Malaysia comprises the three territories of Peninsular Malaysia, Sarawak, and Sabah, stretching over 2000 km (1240 miles) from the edge of the Indian Ocean to the northeastern end of the island of Borneo. A central mountain chain divides Peninsular Malaysia, separating fertile western plains from an eastern coastal belt. Sarawak and Sabah have swampy coastal plains rising to mountains on the border with Indonesia. Putrajaya, just south of Kuala Lumpur, is a high-tech new development intended as the future capital. The United Malays National Organization has dominated politics since independence.

The key distinction in Malaysian society is between the indigenous Malays, termed the Bumiputras ("sons of the soil"), and the Chinese. The Malays form the largest group, accounting for just under half of the population. However, the Chinese have traditionally controlled most business activity. The New Economic Policy (NEP), introduced in the 1970s, was designed to address this imbalance by offering positive opportunities to the Malays through the education system and by making jobs available to them in both the state and private sectors. There are estimated to be more than one million Indonesian and Filipino immigrants in Malaysia, attracted by its need for labor and a dearth of employment in their own countries. In addition, nearly 255,000 Vietnamese refugees were offered temporary refuge in Malaysia between 1975 and 1997; most have now been resettled in third countries, but around 6000 remain. Gender discrimination was only outlawed in 2001. Muslim women are encouraged to take the veil.

Strengths

Electronics, computer hardware, and electrical appliances. Tourism. Heavy industries such as steel. Palm oil. Latex, rubber, chemical products. Success of "national car," the Proton. Return to growth from 2000.

Weaknesses

High level of debt. Shortage of skilled labor. High interest rates deter private investors. High government budget spending. Competition from NICs.

Profile

From 1987, for almost a decade, Malaysia expanded faster than any other southeast Asian nation, at an average yearly rate of 8%, with much of the growth state-directed. However, plans for full industrialization, named "Vision 2020," were revised after the 1997 financial crisis. The construction of Putrajaya provided a renewed stimulus to growth at the end of the 1990s. A project for a Multimedia Super Corridor (MSC), located south of Kuala Lumpur and aimed at attracting world-class companies, is expected to be completed by 2003.

Supreme power rests in theory with the monarch, acting on the advice of parliament. In practice the prime minister wields executive authority. Opposition parties, while legal, are under tight control.

Profile

Malaysia has been dominated by UMNO, part of the ruling BN coalition, since Malay independence in 1957. It controls a huge network of patronage.

In 2002, Prime Minister Mahathir Mohamed shocked the country by tearfully announcing that he would retire in 2003, after 22 years at the helm. He had appeared unassailable, although his authority had been shaken by the economic crisis of 1997–1998 and dissent within the ruling coalition. In 1998, Anwar Ibrahim, deputy prime minister and once Mahathir's chosen successor, was dismissed after challenging the government's economic policy and calling for political reform. He was convicted in 1999 on corruption charges; his prison sentence was lengthened to 15 years in 2000 after his conviction for sodomy. The initial verdict sparked riots and gained support for the new opposition PKN headed by Anwar's wife, Wan Azizah. PKN activists have been hounded by the government. In the 1999 elections, the BN coalition retained its large majority but Mahathir's own UMNO lost ground. .

Main Political Issue

Malay dominance of government

Mahathir's administration has declared that it no longer wishes to discriminate positively in favor of Malays, but the Chinese community accuses the government of corruption and uncompetitive practices, declaring that Malays are still favored for the placing of government contracts. It is further alienated by the more restrictive Islamic society.

Mahathir sees himself as one of the developing world's leading voices. He maintains a strongly anti-US line in his public speeches and has chastised the West for singling out Islamic countries in its campaign against international terrorism. Mahathir's pro-Malay policies have caused tensions with Singapore, exacerbated by the latter's dependence on Malaysia for water.

The main defense concerns are Singapore, with its large and highly mechanized army, and more recently, though to a lesser extent, Indonesia. Also important to Malaysia is the growing Chinese influence in the South China Sea.

The military is predominantly composed of Malays. Malaysia is an important market for Western arms suppliers. However, in 1994 Malaysia signed an agreement to buy Russian MiG-29 fighter aircraft. Patrolling east and west Malaysia is a key function of the navy, which is large by regional standards.

Palm oil, of which Malaysia is the world's largest producer, is now the major export product, whereas rubber production is now overshadowed by that of neighboring Thailand. Malaysia is a significant exporter of petroleum and natural gas. Reserves lie offshore from Sabah and Sarawak. The petroleum is high grade, so that most is exported, while crude imports are refined. Malaysia accounts for nearly half of world timber exports, most of which come from Sarawak.

