Malaysia

Malaysia is an exotic country in Southeast Asia with an incredibly diverse culture. It is a harmonious combination of three ancient Asian civilizations — Malay, Chinese and Indian. It is a country of contrasts, where ultra-modern skyscrapers are adjacent to buildings from the colonial era, next to mosques you can find a Chinese pagoda or an Indian temple, and snow-white beaches give way to steep cliffs whose peaks are lost in the clouds.

General information

The official name of the state is Malaysia. The country occupies an area of ​​330,803 km² (65th in the world). The population is approximately 34,151,259 people (as of the beginning of 2024).

In terms of ethnic composition, Malays and other Bumiputra (the name of the ethnic group of the Malays, as well as the indigenous population of Malaysia) make up 65% of the population; Chinese — 26%; Indians — 7.1% and other ethnic groups — 1%.

The Constitution of Malaysia guarantees freedom of religion for non-Malays. Islam has the status of the state religion in the country. It is professed by about 61.3% of the population; Buddhism — 19.8%; Christianity — 9.2%; Hinduism — 6.3%; Confucianism, Taoism and other Chinese religions — 1.3%, and 2.1% profess other religions or are atheists.

The official language of Malaysia is Malay. English was historically (until the late 1960s) the de facto language of administration. Today, English plays an important role as a second language, and is used to some extent in education. In addition, the Malay variant of English is widely used in business, along with Manglish, an English with a very strong influence of Malay and, to some extent, Chinese and Tamil. In the eastern part of the country, the languages ​​of the indigenous peoples are widespread, which are mostly distantly related to Malay.

Malay Chinese speak mainly various southern Chinese dialects (Southern Minh, Cantonese, Hakka, Hainanese, etc.), and, to a lesser extent, Putonghua. The Indians of the country use Tamil.

The official currency of the country is the Malaysian ringgit.

Kuala Lumpur is the capital and largest city of Malaysia, a significant commercial, industrial and financial center of the country. The city and its suburbs are home to rubber processing plants, palm oil and other food products, automobile assembly, electrical and electronic products, agricultural equipment, metal products, and textiles.

Tin and coal mining takes place near Kuala Lumpur. The city is home to the state central bank Bank Negara Malaysia and many other large banks, the stock and commodity exchanges, the boards of the most important state organizations, state and private insurance companies, the main offices of Malaysian branches of TNCs, and various firms and enterprises.

Johor Bahru is the second most populous city in the country after the capital Kuala Lumpur. The city is important for the country as an industrial, commercial, cultural, and tourist center.

The administrative division of Malaysia was formed historically, and currently the country consists of 13 states (Negeri) and 3 federal territories, wilayahs (Wilayah Persekutuan). There are 11 states and 2 federal territories located on and near the Malay Peninsula (West Malaysia), and another 2 states and one federal territory located on and near the island of Kalimantan (East Malaysia).

History, geography, culture, mentality

According to historians, the first human settlements on the territory of modern Malaysia appeared approximately 2500 years BC.

In the first decades of our era, Indian and Chinese merchants began to frequent the Malay Peninsula. Here they exchanged goods and traded with the local population. Soon, this place gained the reputation of a prosperous trading territory, attracting merchants from all over Asia.

The first state on the territory of modern Malaysia was founded at the beginning of the 7th century AD. It was called Srivijaya and was considered one of the most powerful in the region. The first examples of writing found here date back to the 7th century.

By the beginning of the 15th century, the state of Srivijaya first came under the influence of the ancient Indonesian country of Majapahit, and then - the Chinese Empire. At the same time, Islam came to Malaysia and immediately became the dominant religion. In the mid-15th century, the Malacca Sultanate, a medieval Malaysian state, was proclaimed on the territory of Malaysia.

At the beginning of the 16th century, the first Europeans appeared in the Sultanate — the Portuguese. They were followed by the Dutch, who also had a significant influence on the development of Malaysia.

The end of the "golden era" of the Sultanate came in 1699, when the next sultan, Johor, was killed by conspirators. From that moment on, a series of internecine wars began, which led to the fragmentation of the country into many appanage principalities — small sultanates. They fought with each other almost continuously, as a result of which they were greatly weakened.

