Malaysia

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Full Report: Malaysia

Overview

1910-1918: The nine sultanates of the Malay Peninsula together with Port Singapore form the British colony of Malaya. Rubber plantations lead the shift from subsistence to export agriculture. The British encourage the immigration of Tamils from South India. Indian workers comprise the core plantation labor force.

1919-1929: Growth attracts Chinese immigrants, who settle in the urban areas of Singapore and Kuala Lumpur. The British policy of indirect rule maintains the status of traditional rulers and Malay class structure. The provinces of Sabah and Sarawak, on the island of Borneo, are governed by the North Borneo Company and the Brooke family. Port Singapore is Asia's main British naval base.

1930-1940: The worldwide depression hits hard the urban Chinese engaged in trade. Influenced by events in China, Chinese immigrants found the Communist Party of Malaya in 1930. Ethnic friction between Chinese and Malays marks the decade. By the 1930s, the Malay population shrinks to 50 percent as Chinese immigration rises. Chinese merchants dominate commerce and tin mining.

1941-1944: The Japanese occupy Malaya and Borneo in 1942, making Malaya a staging area and supply port and using forced labor to intensify rubber, palm oil, and mining operations. The Japanese are especially repressive towards the Chinese community. In 1943 Allied commando group Force 136 trains and equips Communist guerillas to mount a sabotage and resistance campaign.

1945-1947: Malaya is liberated from Japanese occupation in 1945. The Malayan Union incorporates all of Malaya except Singapore in 1946. Chinese and Indian immigrants receive full citizenship rights. Sarawak and Sabah become crown colonies in 1946. The United Malay National Organization (UMNO) is formed as a reaction to the inclusion of non-Malays as full citizens.

1948-1949: The Federation of Malaya is established in 1948 as a concession to UMNO demands and includes all of Malaya except Singapore. It decentralizes authority back to the Malay states and rescinds citizenship rights for non-Malays. Malayan Communists begin an insurgency, and the British declare a state of emergency. In 1949 Chinese business leaders found the Malayan Chinese Association (MCA).

1950-1956: The British begin talks with ethnic leaders, promising them independence. Postwar economic growth begins with increased rubber and timber production. The Chinese dominate commerce, civil service, and education. The UMNO, MCA, and the Malayan Indian Congress unite to form the Alliance Party. Headed by Tunku Abdul Rahman, it wins 51 of 52 seats in the 1955 national legislative elections.

1957-1962: Malaya gains independence in 1957 as a federal, constitutional monarchy with Kuala Lumpur as its capital and Tunku Abdul Rahman its prime minister. The state of emergency ends in 1960 with the defeat of the Communist guerillas. By 1962, proposals to merge with Singapore and the Borneo states of Sabah and Sarawak gain broad support. Raw material exports are Malaya's main source of foreign exchange.

1963-1968: Singapore, Sabah, and Sarawak join the Malayan states to form Malaysia in 1963. Indonesia's President Sukarno launches a "Crush Malaysia" campaign. Tensions arising from Chinese-Malay friction lead Singapore to withdraw from Malaysia in 1965. Confrontation with Indonesia ends in 1966 as Sukarno falls. Singapore and Malaysia help found the Association of Southeast Asian Nations (ASEAN) in 1967.

1969: The Malay-dominated Alliance loses key seats and significant Chinese support, primarily to the Chinese-dominated opposition parties, in parliamentary elections. Following the outcome, tensions between the Chinese community and the Alliance Malays spark riots in which more than 2,000 people, mostly Chinese, die. The government declares a state of emergency. All parliamentary activities are suspended.

1970-1973: Tunku Abdul Rahman steps down as prime minister in 1970. A joint civilian-military body, the National Operations Council (NOC), governs for 21 months. The 1969 riots force a reappraisal of Malaysian society. The NOC launches the New Economic Policy (NEP), which aims to curb inequalities by favoring Malays in economic and social policy. It combines market policies with social justice programs.

