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Economy of Malaysia

Since it became independent in 1957; Malaysia's economic record has been one of Asia's best. Real gross domestic product (GDP) grew by an average of 6.5% per year from 1957 to 2005. Performance peaked in the early 1980s through the mid-1990s, as the economy experienced sustained rapid growth averaging almost 8% annually. High levels of foreign and domestic private investment played a significant role as the economy diversified and modernized. Once heavily dependent on primary products such as rubber and tin, Malaysia today is a middle-income country with a multi-sector economy based on services and manufacturing. Malaysia is one of the world's largest exporters of semiconductor devices, electrical goods, solar panels, and information and communication technology (ICT) products. Malaysia struggled economically during the 1997-1998 Asian financial crisis and applied several valuable lessons to its economic management strategies that contributed to the economy’s resilience to the 2008-2009 global financial crisis. GDP contracted 1.7% in 2009 compared to 4.6% growth in 2008, but has since rebounded, and is expected to be around 7% in 2010. Malaysian banks are well capitalized, conservatively managed, and had no measurable exposure to the U.S. sub-prime market. The central bank maintains a conservative regulatory environment, having prohibited some of the riskier assets in vogue elsewhere. Malaysia maintains high levels of foreign exchange reserves and has relatively little external debt. The government continues to actively manage the economy with state-owned enterprises heavily involved in the oil and gas, plantation, ship building, steel, telecommunications, utilities, automotive, mining, and other sectors. Since 1971, ethnic preferences have been given to Bumiputras (ethnic Malays and indigenous peoples) by requiring 30% Bumiputra ownership in new businesses. Prime Minister Najib’s New Economic Model reform program includes changes to modify these ethnic preferences and to divest state enterprises while increasing the private sector’s role in stimulating higher levels of investment and boosting GDP growth. The NEM aims to create a business environment more conducive to long-term sustained economic growth, development, and investment, with the goal of Malaysia becoming a high-income, developed nation by 2020. Malaysia has a managed float currency exchange regime. It gives flexibility for the ringgit to adjust to global economic and financial developments and has accorded a level of stability against the currencies of Malaysia’s major trading partners. Economy (2009) Nominal GDP: $191.5 billion. Annual real GDP growth rate: 5.9% (2006); 6.3% (2007); 4.6% (2008); -1.7% (2009); 7.0% (government estimate for 2010). Nominal per capita income (GNI): $6,897. Natural resources: Petroleum, liquefied natural gas (LNG), tin, minerals. Agricultural products: Palm oil, rubber, timber, cocoa, rice, tropical fruit, fish, coconut. Industry: Types --electronics, electrical products, chemicals, food and beverages, metal and machine products, apparel. Trade: Merchandise exports --$180.8 billion: electronic products, machinery, liquid natural gas, petroleum and petroleum products, telecom equipment. Major markets --Singapore 14.0%, China 12.2%, U.S. 11.0%, Japan 9.8%. Merchandise imports --$142.1 billion: electronic products, machinery, machinery parts and apparatus, petroleum and petroleum products. Major suppliers --China 14.0%, Japan 12.5%, U.S. 11.2%, Singapore 11.1%.

Geography of Malaysia

Location: Southeastern Asia, peninsula and northern one-third of the island of Borneo bordering the Java Sea and the South China Sea, south of Vietnam Map references: Southeast Asia Area: total area: 329,750 sq km (127,316 sq. mi.) land area: 328,550 sq km comparative area: slightly larger than New Mexico Land boundaries: total 2,669 km, Brunei 381 km, Indonesia 1,782 km, Thailand 506 km Coastline: 4,675 km (Peninsular Malaysia 2,068 km, East Malaysia 2,607 km) Peninsular Malaysia is separated from East Malaysia on Borneo by 644 km. (400 mi.) of the South China Sea. Maritime claims: continental shelf: 200-m depth or to depth of exploitation; specified boundary in the South China Sea Climate: tropical; annual southwest (April to October) and northeast (October to February) monsoons Terrain: coastal plains rising to hills and jungle-covered mountains Cities: Capital--Kuala Lumpur (1.6 million). Other cities--Penang, Petaling Jaya, Ipoh, Malacca, Johore Bahru, Kuching, Kota Kinabalu. Natural resources: tin, petroleum, timber, copper, iron ore, natural gas, bauxite Environment: current issues: air pollution from industrial and vehicular emissions; water pollution from raw sewage; deforestation natural hazards: flooding

