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 2011.

Performance peaked in the early 1980s through the mid-1990s, as the economy experienced sustained rapid growth averaging almost 8% annually.

High levels of foreign and domestic private investment played a significant role as the economy diversified and modernized.

Once heavily dependent on primary products such as rubber and tin, Malaysia today is a middle-income country with a multi-sector economy based on services and manufacturing.

Malaysia is one of the world’s largest exporters of semiconductor components and devices, electrical goods, solar panels, and information and communication technology (ICT) products

The Economy of Malaysia is a growing and relatively open state-oriented and newly industrialized market economy.

The state plays a significant but declining role in guiding economic activity through macroeconomic plans.

E.g. liberalization policy.

In 2007, the economy of Malaysia was the 3rd largest economy in South East Asia and 28th largest economy in the world by purchasing power parity (PPP) with gross domestic product 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 the nominal per capita GDP was US$8,100. 

Malaysian economy base can be understood through its Industrial Development Policies:

1.1950’s:Malaysia was largely an exporter of primary commodities of which rubber and tin alone accounted for about 80% of our gross export earning.

2. 1960’s:Import-substitution phase as the country deliberately began to pursue a policy of diversification in its economic structure which includes not only primary commodities but also manufactures products.

– Industries to substitute imports such as food, beverages and tobacco, printing and publishing, building materials, chemicals and plastic.

3. 1970’s: Export orientation decade in order to overcome the constraints of a limited domestic market and to absorb the growing pool of the unemployed.

– During this period, labor intensive and export-oriented industries were actively promoted.

– FDI attracted by the liberal government policies on equity, tax incentives and the provision of extensive infrastructure including Free Trade Zone (FTZ) and License Manufacturing Warehouses (LMW).

4. 1980’s:Further measures were taken by the government to widen and deepen the industrial base through a two-pronged strategy of encouraging resource-based industries, engineering and supporting industries as well as heavy industries.

5. 1986:Government launched the Industrial Master Plan (IMP) – HICOM, PROTON etc.

6. 1990’s: The main thrust of the industrial development strategy then was to broaden, deepen and modernise the industrial structure through:

1. The development of export oriented.2. High value added industry.3. High technology industries with more extensive

linkages to the domestic economy.

1. Industry – manufacturing, utilities, shipping route.

2. Banking and Finance – Islamic banking, Insurance, Takaful, Micro-credit facilities.

3. Oil and Gas – PETRONAS 4. Tourism – “Malaysia, Truly Asia” 5. Science and Technology – LIMA,

Malaysian Defense Industry Council. 6. Knowledge-based Services – Medical

tourism, agro-based input.

1. Government Affirmative Actions – NEP, NDP, Privatization Policy.

2. Monetary Policy – OPR, Capital Control, Floating Exchange Rate.

3. Subsidies and Price Control – petrol, diesel, food, cement, steel etc.

4. Sovereign Wealth Funds – EPF, PETRONAS, Khazanah Nasional Berhad, PNB.

5. Government Link Investment – EPU, GLCs e.g. PETRONAS, PROTON, MAS etc.

Small scale industries refers to the company’s shareholders fund of less than RM 500,000.

Small scale industry engaged in a wide variety of economic activities, such as production of foodstuff, furniture, handicraft, fabricated metal products, textiles and clothing.

The dynamic of SMIs will contribute towards a more dynamic and competitive industrial sector through its supportive and complementary role.

The contribution of SMIs to the economy is relatively substantial.

In 1988, SMIs constituting about 92.6% of manufacturing establishment, accounted for 40% of industrial employment and 19% of industrial value-added. Productivity per worker in SMIs is RM 11,900 compared to RM 32,700 for large scale industries.

The medium scale industry consists of companies with shareholder’s fund of between RM 500,001 and RM 2.5 m.

Medium scale industry tends to concentrate more on processing of beverage and tobacco, electrical and electronics instruments, automotive parts and components.

1. Their small sized coupled with inadequate capital, managerial capability, shortage of skilled labor, poor data base, marketing and production capability.

2. Technological aspects of SMIs is at the low level in many aspects.

3. Requires external assistance in the areas of technical consultancy, training, information and research support facilities because they do not have such capacity in-house.

4. Inadequate managerial capability and the lack of skilled technical and scientific manpower.

Programs initiated by government:1.1990 – Industrial Technical Assistance Fund

was set up to help finance SMIs projects.2.Development of international marketing

network and expertise.3.Upgrading of managerial and

entrepreneurial know-how and the development of indigenous technology.

4. Transitions towards Hi-Tech Industries:– Given the current stage of industrial

development, there is a strategic need move from input driven growth to productivity driven growth.

– Future growth has to be mainly led by increased efficiency in the utilization of physical and human resources, higher technology and an effective combination of resources and technology.

– Important aspect of investment that will be given increasing focus is the quality of the selective areas for future investment – towards attracting more capital and technology driven – intensive investment with a high export orientation, lower import content, and high linkages with the domestic economy in order to generate max. value-added and export earningsi. electrical and electronics productsii. transportation equipmentiii. chemicalsiv. textiles and apparelv. materialsvi. food processingvii. machinery and equipment