PROJECT ON INTERNATIONAL BUSINESS FOR MALAYSIA

SUBMITTED BY AFRAN HUDA ROLL NUMBER-2010197 MMS II (III SEMESTER -MARKETING) SUBJECT-INTERNATIONAL BUSINESS

BRIEF HISTORY
Malaysia is a federal constitutional monarchy in Southeast Asia. It consists of thirteen states and three federal territories and has a total landmass of 329,847 square kilometres (127,350 sq mi) separated by the South China Sea into two regions, Peninsular Malaysia and Malaysian Borneo. Land borders are shared with Thailand, Indonesia, and Brunei, and maritime borders exist with Singapore, Vietnam, and the Philippines. The capital city is Kuala Lumpur, while Putrajaya is the seat of the federal government. In 2010 the population exceeded 27.5 million. Malaysia has its origins in the Malay Kingdoms present in the area which, from the 18th century, became subject to the British Empire. The first British territories were known as the Straits Settlements, with the other states forming protectorates. The states on Peninsular Malaysia, then known as Malaya, was first unified as the Malayan Union in 1946. Malaya was restructured as the Federation of Malaya in 1948, and achieved independence on 31 August 1957. Malaya united with Sabah, Sarawak, and Singapore on 16 September 1963, with 'si' being added to give the new country the name Malaysia. However, less than two years later in 1965, Singapore was expelled from the federation. Since independence, Malaysia has had one of the best economic records in Asia, with GDP growing an average 6.5% for almost 50 years. The economy has traditionally been fuelled by its natural resources, but is expanding in the sectors of science, tourism, commerce and medical tourism. The head of state is the Yang di-Pertuan Agong, an elected monarch chosen from the hereditary rulers of the nine Malay states every five years. The head of government is the Prime Minister. The government system is closely modelled on the Westminster parliamentary system and the legal system is based on English Common Law. The country is multi-ethnic and multi-cultural, factors that influence its culture and play a large role in politics. Islam is the state religion, although freedom of religion is protected by a secular constitution. Malaysia contains the southernmost point of continental Eurasia, Tanjung Piai, and is located near the equator and has a tropical climate. It has abiodiverse range of flora and fauna, and is considered a mega diverse country. It is a founding member of the Association of Southeast Asian Nations and the Organisation of Islamic Cooperation, and a member of Asia-Pacific Economic Cooperation, the Commonwealth of Nations, and the Non-Aligned Movement.

CAPITAL
KUALA LUMPUR

CURRENT PRIME MINISTER OF MALAYSIA

NAJIB TUN RAZAK

CURRENCY
Ringgit (RM) (MYR)

POLITICAL SYSTEM
Malaysia is a federal constitutional elective monarchy. The system of government is closely modelled on that of the Westminster parliamentary system, a legacy of British colonial rule. The head of state is the Yang di-Pertuan Agong, commonly referred to as the king. The Yang di-Pertuan Agong is elected to a five-year term by and from among the nine hereditary rulers of the Malay states; the other four states, which have titular Governors, do not participate in the selection. By informal agreement the position is systematically rotated among the nine,and has been held by Mizan Zainal Abidin of Terengganu since 2007. The Yang di-Pertuan Agong's role has been mostly ceremonial since changes to the constitution in 1994. Legislative power is divided between federal and state legislatures. The bicameral federal parliament consists of the lower house, the House of Representativesand the upper house, the Senate.The 222-member House of Representatives is elected for a maximum term of five years from single-member constituencies, which are determined based on population. All 70 senators sit for three-year terms; 26 are elected by the 13 state assemblies, and the remaining 44 are appointed by the Yang di-Pertuan Agong upon the Prime Minister's recommendation.The parliament follows a multi-party system and the government is elected through a first-past-the-post system. Since independence Malaysia has been governed by a multi-party coalition known as the Barisan Nasional. Each state has a unicameral State Legislative Assembly whose members are elected from single-member constituencies. State governments are led by Chief Ministers,who are state assembly members from the majority party in the assembly. In each of the states with a hereditary ruler, the Chief Minister is required to be a Malay, appointed by the ruler upon the