The British Empire, which was actively expanding its possessions, did not fail to take advantage of this. The first British colonizers appeared in Malaysia at the end of the 18th century, and by the beginning of the 19th century the British controlled almost a third of the country. By 1874 the power of the British Empire extended to the entire territory of Malaysia.

The country remained under British rule until December 8, 1941 - it was on this day that the Japanese aggressor troops invaded Malaysia. Just 2 months later, the Japanese controlled not only all of Malaysia, but also neighboring Singapore. The British surrendered their colony almost without resistance, but did not fail to return here after the capitulation of Japan, at the end of World War II.

The Malays did not want to submit to the British Empire a second time. A struggle against the colonizers unfolded in the country, first politically, and in 1948 - armed. Malaysia declared its independence only in 1957, and a truly independent state was created in 1963. It was called the Federation of Malaysia and included Singapore. However, 2 years later, Singapore seceded from the new country and became an independent state itself.

After gaining independence, Malaysia began to develop intensively. But by the middle of the 20th century, it still remained a semi-backward, predominantly agrarian country, so its authorities announced the beginning of the NEP - a new economic policy, the goal of which was to create not only a modern economy, but also a "new Malaysian" - a successful and enterprising person, open to everything new, who values and respects the traditions of his country, but does not reject Western values.

The NEP policy was a success. Since the 70s of the last century, huge investments have been directed to the country, mainly from the USA, Japan and Western Europe. Malaysia has built cutting-edge microelectronics and home appliance manufacturing plants.

Malaysia is located in Southeast Asia and is divided by the South China Sea into two parts, East and West Malaysia. Malaysia shares land borders with Thailand, Indonesia and Brunei, and maritime borders with Vietnam, the Philippines and Singapore.

West Malaysia occupies the territory in the south of the Malay Peninsula, and East Malaysia is a number of islands, including Kalimantan.

The Titiwangsa Mountains stretch across the entire territory of West Malaysia, i.e. on the mainland. The highest local peak is Mount Gunung Tahan, whose height reaches 2,187 meters. The longest rivers in Malaysia are Rajang (760 km), Kinabatangan (560 km) and Pahang (435 km).

The country has large reserves of oil, tin, tungsten ore, bauxite, copper, and iron. In addition, there are small deposits of brown coal, titanium, manganese, antimony, gold, and phosphorites. Most of the oil reserves are concentrated on the shelf of the state of Sabah. Tin deposits are located mainly in the west of the peninsular part of the country and stretch in a strip from the border with Thailand to Singapore. Along with gold, tungsten, iron, niobium, tantalum, yttrium, and other rare and rare earth metals are found here. In the central part of the Malay Peninsula, there are minor deposits of gold, copper, and zinc. In Sarawak, there are deposits of antimony, gold, bauxite, and iron; in Sabah, there are copper and bauxite.

Malaysia’s multi-ethnicity, religions and languages have contributed to the country’s cultural diversity. The indigenous people known as the Orang Asli, Malays, Chinese and Indians have all contributed to the country’s culture. The long-standing presence of Europeans and Arabs has also left its mark. Malaysia’s traditional crafts reflect the intricate craftsmanship and cultural pride of its people. From fine hand-woven fabrics such as batik and rosette to intricate wood carvings such as keris and wayang kulit, these crafts are a window into the country’s history and identity.

Malaysia’s architecture is a fascinating blend of tradition and modernity, showcasing its rich history and contemporary aspirations. The sleek lines and innovative design of the iconic Petronas Twin Towers symbolize Malaysia’s progress and ambition. The historic Sultan Abdul Samad Building, adorned with Moorish architecture, tells the story of the country’s colonial legacy. Temples, mosques, and churches, each with unique architectural elements, are not only places of worship but also landmarks that celebrate Malaysia’s religious diversity. The traditional Bornean longhouses and ornate Malay houses offer a glimpse of vernacular architecture that has stood the test of time.

