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1.0 Introduction

Malaysia is a federalconstitutional monarchy in Southeast Asia. It consists ofthirteen states andthree federal territories and has a total landmass of 329,847 square kilometers (127,350 sq mi) separatedby the South China Sea into two regions, Peninsular Malaysia and Malaysian Borneo. Land borders areshared with Thailand, Indonesia, and Brunei, and maritime borders exist with Singapore, Vietnam, andthe Philippines. The capital city is Kuala Lumpur, while Putrajaya is the seat of the federal government. In

2010 the population exceeded 27.5 million. Now according to the Department of Statistics the populationis 28.3 million.

Malaysia has its origins in the Malay Kingdoms present in the area which, from the 18th century,became subject to the British Empire. The first British territories were known as the Straits Settlements,with the other states forming protectorates. The states on Peninsular Malaysia, then known as Malaya,were first unified as the Malayan Union in 1946. Malaya was restructured as the Federation of Malaya in1948, and achieved independence on 31 August 1957. Malaya united with Sabah,Sarawak, and Singaporeon 16 September 1963, with si being added to give the new country the name Malaysia. However, lessthan two years later in 1965, Singapore was expelled from the federation. Since independence, Malaysiahas had one of the best economic records in Asia, with GDP growing an average 6.5% for almost 50years. The economy has traditionally been fuelled by its natural resources, but is expanding in the sectorsof science, tourism, commerce and medical tourism.

The head of state is the Yang di-Pertuan Agong, an elected monarch chosen from the hereditaryrulers of the nine Malay states every five years. The head of government is the Prime Minister. Thegovernment system is closely modeled on the Westminster parliamentary system and the legal system isbased on English Common Law. The country is multi-ethnic and multi-cultural, factors that influence itsculture and play a large role in politics. Islam is the state religion, although freedom of religion isprotected by a secular constitution.

2.0 Demographics of Malaysia

2.1 Location:

Malaysia, in the south east part of Asia, has a geographic coordinate that reads 2 30' Northlatitudeand 112 30' Eastlongitude. Kuala Lampur which is the capital of Malaysia is located in between3 10' North latitude and 101 42' East longitude. As a result of its latitude and longitude, Malaysia staysahead by eight hours from the Greenwich Mean Time. Malaysia has several types of landscapes for itscertain latitude and longitudemeasurements.

2.2 Population:

Census 2010 revealed that the total population of Malaysia was 28.3 million, compared with 23.3million in 2000 (Chart 1). This gives an average annual population growth rate of 2.0 per cent for theperiod 2000-2010. The rate was lower compared to that of 2.6 per cent during 1991-2000 (Chart 2). Thestate with the highest growth rate for the period 2000-2010 was W. P. Putrajaya (17.8%), followed bySelangor (2.7%), Melaka (2.6%) and Sabah (2.1%). Among the states which experienced lower growthrate were Terengganu (1.4%), Perak (1.4%), W. P.

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2.2.1 Population Distribution

Population distribution by state indicated that Selangor was the most populous state (5.46 million),followed by Johor (3.35 million) and Sabah (3.21 million). The population share of these states to thetotal population of Malaysia was 42.4 per cent. The least populated states were W. P. Putrajaya (72,413)and W .P. Labuan (86,908).

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2.2.2 Population Density

Population density of Malaysia stood at 86 persons per square kilometre in 2010 compared with71 persons in 2000. Unlike the population distribution, the population density revealed a different picture.Selangor being the most populous state was only ranked fifth in terms of population density with 674persons per square kilometre. Among the most densely populated states were W. P. Kuala Lumpur (6,891persons), Pulau Pinang (1,490 persons) and W. P. Putrajaya (1,478 persons).

2.2.3 Ethnicity

The total population was 28.3 million of which 91.8 per cent were Malaysian citizens and 8.2 percent were non-citizens. Malaysian citizens consist of the ethnic groups Bumiputera (67.4%), Chinese(24.6%), Indians (7.3%) and Others (0.7%). Among the Malaysian citizens, the Malays was thepredominant ethnic group in Peninsular Malaysia which constituted 63.1 per cent. The Ibans constituted30.3 per cent of the total citizens in Sarawak while Kadazan/Dusun made up 24.5 per cent in Sabah.

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2.2.4 Religion

Islam was the most widely professed religion in Malaysia with the proportion of 61.3 per cent. Asa multi-racial nation, other religions embraced were Buddhism (19.8%), Christianity (9.2%) andHinduism(6.3%).

2.3 Labor Force

In economics, a labor force or labour force is a region's combined civilian workforce, includingboth the employed and unemployed. Normally, the labor force of a country (or other geographic entity)

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consists of everyone of working age (typically above a certain age (around 14 to 16) and below retirement(around 65) who are participating workers, that is people actively employed or seeking employment.People not counted include students, retired people, stay-at-home parents, people in prisons or similarinstitutions, people employed in jobs or professions with unreported income, as well as discouragedworkers who cannot find work.

As Malaysia is a developing country their utilization of labor force increasing in every year. Thefollowing data represent in million.

Country

1999 2000 2001 2003 2004 2005 2006 2007 2008 2009 2010

Malaysia

9,300,000

9,600,000

9,900,000

10,260,000

10,490,000

10,670,000

10,730,000

10,940,000

11,090,000

11,380,000

12,200,000

3.0 Geography of Malaysia

Malaysia is the 66th largest country by total land area, with a land area of 329,847 square kilometres(127,355 sq mi). It has land borders with Thailand in West Malaysia, and Indonesia and Brunei in East Malaysia. Itis linked to Singapore by a narrow causeway, and also has maritime boundaries with Vietnam and the Philippines.

3.1 Climate

Malaysia's climate is categorized as equatorial being hot and humid throughout the year. Theaverage rainfall is 250 centimeters (98 in) a year and the average temperature is 27 C (80.6 F) Climatechange is likely to have a significant effect on Malaysia, increasing Sea levels and rainfall, increasingflooding risks and leading to large droughts.Malaysia faces two monsoon winds seasons:

The Southwest Monsoon from late May to September, The southwest monsoon originates fromthe deserts of Australia

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The Northeast Monsoon from November to March. The Northeast Monsoon brings in morerainfall compared to the Southwest Monsoon,originating in China and the North Pacific. Marchand October form transitions between the two monsoons.