recommendation of the Prime Minister.Parliamentary elections are held at least once every five years, the most recent of which took place in March 2008. Registered voters of age 21 and above may vote for the members of the House of Representatives and, in most of the states, for the state legislative chamber. Voting is not mandatory.Except for elections in Sarawak, all state elections are held concurrently with the federal election. Executive power is vested in the Cabinet, led by the Prime Minister. The prime minister must be a member of the house of representatives, in the opinion of the Yang di-Pertuan Agong, commands a majority in parliament. The cabinet is chosen from members of both houses of Parliament. The Prime Minister is both the head of cabinet and the head of government. The incumbent, Najib Razak, appointed in 2009, and is the sixth prime minister since independence. Malaysia's legal system is based on English Common Law. Although the judiciary is theoretically independent, supporters of the government hold many judicial positions. The highest court in the judicial system is the Federal Court, followed by the Court of Appeal and two high courts, one for Peninsular Malaysia and one for East Malaysia. Malaysia also has a special court to hear cases brought by or against Royalty. Separate from the civil courts are the Syariah Courts, which decide on cases which involve Malaysian Muslims and run parallel to the normal court system. The Internal Security Act allows detention without trial, and the death penalty is in use for crimes such as drug trafficking. Race is a significant force in politics, and many of the political parties are ethnically based. Actions such as the New Economic Policy and the National Development Policy which superseded it, were implemented to advance the standing of the bumiputra, who are considered the original inhabitants of Malaysia, over non-bumiputra such as Malaysian Chinese and Malaysian Indians. These policies provide preferential treatment to Malays over non-Malays in employment, education, scholarships, business, and access to cheaper housing and assisted savings. However, it has generated greater interethnic resentment. Debate exists over whether the country should be secular or Islamic. Some state governments controlled by the Pan-Malaysian Islamic Party, including that of Terengganu, have passed Islamic laws, but these have not gone into effect due to opposition from the federal government.

CURRENCY FLUCTUATIONS Date 12 June 1967 Changes to the exchange rate regime The unit of Malaysian Dollar was created. The old Sterling-linked Malayan/Straits Dollar was replaced by separate dollars of Malaysia, Singapore and Brunei. All these 3 currencies can be freely interchangeable. (WCY 1984) 15 August 1971 20 December 1971 25 June 1972 The Malaysian Dollar linked to the Pound Sterling at a fixed rate M$7.3469 per Sterling Pound. (WCY 1984) A new Official Rate was established at a rate M$2.81955 per 2.820 U.S. dollar which based on the Malaysian Dollar's unchanged gold content. (WCY 1984) With the floating of Sterling and the dismantling of the Sterling Area on 23 June 1972, Malaysia broke the Malaysian Dollar's ties to the British unit and linked the currency to the U.S. Dollar with a fluctuation range for the Effective Rate. The range is between M$2.7561 and M$2.8830 per U.S. dollar. (WCY 1984) Following the U.S. Dollar devaluation in February 1973, the 2.538 Official Rate of Malaysian Dollar was realigned to M$2.5376 per U.S. dollar, based on the currency's unchanged gold content. The new fluctuation range for the Effective Range was defined, M$2.4805-M$2.5947 per U.S. dollar. (WCY 1984) 8 May 1973 Malaysia abrogated the accord with Singapore providing for the free exchangeability at par of the Malaysian and Singapore Dollars, which had been functioning since 1967. (WCY 1984) The unrestricted exchange at par of the Brunei Dollar and the Malaysian Dollar was suspended and the currency interchangeability agreement with Brunei was rescinded. (WCY 1984) The authorities ceased to maintain the exchange rate within announced margins. (IMF 1976) Malaysia placed the Effective Rate for her dollar on a controlled, floating basis. (WCY 1984, p.495) The Central Bank of Malaysia intervened in order to maintain relative stability in the value of Ringgit in relation to the basket of currencies. (IMF 1979). If the exchange rate of Ringgit was fluctuated, the Central Malaysian Ringgit per U.S. Dollar

13 February 1973

22 May 1973

21 June 1973

Bank would intervene and maintain the rate close to the Official Rate, M$2.5376 per U.S. dollar.

21 August 1975

The Malaysian Currency (Ringgit) Act 1975 amended the Central Bank of Malaysia Ordinance 1958. (IMF 1976, 305) The Malaysian Dollar (M$) was officially renamed the Ringgit (RM). (WCY 1984)

27 The controlled, floating Effective Rate for the Ringgit was September replaced, the external value of the Ringgit was determined 1975 on the basis of its relationship to a weighted basket of currencies of Malaysia's major trading partners. (IMF 1976,The minimum reserve requirement was 80.59% in gold and foreign exchange for Malaysian banknotes. (WCY 1990/93) 1978 Rates for all other currencies were determined on the basis of the Ringgit-U.S. Dollar rate and the U.S. Dollar rates for those currencies in markets abroad. (IMF 1979) The commercial banks were free to determine and quote exchange rates for all currencies, other than Israeli and South African currencies, to customers. The commercial banks were permitted to deal forward in all currencies other than Israeli and South African currencies, and were free to determine the rates. (IMF 1987) 31 March 1989 1992 Following the IMF classification, Malaysia was considered to be pegged to composite basket of currency. The commercial banks were free to determine and quote exchange rates for all currencies, other than those of Israeli, South African and the Federal Republic of Yugoslavia (Serbia and Montenegro), to customers. The commercial banks were permitted to deal forward in all currencies other than those of Israeli, South African and the Federal Republic of Yugoslavia (Serbia and Montenegro), and were free to quote the rates. (IMF 1993) 28 All exchange control restrictions governing transactions with September South Africa were lifted. (IMF 1994) 1993 1995 Foreign exchange contracts were effect freely for commercial transactions; prior approval was required for financial transactions. (IMF 1996)

