About the CBI

September 2005
Background Note: Malaysia

Flag of Malaysia is 14 equal horizontal stripes of red (top) alternating with
white (bottom); there is a blue rectangle in the upper hoist-side corner
bearing a yellow crescent and a yellow 14-pointed star.

PROFILE

OFFICIAL NAME:
Malaysia

Geography
Area: 329,749 sq. km. (127,316 sq. mi.); slightly larger than New Mexico.
Cities: Capital--Kuala Lumpur. Other cities--Penang, Ipoh, Malacca, Johor
Baru, Kuching, Kota Kinabalu, Alor Setar, Shah Alam, Miri.
Terrain: Coastal plains and interior, jungle-covered mountains. The South
China Sea separates peninsular Malaysia from East Malaysia on Borneo (400
mi.).
Climate: Tropical.

People
Nationality: Noun and adjective--Malaysian(s).
Population (2004): 25.6 million.
Annual growth rate: 2.4%.
Ethnic groups: Malay 50.8%, Chinese 23.8%, Indigenous 10.9%, Indian 7.1%,
non-Malaysian citizens 6.8 %, others 0.6%.
Religions: Islam (60.4%), Buddhism (19.2%), Christianity (9.1%), Hinduism
(6.3%),Confucianism (2.6%), Animism (0.8%), others (including Taoism,
Sikhism, Baha'i faith -- 0.4%), none (2.8%).
Languages: Malay, Cantonese, Hokkien, Mandarin Chinese, English, Tamil,
indigenous.
Education: Years compulsory--9. Attendance--98.5% (primary), 82% (secondary).
Literacy (2002)--95%.
Health: Infant mortality rate (2003)--5.8 /1,000. Life expectancy (2003)
--female 75.5 yrs., male 71.0 yrs.
Work force (10.6 million, 2003): Manufacturing 29.1%; other services--28.2%;;
agriculture--13.8%; government services 9.8%; construction--7.6%;
finance--6.4%; transportation and communications--5.2%; mining and
petroleum--0.4%.


Government
Type: Federal parliamentary democracy with a constitutional monarch.
Independence: August 31, 1957. (Malaya, which is now peninsular Malaysia,
became independent in 1957. In 1963 Malaya, Sabah, Sarawak, and Singapore
formed Malaysia. Singapore became an independent country in 1965.).
Constitution: 1957.
Subdivisions: 13 states and three federal territories (Kuala Lumpur, Labuan
Island, Putrajaya federal administrative territory). Each state has an
assembly and government headed by a chief minister. Nine of these states have
hereditary rulers, generally titled "sultans," while the remaining four have
appointed governors in counterpart positions.
Branches: Executive--Yang di-Pertuan Agong ("paramount ruler," who is head of
state and customarily referred to as the king and has ceremonial duties),
prime minister (head of government), cabinet. Legislative--bicameral
parliament, comprising 70-member Senate (26 elected by the 13 state
assemblies, 44 appointed by the king on the prime minister's recommendation)
and 219-member House of Representatives (elected from single-member
districts). Judicial--Federal Court, Court of Appeals, high courts, session's
courts, magistrate's courts, and juvenile courts. Shariah courts hear cases
on certain matters involving Muslims only.
Political parties: Barisan Nasional (National Front)--a coalition comprising
the United Malays National Organization (UMNO) and 13 other parties, most of
which are ethnically based; Democratic Action Party (DAP); Parti Islam se
Malaysia (PAS); Parti KeADILan Rakyat. There are more than 30 registered
political parties, including the foregoing, not all of which are represented
in the federal parliament.
Suffrage: Universal adult (voting age 21).

Economy (2003)
GNP: $111.3 billion.
Annual real GDP growth rate: 7.1%.
Per capita (GDP) income: $4,352.
Natural resources: Petroleum, liquefied natural gas (LNG), tin, minerals.
Agriculture: Products--palm oil, rubber, timber, cocoa, rice, tropical fruit,
fish, coconut.
Industry: Types--electronics, electrical products, chemicals, food and
beverages, metal and machine products, apparel.
Trade: Merchandise exports--$127.0 billion: electronics, electrical products,
palm oil, petroleum, liquid natural gas, apparel, timber and logs, plywood
and veneer, natural rubber. Major markets--U.S. 18%, Singapore 15.0%, Japan
10.9%. Merchandise imports--$ 99.2 billion: machinery, chemicals,
manufactured goods, fuels, and lubricants. Major suppliers--U.S. 15%, Japan
15%, Singapore 11%.

