Political situation
Malaysia practises parliamentary democracy based on the federal system, with a constitutional monarchy and three branches of government: the legislative, judicial and administrative or executive. Under the Federal Constitution, the states of Perlis, Kedah, Pulau Pinang, Perak, Selangor, Negeri Sembilan, Melaka, Johor, Pahang, Terengganu, Kelantan, Sarawak and Sabah have agreed to the concept of the formation of the country of Malaysia. The powers of state governments are limited by the Federal Constitution.
The chief of state is the Paramount Ruler (Yang Di-Pertuan Agong), who is elected from and by the hereditary rulers of nine of the states for a five-year term. The Paramount Ruler has the power to safeguard the customs and traditions of the Malay people and the administration of the Islamic religion in each state. He is also the Highest Commander of the Armed Forces. Since December 2001, the Paramount Ruler has been Tuanku Syed Sirajuddin ibni Almarhum Tuanku Syed Putra Jamalullail, the Rajah of Perlis.
The head of government is the Prime Minister, who appoints the Cabinet from among the members of Parliament with the consent of the Paramount Ruler. The current Prime Minister is Abdullah bin Ahmad Badawi (since October 2003).
Economic situation
The Malaysian economy grew at an average rate of 6.2% per annum during the period from 1991 to 2005. The strong rate of growth was achieved despite the challenges faced from events such as the 1997-98 Asian financial crisis, the September 11 incident in 2001, wars in Afghanistan and Iraq, outbreaks of severe acute respiratory syndrome (SARS) and avian influenza, as well as increases in world oil prices. Economic fundamentals remain strong. Growth was achieved, with inflation averaging a low 2.9% per annum and similarly low unemployment averaging 3.1% over the period. The current account of the balance of payments and the consolidated public sector account registered twin surpluses by the end of the period. The level of savings and external reserves rebounded to healthy levels after the Asian financial crisis.
Gross domestic product (GDP) per capita grew at an average of 7.1% per annum to RM 18 489 or US$ 4904 in 2005. When adjusted for Malaysia’s cost of living, the Purchasing Power Parity (PPP)–adjusted GDP per capita in 2005 doubled to US$ 10 318. Compared with other Organisation for Economic Co-operation and Development (OECD) countries, Malaysia’s PPP-adjusted GDP per capita is above that of Mexico and that of Poland.
The economy evolved from capital-led growth in 1991 to growth based more evenly on capital, labour and total factor productivity (TFP) in 2005. Malaysia’a economic structure continues to develop away from manufacturing services. Growth in knowledge-based service industries was expanded with the establishment of the Multimedia Super Corridor in 1996, followed by other initiatives such as the National Biotechnology Policy, launched in 2005.
