Economic Development of Malaysia - Case Study Example

MAJOR ASSIGNMENT: DEVELOPMENT OF MALAYSIA Client Insert Name Client Insert Institution Client Insert Due Date Major Assignment: Development of Malaysia Introduction Malaysia is an Asian country in the Southeast part of the continent having a total land size of 127350 square miles. South China Sea divides the country into two regions namely; East Malaysia and Peninsular Malaysia with the latter sharing a maritime and land border with Thailand, Vietnam, Singapore, and Indonesia and the former sharing a maritime and land borders with Vietnam, Philippines, and Brunei (Nooi 2008). Malaysia has thirteen states and three federal territories and has Kuala Lumpur as its capital city and the seat of the Federal government is at Putrajaya. According to statistics, in 2015, Malaysia’s population hit the 30 million mark officially becoming the 43rd most populous country in the world (Nooi 2008). The country is comprised of multiple ethnic communities which largely influence how politics are played in the country. Islam is the country’s constitutional state religion although there continues to be a growing preference of other religions because of the constitutional provisions allowing freedom of religion (Raghavan 2010). According to Andaya & Andaya (2010), its government structure is modeled on the Westminster Parliamentary System with the Common Law forming its legal system and structure. Yang di Pertuan Agong is the King who is the head of state and he is elected from the hereditary rulers of the 9 states of Malay after five years of service. The country’s government is headed by the Prime Minister. Malaysia is one of the most promising economies in Asia based on studies on it after its independence with the Gross Domestic Product (GDP) growing at an annual average of 6.5% for the past 50 years (Raghavan 2010). Statistics indicate that the country’s natural resources are the primary influencers of its economic development and have been doing so for many years before other contributors such as tourism, science, and commerce become alternatives to further grow its economy (Raghavan 2010). Reports indicate that currently, the country has a fully industrialized market economy that stands as the third largest market economy in South Asia and twenty ninth in the whole world (Andaya & Andaya 2010). Raghavan (2010) indicates that Malaysia is a “founding member of the Association of Southeast Asian Nations, the Organization of Islamic Cooperation, and the East Asia Summit” (Raghavan 2010, p. 432). It is a member state of many global and regional organization such as the Commonwealth of Nations, Asia-Pacific Economic Cooperation, and the Non-Aligned Movement among others (Raghavan 2010). Demographics of Malaysia According to the 2010 Census, Malaysian population was recorded as being 28,334,135 people and this made it the 42nd most populated country in the world (Andaya & Andaya 2010). This population is comprised of many different ethnic groups and communities that have different cultures and traditions. From the statistics of the same year, 91.4% of the population was made up of the Bumiputera, a title given indigenous Malay peoples in the country. Other non-indegeneous people making up the Malaysian population included Thais, Chams, Khmers among other natives of Sarawak and Sabah (Swee-Hock & Kesavapany 2014). In addition to this, there are also other aboriginal groups making up the Malaysian community in the country and these are smaller groups that are found on the Peninsula and they are commonly referred to as The Orang Asli (Swee-Hock & Kesavapany 2014). Figure 1 below shoes distribution of Malaysian population as percentages based on the statistics of 2010 Census. Fig. 1: Population Distribution of Malaysian People based on 2010 Census Source: (Milner 2010, p. 121). Official statics indicate that there about 24.6% of the Malaysian population comprising of Chinese people, and 7.3% of Indian people. Traditionally, the Chinese are more dominant in commerce in the country while the Malaysian population of Indian descent largely constitute the immigrants and middle to lower class workers in the country’s economy (Swee-Hock & Kesavapany 2014). Figure 2 below shows the distribution of Malaysian population based on ethnic groups according to the 2010 Census. Fig. 2: Distribution of Malaysian Population based on Ethnic Grouping according to 2010 Census Source: (Milner 2010, p. 45). There are different ways that people can acquire nationality in Malaysia where nationality is not guaranteed for those born in Malaysia although it is guaranteed for the children of two Malaysian parents born outside of Malaysia (Milner 2010). The country’s constitution does not allow dual citizenship for its citizens and it provides provisions for citizenship in Sarawak and Sabah states in Malaysian Borneo making it distinct from citizenship in Peninsular Malaysia because of immigration complexities (Swee-Hock & Kesavapany 2014). All citizens of Malaysia upon reaching legal age which is 12 years, are issued with biometric smart chip called MyKad as the official identity card with the requirement that they carry this card at all times for any official transaction or identification purposes (Swee-Hock & Kesavapany 2014). Malaysian Economy and Development Malaysia is a standard Industrialized