Malaysian society is hierarchical. Elders, parents, and family are valued, and authority figures are respected. Foreigners should watch their behavior and not overstep the bounds of the law.

When meeting Malaysians, they may ask a few personal questions to find out where they fit in the hierarchy. This may seem pushy and rude to foreigners, but it should not be perceived that way. At the same time, teamwork is respected in business and all employees are valued equally.

When doing business in Malaysia, it is worth keeping in mind the differences in accepted cultural norms of behavior among the Chinese, Indians and Malays. All Malaysians attach great importance to politeness and non-confrontationalism. It is difficult for them to criticize, give a direct answer to difficult questions, so such situations should be avoided.

Power

Malaysia is a constitutional monarchy. The Supreme Ruler (King) of Malaysia is elected for a five-year term from among nine hereditary rulers (Sultans) of the states.

According to the constitution, the Supreme Ruler governs the state, guided by the recommendations of the Prime Minister, the Cabinet of Ministers and Parliament. The King approves laws passed by Parliament, the candidacies of the heads of the most important bodies of state power, has the right to pardon convicted persons and is the commander-in-chief of the armed forces of the country. In practice, he remains the nominal head of state, retaining exclusive powers only in some private matters (Islam, the status of the sultans, etc.).

The leaders of the 13 Malaysian states form a special body - the Council of Rulers, whose main function is to elect the head of state. However, it is also assigned other specific issues related to the resolution of disputes between individual states, the status of indigenous people, etc.

Executive power belongs to the Cabinet of Ministers headed by the Prime Minister, who is the leader of the party that wins the majority of seats in the House of Representatives in the general election.

Executive power in the states is exercised by local governments or state executive councils — headed by chief ministers appointed by the heads of states (sultans or governors) based on the results of local elections to the legislative assemblies.

The legislative body is a bicameral Parliament. The upper house is the State Council (Senate). It consists of 70 members (44 senators are appointed by the king, and 26 are elected by the legislative assemblies of the states — two senators from each state).

The lower house is the People's Council (House of Representatives) — includes 222 deputies who are elected for five years by direct general elections in single-member constituencies.

Each state has a local legislative body — a unicameral legislative assembly.

Economy

Malaysia is on track for further economic growth this year, following a 4.2% expansion in the first quarter of 2024, Bank Negara Malaysia (BNM) announced on May 17. Free Malaysia Today reported that productivity gains in key economic sectors – palm oil, manufacturing, services, and oil and gas – helped drive the growth.

Malaysia is among the 24 most competitive countries in the world. It is the region’s top exporter of agricultural commodities and second (after Singapore) in manufactured goods. Along with Indonesia and Brunei, Malaysia is the largest exporter of oil and liquefied natural gas in the entire Southeast Asian region.

Malaysia is on track to achieve high-income status by 2026. The country has one of the highest standards of living in Southeast Asia and a low unemployment rate, estimated at 3.6% in 2023 (IMF).

International trade, facilitated by the important maritime trade route through the Strait of Malacca, and manufacturing are the country's most important economic sectors. Malaysia is a major exporter of agricultural and natural resources, the most significant of which is oil. Proven oil reserves amount to about 4.3 billion barrels. The country was once a major producer of tin, natural rubber, and palm oil. Malaysia is also a well-established center for Islamic banking.

Since independence in 1957, the country has successfully diversified its economy from agriculture and commodities to robust manufacturing and service sectors. In 2023, the labour force was 16.1 million out of a population of 32.97 million. Agriculture employs about 10% of Malaysians and contributes 8.9% of GDP (World Bank). Malaysia is the second-largest producer of palm oil and tropical timber and the fifth-largest exporter of rubber. The country has successfully developed its commodity-based economy and has significant reserves of oil, gas, copper, and bauxite. Malaysia's crude palm oil production was estimated at about 17.9–18.5 million tonnes in 2023, driven by lower yields from aging palm trees (S&P).