3.1.1Geology

Malaysia is located on the Sunda Shelf and is tectonically inactive. The oldest rocks in the countrydate from 540million years ago, and are mostly Sedimentary the most common form of rock is limestone

formed during the paleozoic Era.

3.2 Land

The total land area of Malaysia is 329,847 square kilometers (127,350 sq mi), the 67th largestcountry in the world in terms of area. It is the only country to contain land on both mainland Asia and theMalay Archipelago Peninsular Malaysia makes up 132,090 square kilometers (51,000 sq mi), or 39.7%,while East Malaysia covers 198,847 square kilometers (76,780 sq mi), or 60.3% of the total land of thecountry. From the total land area, 1,200 square kilometers (460 sq mi) or 0.37% is made up of water suchas lakes, rivers.

3.3 Forest

Malaysian forests can be categorized as tropical rainforest. Approximately 58.2% of Malaysianland is covered by forest. A large amount of lowland forest present below an altitude of 760 meters(2,493 ft). East Malaysia, like most of Borneo, was formerly covered with Borneo lowland rain forestswith over 2000 tree species. Over 80% of Sarawak's forests have been felled, and the logging throughoutEast Malaysia has polluted waterways, increased erosion, and damaged agriculture. Some stategovernments have now taken measures to halt the degradation of the rain forest. There are over 1,425square kilometers (550 sq mi) of mangroves in Malaysia.

3.4 Islands

Malaysia contains numerous islands, the largest of which is Labuan, which has an area of 92square kilometers (40 sq mi). It is followed by Banggi Island in Sabah, followed by Betruit Island inSarawak, Langkawi in Kedah, and Penang Island in Penang.

3.5 Bodies of water

Between Peninsular Malaysia and East Malaysia is the South China Sea, the largest body of wateraround Malaysia. Facing the western coast of Peninsular Malaysia there is the Straits of Malacca towardsthe south, and the Andaman Sea towards the north. The Straits of Malacca lying between Sumatra andPeninsular Malaysia is arguably the most important shipping lane in the world. These seas are marginalseas of the Indian Ocean. The Bera Lake in Pahang is one of the largest lakes in Malaysia, and one of the

only two natural lakes in Malaysia with Tasik Chini. There are many systems of rivers found aroundMalaysia. The longest is the Rajang River in Sarawak with a length of 760 kilometers (472 mi).

4.0 Natural resources

4.1Minerals and petroleum

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Malaysia produces petroleum and is a net exporter. Malaysia also produces liquefied natural gas aswell as various other related products, most of which are found off the coasts of Terengganu, Sabah, andSarawak. Natural resources: tin, petroleum, timber, copper, iron, ore, natural gas, bauxite

Coal is mostly concerted in Sarawak town of Kapit, Mukah and Silantek.

4.2 Forestry

Timber can be found in the vast jungles in Malaysia, especially in East Malaysia.

4.3 Land use

Large areas of land are used as palm oil plantations, rubber plantations, and paddy fields. Malaysiais the largest exporter of palm oil in the world producing 15.8 million tonnes of crude palm oil in 2007.Malaysia is also one of the largest producers and exporters of rubber and other rubber products.

5.0 Human geography

Peninsular Malaysia is more populated than East Malaysia.59% of Malaysian population lived inurban areas, while the rest live in rural areas. The largest city is Kuala Lampurwith a population of 1.89million people in the city, and about 7 million in the metropolitan area known asKlang Valley. Other

major cities include George town, Johar Bahadur, Ipoh,Kuching and Kinabalu

6.0 Political geography

Malaysia is divided into thirteen states and three Federal Territories. Eleven states and two FederalTerritories are found in Peninsular Malaysia. While two states and one Federal Territory is found in EastMalaysia. The states are further divided into administrative districts. In Sabah and Sarawak, they are firstdivided into divisions and then further divided into districts. There are separate subdivisions for electoraldistricts for polling purposes.

6.1 Political situation in Malaysia for international business:

The politics of Malaysia takes place in the framework of a federal constitutional monarchy, inwhich the Yang di-Pertuan Agong is head of state and the Prime Minister of Malaysia is the head ofgovernment. Executive power is exercised by the federal government and the 13 state governments.Federal legislative power is vested in the federal parliament and the 13 state assemblies. The judiciary isindependent of the executive and the legislature, though the executive maintains a certain level ofinfluence in the appointment of judges to the courts.

The Constitution of Malaysia is codified and the system of government is based on the system. Malaysiahas a multi-party system. Malaysias predominant political party, the United Malays NationalOrganization (UMNO), has held power in coalition known as the in 1973. The Barisan Nasional

composed of fourteen parties. Today the Barisan Nasional coalition has three prominent members theUMNO, MCA (Malaysian Chinese Association) and MIC (Malaysian Indian Congress). The PrimeMinister of Malaysia has always been from UMNO.

The hierarchy of authority in Malaysia, in accordance to the Federal Constitution, has stipulatedthe three branches (administrative components) of the Malaysian government as consisting of the,Executive, Judiciary and Legislative branch

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6.1.1 Monarchy

The monarch of Malaysia is the Yang di-Pertuan Agong (YDPA), commonly referred to as the King ofMalaysia. Malaysia is a constitutional elective monarchy, the Yang di-Pertuan Agong is selected for a five-yearterms from among the nine Sultans of the Malay states. The other four states that do not have monarch kings, arerule by governors. System of government

6.1.2 Legislative

Legislative power is divided between federal and state legislatures. The bicameral parliament consists ofthe lower house, the House of Representatives or literally the "Chamber of the People") and the upper house, theSenate or literally the "Chamber of the Nation"). All seventy Senate members sit for three-year terms (to amaximum of two terms); twenty-six are elected by the thirteen state assemblies, and forty-four are appointed by theking based on the advice of the Prime Minister

6.1.3 Executive

Executive power is vested in the cabinet led by the prime minister. The Executive branch of thegovernment consists of the Prime Minister as the head of the government, followed by the various ministers of theCabinet

6.1.3 Judicial

The judiciary is theoretically independent of the executive and the legislature, although supporters of thegovernment hold many judicial positions. The highest court in the judicial system is the Federal Court, followed bythe Court of Appeal, and two High Courts, one for Peninsular Malaysia, and one for EastMalaysia

7.0 Doing Business with the Government

You must registeryour enterprise with the Malaysian Ministry of Finance (MOF) if you wish to conduct

business, whether as a supplier or a consultant, with the government of Malaysia.

