Malaysia Overview

At a Glance

  • Located in the middle of Southeast Asia, Malaysia is a multi-ethnic, multicultural country with a population of 29M and a GDP of US $312B

  • It has one of the best economic records in Asia as a result of its rich natural resources, large manufacturing sector and thriving service industry

  • The tech community is starting to mature after years of careful nurturing by the government and veteran entrepreneurs

  • It boasts of the highest number of tech IPOs in SE Asia



Key Figures to Know



Taking A Closer Look

The nation of Malaysia turns 57 in 2014, but its rich history dates back to the first millennium CE, when it was still the Malay Peninsula. Back then, the Malay Peninsula was known to ancient Tamils as Suvarnadvipa, or the Golden Peninsula. Strategically located between China and India, its ‘golden’ sea-lane position was a source of many trade and foreign influences that charted the course of its history.

The Malay Peninsula became an international hub for Indian and Chinese merchants, trading not only goods, but also gods. Malays began practicing Hinduism and Buddhism in the fourth century CE. Religion had a major effect on the evolution of their language and culture, most evidently seen through the adoption of Sanskrit in common parlance.

Before 600 CE, there were as many as 30 Malay kingdoms ruling the Malay Peninsula. By 671, the majority of separate kingdoms were incorporated into one maritime empire that was known as Srivijaya (now Indonesia Sumatra).

Srivijaya had full control over two key trade routes in the Indian Ocean – the Malacca Straits and the Sunda Straits. As a result, they had a monopoly on all the goods passing between China, India and Arabia. At the peak of its empire, Srivijaya’s influence had spread as far east as the Philippine islands.

In 1402, a Srivijayan prince named Parameswara founded the Malacca Sultanate, the first independent state centred in modern-day Malaysia. Parameswara’s conversion from Hinduism to Islam – and the subsequent changing of his identity to Sultan Iskandar Shah – spelled the end of the Srivijaya Empire.

However, Malacca’s independence was short-lived. Its fame as an international port drew the attention of many foreign powers. The Portuguese attacked and subdued the city in 1511, forcing local rulers to establish a new capital further south in Johor Lama.

It was a long battle for the Malay Peninsula. Three main parties – the Portuguese, the Sultanate of Johor and the Sultanate of Acheh – fought for nearly a century. In 1641, the Dutch East India Company (VOC) formed an alliance with the Sultanate of Johor, successfully driving the other parties out of the country.

The Dutch had a hands-off approach with matters on the Peninsula, interfering only to divert trade to its colonies in Java. The local leaders enjoyed a brief hegemony before the British took notice of the Malay Peninsula’s economic potential, particularly in the production of tin.

The Anglo-Dutch Treaty sealed the deal, and the British soon had full control over the Malay Peninsula and Borneo (now known collectively as Malaya). The impact the British had on Malaya was double-edged: it was exploiting the country of its natural resources, while at the same time, it was equipping the country with the necessary infrastructure and technology to process said resources – things that would have taken Malaya years to develop themselves.

Malaya’s most obvious attractions were its tin and gold mines, but the British also experimented with tropical plantation crops. Rubber and palm oil – now Malaysia’s biggest exports – were chief among them. All of this required a large, disciplined workforce, so the British imported Indian labourers to work in the plantations. The ubiquity of economic opportunities also attracted an influx of Chinese immigrants. This marked the beginning of Malaysia’s multi-racial ethnography.

The British were so focused on economic expansion that they were caught completely unawares when the Japanese invaded Malaya in 1942. Provoked by their ongoing war with China, Japan committed genocide against the Malayan Chinese, while simultaneously promoting Malay nationalism. Malaya suffered under oppressive Japanese rule for 5 years.

At the end of the war, the British wanted to return to Malaya, but were rebuffed by local leaders – most prominent of which being Tunku Abdul Rahman – who wanted independence. The Federation of Malaya was formed under British protection in 1948, independence was declared in 1957, and Malaysia was officially federated as a nation in 1963.

In spite of all its political conflicts, Malaysia continues to be able to boast of an exceptionally stable economy. It has since transitioned from its primarily mining and agriculture-based economy to a more multi-sector economy. The industrial sector in particular has contributed immensely to Malaysia’s growth; the country is now one of the world’s leading exporters of semiconductor components, amongst other ICT products.

In an effort to reduce Malaysia’s dependence on export goods, the government has diversified the economy by pushing service-related fields. Tourism, Islamic banking and knowledge-based services are all expanding. Between 2013 and 2014, Malaysia was listed as one of the best places to retire in the world.

There is a vested interest in the field of technology, with Malaysia’s IT spending slated to grow by 7.4% to RM68B (USD $22B) in 2014.

Economic inequalities exist between different ethnic groups. The Chinese make up about one-third of the population, but account for 70% of the country's market capitalization. In spite of this, the three races – Chinese, Malay and Indian – get along in remarkable harmony. The people are genuinely congenial and hospitable. English is the unofficial first language, and the sense of community is strong.

The former Prime Minister of Malaysia, Mahathir bin Mohamad outlined his ideal, Vision 2020 as a common goal for Malaysians to strive towards. He envisions that Malaysia will become a self-sufficient industrialized nation by 2020.

He is not the only one of that opinion. Viktor Shvets, the managing director of Credit Suisse, notably said: "Malaysia has all the right ingredients to become a developed nation.”