Government of Malaysia

Malaysia is a constitutional monarchy, nominally headed by the Yang di-Pertuan Agong, customarily referred to as the king. The king is elected for 5-year terms from among the nine sultans of the peninsular Malaysian states. The king also is the leader of the Islamic faith in Malaysia. Executive power is vested in the cabinet led by the prime minister; the Malaysian constitution stipulates that the prime minister must be a member of the lower house of parliament who, in the opinion of the Yang di-Pertuan Agong, commands a majority in parliament. The cabinet is chosen from among members of both houses of parliament and is responsible to that body. The bicameral parliament consists of the Senate (Dewan Negara) and the House of Representatives (Dewan Rakyat). All 70 Senate members sit for 3-year terms, which are normally extended for an additional 3 years; 26 are elected by the 13 state assemblies, and 44 are appointed by the king following the prime minister's recommendation. Representatives of the House are elected from single-member districts by universal adult suffrage. The 222 members of the House of Representatives are elected to parliamentary terms lasting up to 5 years. Legislative power is divided between federal and state legislatures. The Malaysian legal system is based on English common law. The Federal Court reviews decisions referred from the Court of Appeal; it has original jurisdiction in constitutional matters and in disputes between states or between the federal government and a state. Peninsular Malaysia and the East Malaysian states of Sabah and Sarawak each have a high court. The federal government has authority over external affairs, defense, internal security, justice (except civil law cases among Malays or other Muslims and other indigenous peoples, adjudicated under Islamic and traditional law), federal citizenship, finance, commerce, industry, communications, transportation, and other matters. POLITICAL CONDITIONS Malaysia's predominant political party, the United Malays National Organization (UMNO), has held power in coalition with other parties continuously since independence in 1957. The UMNO coalition's share of the vote declined in national elections held in May 1969, after which riots broke out in Kuala Lumpur and elsewhere, mainly between Malays and ethnic Chinese. Several hundred people were killed or injured. The government declared a state of emergency and suspended all parliamentary activities. In the years that followed, Malaysia undertook several initiatives that became integral parts of its socioeconomic model. The New Economic Policy (NEP), launched in 1971, contained a series of affirmative action policies designed to benefit Malays and certain indigenous groups (together known as Bumiputras or "sons of the soil"). The constitution was amended to limit dissent against the specially-protected and sensitive portions of the constitution pertaining to the social contract. The government identified intercommunal harmony as one of its official goals. The previous alliance of communally based parties was replaced with a broader coalition--the Barisan Nasional (BN) or National Front. The BN won large majorities in the 1974 federal and state elections. Mahathir Mohamad was Prime Minister between 1981 and 2003, leading UMNO and BN to successive election victories. Mahathir emphasized economic development during his tenure, in particular the export sector, as well as large-scale infrastructure projects. Mahathir attributed the success of the Asian tiger economies to the "Asian values" of its people, which he believed were superior to those of the West. Mahathir sharply criticized the International Monetary Fund (IMF), international financiers, and Western governments during the economic and financial crisis that affected Asia in 1997-1998, and denied that the sharp downturn was due to economic or corporate mismanagement, corruption, or "crony capitalism." The end of Mahathir's tenure was marred by a falling out with his deputy and presumed successor, Anwar Ibrahim. In September 1998, Mahathir dismissed Anwar and accused him of immoral and corrupt conduct. Although Anwar was convicted on both charges in 1999 and 2000, the trials were viewed as seriously flawed. Malaysia's Federal Court eventually freed Anwar after overturning his immoral conduct conviction in September 2004. Mahathir stepped down as Prime Minister in October 2003 after 22 years in power, and his successor, Deputy Prime Minister Abdullah Ahmad Badawi, was sworn into office. Abdullah called elections and won an overwhelming victory in March 2004. Abdullah, an Islamic scholar, promoted the concept of "Islam Hadhari" or "civilizational Islam," emphasizing the importance of education, social harmony, and economic progress. His relationship with Mahathir eventually soured, with Mahathir expressing regret at supporting Abdullah to be his successor. Malaysia held national elections in March 2008. UMNO and its coalition allies in the BN won a simple majority of the seats in the national parliament, but for the first time in history failed to gain the two-thirds majority necessary to amend the constitution. A loose coalition of opposition parties, called the Pakatan Rakyat or People's Alliance, led by Anwar Ibrahim, won 82 of 222 seats in parliament and took control of the state-level assemblies in five of Malaysia's 13 states. However, in February 2009 the opposition Alliance lost control of one of the states through defections of its assembly members--several members of the opposition and two from the BN became independent, bringing the opposition strength down to 79 members and the BN to 138 members. Prime Minister Abdullah, taking responsibility for his party’s poor showing in the March 2008 general election, stepped down as Prime Minister in a carefully timed transfer of power to his deputy, Mohd Najib bin Abdul Razak, in April 2009. The Najib administration's cornerstone policy is the "1Malaysia" initiative, which emphasizes national unity amongst Malaysia's ethnically diverse population. Other initiatives include the Government Transformation Program to improve government services delivery systems; the Economic Transformation Program to provide a framework to emphasize private investment and de-emphasize public investment; and the New Economic Model (NEM), to reform the 1970s (and still current) economic policy known as the New Economic Policy. Principal Government Officials Prime Minister--Dato' Sri Mohd Najib bin Tun Haji Razak Foreign Minister--Datuk Anifah Haji Aman Ambassador to the U.S.--Dato' Sri Jamaludin Jarjis Ambassador to the UN--Datuk Hamidon bin Ali Malaysia maintains an embassy in the U.S. at 2401 Massachusetts Ave. NW, Washington, DC 20008, tel. (202) 328-2700; a Consulate General in the Los Angeles World Trade Center, 350 South Figueroa Street, Los Angeles, CA, tel. (213) 621-2991; and a Consulate General at 140 E. 45th Street, New York, NY 10017, tel. (212) 490-2722.