Businesses interested in registering with the Ministry can do so online withePerolehan , or eP, anelectronic procurement system established by the Government. eP-enabled Government agencies will only conductbusiness with MOF-registered suppliers who are also eP-enabled.

Malaysia is known for political stability. In 1997, the Asian financial crisis came; yet, many investors keptmoney invested within Malaysian markets because of their confidence within the stability of their politicalsystem.

7.1 Political Risk:

The government has been slowly implementing initiatives that allow for somewhat more transparency inpublic contracts, fewer government subsidies and price controls, less government involvement in various economicsectors,and increased foreign participation. Though its role is declining, the government maintains significant ownership inmajor sectors, such as oil and banking.

The government has made it a priority to cultivate growth and advancement in high-end economicsectors, with the overall goal of becoming a developed country by 2020.

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The government encourages foreign investment, but maintains approval rights for individual investments,often opting to restrict foreign equity or encouraging the transfer of technology from foreign firms.

7.2 Legal system

Malaysia's legal system is based on English Common Law, alongside a Sharia court system for MalaysianMuslims. The Federal Court reviews decisions referred from the Court of Appeals; it has original jurisdiction inconstitutional matters and in disputes between states or between the federal government and a state. PeninsularMalaysia and the East Malaysian states of Sabah and Sarawak each has a high court. The federal government hasauthority over external affairs, defense, internal security, justice (except civil law cases among Malays or otherMuslims and other indigenous peoples, adjudicated under Islamic and traditional law), federal citizenship, finance,commerce, industry, communications, transportation, and other matters.

7.3 State powers and law enforcement

Due to the Internal Security Act, the Interior Minister is able to arrest any Malaysian without trial.The government has effective control of all media, with media outlets only able to operate if licensed bythe government. Convictions cannot be challenged.

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7.4 State governments

Each state has a unicameral state legislative chamber (Malay: Dewan Undangan Negeri) whosemembers are elected from single-member constituencies. State governments are led by Chief Ministerswho are state assembly members from the majority party in the Dewan Undangan Negeri. They advisetheir respective sultans or governors. In each of the states with a hereditary ruler, the Chief Minister isrequired to be Malay, appointed by the Sultan upon the recommendation of the Prime Minister.Parliamentary elections are held at least once every five years, with the last general election being in

March 2008. Registered voters of age 21 and above may vote for the members of the House ofRepresentatives and, in most of the states, for the state legislative chamber. Voting is not mandatory.Although Malaysia is a federal state, political scientists have suggested that its "federalism is highlycentralized":

8.0 Economy of Malaysia

Economy of Malaysia

Fixed exchange

rates1Ringgit = 100 sen

Fiscal year Calendar yearTrade

organisationsAPEC,ASEAN,IOR-ARC,WTO

Statistics

GDP$414.4 billion (2010)Rank: 30

GDP growth 7.2%

GDP per capita $14,700 (2010)

GDP by sectorAgriculture: 10.5%; industry: 41.4% services:48.2% (2010)

Inflation(CPI) 1.7% (2010)

Populationbelowpoverty

line

3.6% (2010)

Labor force

by occupation

Agriculture: (13%), industry: (36%), services:(51%) (2010)

Unemployment 3.4% (2010)

Main industries

Peninsular Malaysia - rubber and palm oil processing and manufacturing, lightmanufacturing industry, electronics, tinmining and smelting, logging and processingtimber, tourism, petroleum production and

refining, loggingExternal

Exports $210.3 billion (2010)

Export goods

electronic equipment, petroleum and liquefiednatural gas, wood and wood products, palmoil, rubber, textiles, chemicals

Main export Singapore 13.4%,China 12.6%,Japan 10.4%,

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partnersUnited States 9.5%, Thailand 5.3%, HongKong 5.1% (2010)

Imports $ 156.6billion (2010)

Import goods

electronics, machinery, petroleum products, plastics, vehicles, iron and steel products,chemicals

Main import

partners

China 12.6%,Japan 12.6%, Singapore 11.4%,United States 10.7%, Thailand 6.2%,

Indonesia 5.6% (2010)FDI stock $77.4 billion (31 December 2010)

Gross external

debt$72.6 billion (31 December 2010)

Public finances

Revenues $49.56 billion (2010)

Expenses $63 billion (2010)

Economic aid $31.6 million (2009)

Foreign reserves US$130.128 billion (March 2011)

Main data source: CIA World Fact Book

All values, unless otherwise stated, are in US dollars

The Economy of Malaysia is a growing and relatively open state-oriented and newlyindustrialized market economy. The state plays a significant but declining role in guiding economicactivity through macroeconomic plans. In 2007, the economy of Malaysia was the 3rd largest economy inSouth East Asia and 28th largest economy in the world bypurchasing power parity with gross domesticproduct for 2008 of $222 billion with a growth rate of 5% to 7% since 2007 . In 2010, GDP per capita(PPP) of Malaysia stands at US$14,700. In 2009, the nominal GDP was US$383.6 billion, and thenominal per capital GDP was US$8,100.

As Malaysia is one of three countries that control the Strait of Malacca, international trade plays alarge role in its economy. At one time, it was the largest producer of tin, rubberandpalm oil in the world.Manufacturing has a large influence in the country's economy. Malaysia is the world's largest Islamicbanking and financial centre.

Since it became independent in 1957, Malaysia's economic record has been one of Asia's best.Real gross domestic product (GDP) grew by an average of 6.5% per year from 1957 to 2005. Performancepeaked in the early 1980s through the mid-1990s, as the economy experienced sustained rapid growthaveraging almost 8% annually. High levels of foreign and domestic private investment played asignificant role as the economy diversified and modernized. Once heavily dependent on primary productssuch as rubber and tin, Malaysia today is a middle-income country with a multi-sector economy based onservices and manufacturing. Malaysia is one of the world's largest exporters of semiconductorcomponents and devices, electrical goods, solar panels, and information and communication technology

(ICT) products.

