Malaysia is rich in natural resources and its traditional economic strength lay in commodities. It is still an important source of tin and rubber, produces more than half the world’s palm oil and is a net exporter of oil and gas. Reserves of oil were estimated in January 2014 to be 3.7 billion barrels, and of gas, 1.1 trillion cubic metres. Average daily oil production in 2013 was 657,000 barrels.
During the 1980s and 1990s, however, the character of the economy changed radically as it developed into a predominantly manufacturing country focusing on export-oriented electronic and electrical equipment (manufacturing contributed 24.2 per cent of GDP in 2012) but also cars, and a wide range of goods for the domestic market. Manufacturing output grew by more than nine per cent p.a. during the two decades 1980–2000 and 3.4 per cent p.a. 2000–10. Latterly, the services sector, too, has been growing rapidly.
The long-term economic plan is to transform the manufacturing sector from the assembly of imported components to the design and production of original products, with the objective of attaining industrialised-country status by 2020. Priority areas are advanced materials, automated manufacturing, biotechnology, microelectronics/IT and energy technology.
After a brief recession in the mid-1980s, growth was very strong until 1997, when the collapse of some South-East Asian financial markets caught Malaysia in their fall, interrupting its rapid growth and throwing the economy into recession. The economy shrunk by 7.4 per cent in 1998. Demand for exports collapsed, especially demand in Japan for semiconductors; several large development projects were postponed; many companies experienced difficulties; and unemployment rose. During 1998 the government took measures to stimulate growth and the economy began to grow again in the second quarter of 1999, becoming very strong in 2000, with growth being led by manufacturing.
Exports – particularly of electrical and electronic goods – soared and there was a sharp increase in interest in foreign investment. However, in 2001 the economy again stalled, as demand for the country’s exports slowed, picking up again, with rising international oil and commodity prices, in 2002. Strong growth of more than five per cent p.a. continued during 2003–07. Then, with the world economic downturn and fall in global demand of 2008–09, the economy slowed in 2008 and contracted by 1.5 per cent in 2009. But it then recovered strongly in 2010 (growing by 7.4 per cent), continuing at four to six per cent p.a. in 2011–15.