified. Of that total, narrow gauge lines accounted for 1,833 km (1,140 mi), of which 150 km (93 mi) were electrified. Rail lines on peninsular Malaysia are operated by the country's Malayan Railway Administration. These lines provide links to Thailand, Singapore, and the eastern parts of the peninsula. On the island of Borneo, the Sabah State Railways provides diesel service along the west coast and in the interior for 136 km (85 mi). There are no railroads in Sarawak.

There are 7,296 km (4,533 mi) of waterways in all of Malaysia: 3,209 km (1,994 mi) in peninsular Malaysia; 1,569 km (975 mi) in Sabah; and, 2,518 km (1,565 mi) in Sarawak.

The three leading ports, all located on the busy Strait of Malacca, are Kelang (the port for Kuala Lumpur), Johor Baharu, and George Town. Kuching is the main port for Sarawak, and Kota Kinabalu the main port for Sabah. The Malaysian merchant fleet in 2005 consisted of 346 ships of 1,000 GRT or more, totaling 5,389,397 GRT.

Also in 2004, there were an estimated 117 airports. As of 2005, a total of 37 had paved runways, and there was one heliport. Most international flights enter or leave Malaysia through Kuala Lumpur International Airport. Other principal airports include Kota Kinabalu, Kuching, and Penang. The Malaysian Airline System (MAS) provides domestic service to most major cities of the peninsula and to Sarawak and Sabah. In 2003, about 15.214 million passengers were carried on scheduled domestic and international flights.


The ancestors of the Malays came down from South China and settled in the Malay Peninsula about 2000 bc. Sri Vijaya, a strong Indo-Malay empire with headquarters at Palembang in southern Sumatra, rose about ad 600 and came to dominate both sides of the Strait of Malacca, levying tribute and tolls on the ships faring between China and India. In the 14th century, however, Sri Vijaya fell, and Malaysia became part of the Majapahit Empire centered in Java. About 1400, a fugitive ruler from Temasik (now Singapore) founded a principality at Malacca and embraced Islam. It was at Malacca that the West obtained its first foothold on the peninsula. At the height of glory and power, the Malacca principality fell to Portugal in 1511. In their turn, the Portuguese were driven out by the Dutch in 1641. The British East India Company laid the groundwork for British control of Malaya in 1786 by leasing from the sultan of Kedah the island of Pinang, off the west coast of Malaya, about 800 km (500 mi) north of Singapore. Fourteen years later, it obtained from him a small area on the mainland opposite Pinang. In 1819, Sir Thomas Stamford Raffles obtained permission to establish a settlement at Singapore; in 1824, by agreement and financial settlement, the island was ceded to the British East India Company. In the following year, the Dutch settlement at Malacca was ceded to Great Britain. Pinang, Singapore, and Malacca were combined under British rule in 1829 to form the Straits Settlements. The states of Perak and Selangor in 1874 secured treaties of protection from the British. Similar treaties were subsequently made with the sultans of Negri Sembilan (187489) and Pahang (1888). In 1895, these four states became a federation (the Federated Malay States), with a British resident-general and a system of centralized government. In 1909, under the Bangkok Treaty, Siam (now Thailand) ceded to British control the four northern states of Kelantan, Trengganu, Perlis, and Kedah. These four, together with Johor, which in 1914 was made a British protectorate, became known as the Unfederated Malay States. Separate British control was extended to Sabah, then known as North Borneo, in 1882. Six years later, North Borneo and Sarawak each became separate British protectorates. Tin mining and rubber cultivation grew rapidly under British rule, and large numbers of Chinese and Indian laborers were imported for these industries.

Japanese forces invaded Malaya and the Borneo territories in December 1941 and occupied them throughout World War II. Within a year after the Japanese surrender in September 1945, the British formed the Malayan Union, consisting of the nine peninsular states, together with Pinang and Malacca; also in 1946, Singapore and the two Borneo protectorates became separate British crown colonies. The Malayan Union was succeeded by the Federation of Malaya on 1 February 1948. Over the next decade, the British weathered a Communist insurgency as Malaya progressed toward self-government. On 31 August 1957, the Federation of Malaya became an independent member of the Commonwealth of Nations. On 1 August 1962, Great Britain and Malaya agreed in principle on the formation of the new state of Malaysiaa political merger of Singapore and the British Borneo territories (Sarawak, Brunei, and North Borneo) with the Federation. On 1 September 1962, by a 70% plurality, Singapore voted in a referendum for incorporation in the proposed Malaysia, but an abortive revolt staged by Brunei's ultranationalist Brunei People's Party in December 1962 eliminated the sultanate from the proposed merger. On 16 September 1963, the Federation of Malaya, the State of Singapore, and the newly independent British colonies of Sarawak and Sabah merged to form the Federation of Malaysia ("Federation" was subsequently dropped from the official name). On 7 August 1965, Singapore seceded from the Federation and established an independent republic. From the outset, Indonesia's President Sukarno attempted by economic and military means to take over the young nation and incorporate in into Indonesia; cordial relations between the two countries were not established until after Sukarno's ouster in 1966. Internal disorders stemming from hostilities between Chinese and Malay communities in Kuala Lumpur disrupted the 1969 national elections and prompted the declaration of a state of emergency lasting from mid-1969 to February 1971. Successive governments managed to sustain political stability until 1987, when racial tensions between Chinese and Malay increased over a government plan to assign non-Mandarin-speaking administrators to Chinese-language schools.

Between 1978 and 1989 Malaysia provided asylum to about 230,000 Vietnamese refugees as they awaited resettlement in the West. In March 1989 Malaysia responded to the continuing influx of refugees and the Western nations' slow efforts to place them with a plan to screen refugees in order to separate economic migrants from political refugees. This policy was confirmed by the United Nations (UN).

In October 1987 the Malaysian government, under provisions of the Internal Security Act (ISA), which allows detention without trial on grounds of national security, arrested 79 political and civil leaders and closed four newspapers in an effort to stifle dissent. The government called its actions necessary to prevent racial violence, but many prominent Malaysians, including Tunku Abdul Rahman, the country's first prime minister, condemned the actions. At the same time the government clamped down on all news sources disseminating what the government considered false news, and new legislation denied licensing to news sources not conforming to Malaysian values. In 1981 Dato' Hussein bin Onn was succeeded as prime minister by Sato' Sei Dr. Mahathir Mohamad, whose leadership came under criticism from within the United Malays National Organization (UMNO) and other political parties as racial tensions increased. Part of the challenge to Mahathir's party leadership came in the form of a legal suit claiming that some of the delegates to the UMNO elections of 1987 had not been legally registered, and therefore the election should be declared null and void. The High Court ruled that, due to the irregularities, UMNO was an unlawful society and that in effect the election was invalid. Mahathir held that the ruling did not affect the legal status of the government; he was supported by the ruling head of state, Tunku Mahmood Iskandar. In 1988 Mahathir formed a new UMNO, Umno Baru, and declared that party members would have to reregister to join. (Umno Baru was thereafter referred to as UMNO.) Under provisions of the ISA four people linked to the Parti Bersatu Sabah (PBS) were detained over alleged involvement in a secessionist plot in Sabah in June 1990. In July 1990 elections, the PBS won 36 of 48 seats in the Sabah State Legislative Assembly. Prior to the general election of 1990 the PBS aligned itself with the opposition, which had formed an informal electoral alliance, People's Might (Gagasan Rakyat). the National Front (BN) won 127 of the 180 seats, thus maintaining control of the House of Representatives with the two-thirds majority necessary to amend the constitution. The opposition increased its seats from 37 to 53. In 1992 the People's Might registered as a political organization and Tengku Razaleigh was elected chairman.

In 1990 the restructuring of the portfolio of the Ministry of Trade and Industry was rationalized into two new ministriesthe Ministry of International Trade and Industry (MITI) and the Ministry of Domestic Trade and Consumer Affairs (MDTCA). In an action that was widely regarded as politically motivated, Datuk Seri Joseph Pairin Kitingan, chief minister of Sabah and president of the PBS, was arrested in January 1991 and charged with corruption, then released on bail. After subsequent meetings with Mahathir it was announced that the PBS state government had proposed power sharing with United Sabah National Organization (USNO). The head of USNO, Tun Mustapha Harun, resigned from USNO and joined UMNO. This switch necessitated a byelection and in May 1991 UMNO took its first seat in Sabah. the rise of Dayak nationalism in Sarawak was considered as less of a threat after the 1991 state elections. The Sarawak Native People's Party (Parti Bansa Dayak SarawakPBDS) retained only 7 of the 15 seats it had won in the 1987 election. A High Court ruling in 1991 upheld a ruling by the Ministry of Home Affairs banning the public sale of party newspapers. Speculation was that by targeting limited media outlets the government was muzzling the opposition press.

In 1991 UMNO raised the issue of the alleged abuse of privilege by Malaysia's nine hereditary rulers. A resolution tabled in 1990 had demanded the rulers be restrained from interfering in politics. In November 1992 the issue of the constitutional status of the sultans again arose when it was proposed that the rulers' immunity from prosecution be removed. The cases inpiring the proposed changes to the constitution were an assault on a hockey coach by the sultan of Johore, and a 1981 incident in which the sultan of Johore (before he became sultan) was convicted of homicide but pardoned by his father, who was sultan at the time. In January 1993 these proposed amendments to the constitution were passed. Immediately after passage of the bill, royal privileges other than those sanctioned and allocations not expressly provided in the constitution were withdrawn. The nine hereditary rulers first rejected the constitutional changes; however, they eventually agreed to a compromise formula on the bill that effectively removed the blanket legal immunity granted to them. The compromise upheld the constitutional stipulation of royal assent for laws affecting the monarchy. Criticism arose over Mahathir's handling of this situation, as it emphasized the antipathy between his authoritarian style and the "Malay way." These constitutional changes also highlighted Mahathir's moves to strengthen executive power at cost of the judiciary, to consolidate UMNO's control of the legislature, and to control the press. On 17 January 1994 Sabah's chief minister, Datuk Joseph Pairin Kitingan, was found guilty of corruption. the fine imposed on him fell short of the minimum required to disqualify him from office. Although the PBS won the Sabah polls in February 1994, Pairin resigned as the PBS's leading members joined the National Front, and the Sabah wing of UMNO (with 18 of 48 seats) was about to be installed. In August 1994 the government moved to ban the radical Islamic sect, Al-Arqam.

In the general election held 25 April 1995, the ruling National Front captured 162 parliamentary seats out of a possible 192, its biggest victory ever. The coalition won 64% of the popular vote and easily retained its two-thirds parliamentary majority.

The Asian economic crisis of 1997 affected both the economy and the political landscape in Malaysia. By early 1998, the Malaysian economy had undergone its first downturn in 13 years, and tensions over the handling of the crisis erupted between Prime Minister Mahathir, an economic isolationist, and his deputy, Anwar Ibrahim, who favored open-market policies. In September 1998, Mahathir removed Anwar from his cabinet and party posts and imposed currency controls. When Anwar publicly protested these moves and attempted to rally opposition to his former mentor's policies, he was arrested and later tried for corruption and sexual misconduct (sodomy). In 1999 Anwar was sentenced to six years in prison, and his wife launched a new political party, Keadilan (Justice), to contest the upcoming national elections.