PEOPLE
Malaysia's population of 25.6 million (2004) continues to grow at a rate of
2.0% per annum; about 32.8% of the population is under the age of 15.
Malaysia's population comprises many ethnic groups, with the politically
dominant Malays comprising a majority. By constitutional definition, all
Malays are Muslim. About a quarter of the population is Chinese, who have
historically played an important role in trade and business.

Malaysians of Indian descent comprise about 7% of the population and include
Hindus, Muslims, Buddhists, and Christians. About 85% of the Indian community
is ethnically Tamil, with the remainder including those of Telegu, Malayalam,
Punjabi and Gujarati descent.

Non-Malay indigenous groups make up more than half of the Borneo state of
Sarawak's population and about 66% of the Borneo state of Sabah's population.
They are divided into dozens of ethnic groups, but they share some general
patterns of living and culture. Until the 20th century, most practiced
traditional beliefs, but many have become Christian or Muslim. The "other"
category includes Malaysians of, inter alia, Thai, European and Middle
Eastern descent. Population distribution is uneven, with some 20 million
residents concentrated in the lowlands of peninsular Malaysia, an area
slightly smaller than the state of Michigan.

HISTORY
The early Buddhist Malay kingdom of Srivijaya, based at what is now
Palembang, Sumatra, dominated much of the Malay peninsula from the 9th to the
13th centuries AD. The powerful Hindu kingdom of Majapahit, based on Java,
gained control of the Malay peninsula in the 14th century. Conversion of the
Malays to Islam, beginning in the early 14th century, accelerated with the
rise of the state of Malacca under the rule of a Muslim prince in the 15th
century. Malacca was a major regional entrepot, where Chinese, Arab, Malay,
and Indian merchants traded precious goods. Drawn by this rich trade, a
Portuguese fleet conquered Malacca in 1511, marking the beginning of European
expansion in Southeast Asia. The Dutch ousted the Portuguese from Malacca in
1641. The British obtained the island of Penang in 1786. In 1795, the Dutch
gave up Malacca to the British temporarily to prevent it from falling to the
French during the Napoleonic war. It was returned to the Dutch in 1818. In
1824, through the Anglo-Dutch treaty, Malacca was given to the British in
exchange for Bengkulen on the island of Sumatra, in what is today Indonesia.

In 1826, the British settlements of Malacca, Penang, and Singapore were
combined to form the Colony of the Straits Settlements. From these
strongholds, in the 19th and early 20th centuries the British established
protectorates over the Malay sultanates on the peninsula. Four of these
states were consolidated in 1895 as the Federated Malay States.
During British control, a well-ordered system of public administration was
established, public services were extended, and large-scale rubber and tin
production was developed. This control was interrupted by the Japanese
invasion and occupation from 1941 to 1945 during World War II.

Popular sentiment for independence swelled during and after the war and, in
1957, the Federation of Malaya, established from the British-ruled
territories of peninsular Malaysia in 1948, negotiated independence from the
United Kingdom under the leadership of Tunku Abdul Rahman, who became the
first prime minister. The British colonies of Singapore, Sarawak, and Sabah
(called North Borneo) joined together with the Federation to form Malaysia on
September 16, 1963.

Singapore left the Federation on August 9, 1965, and became an independent
republic. Neighboring Indonesia objected to the formation of Malaysia and
pursued a program of economic, political, diplomatic, and military
"confrontation" against the new country, which ended only after the fall of
Indonesia's President Sukarno in 1966.

Following World War II, local communists, nearly all Chinese, launched a
long, bitter insurgency, prompting the imposition of a state of emergency in
1948 (lifted in 1960). Small bands of guerrillas remained in bases along the
rugged border with southern Thailand, occasionally entering northern
Malaysia. These guerrillas finally signed a peace accord with the Malaysian
Government in December 1989. A separate, small-scale communist insurgency
that began in the mid-1960s in Sarawak also ended with the signing of a peace
accord in October 1990.

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

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

The bicameral parliament consists of the Senate (Dewan Negara) and the House
of Representatives (Dewan Rakyat). All 70 Senate members sit for 3-year
terms, which are normally extended for an additional 3 years; 26 are elected
by the 13 state assemblies, and 44 are appointed by the king. Representatives
of the House are elected from single-member districts by universal adult
suffrage. The 219 members of the House of Representatives are elected to
parliamentary terms lasting up to 5 years. Legislative power is divided
between federal and state legislatures.