Malaysia's capital market crossed the RM 2 trillion thresholds for the first time ever as at end-2010. The capital market had achieved an annual compounded growth rate of 11% from RM 717 billionin 2000 due to rapid industry expansion and strong regulatory oversight that underpinned investorconfidence in the Malaysian capital market.

8.1 Macro-economic trend11

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This is a chart of trend of gross domestic product of Malaysia at market prices estimated by theInternational Monetary Fund with figures in millions of Malaysian Ringgit.

Year

GDP

(in

millions)

Exchange

(1 USD to

MYR)

Inflation

Index

(2005=100)

Nominal Per Capita

GDP

(as % of USA)

PPP Per Capita

GDP

(as % of USA)

1980 54,285 2.17 47 14.78 19.19

1985 78,890 2.48 60 11.44 19.33

1990 119,082 2.70 65 10.47 20.87

1995 222,473 2.50 79 15.69 27.02

2000 343,216 3.80 92 11.47 26.01

2005 494,544 3.78 100 12.67 26.67

2010 765,966 3.04 113 17.81 31.03

For purchasing power parity comparisons, the US Dollar is exchanged at 1.70 Ringgit only. Mean

wages were $6.95 per man hour in 2009.

From 1988 to 1997, the economy experienced a period of broad diversification and sustained rapidgrowth averaging 9% annually.

By 1999, nominal per capita GDP had reached $3,238. New foreign and domestic investmentplayed a significant role in the transformation of Malaysia's economy. Manufacturing grew from 13.9% ofGDP in 1970 to 30% in 1999, while agriculture andmining which together had accounted for 42.7% ofGDP in 1970, dropped to 9.3% and 7.3%, respectively, in 1999. Manufacturing accounted for 30% ofGDP (1999). Major products include electronic components Malaysia is one of the world's largestexporters ofsemiconductor devices electrical goods and appliances.

Rapid growth was achieved partly throughprivatization of inefficient state owned enterprises, thussubjecting them to commercial pressures and forcing them to better utilize their resources.

Foreign funds were attracted to invest making the local money market and bourse liquid. Thiscreated opportunity for local businesses to raise capital on the KLSE, and carry out infrastructuredevelopment in areas like telecommunications, highways and power generation to meet bottleneckscaused by rapid industrialization. An intense labor shortage created employment for millions of foreignworkers. Subsequent events show that more than 50% were illegal.

The influx of foreign investment led to the KLSEComposite index trading above 1,300 in 1994and the Ringgit trading above 2.5 in 1997. At various times the KLSE was the most active exchange in

the world, with trading volume exceeding even the NYSE. The stock market capitalization of listedcompanies in Malaysia was valued at $181,236 million in 2005 by the World Bank.

Some of the more visible projects from that period are Putrajaya, a new international airport(Kuala Lumpur International Airport), a hydroelectric dam (Bakun dam), the Petronas Towers and theMultimedia Super Corridor. Proposals that were eventually canceled include the 95 km SumatraMalaysia bridge (would have been world's longest), the Mega International Sea and Air port on reclaimed

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land inKedah (would have been world's biggest) and the KL Linear City (would have been the world'slongest mall and the world's first city built over a river).

8.2 Economic policies

Like many other independent nations, Malaysia's economic policies were shaped by various events

in the nation's history since independence.

8.2.1 Monetary policy

Prior to the 1997 Asian Financial Crisis, the Malaysian ringgit was an internationalized currency,which was freely traded around the world. Just before the crisis, the Ringgit was traded RM2.50 at thedollar. Due to speculative activities, the Ringgit fell as much as RM4.10 to the dollar in matter of weeks.Bank Negara Malaysia, the nation's central banks decided to impose capital controls to prevent theoutflow of the Ringgit in the open market.

Bank Negara Malaysia for the time being, uses interest rate targeting. The OPR(Overnight Policy

Rate) is their policy instrument, and is used to guide the short term interbank rates which will hopefullyinfluence inflation and economic growth.

8.2.2 Affirmative action

Tun Abdul Razak, who was then the Prime Minister, implemented the affirmative action policynamed as New Economic Policy soon after May 13 Incident in 1969. Prior to the incident, the povertyrates among Malays were extremely high (at 65%) as was discontent between races, particularly towardsthe Chinese, who controlled 34% of the economy at the time. The Chinese minority still accounts for 70percent of the country's market capitalization.

Through NEP, Bumiputera quotas are placed in housing developments, scholarship admission andalso for ownership of publicly listed companies. The quota system has been relaxed recently since theMarch 8, 2008 General election. Bumiputera equity requirement for publicly listed companies has beenrelaxed since 12 November 2008 by allowing those companies to remove the quota once after IPO hasbeen done. Further liberalization in the retail sector is expected to remove the present 30% Bumiputeralisting requirements. According to the Secretary-General of Ministry of Domestic Trade and ConsumerAffairs Datuk Mohd Zain Mohd Dom said, the amendments is reflective of Malaysia "moving towardsprogressive liberalisation"

On April 21, 2009, the prime minister Najib Tun Razak has announced liberalization of 27services sub-sector by abolishing the 30% bumiputera requirement. The move is seen as the government

efforts to increase investment the service sector of the economy. According to the premier, many moresectors of the economy will be liberalized. On June 30, 2009, the premier announces further liberationmoves including the dismantling of the Bumiputera equity quotas and repealing the guidelines of theForeign Investment Committee, which was responsible to monitor foreign shareholding in Malaysiancompanies. However, any Malaysian companies that wish to list in Malaysia would still need to offer 50percent of public shareholding spread to Bumiputera investors.

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8.2.3 Subsidies and price controls

The Malaysian government subsidizes and controls prices on a lot of essential items to keep theprices low. Prices of items such as palm oil cooking oil, petrol, flour, bread, rice and other essentials havebeen kept under market prices to keep cost of living low. In 2008, the government announced that it hasspent RM40.1 billion in 2007 in subsidies to keep prices leveled. As of 2009, 22 per cent of governmentexpenditures were subsidies, with petrol subsidies alone taking up 12 per cent.