The economy began to recover by the end of 1998 and in August 1999 the government officially announced that the recession was over. Responding to an April 2000 deadline for national elections, Mahathir called a snap election in November 1999. Although the arrest of Anwar and his treatment while in custody ignited widespread criticism of Mahathir and his government, the UMNO-led coalition maintained its two-thirds majority in parliament and Mahathir remained in power. However, electoral gains by the Islamic Party of Malaysia (Parti Se-Islam MalaysiaPAS) suggested a significant challenge to the popularity of the government and made PAS the country's largest opposition party.

On 9 March 2001, a wave of intercommunal violence between Malays and ethnic Indians began on the outskirts of Kuala Lumpur, the worst in more than 30 years. Six people, including five of Indian origin, were killed and over 50 were injured. Most of the wounded were ethnic Indians. When opposition leaders claimed the casualty figures were higher, the government threatened to charge them with sedition, although charges were never brought.

In early April 2001, days before public protests were scheduled for the second anniversary of the sentencing of Anwar, 10 opposition leaders were detained under Malaysia's Internal Security Act (ISA). The ISA allows the detention of suspects for up to two years without trial. Most of the detainees were members of the opposition party Keadilan founded by Anwar's wife, Wan Aziziah. the government used a variety of laws to restrict freedom of expression, and peaceful rallies were broken up by the police. An AntiISA Movement (AIM) was formed to work for the repeal of the ISA, which as of 2006 was still in effect.

In September 2001, Malaysia and Singapore came to a series of agreements over issues that had strained relations between them for years. Largely prodded by concern over the growing influence of Islam in Malaysian politics, Singapore agreed to a Malaysian proposal that the causeway linking the two countries be demolished and replaced by a bridge and undersea tunnel after 2007. Malaysia agreed to supply water to Singapore after two water agreements expire in 2011 and 2061. Also discussed were disputes over the use of Malaysian-owned railway land in Singapore, and requests by Singapore to use Malaysian air space.

With the rise in popularity of the Islamic PAS party, Malaysia's image as a moderate Islamic state began to be questioned. In the aftermath of the 11 September 2001 terrorist attacks on the United States, countries in Southeast Asia were asked by the United States to increase their security plans and efforts to combat terrorism. However, many nations have been cautious of a broad sweeping link between Islam and terrorist activities. In May 2002, members of Association of Southeast Asian Neighbors (ASEAN) met in Kuala Lumpur to form a united antiterror front (including strengthening laws to govern the arrest, investigation, prosecution, and extradition of suspects), and pledged to set up a strong regional security framework. Alleged militants with suspected ties to Osama bin Laden's al-Qaeda organization have been arrested in Malaysia. ISA detention was used as an antiterrorism measure, as were tightened laws against money laundering and harsher criminal penalties passed in 2003. The government continued to keep "extremist" Muslim organizations under surveillance.

In June 2002, Mahathir shocked the country with the news that he would resign in October 2003. It was to be the first transfer of the prime ministerial office in over 20 years. His successor was Abdullah Ahmad Badawi, one of three UMNO vice presidents. Badawi pledged to continue Mahathir's policies, but has a far more low-key political style. After just four months as an appointed prime minister, Badawi won an overwhelming mandate in the March 2004 national election, in which his UMNO took over 90% of the parliamentary seats, soundly defeating a challenge from the PAS opposition. During the election campaign, Badawi pledged more transparency in government. He also promoted a policy of Islam Hadhari (Civilized Islam) as a moderate, open, and tolerant alternative to fundamentalist or militant Islam.

Malaysia's Federal Court overturned the sodomy conviction of Anwar Ibrahim in September 2004, and he was freed after nearly six years of imprisonment. This was seen as the real end of the Mahathir era's authoritarianism, although Anwar's eventual role in Malaysian politics remained unclear through 2006. With Badawi's UMNO landslide in the 2004 elections, the status of the opposition as personified by Anwar was much diminished.

A devastating tsunami in December 2004 caused far less damage in Malaysia than in neighboring Thailand and Indonesia; there were fewer than 100 deaths in Malaysia and the Malaysian government did not seek international tsunami relief. A health emergency was declared in August 2005 when smoke from Indonesian forest fires enveloped Kuala Lumpur. Indonesia announced plans to indict 10 companies for burning forest land for plantations; 8 of the companies were Malaysian.

The Badawi government's policies regarding illegal immigrants, mostly from strife-prone areas of Indonesia and Myanmar, seemed inconsistent, when an amnesty was followed by a crackdown in March 2005. Immigrant workers were detained, imprisoned, and deported. With a need for workers, particularly in the construction sector, Malaysia continued to attract immigrants in 2005, and government policy appeared unclear regarding the political refugees and asylum seekers among those foreign workers.


Malaysia is a constitutional monarchy consisting of 13 states, 9 of which were formerly sultanates under British protection and 4 of which (Melaka, Pulau Pinang, Sarawak, and Sabah) were former British settlements ruled by appointed governors.

The constitution, promulgated on 31 August 1957 and subsequently amended, derives from the former Federation of Malaya, with provisions for the special interests of Sabah and Sarawak. It provides for the election of a head of state, the yang di-pertuan agong (paramount ruler), for a single term of five years by the Conference of Rulers. The constitution also provides for a deputy head of state, chosen in the same manner and for the same term.

The Conference of Rulers consists of the nine hereditary sultans. Its consent must be obtained for any law that alters state boundaries; affects the rulers' privileges, honors, or dignities; or extends any religious acts, observances, or ceremonies to the country as a whole. The conference must also be consulted on proposed changes of administrative policy affecting the special position of the Malays or the vital interests of other communities.

The yang di-pertuan agong, who must be one of the hereditary sultans, is commander in chief of the armed forces and has the power to designate judges for the Federal Court and the High Courts on the advice of the prime minister, whom he appoints. Until January 1984, the paramount ruler had the right to veto legislation by withholding his assent; this right was lost in a constitutional compromise that gave the paramount ruler the right to delay new laws for up to 60 days but also stipulated that, if passed by a two-thirds majority, a bill may become law after six months without his signature.

The yang di-pertuan agong from 1979 to 1984 was Ahmad Shah al-Musta'in Billah Ibni al-Marhum, the sultan of Pahang. the leading candidate to succeed him was Idris al-Mutawakil Allahi Shah Ibni al-Marhum, the sultan of Perak, but when Idris died of a heart attack on 31 January 1984, the Conference of Rulers selected Mahmud Iskandar Ibni al-Marhum Sultan Ismail. As crown prince of Johor he had been convicted of homicide in a shooting incident in 1977 but had been pardoned by his father and became sultan in 1981. In 1989 the sultan of Perak, Azlan Muhibuddin Shah, became the yang di-pertuan agong. He was succeeded in 1994 by Tuanku Ja'afar ibni Al-Marhum Tuanku Abdul Rahman, who was in turn succeeded in 1999 by Salehuddin Abdul Aziz Shah ibni Al-Marhum Hismuddin Alam Shah. Salehuddin died in office on 21 November 2001 and was succeeded in 2002 by Tuanku Syed Sirajuddin ibni Almarhum Tuanku Syed Putra Jamalullail, the sultan of Perlis.

Executive power rests with the cabinet, chosen by the prime minister, who is the leader of the majority party or coalition of the house of representatives (Dewan Rakyat), the lower house of parliament. The 193 members of the house of representatives must be at least 21 years old; they are elected by universal adult suffrage (at age 21). Their term is five years unless the house is dissolved earlier. The 69-member senate (Dewan Negara) consists of 26 elected members (2 from each state); 2 members appointed by the paramount ruler to represent the federal territory of Kuala Lumpur, and 1 to represent the island of Labaun; and 40 members appointed by the paramount ruler on the basis of distinguished public service or their eligibility to represent the ethnic minorities. Senators must be at least 30 years old; they hold office for six year terms.


Before World War II, there was limited political activity in Malaya, but the Japanese occupation and its aftermath brought a new political awareness. Postwar political parties sought independence, and although the Malays feared domination by the populous minorities, particularly the economically stronger Chinese, the United Malays National Organization (UMNO), the leading Malay party, and the Malaysian Chinese Association (MCA) formed the Alliance Party in 1952. This party was later joined by the Malaysian Indian Congress (MIC) and became the nation's dominant political party. The Malayan Communist Party, a powerful and well-organized group after the war, penetrated and dominated the trade unions. In 1948, after the Communists had resorted to arms, they were outlawed.

In the elections of April 1964, the Alliance Party won a majority of 89 of the 154 House seats. The third general election since independence was held in peninsular Malaysia on 10 May 1969; in the balloting, the Alliance Party suffered a setback, winning only 66 seats. The election was followed by communal rioting, mainly between Malays and Chinese, resulting in much loss of life and damage to property. The government suspended parliament and declared a state of emergency; elections in Sarawak and Sabah were postponed until July 1970. By the time parliament was reconvened on 22 February 1971, the Alliance had achieved a two-thirds majority (required for the passage of constitutional amendments) with the addition of 10 unopposed seats from Sabah and through a coalition with the Sarawak United People's Party, which controlled 12 seats.

The elections for state assemblies resulted in a setback for the Alliance Party, which before the elections had controlled 10 of the 13 state assemblies, but after the elections only 7. In September 1970, Tunku Abdul Rahman retired as prime minister and was replaced by the deputy prime minister, Tun Abdul Razak. In 1973, the Alliance Party formed a broader coalition consisting of the UMNO, MCA, MIC, and eight minority parties. Known as the National Front and led by the UMNO, the ruling coalition was returned to power in the 1974, 1978, 1982, and 1986 elections with overwhelming majorities (148 of 177 seats in 1986). In April 1987, Mahathir narrowly overcame a challenge to his leadership of the UMNO. The principal opposition parties (which win few seats owing to a legislative apportionment scheme that heavily favors Malay voters) are the Chinese-based Democratic Action Party (DAP), founded in 1966, and the Parti sa Islam Malaysia (PAS), dedicated to establishing an Islamic state. The post-Mahathir 2004 elections made UMNO more dominant than ever, with an over 90% mandate.

As of 2003 there were more than 20 registered parties. the governing coalition is the Barisan Nasional (National Front), led by the United Malays National Organization (UMNO) and comprising 13 other parties, most ethnically based. Major opposition groups are the Muslim Unity Movement (APU), dominated by the Parti sa Islam Malaysia (PAS); the Democratic Action Party (DAP), which is predominantly Chinese and socialist; the Parti Bersatu Sabah (PBS); and Keadilan, formed by Wan Aziziah Wan Ismail, the wife of government official Anwar Ibrahim, who was jailed from 19992004.

