Business and Market Overview on Malaysia

 


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ECONOMY. Malaysia is a middle-income economy and has the third highest GDP per capita (US$4,625) among the Southeast Asian countries after Singapore and Brunei. The country was primarily a producer of raw materials but transformed its economy from the 1970s to the 1990s into a multi-sector economy. Malaysia's economic growth is export driven mainly from exports of electrical and electronic products.

Malaysia's economy is relatively stable with healthy foreign exchange reserves and a GDP of US$118.3 billion in 2004. From 2000 to 2004, Malaysia's real GDP grew by an annual average of 5.7% while inflation remained below 2.0% and unemployment below 4.0%. The Asian economic crisis of 1997 adversely affected Malaysia's economy during the period. It is unlikely that the country will experience an economic crisis similar to 1997 with current healthy foreign exchange reserves, low inflation and small foreign debt.

The manufacturing sector accounted for 48.5% of Malaysia's GDP in 2004, services accounted for 42.4% and the agriculture sector accounted for 9.1%. Major industries include electronic & electrical products, textiles, clothing & footwear, chemicals, petroleum, wood and metal products. Major agriculture industries include palm oil, rubber, cocoa, rice, poultry and timber.

DEMOGRAPHY. Malaysia comprises of Peninsular Malaysia and East Malaysia (located on the northern half of the island of Borneo) with a population of 26 million. Malaysia is a multi-ethnic society comprising of the predominant indigenous Malays (50%) followed by the Chinese (24%) and Indians (7%). Other indigenous groups (11%) include the Ibans, Kadazans, Melanaus and Kelabits. Major religion practiced is Islam followed by Buddhism, Taoism, Hinduism and Christianity. Major languages used are Malay (national language), English (commonly used in business), Chinese (mainly Mandarin, Hokkien and Cantonese) and Tamil.

Malaysia's population is becoming increasingly urban. The country's urban population increased from 54.7% to 62.8% of Malaysia's total population from 1995 to 2004. Main reason is increasing employment opportunities in the major urban areas. Major urban areas include the nation's capital Kuala Lumpur and the surrounding areas (known as the Klang Valley), Penang, Johor Bahru, Ipoh, Kuantan, Kuching and Kota Kinabalu.

Households in the urban areas have an average income that is twice than those in the rural areas. An estimated 5% of Malaysian households live below the poverty level while 50% are low-income households. The proportion of medium income households is 33% while high-income households are 10%.

INFRASTRUCTURE. Malaysia has a well-served international and domestic telecommunication system. Cities and towns are well connected by roads including highways and public transport. Internet broadband services are available in the cities and major towns. Malaysia has an international airport situated near Kuala Lumpur and airports across the country serving mainly domestic travel.

INTERNATIONAL TRADE. Malaysia's major trading partners include the United States, Japan, China, Singapore, Thailand, Taiwan and South Korea. Major exports from the country include electrical and electronic products, machineries, petroleum and liquefied natural gas (LNG), textiles, clothing & footwear, palm oil, furniture and sawn timber. High technology exports (mainly electrical and electronic products) account for more than 50% of Malaysia's exports. Major imports include electrical and electronics, machineries and equipments, petroleum products, plastics, iron and steel products, chemicals and foods.

CONSUMER USAGE OF TECHNOLOGY. Nearly 75% of all homes have fixed line telephones and there are 15 million mobile phone subscribers for a population of nearly 26 million in 2004. Penetration of personal computers in homes was nearly 30% during the period with 3.5 million internet subscribers and 10 million internet users. More than 90% of all Malaysian homes have refrigerators and televisions. Nearly all middle and high-income homes have cars and most have more than one. The estimated penetration of cars in homes is between 75% and 80%. Thus, many low-income homes have cars but tend to be lower-end models or cheaper second hand cars. Furthermore, nearly all lower income homes have motorcycles for their travelling needs.

RETAIL MARKET. Retail sales in Malaysia reached an estimated US$14 billion in 2004 and forecast to grow further to US$20 billion by 2010. The Klang Valley (Kuala Lumpur and the surrounding areas) contributes nearly 30% of the country’s total retail trade. The traditional “mom and pop" establishments dominate Malaysia’s retail industry while shopping at the modern retail establishments such as hypermarkets, supermarkets, departments, mini-markets and convenience stores is gaining popularity. These modern establishments account for nearly 25% of the total retail sales. Shopping at the traditional open-air markets remains popular among Malaysia’s low, medium and even high-income consumers because of their festivity atmosphere.

FOOD CULTURE. Malaysia has three major ethnic food cultures i. e. Malay, Chinese and Indian foods. Rice is the staple food followed by various types of noodles and Indian bread. Malay dishes tend to be hot and spicy, Indian foods are usually curry dishes while Chinese foods are salty. However, the various ethnic communities have adapted foods from other communities. Western baked bread and bakeries and fast foods are popular and affordable even among many in the lower income group.

Khal Mastan is a Senior Consultant with Pegasus Business and Market Advisory (http://bma.pegasus-asia.com ) based in Malaysia. He involves himself in business and marketing research and provides consulting services on markets in Southeast Asia namely Malaysia, Thailand, Singapore, Indonesia, Philippines and Brunei. He has more than 20 years experience in the region and work experience in various industries. He holds a bachelors degree in Biochemistry and an MBA. He can be contacted at khalzuri@pegasus-asia.com or +6 (03) 7726 5373 in Malaysia.

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