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History of Malaysia

The early Buddhist Malay kingdom of Srivijaya, based at what is now Palembang, Sumatra, dominated much of the Malay peninsula from the 9th to the 13th centuries AD. The powerful Hindu kingdom of Majapahit, based on Java, gained control of the Malay peninsula in the 14th century. Conversion of the Malays to Islam, beginning in the early 14th century, accelerated with the rise of the state of Malacca under the rule of a Muslim prince in the 15th century. Malacca was a major regional commercial center, where Chinese, Arab, Malay, and Indian merchants traded precious goods. Drawn by this rich trade, a Portuguese fleet conquered Malacca in 1511, marking the beginning of European expansion in Southeast Asia. The Dutch ousted the Portuguese from Malacca in 1641. The British obtained the island of Penang in 1786 and temporarily controlled Malacca with Dutch acquiescence from 1795 to 1818 to prevent it from falling to the French during the Napoleonic war. The British gained lasting possession of Malacca from the Dutch in 1824, through the Anglo-Dutch treaty, in exchange for territory on the island of Sumatra in what is today Indonesia. In 1826, the British settlements of Malacca, Penang, and Singapore were combined to form the Colony of the Straits Settlements. From these strongholds, in the 19th and early 20th centuries the British established protectorates over the Malay sultanates on the peninsula. During their rule the British developed large-scale rubber and tin production and established a system of public administration. British control was interrupted by World War II and the Japanese occupation from 1941 to 1945. Popular sentiment for independence swelled during and after the war. The territories of peninsular Malaysia joined together to form the Federation of Malaya in 1948 and eventually negotiated independence from the British in 1957. Tunku Abdul Rahman became the first prime minister. In 1963 the British colonies of Singapore, Sarawak, and Sabah joined the Federation, which was renamed Malaysia. Singapore's membership was short-lived, however; it left in 1965 and became an independent republic. Neighboring Indonesia objected to the formation of Malaysia and began a program of economic, political, diplomatic, and military "confrontation" against the new country in 1963, which ended only after the fall of Indonesia's President Sukarno in 1966. Internally, local communists, nearly all Chinese, carried out a long, bitter insurgency both before and after independence, prompting the imposition of a state of emergency from 1948 to 1960. Small bands of guerrillas remained in bases along the rugged border with southern Thailand, occasionally entering northern Malaysia. These guerrillas finally signed a peace accord with the Malaysian Government in December 1989. A separate, small-scale communist insurgency that began in the mid-1960s in Sarawak also ended with the signing of a peace accord in October 1990.

People of Malaysia

Malaysia's multi-racial society contains many ethnic groups. Malays comprise a majority of just over 50%. By constitutional definition, all Malays are Muslim. About a quarter of the population is ethnic Chinese, a group which historically played an important role in trade and business. Malaysians of Indian descent comprise about 7% of the population and include Hindus, Muslims, Buddhists, and Christians. Non-Malay indigenous groups combine to make up approximately 11% of the population. Population density is highest in peninsular Malaysia, home to some 20 million of the country's 28 million inhabitants. The rest live on the Malaysian portion of the island of Borneo in the large but less densely-populated states of Sabah and Sarawak. More than half of Sarawak's residents and about two-thirds of Sabah's are from indigenous groups. Nationality: Noun and adjective --Malaysian(s). Population (2010): 28.3 million. Annual population growth rate: 1.7%. Ethnic groups: Malay 53.3%, Chinese 26.0%, indigenous 11.8%, Indian 7.7%, others 1.2%. Religions: Islam (60.4%), Buddhism (19.2%), Christianity (9.1%), Hinduism (6.3%), other/none (5.0%). Languages: Bahasa Melayu (official), Chinese (various dialects), English, Tamil, indigenous. Education: Years compulsory --6. Attendance --90.1% (primary), 60.0% (secondary). Literacy --93.5%. Health: Infant mortality rate (2007)--6.7/1,000. Life expectancy (2007)--female 76.4 yrs., male 71.9 yrs. Work force (10.89 million, 2007): Services --57%; industry --28% ( manufacturing --19%, mining and construction --9%); agriculture --15%.
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