In the election held 28 and 29 November 1999, the 193 seats of the lower house were distributed as follows: National Front (148 seats), DAP (10), PBS (3), PAS (27), and Keadilan (5). In the election, PAS won control of the state governments of Kelantan and Terengganu, giving it 2 of Malaysia's 13 states.

In the March 2004 general election, the UMNO-dominated Barisan Nasional (BN) coalition took 198 of 219 seats in parliament's lower house, and won control of 11 of 12 state governments contested. The opposition Parti Islam sa Malaysia (PAS) won only six seats, losing even in conservative Muslim states. the Democratic Action Party (DAP) won 12 seats, making DAP's Lim Kit Siang the opposition leader in the Malaysian parliament. the PAS and the DAP were at odds over religious policy issues and the opposition was in a particularly weakened position. The next national election was scheduled to take place by 2009.


Of the 11 peninsular Malaysian states, 9 are headed by sultans, who act as titular rulers and as leaders of the Islamic faith in their respective states. The other two peninsular states, Pinang and Melaka, are headed by federally appointed governors. State governments are parliamentary in form and share legislative powers with the federal parliament. Effective executive authority in each state is vested in a chief minister, selected by the majority party in the state legislature. The legislative assembly, composed of elected members, legislates in conformity with Malaysian and state constitutions, subject to the sultan's assent. In peninsular Malaysia the states are divided into districts, each of which consists of 5 to 10 subdistricts, called mukims (derah in Kelantan). Each mukim is responsible for varying numbers of kampongs (villages or compounds). The mukim may include villages or consist of large, sparsely populated tracts of land. Each one is headed by a penghulu (penggawa in Kelantan), a part-time official locally elected for five years, who serves as the principal liaison between the district and the village. The village elects a ketua (chief).

Upon incorporation into the Federation of Malaysia in 1963, both Sabah and Sarawak adopted separate constitutions for their local self-government; each is headed by a chief minister, appointed by the majority party of the elective legislature. In Sarawak, divisions and districts are the main subdivisions; in Sabah their counterparts are residencies and districts. The district officer is the most important link between the governing and the governed. His responsibilities are administrative, fiscal, and judicial. Kuala Lumpur, the national capital and former capital of Selangor State, was constituted as a separate federal territory, under the national government, on 1 February 1974. The mayor is appointed by the paramount ruler on the advice of the prime minister.


Malaysia has a unified judicial system, and all courts take cognizance of both federal and state laws. The legal system is founded on British common law. Most cases come before magistrates and sessions courts. Religious courts decide questions of Islamic law and custom. The use of religious law by states, and selective, inconsistent enforcement by religious officers, has become controversial. The use of the Internal Security Act (ISA) against dissidents and restrictions of the press and freedom of expression remain concerns of civil libertarians and international human rights organizations.

The Federal Court, the highest court in Malaysia, reviews decisions referred from the High Court of Peninsular Malaysia, the High Court of Sabah and Sarawak, and subordinate courts. the Federal Court, of which the yang di-pertuan agong is lord president, has original jurisdiction in disputes among states or between a state and the federal government. The Federal Court consists of the chief justice, the two chief judges from the High Courts, and seven other judges. Administrative detention is permitted in security cases, in which certain other guarantees of due process are reportedly suspended.

The judiciary has traditionally functioned with a high degree of independence. Most civil and criminal cases are fair and open. The accused must be brought before a judge within 24 hours of arrest. Defendants have the right to counsel and to bail. Strict rules of evidence apply in court and appeal is available to higher courts. Criminal defendants may also appeal for clemency to the paramount ruler or to the local state ruler. Severe penalties, including the death penalty, are imposed for drug-related offenses.

High courts have jurisdiction over all serious criminal cases and most civil cases. The sessions courts hear the cases involving landlord-tenant disputes and car accidents. Magistrates' courts hear criminal cases in which the maximum sentence does not exceed 12 months. The Court of Appeals has jurisdiction over high court and sessions court decisions.


In 2005, Malaysia had 110,000 active personnel in its armed forces, with 51,600 reservists. The total strength of the Army was 80,000, including infantry and armored battalions, artillery regiments, and supporting air defense, signal, engineer, special forces, and administrative units. Equipment included 26 Scorpion light tanks, 418 reconnaissance vehicles, 1,020 armored personnel carriers, and 414 artillery pieces. The Navy had 15,000 active personnel including a 160-person naval aviation arm and a unit of naval commandos. Major naval units included 4 frigates, 6 corvettes, 35 patrol/coastal vessels, and 4 mine warfare ships. The naval aviation arm operated six antisubmarine warfare helicopters. the Air Force had 15,000 personnel and 63 combat capable aircraft that included 28 fighters and 16 fighter ground attack aircraft. Paramilitary forces numbered an estimated 20,100, and included aviation and marine police units. There was also the People's Volunteer Corps, which had 240,000 reservist personnel, of which around 17,500 were armed. In 2005, Malaysia provided support to 10 UN peacekeeping missions. Australia provides a small training mission. The defense budget for 2005 totaled $2.47 billion.


Malaysia became a member of the United Nations on 17 September 1957, and participates in ESCAP and several nonregional specialized agencies, such as the FAO, UNESCO, UNIDO, IFC, IAEA, the World Bank, and the WHO. It also belongs to the WTO, the Asian Development Bank, ASEAN, the Commonwealth of Nations, APEC, the Arab Bank for Economic Development in Africa, the Colombo Plan, the Organization of the Islamic Conference (OIC), and G-77.

Before the 1970s, Malaysia pursued a pro-Western policy, but it later promoted the neutralization of Southeast Asia while establishing ties with China, the Democratic People's Republic of Korea, and Cuba, and strengthening relations with the USSR and other East European states. Links with its traditional allies, including the United States, remained strong in the course of this transition. Relations with the United Kingdom were strained in the early 1980s, after the British imposed surcharges on foreign students attending universities in the United Kingdom and issued new regulations reducing opportunities for foreign takeovers of British-owned companies. Malaysia agreed to drop its "buy British last" campaign in 1983 after the United Kingdom expanded scholarship opportunities for Malaysian students.

In 1986 there was some friction with Singapore because of its improved relations with Israel. Malaysia shares the anti-Zionist ideology of the Arab League countries. The nation has offered support to UN missions and operations in Kosovo (est. 1999), Western Sahara (est. 1991), Ethiopia and Eritrea (est. 2000), Liberia (est. 2003), Sierra Leone (est. 1999), East Timor (est. 2002), and Burundi (est. 2004), among others. The country is part of the Nonaligned Movement.

In the 1990s and early 2000s Malaysia has been building better relations with its neighbors. Malaysia has cooperated with the ASEAN Regional Forum (ARF), a 23-member Asian security network, helping to reduce tensions over the disputed Spratley Islands in the South China Sea. Malaysia also seeks increased economic integration in Southeast Asia. In 1990, Prime Minister Mahathir proposed the creation of an East Asian Economic Caucus, an idea that was initially regarded with skepticism, but was subsequently taken up by the ASEAN+3 group (the ten ASEAN members plus China, Japan, and South Korea) as a way of strengthening financial and trade ties between those states.

In environmental cooperation, Malaysia is part of the Basel Convention, the Convention on Biological Diversity, Ramsar, CITES, International Tropical Timber Agreements, the Kyoto Protocol, the Montréal Protocol, MARPOL, the Nuclear Test Ban Treaty, and the UN Conventions on the Law of the Sea, Climate Change, and Desertification.


Malaysia was one of the most prosperous nations in Southeast Asia before 1998, albeit with the mood swings inherent in an export-oriented economy. Until the 1970s, Malaysia's economy was based chiefly on its plantation and mining activities, with rubber and tin the principal exports. Since then, however, Malaysia has added palm oil, tropical hardwoods, petroleum, natural gas, and manufactured items, especially electronics and semiconductors, to its export list. This diversification greatly reduced the nation's dependence on overseas commodity markets. By 1980, rubber accounted for about 7.5% of the value of all exports, down from 30% in the 1970s, and tin for about 4.3%, down from about 20% in the 1970s. The worldwide recession in 198182 hurt the Malaysian economy. Prices of Malaysia's traditional commodity exports were depressed, growth slowed, and investment fell. Government efforts to stimulate the economy through spending on heavy industry and infrastructure projects financed by borrowing pushed foreign debt from $4 billion in 1980 to $15 billion in 1984.

In 1985, the GDP in current prices was estimated at $31 billion, up from $25 billion in 1981. Real growth rates rose to 6.9% in 1981, and 7.6% in 1984, but declined 1.0% in 1985. In 198586 Malaysia's period of high growth was halted abruptly as both oil and palm oil prices were halved. Recovery began in late 1986 and 1987, spurred by foreign demand for exports. Growth rates reached an average 89% from 198792, and for most of the 1990s, the economy grew annually by just under 9%.

The Asian financial crisis put an end to 13 years of uninterrupted growth with a decline in GDP of -7.4% in 1998. the government's response was to embark on a massive economic recovery program, aimed at stabilizing the currency, restoring market confidence, maintaining market stability, strengthening economic fundamentals, furthering socioeconomic goals, and reviving badly affected sectors. The program featured two fiscal stimulus packages amounting to 2.25% of GDP and the establishment of three special purpose agencies: the Danahartaalso known as the National Asset Management acquire and dispose of nonperforming loans (NPLs); the Danamodal, charged with implementing government policy on recapitalizing financial institutions; and the Corporate Debt Restructuring Committee (CDRC), to facilitate voluntary debt restructuring between creditors and viable corporate debtors. More controversially, the government proceeded in 2000 with merger plans to consolidate Malaysia's banks into 10 "anchor" banks and to consolidate Malaysian domestic brokerage houses into 15 "universal brokers." The rationale behind the consolidations was that larger entities would be better able to compete with international counterparts. Gross domestic product growth recovered to 6.3% in 1999 and increased to 7.9% in 2000, but was reduced to 0.7% in 2001 as the global economic slowdown and the aftermath of the 11 September 2001 terrorist attacks on the United States helped produce a 10.6% reduction in exports.