Smuggling and hoarding, which leads to shortages, is a prominent problem in Malaysia due to thesubsidies. For example, cooking oil is subsidized for domestic use only. This situation creates anenvironment where industrial players hoard domestic cooking oil for industrial use. During shortage time,such as the January 2008 cooking oil crisis, the government imposed a 5 kg limit for each purchase torelief domestic demand. However, the limited purchase has created more panic buying, which prompts theGovernment to negotiate with cooking oil manufacturers to increase their production capacity, and thesituation reverted to normal within one week. Another example is when vehicles in Thailand come toMalaysia to smuggle cheap petrol and diesel out of the country. The government also looking intorestructuring the fuel subsidy so that the selected needy group will get the subsidy. The government isconsidering removing subsidies on diesel for general consumers while maintaining subsidies for suitablegroups, such as those involved in public transport.

On January 2010, the government announce dual price structure for fuel, based on citizenship.Foreigners are expected to pay market price for fuel while citizens will have subsidy allocations based toengine capacity. The dual pricing structure is expected to begin on May 1, 2010.

The government has considered removing the subsidies but a formal plan had yet to materialize asof 2007. In 2008, the government is considering to remove price controls on construction materials suchas cement and steel bars while banning exports to ensure steady supply.

Another strategic item which is heavily subsidized but moving towards a market based approach isNatural Gas which is used in the industrial sector. Beginning July 1, 2008, the government is expected toreduce the gas subsidy 5% to 10% per annum over 11 years, in which the gas price will reflect market

price.

8.2.4 Sovereign wealth funds

The government owns and operates several sovereign wealth funds (A sovereign wealth fund(SWF) is a state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals or other financial instruments) that invests in local companies and also foreigncompanies. One such fund is Khazanah NationalBerhad which was established in 1993. Its objective is tohelp shape selected strategic industries in Malaysia and develop those investments for the benefit ofMalaysia. The fund invest in major companies in Malaysia such as Proton Holdings in the automotivesector, CIMB in the banking sector, Pharmaniaga in the medical sector, UEM Group in the construction

sector, Telekom Malaysia in the communications industry and many other companies in many otherindustries. It is estimated that the fund size of Khazanah National stands at around US$19 billion.

Another fund that is owned by the Malaysian government is the Employees Provident Fund whichis claimed to be the fourth largest state run pension fund in Asia. Like Khazanah National, the EPFinvests and sometimes owns several major companies in Malaysia such as RHB Bank. EPF investment isdiversified over a number of sectors but almost 40% of their investments are in the services sector. Fundsize in 2007 is estimated at US$100 billion.

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8.3 Currency

The only legal tender in Malaysia is the Malaysian Ringgit. As of 20 March 2008, the Ringgit istraded at MYR3.18 at the US dollar. The Ringgit has not been internationalized since September 1998,an effect due to the1997 Asian Financial Crisis in which the central bank impose capital controls on thecurrency. As a part of series of capital controls, the currency was pegged between September 1998 to 21July 2005 at MYR 3.80 to the dollar. In recent years, Bank Negara (BNM; literally National Bank of

Malaysia , officially Central Bank of Malaysia ) Malaysia beginning to relax certain rules to the capitalcontrols although the currency itself is still not traded internationally yet. According to the BankGovernor, the Ringgit will be internationalized when it's ready.

On September 2010, in an interview with CNBC (Consumer News & Business Chanel), the PrimeMinister of Malaysia and also the Finance Minister said that the government is open to open up theRinggit to off shore trading if the move will help the economy. He further added that before such a moveto be made, it will ensure that rules and regulation will be in place so the currency will not be abused.

8.4 Natural resources

Malaysia is well-endowed with natural resources in areas such as agriculture, forestry andminerals. It is an exporter of natural and agricultural resources, the most valuable exported resource beingpetroleum. At one time, it was the largest producer of tin,rubberandpalm oilin the world. In terms ofagriculture, Malaysia is one of the top exporters of natural rubberandpalm oil, which together with sawnlogs and sawn timber, cocoa,pepper,pineappleand tobacco dominate the growth of the sector. Palm oil isalso a major generator of foreign exchange.

Regarding forestry resources, it is noted that logging only began to make a substantial contributionto the economy during the nineteenth century. Today, an estimated 59% of Malaysia remains forested.The rapid expansion of the timber industry, particularly after the 1960s, has brought about a seriouserosion problem in the country's forest resources. However, in line with the Government's commitment to

protect the environment and the ecological system, forestry resources are being managed on a sustainablebasis and accordingly the rate of tree felling has been on the decline.

Tin and petroleum are the two main mineral resources that are of major significance in theMalaysian economy. Malaysia was once the world's largest producer of tin until the collapse of the tinmarket in the early 1980s. In the 19th and 20th century, tin played a predominant role in the Malaysianeconomy. It was only in 1972 that petroleum and natural gas took over from tin as the mainstay of themineral extraction sector. Meanwhile, the contribution by tin has declined. Petroleum and natural gasdiscoveries in oil fields off Sabah, Sarawak and Terengganu have contributed much to the Malaysianeconomy. Oil and gas resources are managed by Petronas, the state controlled oil company which formsproduction sharing contracts with other players like Exxon-Mobil and Royal Dutch Shell to explore oil

fields in Malaysia. Other minerals of some importance or significance include copper, bauxite, iron-oreand coal together with industrial minerals like clay, kaolin, silica, limestone, barite, phosphates anddimension stones such as granite as well as marble blocks and slabs. Small quantities of gold areproduced.

Malaysia's broad and shallow continental shelfconsists of several deep water prospective areas.Malaysia has 500,000 km2 available for oil and gas exploration. 51 of the 70 producing fields in Malaysiaareoil fields. The country produces about 0.00075 billion barrels (119,000 m3) barrels ofcrude oilevery

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day and 2.20 trillion standard cubic feet (60 km3) ofnatural gas condensates per year. As of January 2009,Malaysia has proven oil reserves of up to 4 billion barrels (640106 m3).