Industry accounts for about 39.1% of GDP and employs nearly 28% of the active population (World Bank). Malaysia is one of the world’s largest exporters of semiconductors, electrical goods and white goods, and the government has ambitious plans to establish the country as a key manufacturer and developer of high-tech products, including software. The country is a top outsourcing destination for component manufacturing after China and India. It has attracted significant foreign investment, which has played a major role in transforming its economy.

During the first eleven months of 2023, the Index of Industrial Production (IIP) showed a more moderate growth of 1% compared to the corresponding period of the previous year (January-November 2022: 7.1%). This growth was driven by positive contributions from the electricity (2.3%), manufacturing (0.9%) and mining (0.6%) indices. The services sector employs a large share of the active population (over 62%) and accounts for 50.9% of GDP (World Bank), driven mainly by health services, transport, retail and tourism. Tourism was the third-largest contributor to Malaysia's GDP after manufacturing and commodities, accounting for more than 7% of GDP, according to Tourism Malaysia. However, with the sector still recovering from the COVID-19 pandemic, a surge in tourist arrivals to Malaysia in 2023 has prompted the government to adjust its annual tourism target for the same year to 19.1 million, up from its original target of 16.1 million, and aims for tourist arrivals to exceed pre-pandemic levels in 2024.

Bilateral cooperation between Russia and Malaysia

Malaysia is one of the promising partners of the Russian Federation among the ASEAN member countries.

The structure of Russia's exports to Malaysia is dominated by mineral fuel and oil, fertilizers, paper, cardboard and products made from them.

A significant share of Russia's imports from Malaysia were electrical machinery and equipment, nuclear reactors and boilers; chemical products, including rubber and rubber products; food products and agricultural raw materials, including fats and oils of animal or vegetable origin, cocoa and products made from it.

In June 2007, OAO Gazprom and the Malaysian oil and gas company Petronas signed a Memorandum of Cooperation, providing for interaction between the companies in the implementation of projects in the territory of the two countries and in third countries, scientific and technical partnership in the field of exploration, production, transportation and storage of gas.

A separate and promising area of Russian-Malaysian trade and economic relations is the work aimed at the preparation and implementation of innovative business projects in the direction of introducing fundamentally new, competitive on the world market Russian products to the Malaysian market, and in the future to the markets of ASEAN countries, produced on the basis of patented Russian technologies (nano-biotechnology, etc.). One of the striking examples of such cooperation is the implementation of a Russian-Malaysian project in the field of biotechnology - the creation of a joint venture in Malaysia to produce a vaccine against dengue fever. This project envisages the organization by Russian specialists of a scientific and production base for the production and sale of vaccines, including those for agricultural purposes, based on innovative Russian genetic engineering technologies.

Another example of interaction between the Russian Federation and Malaysia in the regions is the Russian-Malaysian consortium consisting of the Russian Islamic Business And Finance Development Fund (IBFD Fund) and the Malaysian company AJM Planning and Urban Design Group Sdn Bhd (APUDG), established in 1993. APUDG — a team of urban planners, urbanists, planners, architects, engineers, ecologists and other professionals whose work is related to improving the quality of the living environment in cities, towns and regions.

The Russian-Malaysian Intergovernmental Joint Commission on Cooperation in the Field of Defense, Defense Industry and Defense Technologies is operating.

In 2013, a decision was made to establish the Business Council for Cooperation with Malaysia (BCCM) under the auspices of the Chamber of Commerce and Industry of the Russian Federation.

Russia's interests in cooperation with Malaysia are in the development of high-tech and innovative industries, exchange of experience in the creation of SEZs and technology parks. Strengthening cooperation in the oil and gas industry, developing cooperation in the field of nuclear energy, etc.

Work on the creation of the Intergovernmental Commission on Trade, Economic, Scientific, Technical and Cultural Cooperation between Russia and Malaysia is in its final stages, and Malaysia has also submitted an application to join BRICS.

Business climate

Malaysia’s economic development strategy envisages further liberalisation of the country’s trade and investment policies. The main objectives of the foreign economic policy are to improve access to export markets for primary commodities, manufactured goods and services, develop exports of high value-added products, increase trade with major trading partners, diversify trade by expanding into new markets, strengthen intra-ASEAN trade and economic cooperation and expand bilateral trade and investment ties in the Asia-Pacific region.