1986

4 August 1997

The Central Bank of Malaysia imposed controls requiring banks to limit outstanding noncommercial-related Ringgit offered side swap transactions to $2 million a foreign customer. (IMF 1998)

2 The exchange rate was no longer determined by demand and September supply. The Central Bank announced that the exchange rate 1998 of the Ringgit would be pegged against the U.S. Dollar at RM3.80 = $1. (IMF 1999)

CURRENCY FLUCTUATIONS
The Cross-currency valuation (US dollar) in Malaysia was reported at 895541404.70 in 2008, according to the World Bank. Cross-currency valuation shows the change in debt stock due to cross-currency valuation effects. Cross-currency valuation effects arise from movements in the value of the U.S. dollar against other world currencies, as well as debt forgiveness or reduction, and affect the value of developing country debt. Countries contract debt in various currencies. The debt data that countries report to the DRS is expressed in the currencies in which the original debt was contracted or in currencies in which it is repayable. For purposes of standardization and aggregation, the DRS converts these amounts into dollar values. The exchange rates used are generally the par values or central rates specified by the IMF or market rates when necessary. Exchange rates in effect at the end of any given year are used to convert the stock of debt outstanding for that year in various currencies into the nominal dollar value. Data are in current U.S. dollars.This page includes a historical data chart, news and forecats for Cross-currency valuation (US dollar) in Malaysia. Malaysia is a rapidly developing economy in Asia. Malaysia, a middle-income country, has transformed itself since the 1970s from a producer of raw materials into an emerging multi-sector economy. The Government of Malaysia is continuing efforts to boost domestic demand to wean the economy off of its dependence on exports. Nevertheless, exports - particularly of electronics remain a significant driver of the economy.

MALAYSIA IMPORT/EXPORT
Southeast Asia, particularly Malaysia, has been a trade hub for centuries. Since the beginning of history, Malacca has served as a fundamental regional commercial center for Chinese, Indian, Arab and Malay merchants for trade of precious goods. Today, Malaysia shares healthy trade relations with a number of countries, specifically the US. The country is associated with trade organizations, such as APEC, ASEAN and WTO. The ASEAN Free Trade Area that was established for trade promotion among ASEAN members also has Malaysia as its founding member. Malaysia has also signed Free Trade Agreements with countries including Japan, Pakistan, China and New Zealand. Malaysia was once the worlds largest producer of tin, rubber and palm oil. Its manufacturing sector has a crucial role in its economic growth. The export industry was hit hard during the late 2000 economic recession drastically dropping to 78% i.e. FDI to RM4.2 billion in the first two quarters of 2009. Total exports fell down to $156.4 billion in 2009 from $198.7 billion in 2008. The imports also reduced from 154.7 billion in 2008 to $119.5 billion 2009.

Malaysia Exports Commodities

Malaysia mainly exports the following commodities:
y y y y y y y

Electronic equipment Petroleum and liquefied natural gas Wood and wood products Palm oil Rubber Textiles Chemicals

Malaysia Imports Commodities

Malaysia mainly imports the following commodities:
y y y y y y y

Electronics Machinery Petroleum products Plastics Vehicles Iron and steel products Chemicals

BANKING SYSTEM IN MALAYSIA

1. The Banking System in Malaysia The banking system, comprising commercial banks, investment banks, and Islamic banks, is the primary mobiliser of funds and the main source of financing which supports economic activities in Malaysia. The non-bank financial intermediaries, comprising development financial institutions, provident and pension funds insurance companies, and takaful operators, complement the banking institutions in mobilising savings and meeting the financial needs of the economy. The Central Bank Bank Negara Malaysia (the Bank), the Central Bank of Malaysia, is at the apex of the monetary and financial structure of the country. The principal objective of the Bank is to promote monetary stability and financial stability conducive to the sustainable growth of the Malaysian economy. Its primary functions as set out in the newly enacted Central Bank of Malaysia Act 2009 are to: formulate and conduct monetary policy in Malaysia; issue currency in Malaysia; regulate and supervise financial institutions which are subject to the laws enforced by the Bank; provide oversight over money and foreign exchange markets; exercise oversight over payment systems; promote a sound, progressive and inclusive financial system; hold and manage the foreign reserves of Malaysia; promote an exchange rate regime consistent with the fundamentals of the economy; and act as financial adviser, banker and financial agent of the Government.

To achieve its mandates, the Bank is vested with powers under various laws to regulate and supervise the banking institutions and other non-bank financial intermediaries. The Bank also administers the countrys foreign exchange regulations.