The government estimates that at current production rates Malaysia will be able to produce oil upto 18 years and gas for 35 years. In 2004, Malaysia is ranked 24th in terms of world oil reserves and 13thfor gas. 56% of the oil reserves exist in the Peninsula while 19% exist in East Malaysia. The governmentcollects oil royalties of which 5% are passed to the states and the rest retained by the federal government.

Other minerals of some importance or significance include copper, bauxite, iron-ore and coaltogether with industrial minerals like clay, kaolin, silica, limestone, barite, phosphates and dimensionstones such as granite as well as marble blocks and slabs. Small quantities ofgoldare produced.

8.5 Business environment

According to World Bank, Malaysia ranks 24th in Ease of doing business. Malaysia's strengths inthe rank include getting credit (rank 3rd), protecting investor (ranked 4th) and doing trade across borders(ranked 21st). Weaknesses include dealing with licenses (ranked 105th). The study ranks 178 countries inall aspect of doing business. In the investor protection category of the survey, Malaysia had scored aperfect 10 for the extent of disclosure, nine for director liability and seven for shareholder suits. Malaysia

is behind Singapore, Hong Kong and New Zealand in investor protection category of the survey.

The government is moving towards a more business friendly environment by setting up a specialtask force to facilitate business called PEMUDAH, which means "simplifier" in Malay. Highlightsincludes easing restrictions and requirement to hire expatriates, shorten time to do land transfers andincreasing the limit of sugar storage (a controlled item in Malaysia) for companies. The Government aimsto be in the top 10 in the Ease of doing business survey before 2012 in order to attract even more foreigninvestors.

The efforts of PEMUDAH is beginning to show fruits as their ranking improved to number 20 in2009, with marked improvement in four areas: getting credit; dealing with construction permits; payingtaxes; and enforcing contracts.

8.6 External trade

Malaysia is an important trading partner for the United States. In 1999, two-way bilateral tradebetween the U.S. and Malaysia totaled U.S. $30.5 billion, with U.S. exports to Malaysia totaling U.S.$9.1billion and U.S. imports from Malaysia increasing to U.S.$21.4 billion. Malaysia was the United States'10th-largest trading partner and its 12th-largest export market. During the first half of 2000, U.S. exportstotaled U.S.$5 billion, while U.S. imports from Malaysia reached U.S.$11.6 billion.

The Malaysian Government encourages Foreign Direct Investment (FDI). Principal U.S.investment approved by the Malaysian Investment Development Authority (MIDA) was concentrated in

the chemicals, electronics, and electrical sectors. The cumulative value of U.S. private investment inMalaysia exceeded $10 billion, 60% of which is in the oil and gas and petrochemical sectors with the restin manufacturing, especially semiconductors and other electronic products.

In the first six months of 2007, Malaysia's total trade increased by 2.2% to RM522.38 billion,compared with RM511.11 billion in the same period of 2006.

8.7 Free trade efforts

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Malaysia is a member of the ASEAN Free Trade Area(AFTA) which was established in 1992 topromote trade among ASEAN members. Most tariffs among the first generation member states werescrapped in 2007. ASEAN itself is increasingly playing a large role in free trade negotiation on behalf ofits members.

The Malaysian Government is negotiating free trade deals with Australia, Chile and India, but hassuspended negotiation of free trade deal with United States indefinitely after eight rounds of negotiation.

Malaysia is seeking membership into the Trans Pacific Partnership, a regional trade pact between theUnited States and countries in the Pacific Rim. As of October 2010, TPP (Trans Pacific Partnership)members have agreed to allow Malaysia to join as a full negotiation member of the group. Malaysia willjoin the third round of negotiations in Brunei.

Officials have expressed desire for free trade agreements theirASEAN members Singapore andThailand. The Malaysian Trade Ministry released a statement in Vietnam saying that the FTA "has thepotential to increase trade, investment cross flows and economic cooperation between the two countries.The agreement would also serve to make Chile a gateway for Malaysia's exports to the Latin Americanmarket."

Malaysia signed a Japan-Malaysia Economic Partnership Agreementwith Japan on 13 December2005. This leads to a Free trade agreement which was in effect from 13 July 2006 and expected to be fullyrealized in 2016. The agreement itself is an extension of an FTA between ASEAN and Japan, which iscalled Asean-Japan Comprehensive Economic Partnership.

On 8 November 2007, Malaysian and Pakistan signed a bilateral Free Trade Agreement whichcame in force on 1 January 2008. Malaysia will cut tariffs on 140 lines while Pakistan will cut 124 lines.Most tariffs and duty is expected to be eliminated by 2012.

On 26 October 2009, Malaysia and New Zealand signed a bilateral Free Trade Agreement. NewZealand will cut tariffs on 99.5 percent of goods sent to Malaysia beginning 2010. This agreement itself is

an extension of the ASEAN-Australia-New Zealand Free Trade Agreement.

8.8 Foreign direct investment

Malaysia received RM46.1 billion foreign direct investment (FDI), which was all time high, forthe whole of 2008. The foreign investments accounted for 73.4 percent of the total investments ofRM62.8 billion approved for 2008.

The Minister of International Trade and Industry, Datuk Mustapa Mohamed announced that therewas a sharp reduction in FDI and Malaysia only received RM4.2 billion FDI, about 78% reduction, forthe first five months of 2009.

On the other hand, FDI in other Asean countries has grown rapidly. Malaysia was very muchahead of Vietnam on attracting FDI. Now it has to compete with the latter for the FDI.

8.8.1 Sectors of FDI

8.8.1.1 Industry

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Malaysia industrial sector accounts for 48.1 percent of total GDP or 63.4 billion US dollars. Theindustrial output is ranked 32nd in the world. The industrial sector is regulated and promoted by MalaysiaIndustrial Development Authority. International trade, facilitated by the adjacent Strait of Malaccashipping route and manufacturing are both key sectors of the country's economy. Manufacturing has alarge influence in the country's economy, although Malaysias economic structure is moving away fromit.Malaysia has 18 companies that rank in the Forbes Global 2000 (The Forbes Global 2000 is an annualranking of the top 2000public companies in the world by Forbes magazine) ranking for 2009.