The Malaysian legal system is based on English common law. The Federal Court
reviews decisions referred from the Court of Appeal; it has original
jurisdiction in constitutional matters and in disputes between states or
between the federal government and a state. Peninsular Malaysia and the East
Malaysian states of Sabah and Sarawak each have a high court.
The federal government has authority over external affairs, defense, internal
security, justice (except civil law cases among Malays or other Muslims and
other indigenous peoples, adjudicated under Islamic and traditional law),
federal citizenship, finance, commerce, industry, communications,
transportation, and other matters.

Principal Government Officials
Prime Minister--Dato' Seri Utama Abdullah bin Ahmad Badawi
Foreign Minister--Datuk Seri Syed Hamid Albar
Ambassador to the U.S.--Dato' Ghazzali Sheikh Abdul Khalid
Ambassador to the UN--Datuk Rastam Mohd Isa

Malaysia maintains an embassy in the U.S. at 3516 International Court,
Washington, DC 20008, tel. (202) 572-9700; a Consulate General in the Los
Angeles World Trade Center, 350 South Figueroa Street, Los Angeles, CA, tel.
(213) 621-2991; and a Consulate General at 140 E. 45th Street, New York, NY
10017, tel. (212) 490-2722.

POLITICAL CONDITIONS
Malaysia's predominant political party, the United Malays National
Organization (UMNO), has held power in coalition with other parties since
Malaya's independence in 1957. In 1973, an alliance of communally based
parties was replaced with a broader coalition--the Barisan Nasional--composed
of 14 parties. In September 1998, then-Prime Minister Mahathir dismissed
Deputy Prime Minister Anwar Ibrahim and accused Anwar of immoral and corrupt
conduct. Although Anwar was convicted on both charges in 1999 and 2000, the
trials were viewed as seriously flawed (Malaysia's Federal Court eventually
freed Anwar after overturning his immoral conduct conviction in September
2004). Mahathir replaced Anwar in 1999 with Abdullah Ahmad Badawi.

On October 31, 2003, Prime Minister Mahathir stepped down voluntarily after
22 years in power, and his successor, Deputy Prime Minister Abdullah Badawi,
was sworn into office. Abdullah won an overwhelming victory in March 21, 2004
general elections, with Barisan Nasional winning 199 of 219 seats in the
lower house of parliament. UMNO itself won 110 seats. PAS was reduced to six
seats in parliament and lost control of the state of Terengganu. The
socialist Democratic Action Party (DAP), with predominately urban ethnic
Chinese support, won 12 seats in parliament, and party chairman Lim Kit Siang
became Leader of the Opposition in parliament.

ECONOMY
The Malaysian economy maintained its momentum growing 7.1% (real GDP) in
2004, after expanding 5.3% in 2003. The better than expected expansion in
2004 was fueled primarily by the continuing strength of the manufacturing
sector, particularly the electronics and chemical industries. The strength of
the global electronics sector continued to boost Malaysian exports to the
U.S., Malaysia's principal trade and investment partner. However, the
economic prognosis is that the economy's growth will slow in 2005 -- the
current projection is between 5.0% to 6.0%. Malaysia manufacturers remain
concerned about slowing growth regionally and globally, and the impact of
continued high oil prices.

Although Malaysia is a net exporter of oil, due to the significant and rapid
hike in oil prices, the government has seen an increased cost to support oil
subsidies. It ahs also passed some of the burden of these subsidies to
domestic consumers through higher prices at the pump, thereby raising
concerns about inflation.

On July 21, 2005, the government removed the 7-year old peg linking the
ringgit's value to the U.S. dollar (at an exchange rate of RM 3.8/U.S.$1.0),
replacing it with a managed float against an undisclosed basket of
currencies. This move aims to keep the ringgit stable to support the
country's export-based economy.

Malaysia remains an important trading partner for the United States. In 2004,
bilateral trade between the United States and Malaysia totaled U.S.$39.1
billion. U.S. exports to Malaysia were $10.9 billion, and U.S. imports from
Malaysia were $28.2 billion. Malaysia was the United States' 10th-largest
trading partner and its 16th-largest export market. During the first 6 months
of 2004, U.S. exports to Malaysia totaled $4.8 billion while the United
States imported $15.3 billion from Malaysia.
Malaysia successfully developed from a commodity-based economy to one focused
on manufacturing. Today the Government of Malaysia seeks to make the leap to
a knowledge-based economy. At independence, Malaysia inherited an economy
dominated by two commodities--rubber and tin. In the 40 years thereafter,
Malaysia's economic record had been one of Asia's best. From the early 1980s
through the mid-1990s, the economy experienced a period of broad
diversification and sustained rapid growth averaging almost 8% annually. New
foreign and domestic investment played a significant role in the
transformation of Malaysia's economy. Manufacturing grew from 13.9% of GDP in
1970 to 30.9 % in 2003, while agriculture and mining, which together had
accounted for 42.7% of GDP in 1970, dropped to 8.7% and 7.2 %, respectively,
in 2003. Malaysia is one of the world's largest exporters of semiconductor
devices, electrical goods, and appliances, and the government has ambitious
plans to make Malaysia a leading producer and developer of high-tech
products, including software. Malaysia is a major destination for outsourcing
after China and India.

