The Chinese soon dominated the plantation industry as well as other businesses. During British rule, banking and insurance industries were largely run by the Chinese. Chinese companies, often in partnership with British companies, came to have a stranglehold over the economy.
During the early decades of the 20th century, anti-colonial and nationalist sentiments began to influence some Malay intellectuals. In 1938 Ibrahim Yaacob established an organization called Kesatuan Melayu Muda (Young Malays Union) for the purpose of infusing a sense of unity and solidarity among all Malays. He was against British imperialism and urged his fellow Malays to fight for their rights.
In 1942, amid the turmoil of World War I, the Japanese overran Malaya and occupied Singapore, North Borneo and Brunei. However, they had to retreat in the face of advancing British troops in 1945. The rising wave of nationalism that was sweeping across large parts of Asia reached Malaya. In 1946, the United Malays National Organisation (UMNO), was founded by Malay nationalists, led by Dato Onn bin Jaafar, the chief minister of the Sultanate of Johor. UMNO, which favoured an end to British rule and independence for Malaya, was in the vanguard of the nationalist movement. It drew its members and supporters from all walks of life, including teachers, students, the ulama, peasants and the youth.
Peninsular Malaysia was unified as the Federation of Malaya in 1948 and it gained independence in 1957. In 1963 Malaya united with Sabah, Sarawak and Singapore to form a federal Malaysia. Singapore was expelled from the federation in 1965 due to the apprehension that the Chinese community nurtured an ambition to dominate the federation, which would marginalize the ethnic Malays.
Today Malaysia is a federal polity comprising 13 states and three federal territories. The country has two distinct regions, separated by the South China Sea: Peninsular Malaysia and Malaysian Borneo. Peninsular Malaysia shares its borders with Thailand, Singapore and Vietnam while Malaysian Borneo borders Indonesia and Brunei. Malaysia has a population of nearly 32 million. Kuala Lumpur, with a population of 7.25 million, is Malaysia’s largest city and its capital.
Malaysia’s political system is based on the parliamentary form of government. It is a federal polity with a constitutional monarchy. The head of state is the king, who is chosen from among the hereditary rulers of the nine Malay states every five years. Tunku Abdul Rahman (1903-90) was the first prime minister of the Federation of Malaya from 1955 to 1957. He remained prime minister after independence until his resignation in 1970.
Malaysia is a multiracial, multiethnic and multicultural nation. More than half of the population consist of ethnic Malays. The Malaysian Chinese, who account for 23.2% of the population, are the second largest group after ethnic Malays and form the second-largest community of overseas Chinese in the world. Malaysian Indians constitute 7% of the population. The indigenous people of Malaysia, collectively known as Orang Asli, account for 13.8% of the population. Ethnic Malays and the indigenous people are officially designated as Bumiputera (‘sons and daughters of the soil’). The status of Bumiputera has also been conferred on certain non-Malay communities such as ethnic Thais and Khmers as well as the indigenous people of Sabah and Sarawak. Malaysia’s ethnic and cultural diversity and its hybrid heritage are reflected in its languages, arts and cuisine.
Approximately 61.3% of the population in Malaysia practices Islam, 19.8% Buddhism, 9.2% Christianity, 6.3% Hinduism and 1.3% Confucianism, Taoism and other traditional Chinese belief systems. Malaysia’s constitution recognizes Islam as the established religion of the state. However, it grants freedom of belief and worship to all citizens.
Nearly 137 languages and dialects are spoken across Malaysia. Malaysia’s official language is Bahasa Melayu, commonly known as the Malay language. English is a commonly used second language.
