Economic history of Malaysia
Once heavily dependent on primary products such as rubber and tin, Malaysia today is an upper 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.
Instead of relying on local Malays as a source of labour, the British brought in Chinese and Indians to work in the mines and plantations and provide professional expertise.
[1] With Japanese investment, heavy industries flourished and in a matter of years, Malaysian exports became the country's primary growth engine.
[8] The Reid Commission which drafted the Malaysian Constitution made a provision for limited affirmative action through Article 153, which gave the Malays special privileges, such as 60% of university entrance (quota).
The success or failure of the NEP is the subject of much debate, although it was officially retired in 1990 and replaced by the National Development Policy (NDP).
Current GDP per capita grew 31% in the Sixties and 358% in the Seventies, but this proved unsustainable and growth scaled back sharply to 36% in the Eighties.
Cash-rich PLCs and consortia of banks eager to benefit from increased and rapid development began large infrastructure projects.
This is a chart of trend of gross domestic product of Malaysia at market prices[13] estimated by the International Monetary Fund with figures in millions of Malaysian Ringgit.
Major products include electronic components – Malaysia is one of the world's largest exporters of semiconductor devices – electrical goods and appliances.
During the same period, the government tried to eradicate poverty with a highly controversial race-based program called New Economic Policy (NEP).
First established in 1971 following race riots, commonly known in Malaysia as the May 13 Incident, it sought to eradicate poverty and end the identification of economic function with ethnicity.
It also fully suspended the trading of CLOB (Central Limit Order Book) counters, indefinitely freezing approximately US$4.47 billion worth of shares and affecting 172,000 investors, most of them Singaporeans.
[18][19][20] Prime Minister Mahathir Mohamad refused economic aid packages from the International Monetary Fund (IMF) and the World Bank, unlike the other countries affected by the crisis.
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.
To rejuvenate the economy, massive government spending was made and Malaysia continuously recorded budget deficits in the years that followed.
Economic recovery has been led by strong growth in exports, particularly of electronics and electrical products, to the United States, Malaysia's principal trade and investment partner.
[23] The fixed exchange rate was abandoned on 21 July 2005 in favour of a managed floating system within an hour of China announcing the same move.
In September 2005, Sir Howard J. Davies, director of the London School of Economics, at a meeting in Kuala Lumpur, cautioned Malaysian officials that if they want a flexible capital market, they will have to lift the ban on short-selling put into effect during the crisis.
Regardless of cause and effect claims, rejuvenation of the economy also coincided with massive government spending and budget deficits in the years that followed the crisis.
Others, such as Carmelo Ferlito, from the Centre for Market Education, said it might require something more substantial as the recent budget lacked a strategy for the recovery as well as addressing the political tensions.