Financial Institutions
The following table provides an overview of the number of financial institutions as at endNovember 2009:

Financial Institution

Total

Malaysian Controlled Institutions 9 11 15 25 8 3 1 13

Foreign Controlled Institutions 13 6 2 15 1 4 3 -

Commercial Banks Islamic Banks International Islamic Banks Investment Banks Insurers Islamic Insurers (Takaful Operators) International Takaful Operators Reinsurers Development financial institutions

22 17 2 15 40 8 1 7 13

Islamic Reinsurers (Retakaful Operators) 4

Banks, including Islamic banks, operate through a network of more than 2,651 branches across the country. Six Malaysian banking groups have presence in 19 countries through branches, representative offices, subsidiaries and joint ventures. There are also 22 foreign banks which maintain representative offices in Malaysia. They do not conduct normal banking business but provide liaison services and facilitate information exchange between business interests in Malaysia and their counterparts. Following the announcement in April 2009 of the liberalisation measures for the financial services sector which includes the issuances of new licences and increase of foreign equity limits, there has been great interest by international financial institutions to establish presence in Malaysia. The liberalisation measures aim to strengthen Malaysia's economic interlinkages with other economies and enhance the role of the financial sector as a key enabler and catalyst of economic growth.

Islamic Banking Industry

Islamic banking refers to a system of banking that complies with Islamic law also known as Shariah law. The underlying principles that govern Islamic banking are mutual risk and profit sharing between parties, the assurance of fairness for all and that transactions are based on an underlying business activity or asset. These principles are supported by Islamic bankings core values whereby activities that cultivate entrepreneurship, trade and commerce and bring societal development or benefit is encouraged. Activities that involve interest (riba), gambling (maisir) and speculative trading (gharar) are prohibited. Malaysia has emerged at the forefront in the development of Islamic finance and has a comprehensive and vibrant Islamic financial system which includes Islamic Banking, Islamic Capital Market, Takaful and Retakaful, and Islamic Interbank Money Market. Presently,

Malaysias Islamic banking assets reach RM281.7 billion (USD82.9 billion at exchange rate of 3.4) with an average growth rate 18-20% annually. In terms of product offering, more than 60 Islamic financial products and services are available in the market. The emergence of new innovative products and financial instruments that incorporate globally accepted Shariah principles such as musyarakah mutanaqisah home financing, Ijarah sukuk, commodity murabahah deposits and Islamic profit rate swap in the industry have further elevated the domestic Islamic financial sector to the next stage of advancement.

Development Financial Institution

Malaysia has several development financial institutions (DFIs) that were set up with specific objectives to develop and promote strategic economic sectors, including the manufacturing, agriculture, infrastructure and maritime sectors, small and medium enterprises (SMEs), as well as sectors that are export oriented. These DFIs complement the banking institutions by providing a range of specialised financial and non-financial products and services to suit the needs of the targeted strategic sectors. These include the provision of medium to long-term loans, equity capital, guarantees for loans and a range of supplementary financial and business advisory services. Currently, six DFIs have been placed under the purview of the Development Financial Institutions Acts 2002 and regulated by the Bank to enhance the overall performance, efficiency and effectiveness in delivering their mandated roles.

Malaysia International Islamic Financial Centre

In August 2006, the Malaysia International Islamic Financial Centre (MIFC) initiative was launched to promote Malaysia as a major hub for international Islamic finance. The MIFC initiative comprises a community network of financial and market regulatory bodies, Government ministries and agencies, financial institutions, human capital development institutions and professional services companies that are participating in the field of Islamic finance. This market vibrancy is reflected by the continual innovation in providing a wide range of Islamic financial instruments, and growth in the number of domestic and international financial institutions. It is further supported by thought leaders and a robust legal, supervisory and regulatory framework coupled with strong Government support, and global Shariah best practices to conduct Islamic finance activities such as Sukuk Origination, Islamic Fund and Wealth Management, International Islamic Banking, International Takaful and Human Capital Development, while enjoying attractive incentives. The establishment of the MIFC as one of the key intermediation linkages in the global market place, has an important role in accelerating the bridging process and strengthening the relationship between international Islamic financial markets and thereby expand the investment and trade relations between the Middle East, West Asia and North Africa with East Asia. Situated centrally in the Asian time zone, Malaysia presents itself as a meeting place for those with surplus funds and those who seek to raise funds from any part of the world.

