International Affairs Economic Powerhouse Malaysia Marks Half Century of Independence by Larry Luxner Malaysia, which celebrated its 50th anniversary of independence on Aug. 31, is a “progressive Muslim country” that prides itself on its parliamentary democracy system, its booming economy and warm political ties with the United States. That’s the word from Rajmah Hussain—Malaysia’s dynamic, petite ambassador in Washington. “We have very good leadership,” she told The Washington Diplomat in an interview last month. “Since Malaysia became independent [from Britain] in 1957, we have had a succession of prime ministers who are very visionary. Each of them had their own vision of how the country should move forward, which is what has brought Malaysia to where it is now.” Where it is now is certainly impressive, at least by economic standards. Malaysia’s 27 million people enjoy a per-capita income of $5,300, by far the highest in Southeast Asia outside the city-states of Singapore and Brunei. Between 1991 and 2005, Malaysia saw average economic growth of 6.2 percent per year, and this year, the economy is expected to grow by 6 percent. Unemployment, meanwhile, is only 3.5 percent, and inflation is a negligible 3 percent. Despite its relatively small population, Malaysia now ranks as one of the top 10 trading partners of the United States, and is this nation’s 18th largest export market, with two-way trade reaching $44 billion in 2005. More significant, the United States has consistently been the largest foreign investor in Malaysia, with $674 million in U.S. investment reported in 2006 alone. Today, some 130 companies on the Fortune 500 list have a business presence in Malaysia, representing cumulative investments exceeding $30 billion. Among well-known U.S. firms operating in Malaysia are Dell, Intel, Motorola, Western Digital, AMD, Freescale Semiconductors and Texas Instruments. In the manufacturing sector, U.S. companies boosted their investments to $1.4 billion in 2005—an astonishing 380 percent increase from the $290 million invested in that sector a year earlier. The strong presence of U.S. companies in Malaysia can also be seen in the electronics industry, where they account for 25 percent of the country’s total electronics and electrical exports. In fact, in 2005, 78 percent of Malaysia’s $27.7 billion in exports consisted of electronics. “We have put a lot of emphasis on trade and investment, and our standards are very much international. Of course, there are certain areas where we need to improve,” said Hussain, 56. “We are now into our ninth five-year plan, which have brought the country forward. When we became independent, we were depending on commodities like rubber, tin and palm oil. But over the years, we’ve developed our manufacturing sector. We have a vision of achieving developed-country status by the year 2020.” But this rapid growth came to a screeching halt in 1997, when the Asian financial crisis erupted, sending economies across the region into a tailspin. “Our prime minister at the time [Mahathir Mohamad] said it was because of currency manipulation,” Hussain said. “He then came up with a policy decision that got us out of the crisis very fast. Initially, other countries criticized us for doing that. But now we’ve been proven right.” Since that financial meltdown 10 years ago, Malaysia has completely recovered. In addition to being the world’s largest producer of rubber and tin, it’s also one of the world’s top exporters of semiconductor devices, computer hard disks, audio and video products, and room air-conditioners. Its economic success is symbolized by the Petronas Twin Towers, whose 88-story spires rise 1,486 feet over downtown Kuala Lumpur. The Petronas Towers—headquarters of Malaysia’s state-run Petronas oil monopoly—remained the world’s tallest skyscrapers from the time of completion in 1996 until 2003, when they were overtaken by the 1,667-foot-high Taipei 101 tower in Taiwan. Tourism is a key source of foreign exchange for Malaysia, which in 2006 welcomed 17.5 million tourists—174,000 of them Americans. And this year, which has been designated “Visit Malaysia Year” in honor of the country’s 50th anniversary of independence, even more visitors are expected. To keep investment dollars flowing into Malaysia despite competition from lower-wage China, the government is reducing the effective corporate tax rate from the current 28 percent to 26 percent over the next two years. That’ll make Malaysia’s tax rate more competitive than many of its regional competitors, including Vietnam, Thailand, China, India and the Philippines. Since 2006, Malaysia has also been pushing hard for a free trade agreement with the United States. Five rounds of negotiations have been held so far, and 19 working groups have been set up on a variety of issues ranging from financial services and textiles to agriculture and e-commerce. “Once concluded, a Malaysia-U.S. free trade agreement will help further strengthen bilateral economic ties by providing business opportunities for the private sectors of both our countries,” Hussain said. “It will lay the foundation for increased business collaborations. Given the size and importance of our economic interactions, naturally an FTA between Malaysia and the United States should not be expected to be plain sailing. But what’s important is that both sides must remain resolutely committed to negotiations.” Next Page

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