World

RankCompany Industry

Revenue(billion

$)

Profits(billion

$)

Assets

(billion$)

MarketValue

(billion $)

493CIMB GroupHoldings

Banking 4.24 0.82 70.14 14.05

599 Sime Darby Conglomerates 8.82 0.65 9.92 15.27

642 Public Bank Banking 2.75 0.74 63.27 11.52

706 Maybank Banking 4.63 0.20 87.98 14.70

709 Tenaga Nasional Utilities 8.17 0.26 20.26 10.21

904 Axiata GroupTelecommunications

Services3.83 0.48 10.80 9.71

907 MISC Transportation 4.33 0.39 10.08 10.66

1179 GentingHotels, Restaurants &Leisure

2.60 0.31 12.68 6.81

1192 RHB Capital Banking 1.57 0.35 33.49 3.49

1205 MaxisTelecommunicationsServices

2.22 0.46 5.17 12.08

1224 IOI Group Food, Drink & Tobacco 4.15 0.28 4.53 10.78

1292 AMMB Holdings Banking 1.45 0.24 24.56 4.42

1485 PPB Group Food, Drink & Tobacco 0.57 0.46 3.82 5.60

1501 YTL Utilities 2.53 0.24 12.92 4.16

1613Hong LeongFinancial Group

Banking 1.08 0.18 24.54 2.39

1643 PLUS Expressways Transportation 0.93 0.35 5.36 5.11

1755 Petronas Gas Oil & Gas Operations 0.94 0.25 2.76 5.70

1987 Petronas Dagangan Oil & Gas Operations 60.69 11 1.81 2.63

8.8.1.2 Finance and banking

Finance and Banking sector in Malaysia is regulated by Bank Negara Malaysia. The central bank

limits foreign participation through licensing limits. The central bank launched a Financial Sector Masterplan in 2001 to revamp the finance sector following the Asian Financial Crisis. The master plan calls foremphasis on Islamic Banking, of which Malaysia has become a centre of. Malaysia has the highestnumber of female workers in Islamic banking.

A quarterly report prepared by the Economist Intelligence Unit on behalf ofBarclays Wealth in2007 estimated that there were 48,000 dollar millionaires in Malaysia (over twice that of China).

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In April 2009, the government announces new licenses will be issued for investment bankingIslamic banking, takaful and insurance business between 2009 to 2011. It also announced that thethreshold foreign equity ownership has been raised from 49% to 70% and allowed foreign banks to openup new branches and micro-credit facilities. This move was done as an attempt to put Malaysia in ascenter for Islamic banking and also to liberalize the financial sector.

8.8.1.3 Oil and gas

Malaysia has a vibrant oil and gas industry. The national oil company, Petronas, provides 32% ofthe federal budget in taxes, dividends and royalties. The oil company ranked 121 in Fortune Global 500list of companies in 2007. It also ranked 18 in the industry of the same list. The company has over up tothe rank by being 95th in 2008 in terms of revenue and 8th most profitable company in the world and themost profitable in Asia. Since inception in 1974, Petronas have paid the government RM 403.3 billion,with RM 67.6 billion in 2008. The payment represents a 44% of the 2008 federal government revenue.

Malaysia encourages foreign oil company participation through production sharing contracts, inwhich significant amount of oil will be given away to the foreign oil company until it reaches aproduction milestone. Currently, many major oil companies such as ExxonMobil, Royal Dutch Shell,Nippon Oil, and Murphy Oil are involved in such contracts. As a result, 40% of oil fields in Malaysia are

developed.

Malaysia and Thailand has a wedge shaped area 150 km from Kota Bharu,Kelantanand 260 kmfrom the shores of Songkhla, Thailand which is jointly developed by Petronas and its Thailandcounterpart. The area, which is called Malaysia-Thailand Joint Development Area, has 4.5 trillion cubicfeet (130 km3) of proven reserves.

8.8.1.4 Tourism

In an effort to diversify the economy and make Malaysias economy less dependent on exportedgoods, the government has pushed to increase tourism in Malaysia. As a result tourism has become

Malaysias third largest source of income from foreign exchange, although it is threatened by the negativeeffects of the growing industrial economy, with large amounts of air and water pollution along withdeforestation affecting tourism. The majority of Malaysia's tourists come from its bordering country,Singapore. In 1999, Malaysia launched a worldwide marketing campaign called Malaysia, Truly Asiawhich was largely successful in bringing in over 7.4 million tourists.

The Ministry of Culture, Arts and Tourism (MOCAT) was established in 1987 under which theTDC was incorporated. TDC existed from 1972 to 1992, when it became the Malaysia TourismPromotion Board (MTPB), through the Malaysia Tourism Promotion Board Act, 1992.

8.8.1.5 Science and technology

Science Policy in Malaysia is regulated by the Ministry of Science, Technology, and Environment.Other ministries, such as the Ministry of Agriculture and the Ministry of Health also have sciencedepartments. Training in scientific areas was promoted during the 1970s and 1980s. From 1987-1997research and development used 0.24% of GNP, and in 1998 high-tech exports made up 54% of Malaysia'smanufactured exports. The country is one of the world's largest exporters of semiconductor devices,electrical goods, and information and communication technology products.

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8.9 Bangladesh-Malaysia Ties

Like Malaysia, Bangladesh, a predominantly Muslim country with around 87 per cent of its 140million population being Muslim, has also earned international recognition for its moderate religious andcultural ethos, social tolerance and ethnic cohesion, which characterizes Bangladesh as a liberal, tolerantMuslim country. Being co-members of OIC, NAM Commonwealth, D-8 and ARF and as strongproponents of the multilateralism, the two countries share common perception on major Regional andInternational issues and have been working closely in the International arena to promote peace, stability,

and development. About 200,000 Bangladeshis work in Malaysia and people to people contacts betweenthese two nations have been excellently maintained.

Bangladesh and Malaysia enjoy good bilateral relations based on the foundation of commonreligion, history, and culture. Over the years, thus, the relations between the two friendly countries havegrown in depth and diversity and reached a matured stage. The state of good relations is reflected in thefast-growing bilateral cooperation spanning across a broad range of sectors, including economic andtechnical assistance, trade and investment, employment of Bangladeshi work force in Malaysia, defense-cooperation, education exchange, tourism, culture and sports, technology transfer and HR development.