1974-1980: Tun Abdul Razak reorganizes the Alliance Party into the Barisan National (BN). The BN wins 135 of 154 seats in the 1974 parliamentary elections. The NEP revitalizes Malaysia. A boom begins, sustained by high savings, political stability, and a successful economic transformation from raw materials to manufacturing. Tun Hussein Onn becomes prime minister in 1976 after the death of Tun Abdul Razak.

1981-1986: Dr. Mahathir bin Mohamad becomes prime minister in 1981. He embarks on an aggressive program of economic self-reliance called Malaysia Boleh ("Malaysia can do it"). Economic growth is fueled by oil revenues from offshore reserves in the South China Sea. In an effort to increase efficiency and government revenues, Malaysia begins privatization of state-owned companies.

1987-1990: Mahathir reorganizes his Cabinet after a rift within the UMNO. The party splinters into Mahathir's UMNO Baru and the Semangat '46 faction. Press freedoms are sharply curtailed. The reconstructed UMNO wins reelection in a rushed election in 1990. That same year, Mahathir announces Vision 2020, an ambitious plan to fully industrialize Malaysia by the year 2020.

1991-1996: Manufactured goods eclipse raw materials in export earnings; by 1995, Malaysia has ASEAN's highest growth rate (9.6 percent). Mahathir's BN coalition wins the 1995 elections in a landslide. The combination of political stability, foreign investment, and steady growth rate earns Malaysia global acclaim as an "economic miracle" and "Asian tiger" alongside Taiwan and South Korea.

1997: The 1997 Asian financial crisis severely affects the economy. The Kuala Lumpur stock exchange plunges by 80 percent. Malaysia rejects IMF-recommended remedies. The government restricts currency markets and imposes strict controls to prevent capital flight. Malaysia pegs the ringgit at a fixed exchange rate of 2.45 ringgit to the U.S. dollar.

1998-2000: A political crisis erupts when Deputy Prime Minister Anwar Ibrahim is arrested on corruption charges. The national and international outcry draws attention to a growing authoritarianism. Nevertheless, Mahathir's BN wins the parliamentary elections of 1999. By 2000, Malaysia shows signs of a gradual recovery from the economic crisis.

2001-2003: Malaysia weathers the Asian financial storm better than many neighbors, apparently validating the government's decision to impose financial and currency controls when the crisis hit. Mahathir's political control remains firm, but in 2002, he announces that he will step down after the 2003 elections. Religious and social tensions, however, persist beneath the surface.

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Political

1957-1963: The Malay-dominated United Malay National Organization (UMNO) forms the core of the National Front coalition government. The 12-year communist insurgency ends with insurgent leader Chin Peng's surrender. Chinese-dominated Singapore joins the Federation of Malaysia in 1963. Military confrontation with Indonesia in 1963 rallies the new republic against a common threat.

1964-1968: The incorporation of mainly Chinese Singapore threatens Malay control of the Federation of Malaysia. Singapore leaves the Federation in 1965 after ethnic friction proves insoluble. The "Confrontation" with Indonesia ends in 1966 with the fall of Sukarno. The UMNO Supreme Council includes Dr. Mahathir bin Mohamad, an ardent advocate for Bumiputras, or ethnic Malays.

1969-1970: Malay-Chinese riots during the 1969 parliamentary elections threaten Malaysia's continued existence as a pluralistic society. In response, the New Economic Policy (NEP) mandates programs to increase Malay economic participation. The National Operations Council (NOC), a joint civilian-military body, rules for 21 months. Prime Minister Abdul Rahman resigns and is replaced by his deputy, Abdul Razak.

1971-1974: The NEP mandates affirmative action for ethnic Malays with the goal of 30 percent Bumiputra ownership of corporate wealth by 1990. Abdul Razak's new Barisan National (BN) alliance incorporates every party but the Chinese left-wing Democratic Action Party (DAP). The new BN wins the 1974 elections in a landslide. Mahathir becomes minister of education.