The MIFC initiatives aims to position Malaysia as the Islamic financial hub through five focus areas: i. Sukuk Origination A platform for government agencies, multinational corporations and multilateral development banks and financial institutions across the world to originate sukuk out of Malaysia. Sukuk (plural of sakk) or Islamic bonds is the most popular component in Islamic Finance among Muslim and non-Muslim consumers alike. Sukuk refers to trust certificates or participation securities that grant investors a share of the asset including the cash flow and risks that commensurate from such ownership. Similar to financial bonds in the conventional financial industry, sukuk are proof of ownership title and are utilised by financial institutions to raise cash. ii. Islamic Fund and Wealth Management A destination for fund managers to establish Islamic fund management operations in Malaysia with a wide range of world class capital market and treasury instruments. Islamic fund and wealth management is the professional management of Shariah-compliant securities and assets based on Islamic principles to achieve set financial goals. The scope of activity involves financial analysis, asset and securities selection, investment planning and ongoing monitoring of investment funds. Both individuals and institutions may become Islamic wealth and fund managers through the provision of related services. iii. International Islamic Banking A centre for financial institutions to establish Islamic banking operations in Malaysia to conduct foreign currency business. iv. International Takaful A centre for financial institutions to establish takaful (Islamic insurance) operations in Malaysia to conduct foreign currency business. Takaful is a concept whereby a group of participants mutually guarantee each other against loss or damage. Each participant fulfils his or her obligation by contributing a certain amount of donation (tabarru) into a fund, which is managed by a third party the takaful operator. v. Human Capital Developement A centre of excellence and thought leadership in education, training, consultancy and research in Islamic finance to supply talent for the Islamic finance industry globally. Major incentives introduced under the MIFC initiative include: i. Issuance of International Islamic Banking (IIB) licences under the Islamic Banking Act 1983 to qualified foreign and Malaysian financial institutions to conduct the full range of Islamic banking business with residents and non-residents in international currencies either as a subsidiary or a branch. The entity will enjoy full income tax exemption for ten years

up to year of assessment 2016 under the Income Tax Act 1967.

ii. Issuancther as a subsidiary or a branch. The entity will enjoy similar income te of International Takaful Operator (ITO) licences to qualified foreign and Malaysian financial institutions to conduct full range of takaful business with non-residents and residents in international currencies, eiax exemption as the IIB entity iii. Islamic fund management companies (IFMC) are allowed to invest all their Shariah funds abroad. The entity will enjoy tax exemption on all fees for managing Islamic funds for foreign and Malaysian investors up to year of assessment 2016 under the Income Tax Act 1967. iv. Up to 100% foreign equity ownership is allowed for IIB, ITO and IFMC. v. Tax deduction on expenses incurred in the issuance of Islamic securities approved by the Securities Commission until year of assessment 2015. vi. Stamp duty exemption on instruments used to issue sukuk in any currency until year of assessment 2015. vii. Tax exemption and withholding tax exemption on interest or profits received by nonresident investors from investment in Islamic securities issued in any currency, other than convertible loan stock, approved by the Securities Commission.

ECONOMIC-TECHNOLOGICAL AND SOCIAL SYSTEM IN MALAYSIA

The Economy of Malaysia is a growing and relatively open state-oriented and newly industrialised market economy.The state plays a significant but declining role in guiding economic activity through macroeconomic plans. In 2007, the economy of Malaysia was the 3rd largest economy in South East Asia and 28th largest economy in the world by purchasing power parity with gross domestic product for 2008 of $222 billion with a growth rate of 5% to 7% since 2007In 2009, GDP per capita (PPP) of Malaysia stands at US$14,900.In 2009, the nominal GDP was US$383.6 billion, and the nominal per capital GDP was US$8,100. The Southeast Asian nation experienced an economic boom and underwent rapid development during the late 20th century and has a GDP per capita of $14,800, being considered a newly industrialized country. On the income distribution, there are 5.8 million households in 2007. Of that, 8.6% have an monthly income below RM1,000, 29.4% had between RM1,000 and RM2,000, while 19.8% earned between RM2,001 and RM3,000; 12.9% of the households earned between RM3,001 and RM4,000 and 8.6% between RM4,001 and RM5,000. Finally, around 15.8% of the households have an income of between RM5,001 and RM10,000 and 4.9% have an income of RM10,000 and above. As one of three countries that control the Strait of Malacca, international trade plays a large role in its economy.At one time, it was the largest producer of tin, rubber and palm oil in the world.Manufacturing has a large influence in the country's economy.Malaysia is the world's largest Islamic banking and financial centre. 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 components and devices, electrical goods, solar panels, and information and communication technology (ICT) products. Malaysia's capital market crossed the RM2 trillion threshold for the first time ever as at end2010. The capital market had achieved an annual compounded growth rate of 11% from RM717bil in 2000 due to rapid industry expansion and strong regulatory oversight that underpinned investor confidence in the Malaysian capital market.

Statistics GDP $381.1 billion (2009 est.) Rank: 30 7.2%

GDP growth

GDP per capita $14,800 (2009 est.) GDP by sector agriculture: 10.1% industry: 42.3% services: 47.6% (2009 est.) 0.4% (2009 est.) 3.5% (2007 est.)