The Malaysian Government encourages Foreign Direct Investment (FDI), and the
United States continues to be one of the largest sources of new investment in
Malaysia. In 2004, the Malaysian Government approved U.S. $263 million in new
manufacturing investment by U.S. companies, with the bulk in the electronics
and electrical sectors. The cumulative value of U.S. private investment in
Malaysia exceeds $20 billion, 60% of which is in the oil and gas and
petrochemical sectors with the rest in manufacturing, especially
semiconductors and other electronic products, according to an American
Chamber of Commerce 2003 survey.

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

DEFENSE
In the early 1990s, Malaysia undertook a major program to expand and
modernize its armed forces. This included procurement of F/A-18 and C-130
aircraft from the United States. In 2003, the government announced a major
purchase of Russian Sukhoi aircraft. Malaysia is also acquiring submarines
from France and tanks from Poland.

FOREIGN RELATIONS
As a founding member of the Association of Southeast Asian Nations
(ASEAN--established 1967), Malaysia views regional cooperation as the
cornerstone of its foreign policy. Malaysia was elected chair of the 39th
ASEAN Standing Committee and will host the ASEAN Summit and East Asia Summit
in December 2005. Malaysia will also host the ASEAN Ministerial and ASEAN
Regional Forum meetings in July 2006.. In world affairs, Malaysia maintains
cooperative relations with the United States, the European Union, and Japan.
Malaysia is an active member of the Commonwealth, the UN, the Organization of
Islamic Conference (OIC), and the Non-Aligned Movement (NAM).

In 2003, Malaysia assumed the chairmanship of both the OIC and the NAM.
Malaysia also is a member of APEC and hosted the 1998 Leaders' Meeting.
Malaysia maintains diplomatic relations with North Korea. Malaysia does not
have diplomatic relations with Israel. Malaysia's international affiliations
include the UN and many of its specialized agencies, including UNESCO, World
Bank, International Monetary Fund, and the International Atomic Energy
Agency; General Agreement on Tariffs and Trade; Association of Southeast
Asian Nations; Asian Development Bank; Five-Power Defense Arrangement;
South-South Commission (G-15); Asia-Pacific Economic Cooperation (APEC),
Commonwealth; Non-Aligned Movement; Organization of Islamic Conference; and
INTELSAT.

U.S.-MALAYSIAN RELATIONS
The United States has maintained friendly relations with Malaysia since its
independence in 1957. The United States and Malaysia have a record of
cooperation in many areas, including trade and investment, defense,
counter-terrorism, and counter-narcotics.

Cultural and educational exchanges have been another fruitful area of
cooperation. However, the number of Malaysians studying in the United States
declined significantly from 14,597 in the 1997-98 school year to 6,483 in the
2003-04 school year.

Trade and Investment
The United States is currently Malaysia's largest trading partner and largest
foreign investor. Malaysia possesses abundant resources and land, a
well-educated work force, adequate infrastructure, and a relatively stable
political environment. The return of economic growth should boost U.S.
exports, particularly in priority areas of development, including
high-technology fields, industrial automation, medical products and services,
education/distance learning, and the environment. Of particular interest to
the Malaysian Government is the development of the Multimedia Super Corridor,
Malaysia's effort to create a Silicon Valley in Asia. Malaysia, a member of
the World Trade Organization (WTO), has few restraints on trade goods. Its
service sector, however, remains protected, particularly in financial
services.

Principal U.S. Embassy Officials
Ambassador--Christopher J. LaFleur
Deputy Chief of Mission--David B. Shear
Political Counselor--Thomas F. Daughton
Economic Counselor--Colin S. Helmer
Commercial Counselor--Joseph B. Kaesshaefer
Public Affairs Officer--Phillip Hoffmann
Agricultural Counselor--Jonathan P. Gressel
Consul--Andrew T. Miller

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