1975-1980: Prime Minister Abdul Razak dies suddenly in January 1976. His deputy, Tun Hussein Onn, replaces him. The ruling BN coalition is dominant, with the mainly Chinese DAP as the largest opposition party. The coalition retains power throughout the decade with a combination of pro-Bumiputra policies and a booming economy. Mahathir becomes deputy prime minister in 1978.

1981-1987: In 1981 Mahathir becomes Malaysia's first prime minister not from a royal family. A locally educated Bumiputra, he advocates Malaysian self-reliance and assertiveness. His primary Malay opposition, the Islamic party (PAS), wins only five of 192 seats in the 1982 elections. In April 1987, Mahathir narrowly weathers a challenge to his UMNO presidency from the party old guard.

1988-1989: In 1988 the UMNO breaks into two separate parties, Mahathir's UMNO Baru and the splinter party Semangat '46 ("Spirit of '46," for the year UMNO was founded). The split is fueled by a rift between Mahathir and the UMNO old guard, including two former prime ministers. It represents the first fissure in the Bumiputra political leadership.

1990-1996: The 1990 parliamentary elections are held early, with only a 10-day campaign period. For the first time, the ruling coalition faces a Malay-based opposition. Mahathir's BN loses some seats but maintains a veto-proof majority. The 1995 parliamentary elections consolidate BN power in a landslide, though in the states of Kelantan and Sabah the governing coalition includes the Islamic PAS party.

1997-2001: The 1998 arrest of Deputy Prime Minister Anwar on corruption and sodomy charges sends Malaysia into crisis. University students and opposition leaders lead massive anti-Mahathir demonstrations, but the prime minister holds firm, and the crisis appears to ebb with Anwar's imprisonment. The Islamic PAS wins 27 seats in the 1999 parliamentary elections and forges an alliance with the DAP.

2002-2003: Having secured his grip on power anew and steered Malaysia through the Asian economic crisis and back into growth, Mahathir surprises the nation with the announcement he will step down. Elections in late 2003 will determine his successor and mark the end of rule by an iconoclastic and controversial leader.

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Economic

1957-1963: Palm oil and rubber raw material exports form the basis of Malayan economy. At the time of independence, there is no significant manufacturing industry. The desire to link the commercial power of Singapore with the raw material base of Malaya provides an economic impetus for the creation of the Federation of Malaysia in 1963.

1964-1969: Singapore's defection from the Federation in 1965 robs Malaysia of its busiest port. The first in a series of five-year plans calls for industrialization and diversification. It targets education, foreign investment, and infrastructure as keys to development, and sets out liberal trade policies. Bumiputras (ethnic Malays) are still bit players in a Chinese-dominated economy.

1970-1975: The New Economic Policy (NEP) promotes private entrepreneurship and local investment. Malaysia's stability and free-market policies attract investment primarily from Taiwan, Japan, and the United States. Low inflation and a high savings rate spur growth in the Malaysian economy. In 1974, in the wake of the OPEC oil crisis, Malaysia experiences its highest inflation rate (18 percent) of the decade.

1976-1980: Malaysia discovers significant oil and gas reserves in the South China Sea. Oil revenues help fuel the economic boom. Petronas, the state-owned oil company, runs all aspects of oil extraction and production. By 1979, the economy is growing at an annual rate of 5.2 percent, and the manufacturing sector at 8 percent, driven by light industry and electronics.

1981-1986: The government starts a campaign to reduce foreign ownership, including "dawn raids" to buy back Malaysian assets on the London Stock Exchange. Privatization begins and draws criticism as assets are sold to Malay businessmen with government connections. Mahathir says the buyers are proven business "winners." In 1985 Malaysia launches the Proton Saga, the first locally manufactured automobile.

1987-1996: High levels of education and low labor costs make Malaysia a magnet for foreign direct investment. The government undertakes a series of mammoth infrastructure projects, including the world's tallest buildings, the Petronas Towers, and the Cyberjaya high-tech city. Up to 1996, the economy enjoys an average GDP growth rate of more than 8 percent annually, earning Malaysia "economic miracle" status.