Logging is the overwhelming concern. World Bank estimates suggest that trees are being cut down at four times the sustainable rate. Indigenous forest communities are being destroyed, and some species of wood are near extinction. The government pledged in 1997 to plant 20 million trees across the country by 2000.

Smog caused by burning forests and scrub in Indonesia can create a pollution and health alert across the whole region.

Traditional lifestyles are threatened by grandiose modernization schemes, and the Bakun dam project, shelved in 1997 due to a lack of investment confidence, was restarted in 2000.

Transportation in Peninsular Malaysia is well developed. A major north–south highway connects the urban centers of the west coast. Roads in Sabah are also good, with an efficient bus network linking the towns. Travel in Sarawak, on the other hand, is hindered by poorly maintained roads and a lack of public transportation. East Malaysia is most effectively traversed by air.

There is growing disparity between the modern facilities available in cities and the traditional medicine practiced in rural and outlying areas. Traditional practices such as acupuncture and herbal medicine continue to be used by the Chinese community.

The government is keen to encourage racial integration in multiethnic schools, but teaching will remain in separate languages.

Malays are favored above other communities, especially at tertiary level, where a quota system gives them preference for places. The Chinese community has its own schools, but plans for a private Chinese university were vetoed by the government. Many students, particularly the Chinese, complete their studies in the UK or the USA. From 2002, university students and staff have had to swear allegiance to the state.

The death sentence for possession of narcotics is mandatory. The Internal Security Act is used to detain opponents without trial. The government has proposed introducing corporal punishment. Some Islamic-dominated states have attempted to implement the harsh punishments of the Islamic penal code, including stoning and amputation.

The Chinese remain the wealthiest community in Malaysia. However, following riots in 1970, the UMNO government embarked on a deliberate program of achieving 30% Malay ownership of the corporate sector. The "extremely rich" were barred from government service in 2001 in an effort to stamp out "money politics."

Malaysia is southeast Asia's major tourist destination. Most tourists come for the excellent tropical beaches on the east coast, to hike in the Cameron Highlands, or to trek in the world's oldest rainforests in Borneo. There has recently been an increase in the international business convention trade, and hotel capacity has been growing at 10% a year.

By 1990, when the government ran the Visit Malaysia Year campaign, tourism had become Malaysia's third-biggest foreign exchange earner. Two other such campaigns were launched in 1994 and 1998. However, the resurgence since 1999 of pro-Islamic parties, which favor stricter dress codes for women and a ban on alcohol, has deterred some Western tourists. In 2000 Malaysia backed an integrated tourism package with Thailand, Indonesia, and Singapore to enable tourists to visit the four countries under a common program.

The former British protectorate of Malaya gained independence in 1957. The federation of Malaysia, incorporating Singapore, Sarawak, and Sabah, was founded in 1963.

• 1965 Singapore leaves federation.
• 1970 Malay–Chinese ethnic tension forces resignation of Prime Minister Tunku Abdul Rahman. New prime minister, Tun Abdul Razak, creates the BN coalition.
• 1976-1978 Guerrilla attacks by banned Communist Party of Malaya (CPM), based in southern Thailand.
• 1976 Tun Abdul Razak dies.
• 1977 Unrest in Kelantan following expulsion of its chief minister from Pan-Malaysian Islamic Party (PAS). National emergency declared. PAS expelled from BN.
• 1978 Elections consolidate BN power. PAS marginalized. Government rejects plans for Chinese university.
• 1978-1989 Unrestricted asylum given to Vietnamese refugees.
• 1981 Mahathir Mohamed becomes prime minister.
• 1982 General election returns BN with increased majority.
• 1985 BN defeated by PBS in Sabah state elections.
• 1986 PBS joins BN coalition. Dispute between Mahathir and his deputy, Dakuk Musa, triggers general election, won by BN.
• 1987 Detention without trial of 106 politicians from all parties suspected of Chinese sympathies. Media censored.
• 1989 Disaffected UMNO members join PAS. Screening of Vietnamese refugees introduced. CPM signs peace agreement with Malaysian and Thai governments.
• 1990 General election. BN returned to power with reduced majority.
• 1993 Sultans lose powers, including legal immunity.
• 1995 BN wins landslide victory in the country's ninth general election.
• 1997 Major financial crisis ends decade of spectacular economic growth.
• 1998–1999 Deputy Prime Minister Anwar Ibrahim dismissed from office. Launches Reformasi (reform) movement. Found guilty of corruption, later convicted of sodomy and six-year sentence extended to 15 years; his wife, Wan Azizah, forms National Justice Party.
• 2002 Mahathir announces that he will step down in 2003.