Inflation (CPI) Population below poverty line Labour force by occupation

agriculture: (13%), industry: (36%), services: (51%) (200

SOCIAL SYSTEM
As of the 2010 census, the population of Malaysia was 28,334,135, making it the 43rd most populated country. The population of Malaysia consists of many ethnic groups. Malays make up 50.4 per cent of the population, while other bumiputra make up another 11 per cent. According to constitutional definition, Malays are Muslims who practice Malay customs and culture. They play a dominant role politically. Bumiputra status is also accorded to certain non-Malay indigenous peoples, including ethnic Thais, Khmers, Chams and the natives of Sabah and Sarawak. Non-Malay bumiputra make up more than half of Sarawak's population and over two thirds of Sabah's population. There also exist aboriginal groups in much smaller numbers on the peninsula, where they are collectively known as Orang Asli. Laws over who gets bumiputra status vary between states. Other minorities who lack bumiputra status make up a large amount of the population. 23.7 per cent of the population are of Chinese descent, while those of Indian descent comprise 7.1 per cent of the population. The Chinese have historically been dominant in the business and commerce community, and form the majority of the population of Penang. Indians began migrating to Malaysia in the early 19th century. The majority of the Indian community are Tamils. Many Europeans and Middle Easterners assimilated through inter-marriage into the Christian and Muslim communities respectively. Most Eurasian Malaysians trace their ancestry to British, Dutch or Portuguese colonists. Religion The Malaysian constitution guarantees freedom of religion while making Islam the state religion.[154] According to the Population and Housing Census 2000 figures, ethnicity and religious beliefs correlate highly. Approximately 60.4% of the population are practicing Islam. 19.2% Buddhism; 9.1% Christianity; 6.3%Hinduism; and 2.6% practice Confucianism, Taoism and other traditional Chinese religions. 0.8% reported having no religion, and the remaining 1.5% practised another religion or did not provide any information. All ethnic Malays are considered Muslim by law of the Constitution. Statistics from the 2000 Census indicate that 75.9% of the Chinese population identify as Buddhist, with significant numbers of adherents following Taoism (10.6%) and Christianity (9.6%), along with small Hui-Muslim populations in areas like Penang.The majority of the Indian population follow Hinduism (84.5%), with a significant minority identifying as Christians (7.7%), Muslims (3.8%), over 150,000 Sikhs, and 1,000 Jains. Christianity is the predominant religion of the non-Malay bumiputra community (50.1%) with an additional 36.3% identifying as Muslims and 7.3% follow folk religion

Language The official language of Malaysia is Bahasa Malaysia, a standardised form of the Malay language Historically English was the de facto administrative language, with Malay becoming predominant after the 1969 race riots. English remains an active second language, and serves as the medium of instruction for maths and sciences in all public schools.[161][162] Malaysian English, also known as Malaysian Standard English (MySE), is a form of English derived from British English. Malaysian English sees wide use in business, along with Manglish, which is a colloquial form of English with heavy Malay, Chinese, and Tamil influences. The government discourages the misuse of Malay and has instituted fines for public signs that mix Malay and English.
EDUCATION

The education system features a non-compulsory kindergarten education followed by six years of compulsory primary education, and five years of optional secondary education. Schools in the primary education system are divided into two categories: national primary schools and vernacular schools. Vernacular schools use either Chinese or Tamil as the medium of instruction, whereas national primary schools use Bahasa Malaysia as the medium of instruction for all subjects except English, Science and Mathematics. Before progressing to the secondary level of education, pupils in Year Six are required to sit for the Primary School Achievement Test. Secondary education is conducted in secondary schools for five years. National secondary schools also use Bahasa Malaysia as the language of instruction except in mathematics, science, and language classes. At the end of Form Three, students are evaluated in the Lower Secondary Assessment, although this is set to be abolished by 2016. In the final year of secondary education, students sit for the Malaysian Certificate of Education examination. The government has decided to abandon the use of English in teaching maths and science and revert to Bahasa Malaysia, starting in 2012. Before the introduction of the matriculation system, students aiming to enter public universities had to complete an additional 18 months of secondary schooling in Form Six and sit theMalaysian Higher School Certificate. Since the introduction of the matriculation programme as an alternative in 1999, students who completed the 12-month programme in matriculation colleges can enroll in local universities. However, in the matriculation system, only 10 per cent of places are open to non-bumiputra students. CULTURE Malaysia is a multi-ethnic, multicultural and multilingual society. The original culture of the area stemmed from indigenous tribes that lived there, along with theMalays who later moved there. Substantial influence exists from Chinese and Indian culture, dating back to when