1997-1998: The Asian financial crisis of 1997 severely hurts the Malaysian economy. As the collapse of the Thai currency ripples throughout the region, the value of the Malaysian ringgit plunges sharply. Mahathir blames "foreign speculators" for the crisis. Malaysia rejects the IMF bailout package and instead imposes tight controls on all sectors of the economy.

1999-2003: Government controls succeed in averting a deep recession, despite initial foreign skepticism. A diverse economy and relatively low foreign debt provide a measure of stability. Malaysia is quickly back on the road to recovery; by 2002, growth is above 4 percent, exports are growing in double digits, and corporate taxes are cut. The government seeks to purge insolvent firms from the stock exchange.

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Social

1957-1962: At independence, with Malaya roughly 53 percent Malay, 36 percent Chinese, and 11 percent Indian, Malay is chosen as the official language. Forty-one percent of the Chinese population is denied citizenship under constitutional rules favoring ethnic Malays. This bias, combined with Chinese economic preeminence, stokes Malay-Chinese tensions.

1963-1968: Singapore and North Borneo join Malaya to create the Federation of Malaysia in 1963. With more than 75 percent of Singapore's population Chinese, the Federation's racial balance is upset. The confrontation with Indonesia in 1963 deflects racial tension and helps build national unity, until power struggles and ethnic conflict force Singapore out of the Federation.

1969: Malays are the majority community but enjoy only 2 percent of corporate ownership. Chinese domination of the economy is a source of simmering anger among Malays, sparking the massive 1969 riots. The United Malay National Organization (UMNO) expels Dr. Mahathir bin Mohamad for his criticism of Abdul Rahman's handling of the crisis. Mahathir's pro-Malay tract, "The Malay Dilemma," is banned.

1970: The New Economic Policy (NEP) establishes preferential treatment for Malays in society, the government, and the economy as remedies until the target goal of 30 percent Malay equity in the economy is reached. The Rukunegara, a statement of national principles stressing loyalty to country and king, respect of the constitution and the rule of law, is promulgated to promote national unity.

1971-1980: An upturn in Chinese disaffection and Islamic fundamentalism fail to derail Malaysia's remarkable stability. A surging economy and the NEP welfare programs help alleviate social tension. The Bumiputra Investment Foundation, headed by Mahathir, is founded in 1978 to provide ordinary Malays access to cheap loans. It dispenses units of 10 Malay dollars, accessible to any Malay.

1981-1986: Mahathir urges Malaysians to shed their colonial mentality and "Buy British Last." Malaysia's "Look East" policy promotes hardworking postwar Japan as a model to emulate. The slogan "Malaysia Inc." characterizes the nation as a smooth-running corporation. The Malaysian Trade Union Congress (MTUC) is the largest union, but strikes are rare.

1987-1995: In 1990 Malaysia unveils "Vision 2020," an ambitious project to achieve full development by the year 2020. The boom attracts illegal immigration, and Malaysia draws international criticism in 1991 for its treatment of Vietnamese boat people. Increasing urbanization results in higher crime rates and other social ills. By 1995, almost 70 percent of the population lives in urban areas.

1996-2001: The September 1998 dismissal and subsequent arrest of Deputy Prime Minister Anwar Ibrahim cause unrest, but Mahathir stands firm, and the crisis abates. Malaysia curtails Islamic political activity after the 2001 World Trade Center attack in New York spotlights Islamic terrorism.

2002-2003: Malaysia's ability to withstand the financial crisis and 2001-02 global slowdown shores up Mahathir's position despite concerns over his authoritarian ways. Media remain tightly controlled; live broadcasts are required to submit scripts in advance. Islamic law is passed in one state, highlighting the potential for religious turmoil. But Malaysia remains a generally prosperous multi-ethnic society.

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Environmental

1957-1975: Malaysia is one of the most bio-diverse regions on earth, with extensive tropical forests. Agriculture and infrastructure development cause massive deforestation in the 1960s. Discharge from industrial and mining operations pollutes water resources. The government passes the Environment Quality Act (EQA) in 1974 and establishes the Department of Environment to enforce it.