Market Economy of the 21st Century with an open state oriented business economy where the state has a significant role that it plays in the way the country’s economy is developed and nurtured (Milner 2010). The country has the best economic records in Asia where its GDP has been growing at an average rate of 6.5% from 1957 up to today. In 2014 – 2015 Fiscal Years, the country had one of the most competitive economic development margins which caused it to be ranked as the 6th best economy in Asia and the 20th most developed economies in the world. This placed it at a better performance margins compared to such countries as Australia, South Korean and France among other European economic Powerhouses (Milner 2010). During the same time, the country’s economy in terms of GDP PPP was $746.821 billion which made it rank as the third largest economy in ASEAN competing with more populous economies such as Thailand and Indonesia. During this time in this regard, Malaysia was ranked 28th largest economy in the world (Boulton, Pecht, Tucker & Wennberg 2010). With the current development record and rates, a HSBC Report indicates that Malaysia could become the 21st Century Largest Economy by 2050 when its GDP will have surpassed the $1.2 trillion with a GDP per capita of $29247 (Swee-Hock & Kesavapany 2014). In one section of the report, it says, “The electronic equipment, petroleum, and liquefied natural gas producer will see a substantial increase in income per capita. Malaysia life expectancy, relatively high levels of schooling, and above average fertility rate will help in its rapid expansion” (Swee-Hock & Kesavapany 2014, p. 67). From this report, Malaysia has a lot of credibility that would easily draw it into achieving its Vision 2020 of becoming a Developed Economy with a fully functional and self-sufficient economy and social structures that ensure its success as a developed nation (Swee-Hock & Kesavapany 2014). Figure 3 below shows how Malaysia compares to other countries in terms of labour productivity. Fig. 3: Comparison of Malaysian Economic Development with other Countries in terms of labor Productivity Source: (Swee-Hock & Kesavapany 2014, p. 64). The secret behind this tremendous change in the country’s development according to Swee-Hock & Kesavapany (2014), has been in the shift of the focus areas driving the country’s economy. In the early 1970s, the country’s economy was primarily driven by mining and agriculture-based activities, a status quo that started experiencing transformation into multi-sector economy in the decades following. High investment industrial development fueled the growth and expansion of the country’s economy with evidence of the success of the strategies implemented being seen in the country’s recovery from the 1997 Asian Financial Crisis ahead of its neighboring countries. The economy has fully recovered from the crisis and currently boasts of a GDP per capita of $14800 (Swee-Hock & Kesavapany 2014). Another critical contributor to the country’s economic development is international trade aided by the shipping route in Strait of Malacca. Together with the manufacturing industry, these two sectors of the economy have helped to develop the country further economically. By the immense growth of these two sectors of the economy, Malaysia has continued to dominate in the export of natural and agricultural resources around the world where previously, the country has on numerous occasions been the largest producer and exporter of such natural resources s Tin, Palm Oil, and Rubber among others (Swee-Hock & Kesavapany 2014). The country has learnt extensively from its neighbors as far as the effects of relying on agriculture and natural resources is concerned especially with the 1997 Asian Financial Crisis forming the basis of its rationale to diversify its economy. The countries that relied heavily on natural resources and agriculture were most hit by the crisis as the two industries almost grounded to a halt due to the economic melt down; and it was Malaysia’s diversified economy that helped it recover so fast and sustain its struggling industries in business. One of the areas further developed to help diversify the country’s economy has been the government’s push towards encouraging and increasing tourism exploits to Malaysia over the years. This endeavor has yielded good results as Tourism not stands as Malaysia’s third largest contributor to the countries GDP growth today (Swee-Hock & Kesavapany 2014). It is based on these efforts that in 2014, the country ranked as the best country for one to retire to based on the Global Retirement Index and this was due to the country’s Malaysia My Second Home Program which allowed visitors to the country to stay longer for up to 10 years on a long-sty visa (Swee-Hock & Kesavapany 2014). This year, the county ranks as the fourth Best place to Retire to in the world based on The World’s Best Retirement Havens rankings. As regards investment, the most notable areas of investment characterizing Malaysian economy today is Islamic Banking where the country boasts of having the highest number of female workers in the Islamic banking industry (Swee-Hock & Kesavapany 2014). Because of this form of investment as well as the country’s investment in functional skills training and capacity building, knowledge-based services have continued to grow