The 12th Malaysia Plan 2021-2025 (12MP) covers economic empowerment, environmental sustainability and reengineering. This is in line with Malaysia’s commitment to achieving the Sustainable Development Goals by 2030.

Ideally located as a central hub for global trade routes, Malaysia offers world-class air transport infrastructure. Complemented by strategic coastal ports that serve as accessible maritime links vital to global trade, the country facilitates smooth business operations and enhances investment prospects across continents. It also provides a choice of secure trade corridors and industrial zones, ensuring smooth supply chains and business activities.

Malaysia has business-friendly policies that are pragmatic and effective, creating a stable and conducive environment for businesses to thrive. These policies include flexible incentives, strong intellectual property protection laws in line with global standards, and the right to have 100% equity in manufacturing and select services sectors.

Investment climate

Malaysia’s investment landscape is enhanced by its strategic positioning and connectivity to Southeast Asian markets. It boasts vast land and natural resources, a well-established information and communications technology (ICT) infrastructure, a skilled English-speaking workforce, and a robust ecosystem of manufacturers and suppliers. Key sectors such as medical equipment, semiconductors, and solar panels contribute to Malaysia’s robust economic environment. However, as an export-dependent country, it is highly sensitive to fluctuations in global economic conditions. The government retains considerable discretionary powers to authorize investment projects and uses them to maximize the benefits of foreign participation by requiring agreements that favor technology transfer or joint ventures. Depending on the specific industry, foreign investment may be required to meet local participation requirements, including shareholding or board representation. Typically, restrictions on foreign shareholding take the form of mandatory minimum or majority stakes held by either local Malays or Bumiputera entities (representing ethnic Malays). Overall, Malaysia has a favorable business environment, ranking 36th out of 132 economies in the Global Innovation Index (2023) and 45th out of 184 economies in the Index of Economic Freedom (2023).

Malaysian governments have traditionally been open to foreign direct investment, which is an integral part of the country's economic development. As part of its economic development plan, Malaysia has provided tax incentives to attract foreign investment in strategic sectors of activity, such as the "pioneer status" for manufacturing, agriculture, and tourism, the "Bionexus label" for the biotechnology sector, and the "MSC status" for companies in the ICT and multimedia sectors.

The government has established the National Investment Committee, an investment approval body jointly chaired by the Minister of Finance and the Minister of International Trade and Industry, to expedite the regulatory process for approving new investments.

Business and investment support structures

There are various structures in Malaysia that support business development and attract investment. Here are the main ones:

• Malaysia Investment Development Agency (MIDA). MIDA is responsible for facilitating and coordinating domestic and foreign investment in the industrial and service sectors. The agency provides information, advice, and assistance in obtaining permits and licenses.
• Malaysia External Trade Development Corporation (MATRADE). It promotes the export of Malaysian goods and services. The organization organizes international exhibitions, trade missions and provides support in marketing research.
• SME Corp Malaysia. SME Corp focuses on the development of small and medium enterprises by providing financial assistance, training, consulting services and assistance in accessing new markets.
• TEKUN Nasional. This government agency provides microloans and financial assistance to small entrepreneurs and start-ups, with a particular focus on supporting youth and women.
• Cradle Fund. Cradle Fund specializes in supporting tech start-ups and innovation projects, offering grants, venture capital funding, and other forms of support.
• InvestKL. InvestKL attracts multinational companies to the Greater Kuala Lumpur region by providing assistance in establishing and expanding their businesses, including information support and navigating local regulations.
• Green Technology Corporation (GreenTech Malaysia). This organization promotes green technologies and sustainable development by providing information, advice, and support to environmental projects.
• Malaysian Technology Development Corporation (MTDC). MTDC is dedicated to supporting and commercializing technological innovations by providing venture capital funding, grants and advisory services.

These structures provide comprehensive support to businesses and investors, contributing to the creation of a favorable business environment and sustainable economic growth in Malaysia.