1976-1990: As Malaysia rapidly industrializes, urban smog during the dry season becomes a climate trait. Water toxicity and river silting are side effects of rapid and intense industrialization. Malaysia's population doubles between 1960 to 1990, straining sewage and waste management infrastructure.

1991-1997: Malaysia plays a prominent role at the 1992 Earth Summit in Rio de Janeiro. Mahathir leads calls for sustainable development. In 1997 Malaysia declares a state of emergency as forest fires on Sarawak blanket dense smog over the region; Mahathir appears in public wearing a smog mask. Environmental concerns force suspension of the Bakun hydroelectric dam project in Sarawak.

1998-2003: Malaysia commits to reaching International Tropical Timber Organization (ITTO) sustainable forest management goals. In June 1999 the government declares air pollution figures a national secret. Work begins anew on the Bakun Dam in 2000. Logging is barred in Malaysia except in the tropical rainforest areas in Sabah and Sarawak. The 2001-05 plan makes cleaning up air pollution a national priority.

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Rule of Law

1957-1964: Newly independent Malaya is a constitutional monarchy based on the British parliamentary system. The king is chosen from a rotation of the nine traditional sultans every five years. Real power lies with the prime minister. Each of the nine states has its own parliament and executive subject to the central government. The constitution favors ethnic Malays and makes Malay the official language.

1965-1969: Singapore's ouster from the Federation of Malaysia in 1965 increases Malay-Chinese tension. Race riots during the 1969 elections cause the suspension of parliamentary government for 21 months. The National Operations Council (NOC), a combination of civilian and military leaders, assumes dictatorial power over Malaysia during the state of emergency.

1970-1975: The state of emergency is lifted in 1971. An accord with the North Borneo United People's Party of Sarawak ensures the ruling Alliance a veto-proof two-thirds majority in parliament. Constitutional amendments and the Sedition Act of 1971 give the government sweeping powers to control public debate. The New Economic Program (NEP) mandates pro-Malay quotas in all sectors of society and the economy.

1976-1985: The government bans public political rallies in 1978 when the Malaysian Communist Party (MCP) announces plans to commemorate the 30th anniversary of the communist insurgency. All public meetings are banned in 1982. "Ceremah," invitation-only indoor meetings, are made subject to police permission.

1986-1994: A United Malay National Organization (UMNO) internal crisis leads to a government crackdown on press freedom and the opposition. The Internal Security Act (ISA) allows the government to imprison dissidents without trial. The judiciary is made subservient to the executive branch, and the prime minister holds the greatest power. Parliamentary procedure amendments cut the legislature's power.

1995-1997: By international accounts, the parliamentary elections of 1995 are fair and free. The financial crisis of 1997 sees stricter government control over civil society. Malaysians leaving the country face currency restrictions. Foreign workers are detained and deported.

1998-2003: Deputy Prime Minister Anwar Ibrahim is arrested, tried, and imprisoned in 1998 under the ISA. Foreign human rights groups criticize his treatment and trial. Mahathir clamps down on protest. Amnesty International criticizes the detention without trial of Islamic activists in 2001. Mahathir maintains a firm hand: In 2002 he forces illegal immigrants out on penalty of imprisonment and whipping.

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Trade Policy

1957-1964: Rubber, palm oil, and tin form the basis of Malaysian exports. The largest trading partners are Britain, Japan, and the United States. The economy is subject to fluctuations in international commodities markets. British investors develop and control most of the country's rubber production. Trade is facilitated by infrastructure built during the colonial period.

1965-1970: Deprived of its busiest port with Singapore's defection, Malaysia institutes tariffs to protect local import-substitution industry, including textiles, light manufactures, fertilizers, and industrial chemicals. The first five-year plan aggressively courts foreign investment. The NEP increases public infrastructure investment. Malaysia imports rice and other basic foodstuffs to meet local demand.

