Malaysians were in the party mode on 31 August during the celebrations of the 50th anniversary of the Malay Peninsula’s independence from Britain. And there was indeed much to celebrate; living standards have soared during the past 50 years of sovereignty. The country’s remarkable modernisation drive was symbolised, nine years ago, by the completion of the Petronas twin towers, in Kuala Lumpur, then one of the world’s tallest buildings.

Background

During the late 18th and 19th centuries, Great Britain established colonies and protectorates in the area of present-day Malaysia. In 1948, the British-ruled territories on the Malay Peninsula formed the Federation of Malaya, which became independent in 1957 (hence the 50th anniversary celebrations in 2007).

The effort for independence was spearheaded by Tunku Abdul Rahman Putra Al-Haj, the man who became the first Prime Minister of Malaysia. He led a delegation of ministers and political leaders of Malaya in negotiations with the British in London for Merdeka, or independence. Once it became increasingly clear that the Communist threat posed during the Malayan Emergency had petering out, agreement was reached on 08 February 1956, for Malaya to gain independence from the British Empire. However, for a number of logistical and administrative reasons, it was decided that the official proclamation of independence would only be made the following year, on 31 August 1957. The proclamation took place at Stadium Merdeka (Independence Stadium), in Kuala Lumpur.

The Malaysia that we know today was formed in 1963 when the former British colonies of Singapore and the East Malaysian states of Sabah and Sarawak on the northern coast of Borneo joined the Federation. The first several years of the country’s history were marked by Indonesian efforts to control Malaysia, Philippine claims to Sabah, and Singapore’s secession from the Federation in 1965.

During the 22-year term of Prime Minister MAHATHIR bin Mohamad (1981-2003), Malaysia saw a shift from an agriculture-based economy to one based on manufacturing and industry in areas such as computers and consumer electronics. It was also during this period that the physical landscape of Malaysia changed with the emergence of numerous mega-projects. The most notable of these projects were the Petronas Twin Towers (at the time the tallest building in the world), KL International Airport, North-South Expressway, the Sepang F1 Circuit, the Multimedia Super Corridor, the Bakun hydroelectric dam and Putrajaya, a new federal administrative capital.

Malaysians – The People

Malaya’s population comprises many ethnic groups, with the politically dominant Malays making up the majority, at approximately 50 percent of the population. Malaysians of Chinese origin make up about 24 percent of the population and Malaysians of Indian origin about 8 percent. Close to 90 percent of the Indian community is of Tamil origin, but various other groups are also present including Malayalis, Punjabis and Gujaratis. There are also various non-Malay peoples who are designated as indigenous, mostly in East Malaysia. These make up about 7 percent of the population. All ethnic groups have historically played an important role in trade and business.

Non-Malay indigenous groups make up more than half of the state of Sarawak’s population, constitute about 66 percent of Sabah’s population, and also exist in much smaller numbers on the Peninsula, where they are collectively called Orang Asli. The non-Malay indigenous population is divided into dozens of ethnic groups, but they share some general cultural similarities. Other Malaysians also include those of European, Middle Eastern, Cambodian, Thai and Vietnamese descent. Europeans and Eurasians include British who colonized and settled in Malaysia and some Portuguese, and most of the Middle Easterners are Arabs. A small number of Kampucheans and Vietnamese settled in Malaysia as Vietnam War refugees. Population distribution is uneven, with some 20 million residents concentrated on the Malay Peninsula.

May 13, 1969 saw an incident of civil unrest which was then thought to be largely due to the socio-economic imbalance of the country along racial lines, though in retrospect it may have been more motivated by political firebrands in both governing and opposition parties, as the violence involved only the areas in and around the capital with much of the country remaining at peace. This incident led to the adoption of the New Economic Policy as a two-pronged approach to address racial and economic inequality and to eradicate poverty in the country.

Due to the rise in labour intensive industries, Malaysia has 10 to 20 percent foreign workers with the uncertainty due in part to the large number of illegal workers, mostly Indonesian; there are a million legal foreign workers and perhaps another million unauthorized foreigners. Efforts are underway to deport unauthorized foreign workers.