In 2002, the economy continued to recover, reaching an annual growth rate of about 3.5%. Since late 2001, Malaysia has taken a leading role, with Bahrain, in seeking to institutionalize Islamic banking. In November 2001 Malaysia signed an agreement with Bahrain, Indonesia, Sudan and the Saudi-based Islamic Development Bank (IDB) to establish the International Islamic Financial Market (IIFM). This is an extension of its domestic efforts to foster Islamic banking going back to the Islamic Banking Act of 1983, under which it was the first Islamic economy to issue bonds on an Islamic basis. In June 2002 Malaysia took the lead in offering the world's first Islamic global bond issue. The Islamic bond is a problem because Islam forbids paying or receiving interest. the 144a offering (not subject to SEC disclosure regulations) in the name of the Malaysia Global Sukuk (MGS) involves MGS buying from the Malaysian government the Ministry of Finance building, two hospitals, and a civil service accommodation, and leasing them back to the government for a period of five years, during which time the government issues trust certificates to the investors with payments exactly equal to lease rental payments being made by the government to MGS. At the end of five years, in 2007, the government will buy back the properties at the face value of the bond. These arrangements were judged compliant with Islamic law. the Trust Certificates had their primary listing on the Luxembourg Stock Exchange in August 2002, and their secondary listing on Malaysia's Labuan International Financial Exchange (LFX) in September 2002. The LFX is part of Malaysia's Labuan International Offshore Financial Centre (IOFC), established in October 1990 by the government to provide a full array of financial services for multinational corporations and investors. the MSG certificates are part of an effort to provide Sharia-compliant instruments for a growing Islamic financial market, estimated in 2002 at $200 billion. The Labuan Offshore Financial Services Authority (OFSA) took credit for initiating the idea for the establishment of the IIFM in November 2001. A Malaysian heads the IIFM and the Islamic Financial Service Organization (IFSO) is headquartered in Malaysia. As host country for the IFSO, Malaysia will lead in formulating and developing standards for the regulation of Islamic financial institutions.

In 1990, Malaysia was the world's largest producer of natural rubber, accounting for one-quarter of world production. By 1993, however, production was overtaken by both Thailand and Indonesia. During the late 1990s, production of synthetic rubbers undercut the natural rubber industry. In 1990 Malaysia was the world's largest exporter of tropical hardwood, the world's fourth-largest producer of cocoa, and the source of 60% of the world's palm oil. By 2001, Malaysia exported over half of the world's fixed vegetable oils, accounting for approximately 6.7% of Malaysia's exports. In 2002, electronics accounted for two-thirds of total exports. Malaysia remains a major producer of commodities including rubber, tin, palm oil, tropical hardwoods, cocoa, and pepper. It also produces and exports oil, petroleum products, and liquefied natural gas, amounting to 5% of total exports in 1998.

Government or government-owned entities dominate a number of sectors (plantations, telecommunications, and banking). Since 1986 the government has moved toward the eventual privatization of telecommunications, ports, highways, and electricity production and distribution. In the 1990s, the government embarked on a privatization program aimed at creating a Malaysian business elite as part of its bumiputera (literally, "sons of the soil") policy. However, virtually all the major privatized companies failed in the Asian financial crisis, 199798 (including the carmaker Proton, Malaysian Airlines, the engineering group Renong, and the media group, Malaysian Resources) and were renationalized in the aftermath. the official unemployment rate at 2.6% in 1996 hovered around 3.6% in 200105. the inflation rate as measured by consumer prices, at 5.1% for 1998, fell sharply in the succeeding years to 1.6% in 2000, 1.4% in 2001, 1.8% in 2002, but had risen to 2.9% by 2005. Sarawak's basic economy is subsistence agriculture, supplemented by petroleum production and refining, the collection of forest produce, fishing, and the cultivation of cash crops, primarily rubber, timber and pepper. Sabah's economy rests primarily on logging and petroleum production.

On 1 September 1998, the government pegged the ringgit at m$3.8 = us$1. The government maintained this fixed exchange rate until 21 July 2005, when the peg was replaced by a managed floating exchange rate based on a basket of trade-weighted currencies. Real GDP was forecast to grow by an average 5.1% in 200607, supported by household and investment spending, which will bolster growth in the services sector. Although the trade and current-account surpluses were expected to narrow over the 200607 period, their nominal values were forecast to still be large compared with levels seen in the 1990s. By 2002, Malaysia was the world's dominant world producer of palm oil. Malaysia, like most countries in Southeast Asia, is dependent upon exports for its growth. In 2004, a double-digit surge in exports lifted the region's growth to 6.3%. But in remaining export-driven, the region is vulnerable to the vagaries of the world economy. Reviving domestic consumption is seen as a key to the region's successful economic future.


The US Central Intelligence Agency (CIA) reports that in 2005 Malaysia's gross domestic product (GDP) was estimated at $248.0 billion. The CIA defines GDP as the value of all final goods and services produced within a nation in a given year and computed on the basis of purchasing power parity (PPP) rather than value as measured on the basis of the rate of exchange based on current dollars. The per capita GDP was estimated at $10,400. the annual growth rate of GDP was estimated at 5.1%. the average inflation rate in 2005 was 2.9%. It was estimated that agriculture accounted for 7.2% of GDP, industry 33.3%, and services 59.5%.

According to the World Bank, in 2003 remittances from citizens working abroad totaled $987 million or about $40 per capita and accounted for approximately 1.0% of GDP. Foreign aid receipts amounted to $109 million or about $4 per capita and accounted for approximately 0.1% of the gross national income (GNI).

The World Bank reports that in 2003 household consumption in Malaysia totaled $45.36 billion or about $1,829 per capita based on a GDP of $103.7 billion, measured in current dollars rather than PPP. Household consumption includes expenditures of individuals, households, and nongovernmental organizations on goods and services, excluding purchases of dwellings. It was estimated that for the period 1990 to 2003 household consumption grew at an average annual rate of 4.9%. It was estimated that in 1998 about 8% of the population had incomes below the poverty line.


In 2005, Malaysia's total labor force was estimated at 10.67 million. As of 2004, agriculture accounted for 14.8% of the workforce, 30.1% by industry, and 55.1% by the services sector. Unemployment in 2005 was estimated at 3.6%.

Workers have the right to engage in union activity, but only about 9% of the workforce were unionized in 2005 and were covered by 617 trade unions. Negotiations between unions and employers are voluntary and strikes are permitted but limited due to many restrictions. In addition, unions must be registered with the director general of trade unions, the latter of which can refuse or revoke a union's registration, thus making the union an unlawful association. If a labor dispute has been referred to an industrial court for settlement, the employees are prohibited from engaging in a strike.

As of 2005, the employment of children under the age of 14 is prohibited by law, although some exceptionswhich include public entertainment, family businesses, as an approved apprentice, and work in school or a training facility for the governmentare permitted. However, child labor persists in some areas of the country and protective labor legislation in Malaysia is more extensive than in most Asian countries. The workweek is set at a maximum of 48-hours, 6 days per week, 8 hours per day Actual weekly hours tend to be closer to 44 hours. There is a legal requirement of one rest day per week. There is no national minimum wage that governs all workers, the government preferring to leave wage rates to market forces. Prevailing market wages provide a decent standard of living for a worker and family, although this was not the case with all migrant workers. Occupational safety and health provisions are set by law but are erratically enforced. The provisions are more rigorously enforced in the formal economic sector and are least enforced on plantations and construction sites where immigrant workers are employed. These foreign workers have no legal protections and are prohibited from forming unions.


Agriculture contributed 10% of GDP in 2003 (down from 38% in 1960), occupied about 16% of the employed work force, and accounted for 8.6% of export earnings in 2004. Diversificationincluding development of such newer crops as oil palm, cocoa, and pineappleswas promoted by the government. Much of Sabah and Sarawak is covered with dense jungle and is not conducive to farming. Peninsular Malaysia, however, is predominantly an agricultural region. Cultivation is carried out on the coastal plains, river valleys, and foothills.

Domestic rice cultivation furnishes peninsular Malaysia with about 80% of its requirements; most of the rice supply for Sabah and Sarawak, however, must be imported. Milled rice production for 2004 totaled 2,183,000 tons, of which about 70% came from peninsular Malaysia. Rubber production totaled 1,190,000 tons in 2004. The government, through the Rubber Research Institute of Malaysia, has concentrated on improving production, but many estates have switched to production of the more profitable oil palm. Although Malaysia produced 12% of the world's rubber in 2004 and typically accounts for over one-third of the world's rubber exports, rubber is no longer the country's primary source of export income. Competition from Thailand and Indonesia has diminished the Malaysian market share for rubber.

Production of palm oil and palm kernel oil totaled 13,976,200 and 3,622,000 tons respectively in 2004, more than any other country in the world. More than 90% of all rubber and palm oil is produced in peninsular Malaysia. Black and white peppers are grown on Sarawak; pepper exports amounted to $31.6 million in 2004. Output of lesser agricultural products in 2004 included coconuts, 710,000 tons; cocoa, 33,000 tons; and pineapples, 320,000 tons.


Peninsular Malaysia is free of most of the infectious and contagious diseases that plague livestock in the tropical zone, but the livestock industry is of minor importance. The livestock population in 2005 included 2,150,000 hogs, 755,000 head of cattle, 225,000 goats, 119,000 sheep, and 130,000 buffalo. the swamp buffalo and indigenous breeds of cattle are used mainly as draft animals. Production of meat in 2005 included (in tons): poultry, 965,000; pork, 205,500; and beef (cattle), 21,200. Malaysia is self-sufficient in pork and poultry production and also exports to other countries in the region, particularly Singapore and Japan. Sarawak's poultry sector was growing by 7% annually in response to increased demand from neighboring Kalimantan, Indonesia, where during certain festive months there is a poultry shortage. Malaysia has been monitoring outbreaks of bird flu, with the third case reported in September 2004, believed to have been caused by poultry smuggled along the Malaysia-Thailand border. the government prohibits the importation of chicken and chicken parts in order to protect domestic producers. Hog-raising and export are handled mainly by non-Muslim Chinese. Milk production was 45,125 tons in 2005.


Fishing was being developed both as a means of reducing unemployment and as a primary source of protein in the country's diet. The total catch in 2003 was 1,477,195 tons, as compared with 296,300 tons in 1966; the increase has been largely the result of expanded and improved marketing facilities. Exports of fisheries products were valued at $435.1 million in 2003, with imports of $365.8 million that year. A government training program in navigation and engine care was accelerating the use of powerboats. Freshwater fishing, which accounted for 2% of the total catch, occurred in paddy fields or irrigation ditches and was integrated with rice farming and hog production.


Malaysia produced an estimated 21.8 million cu m (770 million cu ft) of roundwood from a forest area of 17.7 million hectares (43.7 million acres) in 2004. About 33% of the forest area is located in peninsular Malaysia, 22% in Sabah, and 45% in Sarawak.

After 40 years of large scale conversion of lowland forest areas into agricultural plantations, the pace of new land development declined in the mid-1990s. Reduced land availability and a growing need to preserve remaining forests resulted in a 60% reduction from the government's 199195 plan in the total acreage of land scheduled for development. Of the total natural forest area, 14.2 million hectares (35 million acres) of forested land is designated as Permanent Forest Estate, of which 78% is available for sustainable production.

Exports of timber products in 2004 amounted to $5.2 billion, or 4.1% of total exports. Exports of tropical hardwoods in 2004 included (in thousands of cubic meters) logs, 5,118; lumber, 2,761; veneer, 394; and plywood, 4,348. In keeping with the National Forestry Policy of 1978, exports of sawn logs are being progressively reduced (in fact, many states ban the export of logs) in favor of domestic development of veneer, plywood, furniture, and other wood-using industries. Only Sarawak exports tropical hardwood logs, but its state government has placed further restrictions on exporting logs in order to encourage expansion of value-added activities. As of 2004, eight states and 40 timber companies have been given permits for compliance with the government's timber certification program to provide assurance of sustainable and legal sources of forest products to buyers of Malaysian timber.


