Malaysia

The Federation of Malaysia (Malay: Persekutuan Malaysia) or simply Malaysia (Simplified Chinese: ????; Pinyin: M?láix?y?, Tamil: ???????) is a country in Southeast Asia. It consists of two geographical regions divided by the South China Sea:

Economy

The Malay Peninsula and indeed Southeast Asia has been a center for trade for centuries. Various items such as porcelain and spice were actively traded even before Malacca and Singapore rose to prominence.

Related Topics:
Malay Peninsula - Southeast Asia - Porcelain - Spice - Malacca

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In the 17th century, large deposits of tin were found in several Malay states. Later, as the British started to take over as administrators of Malaya, rubber and palm oil trees were introduced for commercial purposes. Over time, Malaya became the world's major largest producer of tin, rubber and palm oil. These three commodities along with other raw materials firmly set Malaysia's economic tempo well into the mid-20th century.

Related Topics:
17th century - Tin - Malay states - British - Malaya - Rubber - Palm oil - 20th century

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In 1970s, Malaysia imitated the footsteps of the original four Asian Tigers and committed itself to a transition from being reliant on mining and agriculture to an economy that depends more on manufacturing. With Japan's assistance, heavy industries flourished and in a matter of years, Malaysian exports became the country primary growth engine. Malaysia consistently achieved more than 7% GDP growth along with low inflation in the 1980s and the 1990s.

Related Topics:
1970s - Asian Tigers - Japan - Export - GDP - Inflation - 1980s - 1990s

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During the same period, the government tried to eradicate poverty with a controversial race-conscious program called New Economic Policy (NEP).

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Healthy economic environment helped drove Malaysia to upgrade its infrastructures and indulge in many huge national projects. Among of them are Putrajaya, a new international airport (Kuala Lumpur International Airport) and a hydroelectric dam (Bakun dam). Despite the prosperity of the 90s, certain factions within Malaysian were worried that the government was spending beyond its means. That concern became more than apparent when the Asian Financial Crisis hit in 1997.

Related Topics:
Putrajaya - Kuala Lumpur International Airport - Hydroelectric dam - Asian Financial Crisis - 1997

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The year 1997 saw the drastic changes in local scenarios. Foreign direct investment fell at an alarming rate and Ringgit depreciated substantially from MYR 2.50 per USD to much levels lower (up to MYR 4.80 per USD at its bottom) as capital flowed out. The Kuala Lumpur Stock Exchange's composite index fell from approximately 1300 to nearly merely 400 points in a few short weeks. In response, the Malaysian government imposed capital controls and pegged the Malaysian Ringgit at 3.80 to a US dollar while refusing economic aid from International Monetary Fund (IMF) which came with austere lending conditions. By refusing aid and thus the conditions attached thereof from the IMF, Malaysia was not affected to the same degree in the Asian Financial Crisis as Indonesia, Thailand and the Philippines.

Related Topics:
Foreign direct investment - Kuala Lumpur Stock Exchange - Capital controls - Pegged - International Monetary Fund

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In order to rejuvenate the economy, massive government spending was made and Malaysia continuously recorded budget deficits in the years that followed. Later, the country enjoyed faster economic recovery compared to its neighbors though in many ways, the level of pre-1997 affluence has yet to be achieved.

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The fixed exchange rate regime was abandoned in July 2005 in favor of managed floating system within an hour of China's announcing of the same move. In the same week, Ringgit strengthened a few percent against various major currencies and is expected to appreciate further.

Related Topics:
Fixed exchange rate - July 2005 - Floating system - China

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In September 2005, Sir Howard J. Davies, director of the London School of Economics, at a meeting Kuala Lumpur, cautioned Malaysian officials that if they want a flexible capital market, they will have to lift the ban on short selling created in 1997.

Related Topics:
September 2005 - London School of Economics - Kuala Lumpur

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• Islamic banking in Malaysia
• List of Malaysian companies