foreign trade began in the area. Other cultures that heavily influenced the culture of Malaysia include Persian, Arabic, and British culture. Due to the political structure of the government, coupled with the social contract theory, there has been minimal cultural assimilation of ethnic minorities. In 1971, the government created a "National Cultural Policy". This policy defined Malaysian culture, stating that it must be based on the culture of the indigenous peoples of Malaysia, it may incorporate suitable elements from other cultures, and that Islam must play a part in Malaysian culture. It also promoted the Malay language above others. This government intervention into culture has caused resentment among non-Malays who feel their cultural freedom was lessened. Both Chinese and Indian associations have submitted memorandums to the government, accusing it of formulating an undemocratic culture policy. Some cultural disputes exist between Malaysia and neighbouring countries, notably Indonesia. The two countries share a similar cultural heritage, sharing many traditions and items. However, disputes have arisen over things ranging from culinary dishes to Malaysia's national anthem. Strong feelings exist in Indonesia about protecting their national heritage. The Malaysian government and the Indonesian government have met to defuse some of the tensions resulting from the overlaps in culture. Feelings are not as strong in Malaysia, where most recognise that many cultural values are shared.

INDIA MALAYSIA RELATIONS

India-Malaysia relations (Malay Hubungan India-Malaysia) refers to bilateral foreign relations between the two countries, India and Malaysia. India has a high commission in Kuala Lumpur, and Malaysia has a high commission in New Delhi. Both countries are full members of the Commonwealth of Nations,Asian Union and G15. India and Malaysia are also connected by various cultural and historical ties that date back to antiquity. The two countries are on excellently friendly terms with each other seeing as Malaysia is home to a strong concentration of Indian immigrants. Mahathir bin Mohamad the fourth and longest serving Prime Minister of Malayasia is of Indian origin, his father Mohamad Iskandar, was a Malayalee Muslim (who migrated from Kerala) and his mother Wan Tampawan, was Malay.

Defence Cooperation
India-Malaysia defence relations have steadily grown over the years. A MOU on Defence Cooperation was signed in 1993. The Malaysian Defence Minister had visited India in 2006 and Indian Defence Minister visited Malaysia in January 2008. Malaysia-Indian Defence Cooperation meetings at the level of Defence Secretary from Indian side and Secretary General from Malaysian side are held regularly; the eighth meeting of the MIDCOM was held in March 2010. Service Chiefs from both countries have regularly exchanged visits; in 2009 Indias Chief of Naval Staff visited Malaysia and the Chief of the Royal Malaysian Air Force visited India. The IAF Training Team deployed in Malaysia from February 2008 trained Malaysian pilots on the SU-30SKM aircraft for two-and-a-half years. India is also participating in the Cooperative Mechanism on the Straits of Malacca and Singapore (SOMS) and contributed to two of the six IMO Projects (Project 1 and Project 4) for enhancement of navigational safety and environmental protection in the Straits.

Economic and Commercial Cooperation

Economic and commercial relations are emerging as the mainstay of the bilateral relationship. Malaysia is the second largest trading partner for India within ASEAN, and India is the largest trading partner for Malaysia from among the countries of the South, excluding China. With the coming-into-force of the ASEAN-India FTA in Goods from 1 January 2010, the bilateral economic engagement is expected to get a further fillip. During the visit of Prime Minister Dr. Manmohan Singh in October 2010, India and Malaysia have signed an agreement signaling the conclusion of negotiations on a Comprehensive Economic Cooperation Agreement (CECA) as a single undertaking covering goods, services, investment and other areas of cooperation. As a follow of this Agreement, India and Malaysia signed the CECA on 18 February 2011 in Putrajaya during the visit of Commerce and Industry Minister. It will now come into force on 1 July 2011

The first-ever India-Malaysia CEOs Forum, comprising 18 CEOs from both sides, was jointly launched on 27 October 2010 by Prime Ministers Dr. Manmohan Singh and Dato' Seri Mohd Najib to develop enhanced partnership and cooperation at the business level. The Second meeting of the CEOs Forum took place in Mumbai on 20 May 2011. Bilateral trade increased by 17 times from US $ 0.6 billion in 1992 to US$ 10.5 billion in 2008, and has more than doubled from US$ 5 billion to US$ 10.5 billion between 2005 and 2008. The global economic crisis had a negative impact on bilateral trade, wherein the twoway trade in 2009 declined to US $ 7.3 billion. However, in 2010 there was a significant recovery of the bilateral trade as evident from a 25% increase compared to 2009 figures to US$ 8.94 billion (Indias exports US$ 2.47 billion and Indias imports US $6.47 billion). With the entry into force of the CECA from 1 July 2011, the bilateral trade has good prospects of increasing further in the coming years. Based on direct investments from Malaysia to India, it is the 21st largest investor in India with cumulative FDI inflows valued at US$ 1.8 billion from January 1991 to 2008. In addition, about US$ 6 billion in Malaysian investments are believed to be invested in India through the Mauritius route. Notable among these are Maxis Communications in Aircel, Axiata in IDEA Cellular Ltd, Khazanah in IDFC, Apollo Hospitals, Yes Bank, etc. Malaysian construction companies largest presence outside Malaysia is in India. They have completed 52 construction projects worth US$ 2.34 billion in India, while 35 projects of similar value are under various stages of implementation. Under a partnership with Malaysian Airports, GMR completed airport in Hyderabad in 2008, and the second one in Delhi in July 2010.