Malaysia is a producer of bauxite, coal, ilmenite, iron ore, kaolin, monazite, sand and gravel, struverite, tin, zircon, and natural gas and oil. Although the country's mining sector in 2004 accounted for 7% gross domestic product (GDP), gas and oil accounted for 95% of that sector. In addition, Malaysia's tin mining sector has been declining because of depleted high-grade reserves and lower tin resources. In 2004, Malaysia mined 2,745 metric tons of tin, down from 3,359 metric tons in 2003, and down from 6,307 metric tons in 2000. To revitalize the tin-mining industry, the Malaysian Chamber of Mines recommended that the government of Perak, one of the two main tin-mining states (Selangor being the other), change the royalty rate to a flat rate. In 2004, total exports were valued at $126.5 billion, of which mining products accounted for 11.5% of that total. However, the bulk of that figure was from oil and liquefied natural gas ($6 billion and $7.1 billion, respectively) with major mineral exports valued at only $424 million, of which tin accounted for $289 million

Subsoil resources were public property of the states, which granted prospecting licenses and mining leases. Royalties on coal and gold accrued to the states. Export duties were levied on other minerals by the government, which returned a portion to the states.

Iron ore production (by gross weight) in 2004 totaled 663,732 metric tons, up from 596,612 metric tons in 2003. Bauxite production has fallen as a result of depleted resources since 2000. In that year, bauxite output (by gross weight) totaled 123,270 metric tons, but in 2004 totaled only 2,040 metric tons. Malaysia ceased copper production in 1999. As a result, silver production, most of which was a by-product of copper mining, dropped from 9,647 kg in 1997 to 364 kg in 2004. Other metal minerals extracted included gold, columbite, and titanium dioxide (from Terangganu). Malaysia was a net exporter of all its coal, ilmenite, rare earths, and zircon concentrate, and most of its smelted tin. Industrial minerals produced in 2004 included hydraulic cement, clays and earth metals, feldspar, mica, nitrogen, silica sand, and stone. Silica sand came mainly from natural sand deposits in Sarawak (56.6 million tons of estimated reserves) and Johor and from tin-mine-tailings sand in Perak and Selangor; 85% was exported and 63% of exports went to Singapore.


Malaysia's large reserves of natural gas and its exports of oil make the country a key player in the world's energy markets. the country is also a modest producer of coal.

Crude oil is now the chief mineral produced by Malaysia. As of 1 January 2005, Malaysia had proven oil reserves estimated at 3 billion barrels, down from 4.3 billion barrels in 1996. In 2004, oil production averaged an estimated 855,000 barrels per day, of which crude oil accounted for 750,000 barrels per day. Domestic demand that year was estimated at 534,000 barrels per day. Malaysia's oil is produced offshore, primarily in the peninsular region. However, of new and increasing importance are large offshore natural gas deposits, with reserves estimated at 75 trillion cu ft as of 1 January 2005. Production in 2002 totaled an estimated 1.7 trillion cu ft, with domestic consumption at an estimated 1 trillion cu ft for that same year.

Malaysia is also a major exporter of liquefied natural gas (LNG). In 2003, LNG exports totaled 0.8 trillion cu m, about 14% of the world's total. Production of oil and natural gas is controlled by the National Petroleum Co. (PETRONAS).

In 2002, Malaysia produced an estimated 900,000 short tons of coal, while demand that year was estimated at 6.9 million short tons. As a result, Malaysia imported 6 million short tons.

Malaysia's net installed electrical generating capacity, as of 1 January 2002, stood at 14 GW, of which 86% was dedicated to conventional thermal fuels and 14% was hydroelectric. Electrical energy production in 2002 was estimated at 67 billion kWh. In 2002, demand for electric power was placed at 65.038 billion kWh. the National Electricity Board, a state-owned corporation, supplied the greater part of the nation's power.


Early industrialization efforts centered on the establishment of import-substitution industries (ISI) and resulted in construction of sugar refineries and motor vehicle assembly plants. Industrialization accelerated after the mid-1960s under the provisions of the Investment Incentives Act and the formation of the Malaysian Industrial Development Authority (MIDA). Special incentives were offered for industries that were labor-intensive, export-oriented, or that utilized domestic rubber, wood, and other raw materials. In the mid-1980s the Malaysian economy changed from a commodity-based to a manufacturing-based economy. In 1986, the leading manufacturing industries included rubber processing, the manufacture of tires and other rubber products, palm oil processing, tin smelting, and the manufacture of chemicals, plywood, furniture, and steel. Other industries were textiles, food processing, and the manufacture of electronic and electrical components. Most early industries were controlled by ethnic Chinese and foreigners, but government policies in the 1990s and early 2000s called for greater participation by ethnic Malays.

In 2005 industry accounted for 33.3% of GDP. Of total exports in 2004, electronics and electrical products accounted for 67.6%; chemicals and chemical products 7.3%; petroleum and liquefied natural gas (LNG) 7.3%; palm oil 5.3%; and textiles, clothing, and footwear 2.7%. In 2001, Malaysia produced about 15% of the world's DVD players, compared with China's 54.1% and Japan's 7.7%. In peninsular Malaysia, the leading industries by value of annual output are rubber and palm oil processing and manufacturing, light manufacturing, electronics, tin mining and smelting, and logging and processing timber. In Sabah, the leading industries are logging and petroleum production, while in Sarawak, they are agricultural processing, petroleum production and refining, and logging.

Malaysia has six oil refineries, with a total capacity of 544,832 barrels per day (BPD) in 2005. Oil production from 1996 to 2002 varied between 650,000 bpd and 730,000 bpd. In 2004, crude oil production amounted to 750,000 barrels per day. Proven reserves have dropped from 4.3 billion in 1996 to 3 billion in 2005, and Malaysia's national oil and gas company, PETRONAS, has invested in oil exploration projects in Syria, Turkmenistan, Iran, Pakistan, China, Vietnam, Burma, Algeria, Libya, Tunisia, the Sudan, and Angola. Overseas operations made up one-third of PETRONAS's operations in 2002. Japan, Thailand, South Korea, and Singapore continue to be the major customers for Malaysian crude oil. Malaysia's domestic oil fields are split between the South China Sea off Borneo and those off peninsular Malaysia. All exploration is conducted under production-sharing contracts (PSCs) between PETRONAS, the national oil company, and foreign companies. In 1999, foreign oil companies involved in the production of oil and gas in Malaysia included Exxon, Shell, Sonoco, Statoil, Union Carbide, Amerada, and Lundin. Gas reserves were being developed to fuel power stations and to supply industries in peninsular Malaysia and Singapore. In 2003, Malaysia accounted for 14% of the world's exports of LNG, down from 18% in 1998.

A top industrial priority in Malaysia economic plans is the development of the "multimedia super corridor" (MSC), an ambitious project underway to transform a 15-by-40 km (9.3-by-25 mi) area south of Kuala Lumpur into Asia's version of California's Silicon Valley. It is composed of a number of projects: the tallest twin towers in the world, the 450-m (1,483-ft) Petronas Twin Towers; two of the world's first Smart CitiesPutrajaya, the $8-billion new seat of government and administrative capital of Malaysia, where the concept of electronic government will be implemented, and Cyberjaya, an intelligent city with multimedia industries, research and development centers, a multimedia university, and operational headquarters for MSC; the construction of a $3.6 billion international airport; and the installation of a fiber-optic telecommunications system linking them all.

In 1998, as part of its policy to encourage manufacturing industries, the government relaxed restrictions on foreign ownership of new manufacturing projects. Any new manufacturing project for which the Malaysian Industrial Authority (MIDA) approves a license may have up to 100% foreign ownership, regardless of its involvement in exporting.


Training in science, technology, and related subjects was promoted at all levels during the 1970s and 1980s. Enrollment at technical and vocational secondary schools rose from 4,510 in 1970 to 20,720 in 1985. The National University of Malaysia at Selangor, the University of Malaya at Kuala Lumpur, the University of Agriculture

Country Exports Imports Balance
World 104,969.3 82,740.6 22,228.7
United States 20,539.7 12,850.7 7,689.0
Singapore 16,522.8 9,811.1 6,711.7
Japan 11,221.8 14,282.4 -3,060.6
China 6,810.1 7,299.7 -489.6
China, Hong Kong SAR 6,783.8 2,257.8 4,526.0
Thailand 4,615.3 3,828.8 786.5
Other Asia nes 3,776.7 4,131.2 -354.5
Netherlands 3,430.6 565.6 2,865.0
Korea, Republic of 3,039.4 4,554.7 -1,515.3
Australia 2,613.8 1,264.0 1,349.8
() data not available or not significant.

at Selangor Darul Ehsan, the University of Science at Penang, the Technological University at Johor Bahru, Kolej, Damansaura Utama College at Selangor, Politeknik Kuching at Surawak, and Tunku Abdul Rahman College at Kuala Lumpur offer degrees in basic and applied sciences. In 198797, science and engineering students accounted for 54% of college and university enrollments. National science policy is administered by the Ministry of Science, Technology, and Environment. The Ministry of Agriculture undertakes all aspects of research for improvement of crops. the Institute of Medical Research is a branch of the Ministry of Health.

The Forest Research Institute Malaysia (FIRM), the Freshwater Fish Research Center, the Malaysian Agricultural Research and Development Institute (MARDI), the Malaysian Institute of Microelectronic Systems (MIMOS), and the Rubber Research Institute of Malaysia are all located in Kuala Lumpur.

In 2002, total expenditures on research and development (R&D) amounted to $1.5 billion or 0.69% of GDP. Of that amount, business accounted for 51.5% of R&D spending, followed by the government at 32.1%, foreign investors at 11.5%, and higher education at 4.9%. In that same year, Malaysia had 294 scientists and engineers and 57 technicians per million people, who were actively engaged in R&D. In 2002, high-tech exports were valued at $40.912 billion and accounted for 58% of manufactured exports.


Imported goods are channeled into the Malaysian market through local branches of large European mercantile firms; by local importers with buying agents abroad; through branch offices and representatives of foreign manufacturers; by local Chinese, Indian, and Arab merchants who import directly; and by commission agents. Chinese merchants occupy an important place in the marketing structure and control a large share of the direct import trade. For warehousing of imported goods, the facilities of the port of Singapore are used, while rubber for export is warehoused mainly on plantations.

The usual business hours are from 9:00 am to 5:00 pm, MondayFriday including an hour-long lunch break, with most businesses operating for a half-day on Saturday. All public service departments and some banks close on the first and third Saturday of the month. In Kelantan, Terengganu, Johor, Perlis, and Kedah states, businesses close for a half-day on Thursday (in keeping with Islamic practice) and Friday is the day of rest. English is widely used in commerce and industry.