1971-1978: The OPEC oil crisis is offset by the discovery of offshore oil reserves, and Malaysia begins to export oil. The economic boom turns Malaysia into a leading exporter of electronic equipment and light manufactured goods. Trade surpluses are common.

1979-1987: Malaysia seeks to broaden and diversify from a labor-intensive to a capital-intensive economy. The Heavy Industry Commission of Malaysia (HICOM) is founded in 1980 to spur steel and iron manufacturing. The first Malaysian auto, the Proton, begins production for the export market in 1985. Malaysia encourages regional trade by supporting the ASEAN Free Trade Area (AFTA).

1988-1993: In 1988 Prime Minister Mahathir calls for economic cooperation between developing nations. In 1991 he promotes the East Asian Economic Caucus (EAEC), a trading bloc for Asian nations. The EAEC attempts to secure the regional Southeast Asian market against foreign competitors while easing trade barriers among member states. Malaysia begins to cut import tariffs in 1993.

1994-1996: Mahathir expresses apprehension at the 1994 Asia-Pacific Economic Cooperation (APEC) meeting over the fast pace of trade liberalization. He fears that free trade will allow Western economies an inequitable advantage over developing countries. Manufactured goods reach 77.4 percent of all Malaysian exports in 1994. Malaysia joins the World Trade Organization (WTO).

1997-2003: Malaysia maintains a trade surplus despite the Asian financial crisis. In 1998 Malaysia reaffirms its commitment to liberalization of its financial industries under WTO rules. Currency fluctuations affect competitiveness, but Malaysia's generally sound recovery from crisis contributes to renewed growth. In 2002 Thailand and Malaysia hold a joint Cabinet meeting in which they emphasize trade ties.

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Money

1957-1969: The ringgit is the official currency of Malaysia at independence. The central bank is established in 1958. The Chinese minority controls most of the lending and finance institutions. Agricultural exports are the primary source of hard currency. The absence of foreign exchange controls is key to attracting foreign direct investment.

1970-1972: The New Economic Program (NEP) promotes cheap loans and finance for local Malay entrepreneurs. Malaysia institutes centralized control of the currency exchange rate. The NEP's goals call for using monetary policy to sustain steady growth rates with low inflation.

1973-1980: Malaysia floats the ringgit in international currency markets in 1973. It is initially valued at RM2.45 per U.S. dollar. The central bank, Bank Negara Malaysia (BNM), intervenes in the currency markets to steady its value. Foreign ownership of financial institutions is limited to 30 percent by law. Malaysia embarks on heavy external borrowing to finance industrialization.

1981-1988: The corporate and government bond markets expand in the early '80s. The government practices fiscal restraint and manipulates the exchange rate to control the economy, periodically buying dollars to depreciate the ringgit and boost Malaysian exports. Inflationary forces remain contained at moderate levels throughout the decade.

1989-1996: The 1989 Banking and Financial Institutions Act places all banking and non-bank lending institutions under the supervision of the central bank. The ringgit is remarkably stable throughout the '80s and early '90s. A loose amalgam of government policies and market forces keeps the financial system running despite a lack of transparency in the operation of capital markets.

1997-1998: The Asian financial crisis of 1997 sends the value of the ringgit into free fall. Mahathir rejects IMF guidelines for recovery. The exchange rate is fixed at RM3.8 per U.S. dollar. All banking units are consolidated into six large banks. The Danaharta, a government-owned asset management company, is established to buy and rehabilitate non-performing loans.

1999-2003: Malaysia's strict control of the economy sees it through the Asian crisis. The fixed exchange rate creates a safeguard against currency fluctuations. Active debt management by the Danaharta keeps external debt under control. By 2001, Malaysia liberalizes its financial system to allow 49 percent foreign ownership of financial institutions. The government withstands pressures to devalue the ringgit.

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Categories: Overview | Political | Economic | Social | Environmental | Rule of Law | Trade Policy | Money
Graphs: Growth | Income | Inflation | Unemployment | Well-being | Trade Volume | Trade (CAB) | Debt | Spending

Related: Video | LinksView all categories for years from to | See Full Report | Print