Malaysian-Danish Country Programme for Cooperation in Environment and Development (2002-2006)

2. Socio-Economic and National Context


Malaysia is situated in the equatorial zone of South East Asia. It has a total land area of 330,000 square km and comprises two major portions – Peninsular Malaysia (about 40% of the land area) which forms the southernmost tip of the Asian mainland and includes eleven separate states and the federal territories of Kuala Lumpur and Putrajaya. The two other states Sabah and Sarawak are placed on the northern portion of the island of Borneo, separated from the Peninsula by the South China Sea.


Malaysia's total population of 23 million people (2000) make up a multi-ethnic and multi-cultural society. The Malays and other Bumiputera comprise 66% of the total population, forming the largest group. People of Chinese ethnic origin are the second largest group, followed by those of Indian ethnic origin and finally, other ethnic groups. Non-Malay indigenous groups make up more than half of Sarawak's population and about two-thirds of Sabah's. About 80% of the population resides in the Peninsula. Industrialisation and expansion of the economy have led to rapid urbanisation in many parts of the country. In 1980, Malaysia's urban population was 34% of the total population; by 2000 it reached 62%.

Government and Politics

Malaysia is a constitutional monarchy, nominally headed by the King. Executive power is vested in the Cabinet led by the Prime Minister. There is both a Senate and the House of Representatives, comprising the parliament. The 193 Representatives of the House are elected from single-member districts by universal adult suffrage. Legislative power is divided between federal and state legislature. Sabah and Sarawak retain certain constitutional prerogatives (e.g. the right to maintain their own immigration controls). Malaysia's predominant political party, the United Malays National Organization, has held power in coalition with other parties since Malaysia's independence in 1957.

The Economy

Malaysia has, for many years, enjoyed rapid economic growth, with an annual average growth rate of about 8% from 1990 until 1997. Low inflation, almost full employment and a high national savings rate accompanied the high growth rate. The per capita gross domestic product is estimated at 3200 USD (2000).

The regional economic crisis of 1997 led to a negative growth rate in 1998 but there are encouraging signs of recovery with a GDP growth for 1999 and 2000 of 5.8% and 8.5% respectively, and a growth rate of more than 5% predicted for 2001. However the effect of the crisis was to push back Malaysia a number of years in terms of its development targets. Measures are being taken to strengthen the country's macroeconomic management and revitalise the manufacturing, services and corporate sectors, as well as to consolidate the financial sector. There is also emphasis on the need to harness the benefit of information technology, whilst promoting the growth of the agricultural and rural sectors. In the social dimension, poverty reduction and distributive policies will continue to be a key strategy to improve the overall quality of life for Malaysians.

Since 1999, a Malaysian quality of life index has been prepared by the government. This index takes account of 10 main factors including: income and distribution; education; health; public safety; social participation and environment. All areas show positive developments since 1980 except public safety (due to road accidents) and environment.

Income and distribution statistics show that the real income (per capita GDP) has doubled since 1980 whilst the inequality in income has reduced marginally (Gini index fell from 0.52 in 1980 to 0.47 in 1997). The incidence of poverty has reduced from 32% in 1980 to around 5% in 2000. Hardcore poverty (defined as income levels below half of the subsistence level) has reduced from over 7% in 1980 to less than 1.5% in 1999. These results reflect the fact that eliminating poverty has been a major goal of the Malaysian five-year Plans. Poverty alleviation strategies have included efforts at not only raising productivity and real incomes, but also improving access of the lower income groups to better social services - education, health care, housing and public amenities, and to better income opportunities.

The percentage of clean rivers has fallen from 56% in 1980 to 32% in 1999. The index on air pollution records a slight improvement from 1980 to 1998. Natural forest cover has also declined to just above 50% nationally and under 40% in the Peninsula. The quality of many of the remaining forests has also deteriorated through heavy levels of logging. An emerging challenge is the need to address environmental and resource issues without compromising economic productivity and growth. In the context of the drive towards revitalising the economy, the Government of Malaysia also made the commitment to ensure that the conditions necessary for achieving sustainable development will not be undermined.

National Planning System

Vision 2020 is the overarching national development policy objective. The national policy framework effects this objective. This policy framework can be sub-divided into three broad categories:
The national development plans, such as the ten-year Outline Perspective Plans and the five-year Malaysia Plans, which set out the broad policy objectives for the overall economic development of the country.
The macro- or cross-sectoral policies, which address the integrated and cross sectorial issues, such as the National Environmental Policy (draft) and the National Policy on Biological Diversity.
The sectoral policies, such as the National Forestry Policy, the National Mineral Policy or the National Agriculture Policy.

The Malaysia Plans are a system of national development plans, setting out the development priorities and goals of the Government. The Malaysia Plans are now increasingly prepared through consultative processes, involving government agencies, non-governmental organisations and the private sector. Malaysia is currently at the start of the Third Outline Perspective Plan (2001-2010) and the 8th Malaysia Plan (2001-2005).