Newspaper and motion picture advertising is directed toward the higher-income consumer, while radio advertising, outdoor displays, and screen slides are used for the lower-income consumer who is less likely to be literate. A code of practice and ethics governing advertising is in force, with restrictions on advertising of some products, such as alcohol and tobacco. Trade fairs are supervised by the Ministry of Trade and Industry.


During the 1970s, petroleum and manufactures displaced rubber and tin as Malaysia's leading exports. Malaysia now exports over one-third of the world's fixed vegetable oil and a considerable portion of the world's radio broadcast receivers, but its largest export revenues come from sales of office machines.

The primary exports in 2004 were: electronics and electrical machinery (67.6% of all exports); petroleum and liquefied natural gas (7.3%); chemicals and chemical products (7.3%); palm oil (5.3%); and textiles, clothing, and footwear (2.7%). the primary imports were: intermediate goods (75.6% of total imports); capital goods (14.6%); consumption goods (6.1%); reexports (4.5%); and dual-use goods (2.5%).

Malaysia's leading markets in 2004 were: the United States (18.8% of all exports); Singapore (15%); Japan (10.1%); China (6.7%); and Hong Kong (6%). Leading suppliers in 2004 were: Japan (15.9% of all imports); the United States (14.5%); Singapore (11.1%); China (9.8%); and Thailand (5.5%).


Malaysia sustained a favorable trade balance throughout the 1960s and 1970s, recording its first trade deficits in 1981 and 1982, as world prices for tin, crude oil, rubber, and palm oil, the major exports, weakened simultaneously. Malaysia's balance of payments, like that of many other producers of primary products, was adversely affected in 198182 by the prolonged recession in the world's industrial nations. From 1983 to 1986, however, Malaysia registered trade surpluses. In the 1990s, a significant growth in exports and a decrease in imports led to trade surpluses, along with a fairly large services deficit. In the early 2000s, however, exports declined, but so did imports of intermediate components used in the manufacture of the country's electronics exports; this contributed to continuing strong trade surpluses.

The current-account recorded a surplus of $14.8 billion in 2004, lifted by a large merchandise trade surplus. The services and income balances remained in deficit. In 2005, the current-account surplus amounted to $15.35 billion. Exports totaled an estimated $147.1 billion in 2005, and imports were estimated at $118.7 billion. Although the trade and current-account surpluses were expected to narrow over the 200607 period, their nominal values

Current Account 13,381.0
     Balance on goods 25,711.0
         Imports -79,289.0
         Exports 104,999.0
     Balance on services -3,955.0
     Balance on income -5,928.0
     Current transfers -2,447.0
Capital Account
Financial Account -3,196.0
     Direct investment abroad -1,369.0
     Direct investment in Malaysia 2,473.0
     Portfolio investment assets -196.0
     Portfolio investment liabilities 1,174.0
     Financial derivatives 119.0
     Other investment assets -4,502.0
     Other investment liabilities -895.0
Net Errors and Omissions -4.0
Reserves and Related Items -10,181.0
() data not available or not significant.

were projected to be large compared with levels seen in the 1990s. In 2002, Malaysia's total exports of goods and services were equivalent to 114% of nominal GDP, a high figure by international standards.


In 1958, the Bank Negara Tanah Melayu (renamed the Bank Negara Malaysia in 1963) was created as the central banking institution. Bank Negara requires banks to maintain a minimum risk-weighted capital ration (RWCR) of 8%. At the end of 2002, Malaysia had 31 licensed commercial banks, 19 finance companies, 12 merchant banks, 2 Islamic banks, and 7 discount houses. A total of 36 foreign banks have offices in Malaysia, but their banking privileges are restricted. Specialized credit institutions include the Federal Land Development Authority (FELDA), the Agricultural Bank of Malaysia (Bank Pertanian Malaysia), and Bank Rakyat, serving rural credit cooperative societies. International trade is financed mainly by the commercial banks. Total banking system assets were $179.1 billion in 2000. There were 51 offshore banks operating on the island of Lauban in 1997.

Malaysia offers Islamic banking, which is based on the concept of profit sharing as opposed to the use of interest in the conventional banking system. One such Islamic bank is Bank Islam Malaysia Berhad. The central bank has embarked on a plan to develop Malaysia as a regional Islamic financial center. Toward this end, the central bank formed a consultative committee on Islamic banking in January 1996 to serve as a think-tank group to develop strategies and proposals to map out the future direction of Islamic banking. Although Islamic operations were only a small proportion of total business, Malaysia has achieved more than most other Islamic countries in this respect and its developments are regarded as models by them.

The International Monetary Fund reported that in 2001, currency and demand depositsan aggregate commonly known as M1were equal to $22.1 billion. In that same year, M2an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual fundswas $93.9 billion. the money market rate, the rate at which financial institutions lend to one another in the short term, was 2.79%.

The principal market for securities is the Kuala Lumpur Stock Exchange (KLSE), which separated from the joint Stock Exchange of Malaysia and Singapore in 1973. A second, smaller exchange has operated since 1970 to serve indigenous Malay interests. In October 1991 the KLSE completely severed its links with the Singapore Stock Exchange. As of 2001, the KLSE was capitalized at approximately $120 billion. Foreign investors are permitted to buy and sell on the stock market, subject only to compliance with regulatory requirements. In June 1995, a wide range of measures liberalizing the Malaysian capital market were introduced. these included the lowering of commission rates on the KLSE, the easing of controls on loans secured against shares, and less stringent conditions for overseas fund managers. Overseas funds can now set up 100% subsidiaries for conducting non-Malaysian business and rules on work permits for expatriate staff have been relaxed. By the end of 1997, the Kuala Lumpur Stock Exchange Composite Index (KLCI) capitalization had declined 53% from its high that year of 1271.57. The KLCI hit a low of 262.70 in September 1998, but had climbed back up to 696.1 by the end of 2001. In 2004, the KLCI rose14.3% from the previous year to 907.4. As of 2004, a total of 962 companies were listed on the Bursa Malaysia and had a market capitalization of $190.011 billion.


In Malaysia, third-party automobile liability, workers' compensation, and social security are compulsory insurances. The law requires insurance firms to maintain a minimum of 80% of their assets in authorized Malaysian holdings, including (by an amendment passed in 1978) 24% in government securities. Foreign insurance companies may operate by obtaining a license. the government's insurance branch, the Malaysian National Reinsurance Berhad, covers 25% of all fire and personal accident, 10% of aviation and automobile, and 20% of all other classes of insurance. In 2003, the value of all direct insurance premiums written totaled $5.609 billion, of which life insurance premiums accounted for $3.455 billion. Malaysia's top nonlife insurer in 2003 was Kurnia, which had gross written nonlife premiums of $252.4 million. In 2002, the country's leading life insurer was Great Eastern, which had gross written life insurance premiums of $802.8 million.


Malaysia's economy, heavily industrial and heavily dependent on export revenues, experienced a bump in the road when the US economy began to slow down at the end of 2000. The United States is a key trading partner for Malaysia, so as exports to the United States fell, so did Malaysia's economy. The government introduced two fiscal stimulus packages in 2001, but neither did the job; at the time, analysts suspected that GDP would grow less than 1% on the year.

The US Central Intelligence Agency (CIA) estimated that in 2005 Malaysia's central government took in revenues of approximately $30.5 billion and had expenditures of $34.6 billion. Revenues minus expenditures totaled approximately -$4 billion. Public debt in 2005 amounted to 48.3% of GDP. Total external debt was $56.72 billion.

The International Monetary Fund (IMF) reported that in 2003, the most recent year for which it had data, central government revenues were m$93,610 million and expenditures were m$110,571 million. The value of revenues was us$24,634 million, based on an official exchange rate for 2003 of us$1 = m$3.8 as reported by the IMF.


Income tax is levied on all individual and corporate income accrued in Malaysia during the previous year. As of 2005, income of resident individuals was progressively taxed, with a top rate of 28%. Nonresidents are taxed at a flat rate of 28%. Resident and nonresident companies are charged a flat rate of 28%. A 38% income tax is levied on petroleum corporations. Royalties and technical fees are subject to a 10% withholding tax, while the withholding rate for interest is 15%. Dividends are treated as income and are not subject to a withholding tax, if the appropriate amount of tax has already been paid on the company's income. Otherwise, the dividends are subject to a flat 28% rate.

Incentives are available for pioneer industries and for certain capital investments. Capital gains taxes are levied on the sale of real estate. Indirect taxes include a general 10% sales tax (5% for essential items, 20% for liquor and 25% for cigarettes) and a 5% services tax.


Import tariffs on textiles and other items already produced in Malaysia are applied in order to protect domestic industries. Rates vary from 0300% and imports are also subject to a 10% sales tax and excise taxes. However, the average duty rate is less than 8.1%. In 2000, the government reduced duties on 136 categories of food products from 520% to 212%. Imported luxury goods have the highest rates. Items imported for industrial development, including machinery and raw materials imported for processing and reexport, are usually duty-free. Exports are generally free of control, except that licenses and export duties apply to exports of petroleum (25%), rubber, tin, palm oil, timber, and pepper.

As a member of the ASEAN free trade area, Malaysia is a part of the Common Effective Preferential Tariff Scheme (CEPT), which aims to liberalize trade in the region. As of 2003, all tariffs on manufactured goods were reduced to 05% between member countries, including Singapore, Brunei, Thailand, Philippines, and Indonesia. Vietnam, Laos, Myanmar, and Cambodia were scheduled to join the CEPT by 2008. Malaysia has bilateral trade agreements with 59 countries as well. There are several free zones and a free port at Port Klang.


The government encourages foreign investors with a tax holiday of up to 10 years for investments in new industries and assurance of convertibility and repatriation of capital and profits. In 1975, the Industrial Coordination Act established new equity participation guidelines that required a substantial majority of Malaysian ownership of new import-substitution industries catering to the domestic market and using local technology; 70% Malaysian ownership was stipulated for export industries. Export industries using imported raw materials could be 100% foreign owned. Some of

Revenue and Grants 93,610 100.0%
     Tax revenue 69,470 74.2%
     Social contributions
     Other revenue 24,140 25.8%
Expenditures 110,571 100.0%
     General public services
     Public order and safety
     Economic affairs
     Environmental protection
     Housing and community amenities
     Recreational, culture, and religion
     Social protection
() data not available or not significant.

these restrictions were eased under the fifth Malaysia plan (198690). The Promotion of Investment Act of 1986 allowed 100% foreign ownership if a company exported at least 50% of its product and did not compete with local industry, or if it exported at least 80% of its product regardless of competition. In 1998, 100% foreign ownership was granted to projects exporting at least 80% of output, 79% foreign ownership for exports of at least 51% of output, up to 50% foreign ownership for exporting at least 20% of output, and a maximum foreign ownership of 30% for projects exporting less than 20%, regardless of the origin of raw materials. Also, for new manufacturing projects, 100% foreign ownership is permitted in any project approved by the Malaysian Industrial Development Authority (MIDA). The MIDA screened all proposals for manufacturing projects to determine if they are compatible with the Second Industrial Master Plan (19962005), and government strategic and social policies.