Tourism & Connectivity

Air links have improved significantly following a bilateral agreement in 2007 to progressively increase the seat capacity to six major destinations in India and a provision for multiple destinations and designating any number of airlines to operate on the IndiaMalaysia routes. At present, there are 114 flights between two countries, of which 93 are operated by Malaysian airlines and 21 by Indian airlines. Regular meeting of the Civil Aviation Ministries are held to liberalize the connectivity, and the last meeting was held in Kuala Lumpur in August 2010. India is the sixth largest source country for inbound tourism to Malaysia with about 600,000 Indian tourists visiting Malaysia in 2009, an increase of 9% over figures of 2008. Malaysia is the tenth largest source country for foreign tourists visiting India with 115,794 Malaysians visiting India in 2008. With the signing of the MoU for cooperation in the field of tourism, there would be greater people-to-people contact and also greater flow of tourists from both the countries.

Labour & Expatriates

There are about 150,000 legally recruited Indian workers in Malaysia in both the skilled and semi-skilled category. This includes about 10,000 expatriated employed in IT, manufacturing, banking, etc. A bilateral MoU on Employment and Welfare of Workers signed in January 2009 establishes an institutional framework to deal with issues concerning Indian workers. Two Joint Working Group meetings at the Secretary-level were held in March 2009 and April 2010. Education & Cultural Cooperation

About 2000 Indian students are studying in Malaysia, while an estimated 3000 Malaysian students are studying in India. An MOU on Higher Education was signed on 20 January 2010 during Prime Minister Dato' Seri Najibs visit to India. India offers about 30 slots under ITEC and 25 under the Colombo Plan. A new Indian Cultural Centre (ICC) has been opened in Kuala Lumpur on 10 February 2010 to promote cultural relations with Malaysia. A Cultural Exchange Programme (CEP) for 2010-13 was signed on 27 October 2010 during the visit of Prime Minister Dr. Manmohan Singh to Malaysia.

Regional and Multilateral

India and Malaysia cooperate in a number of multilateral and regional foras such as UN, NAM, WTO, ASEAN, ARF, East Asia Summit (EAS), Commonwealth, Indian Ocean Rim for Regional Economic Cooperation, etc.

Persons of Indian Origin (PIOs)

Malaysia has one of the largest communities of Persons of Indian Origin in the world, numbering close of 2 million (about 8% of Malaysias population). The overwhelming numbers are Tamil speaking, with significant people speaking Telugu, Malayalee and Punjabi also. The Malaysian Indian Congress is the dominant political organization of the PIOs since pre-independence, and a member of the ruling coalition since independence, but of late several smaller splinter political organizations have emerged. PIOs from Malaysia have been sending the largest contingents to the Pravasi Bharatiya Divas.

ROLE OF IMPORTS
Malaysia mainly imports the following commodities:
y y y y y y y

Electronics Machinery Petroleum products Plastics Vehicles Iron and steel products Chemicals

IMPORT/EXPORTS FOR MALAYSIA Total Exports 28.01 37.58 77.46 179.49 193.13 218.70 281.26 373.27 Total Imports 22.78 28.69 70.37 179.39 182.97 207.36 247.90 311.46 Trade Balance 5.24 8.88 7.09 0.10 10.15 11.34 33.36 61.81

Year 1980 1985 1990 1995 1997 1998 1999 2000

(RM Billion) (RM Billion) (RM Billion)

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

334.28 357.43 397.88 481.25 536.23 588.97 605.15 663.49 553.30 639.43

280.23 303.09 316.54 399.63 432.87 480.77 504.81 521.61 434.94 529.19

54.05 54.34 81.35 81.62 103.36 108.19 100.34 141.88 118.35 110.23

MALAYSIA WORLD BANK REPORT

The World Bank is working to support more than 20 countries in the East Asia and Pacific region by providing grants and low-interest loans for development projects, as well as expert advice and consulting services. In fiscal year 2005, the Bank provided the region with US$2.9 billion ($1 billion in interest-free IDA loans and grants, and $1.8 billion in low-interest loans from the IBRD). Worldwide, the Bank's annual lending commitments reached US$22.3 billion in 2005 for 279 projects worldwide. The World Bank finances and supports a project at the request of the government. An appraisal of the project's feasibility and loan terms is followed by negotiations, board review, and signing. The loan becomes effective after it has been ratified by the government.

Loans and Credits for Malaysia

Mar 30, 1999 Mar 30, 1999 Mar 30, 1999 Jun 18, 1998

Malaysia: Education Sector Support Project Malaysia: Social Sector Support Project Malaysia: Year 2000 Technical Assistance Project Malaysia Economic Recovery and Social Sector Loan

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