The relationship developed in a steady momentum. Today, Malaysia is the largest Asean

investment partner of Bangladesh and Malaysian companies invested about RM4.1 billion (US$1.3billion) last year in 59 projects, mainly in telecommunication, power, textiles and financial sector.However, with regard to bilateral trade between both countries, the figures had been lopsided withBangladesh suffering a chronic trade deficit with Malaysia , exporting only RM53.5 million (US$16.9million) in the 2006-2007 period while imports were RM1.2 billion (US$384.16million).

Malaysian Prime Minister Mahathir bin Mohammeds visit to Bangladesh in 1999 and PrimeMinister Sheikh Hasinas return visit to Malaysia in 2000 infused new dynamism in the bilateral relationsbetween the two countries. The visits opened up new vistas of cooperation and ensured the continuingexport of skilled manpower from Bangladesh to Malaysia.

Malaysia, South-East Asias third largest economy, has an estimated 2.6 million legal and illegal foreignworkers. They are critical to the nations key manufacturing and agriculture sectors, and many householdrely on foreign domestic workers, mainly from Indonesia, Philippines and India.

8.9.1Strain

Issue of labor force administration in Malaysia has somewhat strained the bilateral tiestemporarily. In 2007 Malaysia banned imports of Bangladeshi workers into the country after hundreds ofthem were stranded at an airport because their employers failed to collect them promptly. There weredemonstrations in Kuala Lampur by Bangladeshi workers demanding payments and better conditions.

This created a crisis in the bilateral ties but issue has been resolved with the interference of thegovernments. The government had placed a similar restriction in 1999 but lifted the ban last year byapproving an initial intake of 300,000 workers.

8.9.2 Dhaka and Islamic World

Dhakas relations with Malaysia are a part of its entering into close ties with Islamic world. Theroad of Bangladesh to endear itself to Islamic world has been long and strenuous, though. The country

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began a constructive course in international affairs soon after Bangladesh was admitted to the UnitedNations in 1974 and it was elected to a Security Council term in 1978 and again for another term 2000-2002.

In 1983, Bangladesh hosted the foreign ministers meeting of the OIC. Bangladeshs geographicallocation at the crossroads between South and South East Asia and East Asia beyond, makes it naturallyadvantageous for Bangladesh to pursue a well rounded and balanced policy of cooperation and friendshipwith all the Asian countries as much as with India , Pakistan and the other South Asian nations as with

Myanmar , Thailand and other South-east Asian nations.

8.9.3 Free Trade Agreement

As the ties with Malaysia grew in volumes, the Bangladesh business community seeks now a freetrade agreement (FTA) put on track quickly to help enhance the two-way trade with Malaysia and helpslash the widening trade deficit affecting the South Asian nation. Though the proposed FTA was mootedin 2004, it failed to materialize but now with Bangladesh-Malaysia trade relations on the surge, acomprehensive trade pact could help encourage trade and cross-border investment flow. This FTA proposal merits serious consideration and examination.

The first Showcase Malaysia 2008 event in Dhaka in April, jointly organized by BMCCI andMalaysia South Association, where nearly 75 Malaysian companies, government agencies and industrycaptains are participating in the three-day event, largely to expose Malaysian businesses to Bangladesh .On a similar note, Malaysian High Commissioner to Bangladesh , Datuk Abdul Malek Abdul Aziz, whois also the patron of the Bangladesh-Malaysia Commerce and Industry (BMCCI), said a FTA wouldcertainly add momentum to the current trade relations.

Bangladesh is the only nation among the worlds 49 least-developed countries (LDCs) to bealmost self-sufficient in the production of pharmaceuticals - largely branded generic drugs. Moreover, itsdrug exports - to 68 nations - grew 47% to $28.12 million in 2006-7 and, at $23.63 million, they havebeaten first-half 2007-8s target of $15.63 million by over 51%, the nations Export Promotion Bureau

(EPB) reports. With proper government support to help Dhaka enters the worlds highly-regulatedmarkets, Bangladeshi industrial conglomerates pharmaceuticals arm, BPL, could create an export marketworth over 10,000 crore taka ($1.5 billion) by 2009.

Recently, Malaysia's leading education institutions, port operator, healthcare provider andpharmaceutical company visited Dhaka to explore the new market with nearly 140 million people andpossibly use Bangladesh to penetrate the huge South Asian market, home to nearly 1.3 billion people.

8.9.4Future

Trade and cooperation are increasing year by year between Malaysia and Bangladesh and both are

forecasting sharp increases in their pharmaceutical exports, business groups are calling for theestablishment of a Free Trade Agreement (FTA) between the two nations. One reason is that Bangladeshs total exports to Malaysia - its largest investment partner among the Association of Southeast AsianNations (ASEAN) - were worth just US$16.9 million in 2006-7, while its imports from there totaledUS$384.16 million.

Many Malaysian companies have shown keen interest to participate in infrastructure projects heresuch as power generation, sea port development, waste disposal system, construction of roads and

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highways as well as in the service sector such as education and healthcare. Malaysia said will continue tocontribute positive efforts to promote and expand bilateral relations with Bangladesh , particularly in tradeand investment. Pending projects like the Dhaka-Chittagong highway, worth $1.2 billion, powergeneration, port development etc would be completed.

Malaysia would take initiative to get entry of Bangladeshi products at 'zero tariff' in Malaysia, andsufficient number of visas will be provided for the participants of the fair. Malaysia is keen to seeBangladesh promotes market in that country so as to reduce the trade gap, which is currently in favor of

Kuala Lumpur . Referring to the demand of Bangladeshi garments, home textile, handicrafts, halal food,spices, ceramic, melamine and medicines in Malaysia , Abdul Aziz said Dhaka could take the opportunity by participating in the trade fairs in his country

With close contacts emerging at various levels including governments and companies, peoples andservices, the Bangladesh-Malaysian ties are slated to be on an ever-steady increase. With more and moreagreements being reached, deepening and widening the areas cooperation, the relationship between thesefriendly Muslim nations would grow stronger.

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Reference:1. http://en.wikipedia.org/wiki/Malaysia2. www.statistics.gov.my3. CIA World Fact Book

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