In October 1990 the government established on the Federal Territory of Labuan as an International Offshore Financial Center (IOFC) to provide offshore banking and insurance, trust fund management, offshore investment holding and licensing companies, and other financial services for multinational companies. In the period following the 11 September 2001 terrorist attacks on the United States, Malaysia took the lead in seeking to institutionalize Islamic banking and attract Islamic investment. In November 2001 Malaysia was a founding member of the International Islamic Financial Market (IIFM), along with Bahrain, Indonesia, Sudan, and the Islamic Development Bank (IDB) based in Saudi Arabia. In June 2002 the Malaysian government took the lead in putting together the world's first global Islamic bond issue. the Labuan Offshore Financial Services Authority (OFSA) takes credit for initiating the idea of the establishment of the IIFM, and the Islamic Financial Service Organization (IFSO), which is taking the lead in formulating and developing standards for the regulation of Islamic financial institutions, is headquartered in Malaysia. More conventionally, as of 2006 14 free-trade zones (FTZs) were established in Malaysia. (FTZs are specially designated geographic areas with regulations, including minimum customs controls and formalities when importing raw materials, parts, machinery, and equipment, specifically designed to serve export-oriented industries.) there are specially designated FTZs for businesses engaged in commercial activities including trading, breaking bulk, grading, repacking, relabeling, and transit. Within an FTZ, goods are allowed to be imported without being subject to customs procedures, provided the goods are ultimately exported after processing.

Assets attracting foreign investors to Malaysia are location, cultural ties with Singapore and Taiwan, economic and political stability, an increasingly competent labor force, and good infrastructure. The main barriers have been restrictions put on foreign investment and ownership as a part of the government's bumiputera policy, which sought particularly to insure Malay dominance of domestic markets. Nevertheless, before the sharp reduction in 2001, Malaysia was regularly listed among the top 25 best destinations for foreign investments.

Annual average foreign direct investment (FDI) in Malaysia 19851995 was close to $3 billion, amounting to an average 14.5% of the country's annual gross fixed capital formation. In 1996, annual FDI rose above $7 billion. A strong first half in 1997 brought the year's total to $6.3 billion before falling over 57% to $2.7 billion in 1998, reflecting the rapid disinvestments that precipitated the Asian financial crisis. Recovery was sharp, if incomplete, however; FDI reached $3.89 billion in 1999, 22.2% of the gross fixed capital formation (GFCF), and $3.8 billion (16.5% of GFCF) in 2000. However, in 2001, in the context of a worldwide contraction in foreign investment of almost 50%, FDI to Malaysia fell a precipitous 85.4% to $554 million. Total stocks of FDI in Malaysia grew 83.6% in period 1995 to 2000, from $28.7 billion to $52.7 billion, and from 32.3% to 58.8% as a percent of GDP. In 2001, the total FDI stock increased only 1% as the total reached $53.3 billion. The largest investment sources were the United States, Japan, Germany, Taiwan, Singapore, and Korea.

By 2006, cumulative US foreign direct investment in Malaysia had reached an estimated $30 billion. In 2004, FDI inflows amounted to some $3.5 billion, led by Germany with $1.243 billion invested. Singapore ($399 million), the United States ($279 million), and Japan ($266 million) followed. The majority of FDI went to the electronics sector ($1.796 billion), followed by the paper and print sector ($358 million); and petroleum sector ($214 million). In 2004, Malaysia invested $7.448 billion abroad, with $666 million going to Singapore, $296 million to Hong Kong, $252 million to Chad, $203 million to the United States, and $181 million to Thailand.

In 1996 the government announced a list of 31 major infrastructure projects to be built between 1995 and 2020 at a cost of m$163 billion. The Second Industrial Master Plan (19962005) outlined investment opportunities. These have drawn a huge influx of foreign investment. They include the Bukun hydroelectric dam in Sarawak (Southeast Asia's largest), and the projects involved in the development of the Multimedia Super Corridor (MSC): the Petronas Twin Towers, the world's tallest twin towers; one of the region's most modern airports; and Putrajaya, the new capital city and administrative center for electronic government, and Cyberjaya, Malaysia's center for computer technology.

Most foreign investment is concentrated in the production of electronic components, consumer electronics, and electrical goods (dominated by US and Japanese firms), petroleum production and distribution, textiles, vehicle assembly, steel, cement, rubber products, and electrical machinery.

Malaysian outward investments 198595 amounted to less than a quarter of inward investments, with an annual average of $677 million. However, in 200102, this ratio had more than doubled to about 50%. A significant source of outward investments is Petroliam Nasional Berhad (PETRONAS), the state oil company incorporated in 1974. In 2002, domestic petroleum reserves had fallen to about 3 billion barrels of oil and 2.34 trillion cu m (82.5 trillion cu ft) of gas. Overseas investments in the upstream sectors (exploration, development and production) of the petroleum industries in 20 countries had, as of 2002, yielded an additional 3.25 billion barrels of oil equivalent. In international investments involving downstream operations (refining, distribution, marketing), PETRONAS's acquisition of the entire share holding of Engen Ltd., a South African oil company, increased its net refining capacity by almost 40%, to 361,500 barrels per day. The state company's other downstream activities include liquefied petroleum gas (LPG) terminalizing, bottling, and distribution in China, Vietnam, and the Philippines, and refining and retailing in Cambodia and Thailand.


Malaysia's economy has been transformed from a protected low-income supplier of raw materials to a middle-income emerging multisector market economy driven by manufactured exports, particularly electronics and semiconductors, which constitute about 90% of exports. Since 1970 and the institution of the New Economic Policy (NEP) following deadly riots in 1969 against economically dominant ethnic Chinese, the government's commitment to the free market has been hedged by its bumiputera (literally, "sons of the soil") policies aimed at providing "constructive protection" for Islamic Malays against economic competition from other ethnic groups and foreign investors, particularly in the domestic market. In the Asian financial crisis of 1997, most of the major companies that the government had privatized and reserved for bumiputera leadership (including Proton, the national car company, Malaysian Airlines, the Renong engineering group, and the Malaysian Resources media group) had to be renationalized to prevent their collapse. A vigorous recovery program mounted by the government that was showing positive results in 1999 and 2000 ran abruptly into the wall of the 2001 global economic slowdown. Worldwide, foreign direct investment dropped almost 50%, and in Malaysia the decline was an even more precipitous 85%. Gross domestic product growth dropped to 0.7% for 2001, from its usual 79%.

Business in Malaysia remains dominated by non-Malays. In 1970, a government holding company, Perbadanan Nasional (PERNAS), was created to encourage Malay-controlled businesses; in 1975, the government attempted, through PERNAS, to strengthen Malaysian interests in the tin-mining sector. Also in 1974, the government established the National Oil Co. (PETRONAS), with the overall aim of acquiring majority control of the country's petroleum operations. The Industrial Coordination Act of 1975 attempted to accelerate indigenous Malay participation in the economy by setting limits on foreign participation in the processing, domestic distribution, and export of local raw materials. In 1971, the New Economic Policy (NEP) was adopted, with the aim of channeling a greater share of future economic growth into Malay hands. It specifically called for raising the level of corporate ownership by Malays to 30% by 1990, reducing corporate ownership by other Malaysians (i.e., Chinese and Indians) to 40%, and restricting foreigners to ownership of no more than 30%. Short-term investment strategies are set forth in a series of economic plans. The fourth Malaysia plan (198185) proposed a level of development spending of m$42.8 billion and called for acceleration of the NEP goals for bumiputera economic participation. Major industrial and infrastructural development projects included a m$900-million bridge between Pulau Pinang and the mainland and a m$600-million automobile-manufacturing plant, both of which opened in 1985. Economic planning stressed a "look East" policy, with Malaysia attempting to emulate the economic successes of Japan and the Republic of Korea by importing technology from those countries. In response to deteriorating prices for oil and other exports, the fifth Malaysia plan (198690) moved away from the goals of the NEP, aiming instead at promoting foreign investment, particularly in export industries.

The year 1990 marked the culmination of several economic development plans: the fifth Malaysia plan (FMP), 198690; the conclusion of the first outline perspective plan (OPP1) 19711990; and the completion of the new economic policy (NEP) 19711990. The FMP emphasized industrialization. Specific targets were formulated to ensure that the distribution of ownership and participation in the commercial and industrial sector would be characterized by ethnic group participation, 30% bumiputera (Malays and other indigenous peoples), 40% other Malaysians (Chinese and Indian descent), and 30% foreign. The government provided funds to purchase foreign-owned shareholding on behalf of the bumiputera population, increasing their equity to 20% by 1990. These policies are part of the new national development policy, although specific targets and timetables have been dropped.

A post-1990 NEP defined Malaysian economic strategy for full development by 2020. Three ten-year outline perspective plans, which included a new development plan and six five-year plans, made up the NEP. A second outline perspective plan (OPP2) 19912000 aimed to sustain growth momentum and to achieve a more balanced development of the economy. The sixth Malaysia plan called for an average annual growth rate of 7.5%, and expenditures on infrastructure were included to ensure prospects for further development. Development trends are toward privatization, encouraging the spread of industry throughout the country, increasing manufacturing in the free trade zones, and providing financing for industry through the establishment of specialized financing institutions.

A five-year development plan announced in 1996 forecasted average growth of 8% per year for 19962000. In 199798, low productivity, a skills shortage, and a gaping current-account deficit along with a global financial crisis based in Asia, combined to cause an economic downturn. Massive capital and infrastructure projects have attracted foreign investment and international respect.

The Ninth Malaysia Plan was announced in 2006 to focus on improving supply-side issues, such as the promotion of new sources of value-added economic growth, the liberalization of the financial sector, and further measures to strengthen small- and medium-sized firms. Reducing the deficit was a policy priority, as fiscal stimulus had increased the budget deficit in the early 2000s. The governmentas with those in other Southeast Asian countrieswas committed to finding ways to revive domestic consumption instead of relying primarily upon exports for economic growth, which would help insulate Malaysia from the vagaries of the global economy.


A provident fund provides lump-sum benefits for old age, disability, and death. Pensions are funded by 11% contributions of earnings by workers, and 12% of payroll by employers. Domestic servants, foreign workers, and the self-employed are not covered by the system. The retirement age is 55. Work injury insurance and disability pensions to low-income workers are available, with a special system for public employees.

The government has taken active measures to improve the rights and standing of women. The Islamic Family Law was revised to strengthen the inheritance rights of Muslim women and to increase their access to divorce. The government passed a domestic violence bill that allows the courts to protect victims of spousal abuse. However, this law falls short of making domestic violence a criminal act, and women's groups called for amendments in 2004. Most Muslim women play subordinate roles in public and private life in spite of their growing legal rights. Although women make up more than half of university students, they represent only 15% of key posts in public sector jobs. Custom favors men in matters of inheritance.

