Since the 1970s, Malaysia has used long-term economic planning and foreign investment, primarily Japanese, to diversify its economy away from its colonial-era dependence on exporting tin and rubber, into value-added products. This has resulted in rapid economic growth. Today, electronics constitute over half of exports, with most imports being intermediate electronic goods which are finished and re-exported. This earns Malaysia high scores for openness. Malaysia is also a major exporter of palm oil, natural gas and oil. Services and tourism have also grown considerably, but Malaysia remains reliant on trade and investment, and scores highly in the Index on this category.
State influence in the economy is slowly decreasing. Capital controls and currency pegs introduced in defiance of IMF advice after the 1997 Asian financial crisis have been removed or relaxed. Oil subsidies are being lowered and government-linked corporations like Petronas are being partially sold off to improve efficiency and government finances. Overall, government effectiveness is rated well by the World Bank’s indicators, and Malaysia’s international competitiveness remains strong.
Malaysia benefits from a good, free public education system. Mathematics and science are taught in English to promote international competitiveness, although this policy is threatened by its unpopularity. Tertiary education and technology diffusion are less impressive -- broadband penetration is currently only 4.1% -- and together with the low number of researchers in the workforce, this suggests Malaysia may have weaknesses in highly-skilled human capital. This may hinder government plans for a knowledge economy and efforts to move up the value chain.
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Rapid economic growth has dramatically raised Malaysian incomes, but they still remain at low levels by global standards, and there is a significant minority who live in poverty. Living standards and political party allegiance are strongly correlated with race. Following race riots in 1969, positive discrimination aimed to level the wealth gap between poorer, ethnic Malays and urban, ethnic-Chinese; this policy is slowly being relaxed after producing mixed results. The over one million illegal economic migrants and primarily Filipino and Burmese refugees constitute a ‘miserable minority’ living in bad conditions.
Environmental practices that integrate sustainable logging and farming are helping to curb soil erosion and protect the 59% of Malaysia that is still forested, which help to explain high levels of satisfaction with efforts to protect the environment (as reported to the Gallup World Poll), although illegal logging remains a problem. And even though Malaysia spends less than 4% of GDP on healthcare, including private provisions, satisfaction with personal health is high at 87%g.
Although religious tolerance is enshrined in the constitution, Islam is the state religion. All ethnic Malays are considered Muslim, may not convert, and are subject to Sharia courts in religious matters, including marriage and inheritance. Nevertheless, 84%g of Malaysians report satisfaction with their freedom to choose the course of their lives. Levels of charitable giving are also high, perhaps inspired by Islamic doctrine.
As is common in East Asia and other high-income countries, long working hours (45.4 hours a week) and a lack of leisure time negatively affect Comparative Liveability. However, there is a large range of positive indicators that mitigate many of Malaysia’s problems, including good family life and the warm climate.
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