Malaysia Industry Sectors

By: EconomyWatch Content   Date: 16 March 2010

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Malaysia is a newly industrialised country that experienced an economic boom and underwent rapid development during the late 20th century. Prior to this rapid of rapid industrialisation, Malaysia was the world’s largest producer of tin, rubber and palm oil.

When the tin market collapsed during the early 1980s, the Malaysian government was forced to diversify and modernise the economy. Since then, the government has played an active role in industrialisation and economic development. The Malaysian government was responsible for encouraging the relocation of labour intensive industries to neighbouring countries such as Thailand and Indonesia. At the same time, the government also promoted higher value industries such as electronics, information technology, and multimedia.

Today, Malaysia has moved into the third stage of economic development, with growing emphasis on services. The Industrial Master Plan (IMP3) was created to develop the country into a major trading nation by focusing on services and human capital. IMP3 is expected to cover the period from 2006 to 2020.

Malaysia’s Industry Sectors

Services in Malaysia have been growing in importance for the economy in the past few years. In 2010, Services was responsible for 49.3 percent of the GDP. The concerted development of the service industry is part of the national development strategy to venture into new growth areas and broaden the economic base for exports. It is also expected to provide the basis for sustained growth in the economy in order to achieve the vision of becoming a developed nation by 2020.

According to the 10th Malaysia Plan (RMK 10), the goal for the service industry is to achieve 61 percent of GDP share by 2015 – with an annual growth of 7.2 percent. Under the IMP3, non-government services are targeted to grow at an average annual rate of 7.5 percent. Construction services are also expected to increase annually by 5.7 percent. The Malaysia government is also expected to invest nearly RM687.7 billion or US$228.384 billion dollars over the next fifteen years into services alone.

Presently, Malaysia has a thriving finance industry, particularly in Islamic banking. To date, it is the largest Islamic banking service provider in Asia Pacific. Malaysia is also competing with Bahrain to be the world leader in Islamic banking. In April 2009, the Malaysian government introduced new licences for investment banking, Islamic banking, takaful(Islamic insurance) and insurance business. The threshold for foreign equity ownership was also raised from 49 percent to 70 percent, thus allowing foreign banks to open new branches and micro-credit facilities in the country.

Industry is an equally important element of Malaysia’s economy. In 2010, Industry was responsible for 41.6 percent of Malaysia’s GDP. Malaysia had the 37th highest industrial production growth rate in the world at 7.5 percent. In Peninsular Malaysia, some of the key industries include Rubber, oil palm processing and manufacturing, light manufacturing, pharmaceuticals, medical technology, electronics, tin mining and smelting, logging, and timber processing. The Eastern Malaysian states of Sabah and Sarawak are keenly focused on logging, petroleum producing and refining and agriculture processing.

Malaysia also has a vibrant oil and gas industry. In 2010, Malaysia was the 28th largest oil producer and the 17th largest natural gas producer in the world. Currently, Malaysia has 2.9 billion barrels worth of proven oil reserves and 2.35 trillion cu m of proven natural gas reserves. This makes them the 32nd and 17th ranked country in the world respectively.

Oil and natural gas reserves in Malaysia are managed by Petronas – a Fortune 500 company wholly owned by the Malaysian government. In order to boost development of its oil fields, Petronas maintains sharing contracts with companies such as Exxon-Mobil and Royal Dutch Shell for oil exploration. Malaysia has also partnered with Thailand to share the Malaysia-Thailand Development Area, which has 4.5 trillion cubic feet of proven natural gas reserves.

Malaysia’s agriculture industry was responsible for 9.1 percent of its GDP in 2010. Rubber and palm oil are Malaysia’s key agricultural products. Malaysia is the second largest producer of palm oil in the world, producing more than 17.7 million tonnes of palm oil in 2008. The majority of Malaysia’s palm oil produce are exported to China, the EU, Pakistan, US and India.

Malaysia is also responsible for one third of the world's rubber exports. Rubber production has gradually decreased over the years as producers are gradually switching over to palm oil. In 2009, production plummeted by nearly six percent. However, Malaysia still retains a good reputation for it's high quality and well-priced rubber products. Rubber products made in Malaysia have been exported to countries such as the US and Japan to become components for automobiles, belts, and hoses.

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