Human rights abuses, include arbitrary arrest and detention, torture, and other types of prisoner abuse, exist. Caning is still used for some crimes. The government restricts the freedom of press, religion, association, and assembly.


Malaysia enjoys a comparatively high standard of health, the result of long-established health and medical services. there are three main hospitals in Malaysia, all located in the capital, Kuala Lumpur: Subang Jaya Hospital, General Hospital, and Penang Adventist Hospital. Approximately 80% of the population had access to health care. As of 2004, there were an estimated 70 physicians, 135 nurses, 9 dentists, and 33 midwives per 100,000 people. In the same year, total health care expenditure was estimated at 2.5 % of GDP. As of 2002, the crude birth rate and overall mortality rate were estimated at, respectively, 24.22 and 5.2 per 1,000 people. Approximately 51% of married women (ages 1549) used contraception. Life expectancy was 72.24 years in 2005. It is estimated that 90% of the population had access to safe water, and 94% had adequate sanitation.

Under the tuberculosis-control campaign begun in 1961, the number of annual deaths from tuberculosis declined to 971 in 1970, to 672 in 1983; in 1999, there were 111 reported cases per 100,000 population.

As a result of the yaws-elimination campaign, begun in 1954, the disease was virtually eliminated in the late 1960s. A malaria-eradication program, begun in 1967, resulted in a drop in the number of hospital admissions for malaria from 25,400 in 1970 to 8,274 in 1984, although malaria remains a common disease in Malaysia.

It was estimated that 23% of children under five years of age were considered malnourished. Immunization rates for children up to one year old were quite high: tuberculosis, 99%; diphtheria, pertussis, and tetanus, 93%; polio, 90%; and measles, 88%.

Among the main ethnic groups in Malaysia, those of Indian origins have the highest mortality rates compared to the Chinese and Malay. Similar trends exist for diabetes mortality. the HIV/AIDS prevalence was 0.40 per 100 adults in 2003. As of 2004, there were approximately 52,000 people living with HIV/AIDS in the country. There were an estimated 2,000 deaths from AIDS in 2003. the total fertility rate has dropped from 4.2 in 1980 to 3 in 2000. Infant mortality in 2005 was 8 per 1,000 live births. the maternal mortality rate was 39 per 100,000 live births.


With about 61% of the population living in urban areas, the need for urban housing is acute. It has been estimated that over 20% of Kuala Lumpur's population consists of squatters living in overcrowded shantytowns with few urban amenities. the government has planned to build rental units in urban areas to assist low-income residents unable to purchase their own homes. In 2000, the housing stock was reported at about 5.7 million units. A total of 744,000 new housing units were built during 197080, and an estimated 923,300 units43% public and 57% privatewere part of the 198185 development plan.


Six years of free primary education are followed by three years of general lower secondary education. Two further years of education at the upper secondary level, in either a vocational or an academic program, are offered. Technical schools also offer secondary program, but students must have a strong math and science background in order to attend. A selective one-year pre-university course prepares students for admission to the universities. Malay is the medium of instruction in primary and secondary schools, with english as a compulsory second language. Muslim religious instruction is compulsory for all Muslim children while private Christian schools offer religious training to their students. the academic year runs from July to March.

In 2001, about 88% of all five-year-olds were enrolled in some type of preschool program. Primary school enrollment in 2003 was estimated at about 93% of age-eligible students. the same year, secondary school enrollment was about 70% of age-eligible students (66% for boys and 74% for girls). It was estimated that about 92% of all students complete their primary education. the student-to-teacher ratio for primary school was at about 19:1 in 2003; the ratio for secondary school was about 18:1.

The primary institutions of higher education include the Universiti Kebangsaan Malaysia (the National University of Malaysia), the University of Malaya, and the Technological University of Malaysia, all in or near Kuala Lumpur, and the University of Science Malaysia (formerly the University of Pinang). the MARA Institute of Technology is the largest postsecondary institute in the country. In 2003, about 29% of the tertiary age population were enrolled in some type of higher education program; 26% for men and 33% for women. The adult literacy rate for 2004 was estimated at about 88.7%, with 92% for men and 85.4% for women.

As of 2003, public expenditure on education was estimated at 8.1% of GDP, or 20.3% of total government expenditures.


The National Library of Malaysia, with more than 1.3 million volumes, was established in 1971 and has been charged with wide responsibilities under the National Library Act. Both the National Library and the National Archives are in Kuala Lumpur. the National University of Malaysia (Universiti Kebangsaan Malaysia) in Bargi has 945,000 volumes. Other important libraries are those at the universities; the Sabah (380,000) and Sarawak (500,000) state libraries; Tun Abdul Razak Library at the MARA University of Technology (569,000); and the library of the Malaysian Rubber Board (120,000). The largest public libraries are in Denang, Malacca, and Selangor.

The National Museum of Malaysia in Kuala Lumpur, constructed on the site of the former Selangor Museum (destroyed in World War II), houses extensive collections of Malayan archaeology, ethnography, and zoology. The Perak Museum in Taiping, founded in 1883, has a varied collection exhibiting antiquities, ethnographic, and zoological materials. Also in Kuala Lumpur are the Museum of Asian Art (1974), the Postal Museum, the Air Force Museum, and the National Art Gallery (1958). Sabah and Sarawak maintain anthropological and archaeological collections pertinent to East Malaysia. There is an Aboriginal Affairs Museum in Gombak.


The government owns and operates a well-developed and well equipped telecommunications system. Automatic dialing for the majority of exchanges is provided by a VHF radio circuit. In 2003, there were an estimated 182 mainline telephones for every 1,000 people; about 49,000 people were on a waiting list for telephone service installation. Also in 2003, there were approximately 442 mobile phones in use for every 1,000 people. Telegraph and radiotelephone connections link peninsular Malaysia with most foreign countries.

Radio-Television Malaysia (RTM) operates radio and television stations in Kuala Lumpur, Sabah, and Kuching, and there is a commercial station, Sistem TV-3 Berhad, in Kuala Lumpur as well. Broadcasts are in English, Malay, five Chinese dialects, Tamil, and numerous local languages and dialects. As of 2001 Malaysia had 35 AM and 391 FM radio stations and 1 television station. In 2000, there were 420 radios and 168 televisions sets for every 1,000 people. In 2001, there were 4.1 million Internet subscribers served by 7 service providers.

There are about 80 English, Malay, Chinese, and Tamil daily and weekly newspapers. The Malay-language press is the largest segment, followed by English, Chinese, Tamil, Punjabi, and Kadazan. In Kuala Lumpur, there are two major dailies published in Chinese, China Press, with a 2002 circulation of 210,000, and Nanyang Siang Pau, with a 2002 circulation of 183,800. there are also two major dailies published in Malay, Berita Harian (circulation 350,000 in 2002) and Utusan Malaysia (240,000). the New Straits Times is an English-language paper that had a daily circulation of 190,000 in 2002. Malaysian Nanban is a Tamil-language daily.

In Petaling Jaya leading newspapers include two Chinese publications, New Life Post (every other week, circulation 231,000 in 2002) and Sin Chew Jit Poh (daily, 227,070). the Star is published in English and had a 2002 circulation of 220,490 daily.

Though the constitution provides for freedom of speech and a free press, in practice the government is said to restrict the flow of information deemed "sensitive," including issues regarding citizenship of non-Malays and the special position of Malays in society. Under the Printing Presses and Publications Act, every publisher must obtain a license, to be renewed annually by the government. The government has the right to restrict or ban such publications if their content is considered to contain malicious or distorted views of the government. As such, the media generally practices self-censorship, providing laudatory, noncritical coverage of government activities.


The Malaysian government promotes thrift, credit, processing, marketing, farming, consumer, and housing cooperatives. the cooperative movement was introduced in Malaya in 1922. the Chinese are organized along clan, common dialect, or occupational lines into rural credit associations. These local associations set up and maintain schools, build temples, and provide burial, relief, and employment services. In the larger cities, chambers of commerce, organized along ethnic lines, promote the economic welfare of the group represented. Specialized trade and industry associations include the Pepper Marketing Board, Malaysian Pineapple Industry Board, and the Malaysia Cocoa Board. The National Chamber of Commerce and Industry of Malaysia is in Kuala Lumpur. Professional associations are available for a wide variety of occupations.

Cultural organizations include the multinational Royal Asiatic Society and the International Institute of Islamic Thought and Civilization. Educational and research organizations include the Malaysian Medical Association and the Malaysian Scientific Association. There are several other associations dedicated to research and education for specific fields of medicine and particular diseases and conditions, such as the National Heart Association of Malaysia.

Youth organizations include the Federation of Malay Student Unions, Girl Guides Association of Malaysia, Malaysia Council of Churches Youth Division, Muslim Youth Movement of Malaysia, Junior Chamber, National Union of Malaysian Muslim Students, and the United Malaysian Youth Movement. YMCA/YWCA chapters are also active. There are several sports associations in the nation, including the regional Asean Football Federation. there are active branches of the Special Olympics.

Kiwanis and Lion's clubs have programs in the country. there are national chapters of the Red Crescent Society, Habitat for Humanity, UNICEF, and Amnesty International.


Most large hotels are in the major cities of Kuala Lumpur and George Town. The best-known hill resort areas are Cameron Highlands, Raub, and Pinang Hill. Island resorts off the coast of the peninsula are Langkawi and Pangkor. Horse racing, football (soccer), rugby, cricket, and sepak raga (a form of badminton) are popular spectator sports. Kite fighting and top spinning are traditional pastimes for children and adults, and silat (a Malay martial art) is popular in rural areas.

Passports are required of all entrants. Citizens of most countries, including the United States, Australia, and China, are required to have visas. Precautions against yellow fever, typhoid, and malaria are recommended before travel to Malaysia.

There were 10,576,915 foreign visitors who arrived in Malaysia in 2003. Tourist receipts totaled $6.7 billion. Hotel rooms numbered 144,380 with an occupancy rate of 53%.

In 2004, the US Department of State estimated the daily cost of staying in Kuala Lumpur at $129; and other areas, $121.


Among the foremost Malaysian leaders of the past was Sultan Mahmud, 16th-century ruler of Malacca. A great figure in Malay culture was 'Abdallah bin 'Abd al-Kabir (surnamed Munshi', 17961854), sometimes called the greatest innovator in Malay letters. The best-known figure in the political life of modern Malaysia is Tunku Abdul Rahman Putra bin Abdul Hamid Halimshah (19031990), first prime minister of the Federation of Malaysia. Other political leaders are Tun Abdul Razak (192276), the nation's second prime minister (197076); Datuk Seri Mahathir bin Mohamed (b.1925), prime minister 19812003, succeeding Dato Onn bin Ja'afar (18951962), a founder of the United Malays National Organization; and Sir Cheng-lock Tan (18831960), leader of the Malaysian Chinese Association. Abdullah bin Haji Ahmad Badawi (b.1939) succeeded Mahathir bin Mohamed as prime minister in 2003.


Malaysia has no territories or colonies.


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