Malaysia has evolved from an economy that focused on natural resources into one of Southeast Asia’s biggest economic powerhouses over the course of a few decades.
Originally known for its rich natural commodities such as petroleum and palm oil, Malaysia has moved beyond these industries and branched into the world of technology, commerce, tourism, medicine and leisure.
This article provides a guide to the economy of Malaysia and will take a look at imports, exports, the currency of Malaysia and the Islamic economy.
A healthy economy
GDP has grown by around 5% since 2012 in Malaysia, making it one of the most exciting economies to follow in the region. It is one of the fastest grown A-rated countries in the world, surpassed only by established economies like China and Ireland.
It seems as though Malaysia hasn’t looked back since gaining independence in 1957, and today, the aspirations of this country are impressive. Malaysia wants to become one of the top 20 global economies by 2050, which is ambitious, but its current track record is incredibly impressive. Its national plan, the Transformasi Nasional (TN50) aims to drive innovation, creativity and productivity throughout the country.
Exports and imports in Malaysia
Malaysia has revolutionised its trade from a largely agricultural economy that focused on raw materials to a broad-based, export-driven economy. It has achieved this in an incredibly short time; over the span of a few decades, Malaysia has shifted its economy towards a more diverse portfolio of trade.
In 2019, Malaysia exported around $240 billion in goods across the globe – with 72% going to other Asian countries. Around 11% of Malaysia’s exports went to the U.S.A., with a little over 10% making its way across Europe.
Another consideration when looking at the exports and imports of Malaysia is its specially designated economic zone. This economic zone is found off the North-Western coast of Borneo – bordering Sabah, Sarawak and Brunei found on the island of Labuan.
Malaysia uses the ringgit (MYR) as its currency, which is operated on a managed-float exchange regime. This is measured against a trade-weighted basket of other currencies. You can’t use the ringgit for any offshore trading purposes, as this goes against Malaysia’s policies around its currency.
Malaysia’s central bank is the Bank Negara Malaysia, and they are responsible for setting policy rates for the country. The current Overnight Policy Rate (OPR) stands at 2%, but it has been known to fluctuate.
Malaysia has a healthy amount of international reserves, with over $100 billion USD available to finance over 7 months of imports for the country.
The biggest hurdle for those looking to do business in Malaysia is its foreign currency regulations. Be sure to look into the intricacies of foreign currency regulations before deciding on starting a business in Malaysia.
The Islamic economy
Malaysia has laid out its plans to develop an Islamic finance market that caters to Islamic economic sectors across the globe. When using the Global Islamic Economy Indicator, which assesses halal food, travel, finance, travel and pharmaceuticals for the Islamic economy, Malaysia ranks first – ahead of the likes of the United Arab Emirates. If you are looking to enter the Islamic economy, Malaysia is a fantastic entry point.