in the country which have collectively worked to help Malaysia to “develop a self-reliant defensive ability and support national development for the benefit of its citizenry” (Swee-Hock & Kesavapany 2014, p. 76). This has led to the country extending its dominance in the Information Technology industries and Science and Technology fields in the global economy. According to Boulton, Pecht, Tucker & Wennberg (2010), the country is the largest producer and exporter of semiconductor devices and other related electrical devices in the world. In addition to this, developments in these areas have enabled the country to start expanding its development agenda towards developed country status; in 2002, Malaysia started developing its own Space Program which led to one Malaysian travelling to the International Space Station with Russian astronauts in 2006 in an agreement that saw Malaysia buy 18 Russian Sukhoi Su-30MKM fighter jets (Boulton, Pecht, Tucker & Wennberg 2010). Notable Areas of Development in Malaysian Economy There are three notable areas showing Malaysian development portfolio in relation to its neighbors as well as the whole Asian region and these are: Infrastructure Development – according to Swee-Hock & Kesavapany (2014), Malaysia has the most developed infrastructure in the whole of the Asian region with its Telecommunications systems being second best after Singapore. The country has over 4.7 million fixed line subscribers and close to 30.5 million cell phone subscribers. In terms of connectivity, the country has 7 international ports and 200 industrial parks like Kulim Hi-Tech Park and Technology Park Malaysia among others (Swee-Hock & Kesavapany 2014). The country has made available fresh water to over 95% of its population. Energy Sector – the country’s energy sector forms another formidable attribute of its ever increasing economy. Malaysia’s energy sector is dominated by Tenaga Nasional which is an electric utility company in Southeast Asia with the largest market share in terms of assets. The country provides its citizenry with electric connectivity through a National Grid with over 420 transmission substations. The transmission lines are connected to form a network of over 11000 km in coverage. In 2013, the country had an electric power generation capacity of 29,728 Megawatts and the total amount of electricity generated in that year was 140,985 Gwh with the country’s power demand being 116,087 GWh (Boulton, Pecht, Tucker & Wennberg 2010). This significant capacity to provide sufficient energy for the population is informed by the country’s diversification of energy source alternatives ranging from natural gas, oil, hydro power, and clean energy (Boulton, Pecht, Tucker & Wennberg 2010). Transport System – Boulton, Pecht, Tucker & Wennberg (2010) indicates that Malaysia has one of the most comprehensive transportation system networks in the whole of Southeast Asia region with the total coverage of the country’s transport system is 144,403 kilo meters. The country’s main national road network is Malaysian Federal Roads System which run for over 49,935 km with most of the roads being two-lane designed and almost all of them are paved with tarmac (Boulton, Pecht, Tucker & Wennberg 2010). The country has close to 1,798 km of highways with the longest highway being the North-South Expressway extending for over 800 km on the West Coast of Peninsular Malaysia. It connects significant cities such as Johor Bahru, Kuala Lumpur and Penang among others (Andaya & Andaya 2010). Conclusion From the foregoing discussion, it is clear that Malaysia is a fast growing economy that has highly diversified its economic development agendas to ensure stability and effective management of its recourses. The country continues to strive at becoming a fully developed economy by 2020 which is a vision that is within visible reality given the incredible steps of achievement that have already been made thus far. Despite the challenges with inequalities regarding the minority groups that sometimes make up of significant market capitalization margins such as the Chinese (who are about one third of the country’s population but control over 70% of the country’s market capitalization), the country has done well to ensure that the economy is sufficiently affordable and convenient for the common citizen which is the highest mandate of any government (Andaya & Andaya 2010). Bibliography Andaya, B. & Andaya, L. (2010). A History of Malaysia. Kuala Lumpur: MacMillan Press Ltd. Boulton, W., Pecht, M., Tucker, W. & Wennberg, S. (2010). "Electronics Manufacturing in the Pacific Rim, World Technology Evaluation Center, Chapter 4: Malaysia". The World Technology Evaluation Center, Inc. 1 November 2010. Milner, A. (2010). The Malays: The Peoples of South-East Asia and the Pacific. New York: Wiley-Blackwell. Nooi, P. (2008). "Decentralisation or Recentralisation? Trends in local government in Malaysia". Commonwealth Journal of Local Governance. 19 February 2008. Raghavan, R. (2010). "Ethno-racial Marginality in West Malaysia: The case of the Peranakan Hindu Melaka or Malaccan Chitty community". Royal Netherlands Institute of Southeast Asian and Caribbean Studies, vol. 133, no.4, pp. 438–458. Swee-Hock, S. & Kesavapany, K. (2014). Malaysia: Recent Trends and Challenges. Kuala Lumpur: Institute of Southeast Asian Studies. Read More