Economic Growth

Malaysia, a middle-income country, transformed itself from 1971 through the late 1990s from a producer of raw materials into an emerging multi-sector economy. Growth was almost exclusively driven by exports – particularly of electronics. As a result, Malaysia was hard hit by the global economic downturn and the slump in the information technology (IT) sector in 2001 and 2002. The economy grew 4.9 percent in 2003, notwithstanding a difficult first half, when external pressures from Severe Acute Respiratory Syndrome (SARS) and the Iraq War led to caution in the business community. Growth topped 7 percent in 2004 and 5 percent per year in 2005-06. As an oil and gas exporter, Malaysia has profited from higher world energy prices, although the rising cost of domestic gasoline and diesel fuel forced Kuala Lumpur to reduce government subsidies, contributing to higher inflation. Malaysia “unpegged” the ringgit from the US dollar in 2005 and the currency appreciated 6 percent against the dollar in 2006. Healthy foreign exchange reserves and a small external debt greatly reduce the risk that Malaysia will experience a financial crisis over the near term similar to the one in 1997. The economy remains dependent on continued growth in the US, China, and Japan – top export destinations and key sources of foreign investment. The government presented its five-year national development agenda in April 2006 through the Ninth Malaysia Plan, a comprehensive blueprint for the allocation of the national budget from 2006-10. The plan targets the development of higher value-added manufacturing and an expansion of the services sector.

Indo-Malaysian Relations

India and Malaysia have age-old political and cultural ties dating to the pre-Christian era. The strong influence of India permeates the social mores of Malaysia, the etymology of its language, common family traditions and the rituals of the royalty. The bilateral relationship embraces all aspects: political, economic, education, defence and cultural, with recent focus on economic and commercial relations.

Bilateral relations have traditionally been close and friendly. Many high level visits have taken place between the two countries, which have improved relations in general. Further many Ministerial level visits including visits of State Chief Ministers took place mainly to promote economic relations.

There appears to be convergence of foreign policy objectives of both countries as members of NAM, the Commonwealth, G-15, G-77 and the United Nations. India and Malaysia have cooperated on a wide range of international and economic issues under the umbrella of South-South cooperation and in WTO.

Economic and Commercial Relations

India and Malaysia have had longstanding commercial links. Malaysia’s rubber wealth, called the “lifeblood” of its economy, was created by Indian labour. In modern times, the first Indian joint venture to commence its operations in Malaysia was Godrej and today there are 57 Indian joint ventures in the fields ranging from palm oil refining, power, railways, civil construction, training and information technology. There are 19 Indian companies and 36 Indian IT companies with Multimedia Super Corridor status in Malaysia.

In 1990, it was decided to upgrade the official level Joint Committee to that of a Joint Commission led by Foreign Ministers. Several Joint Commission Meetings have been held to date.

In December 2004, both PM Dr Manmohan Singh and PM Badawi agreed to conclude a bilateral Comprehensive Economic Cooperation Agreement (CECA). Twelve Agreements/MoUs were also signed covering wide ranging cooperation in satellite technology, bio-technology, information technology, infrastructure, education and research. The CECA will fast track the bilateral economic and commercial cooperation envisaging “smart partnerships” in areas such as IT, bio-technology, pharmaceuticals, health care, education and tourism.

Today India is Malaysia’s largest trading partner among countries of the South, excluding ASEAN and China. Palm oil continues to be the main import from Malaysia followed by mineral fuel and electronic and electrical items. From India, transport machinery, food items and manufactured goods are the main exports to Malaysia.

While Malaysia is the 10th largest investor in India with investment of US$76 million, India is the 13th largest in Malaysia with huge investment of US$346 million. Malaysian investment in India is mainly in fuels (power and oil refineries) and telecommunications sectors. Indian investment in Malaysia is primarily in palm oil refining, drugs and pharmaceuticals, textiles and yarn, and services in information technology sectors. Many Malaysian companies have been actively participating in Indian infrastructure projects such as road, airport and seaport constructions, housing and urban development and power. Indian companies are involved in railway line construction, satellite building, palm oil refining, amongst others.