Since its independence in 1957, Malaysia has consistently recorded an impressive rate of economic growth, with its GDP growing at an average of 6.5% per annum. The country has a newly industrialised market economy, with a GDP per capita of $10,430. Malaysia’s economy is ranked as the 4th largest in Southeast Asia and 38th largest in the world. The World Bank and the International Monetary Fund classify Malaysia as an emerging developing country. In 2014-15 Malaysian economy developed more rapidly than that of Australia, France and Korea. The economy thrives on the country’s natural and agricultural resources, manufacturing, petroleum and petroleum products, liquefied petroleum gas, international trade and tourism, electronic equipment and tourism, including medical tourism. Malaysia is one of the world’s largest producers of tin, rubber and palm oil. Tourism is Malaysia’s third largest source of foreign exchange. Since the 1980s the industrial sector, with high levels of investment, has played a key role in accelerating economic growth. Malaysia is one of the world’s largest exporters of semiconductor devices, electrical equipment and IT and communication products. Viktor Shvets, the managing director of Credit Suisse, says that Malaysia has all the right ingredients to become a developed nation in the next few years. According to a HSBC projection, Malaysia will become the world’s 21st largest economy by 2050 with a GDP of $1.2 trillion and a GDP per capita of $29,247.
Malaysia, like most developing nations around the world, invited foreign investment. At the same time, it saw to it that foreign companies transferred technology for the exploitation of the country’s resources and provided training to local workers, which would contribute to the nation’s development effort. Today, the state-owned oil company Petronas has become a global player and is providing training to other developing countries. By managing its own oil company, Malaysia was able to ensure that the value of the resources stayed in the country, rather than being sent overseas as profits.
Malaysia’s record in respect of human development indices is no less impressive. Education up to the primary level is free. Education and healthcare are heavily subsidized by the state for school students, senior citizens and people with physical or mental disability. Healthcare services in Malaysia are considered among the best in the world. The United Nations Development Programme has described the country’s healthcare system as a model for other developing countries.
D. Mahathir Mohamad (born 1925), who can be regarded as the architect of modern Malaysia, joined the United Malays National Organisation (UMNO) at a young age in 1946 and became a member of parliament in 1964. In 1968 he became UMNO’s deputy leader and in 1981 he was sworn in as Malaysia’s prime minister after the resignation of his predecessor, Hussein Onn. Dr Mohamad has won five consecutive elections and served as prime minister for 22 years, from 1981 to 2003. After he stepped down, his hand-picked successor Abdullah Badawi became prime minister in 2004. Badawi was succeeded by Najib Razak in 2013.
In 1991 Dr Mohamad announced what he called Vision 2020, which envisaged that Malaysia would become a fully developed country by 2020. He reckoned that in order to achieve this target, Malaysian economy had to grow at an annual rate of at least 7 percent. Vision 2020 also entailed the National Development Policy (NDP), under which some government programmes and projects that were exclusively designated for the benefit of the Bumiputera would be opened up for other communities as well. In other words, NDP was aimed at increasing wealth for all Malaysians, and not just for ethnic Malays. Vision 2020 envisioned a society based on equality, common citizenship and fundamental rights.
One of the main objectives of the NDP was poverty reduction, which was successfully achieved within a relatively short period. In a span of five years (1990-1995), less than 9% of the population in the country lived in poverty and income inequality had narrowed. Dr Mohamad cut corporate taxes and liberalized financial regulations to attract foreign investment. As a result of these measures, the economy registered a growth rate of 9% per annum until 1997. Impressed by Malaysia’s success story, many Asian and African countries sought to follow the nation’s example. In 1982 Mahathir Mohamad brought Anwar Ibrahim, then a dynamic student leader, into his government. Anwar was appointed finance minister and deputy prime minister in 1991. Anwar had a significant role in Malaysia’s transformation as a dynamic and vibrant nation.
The year 1997 witnessed the awful Asian financial crisis, which threatened to undermine Malaysia’s economic gains and its prospects for the future. The value of the Malaysian ringgit plummeted and the stock exchange fell by over 75%. Foreign investment came to a halt. The International Monetary Fund (IMF) urged Malaysian leaders to cut government spending and raise interest rates. The government complied with the directive, but the steps led to a worsening of the situation. In 1998 Dr Mohamad took a bold and controversial decision to reverse the directive of IMF. Dr Mohamad increased government spending and fixed the ringgit to the US dollar. This confounded the IMF and Mahathir Mohamad’s critics at home and abroad and created a rift between him and Anwar Ibrahim, who supported the IMF directive. Surprisingly, however, Malaysia recovered from the financial crisis much faster than other Southeast Asian countries, which vindicated Dr Mohamad’s vision and strategy. In 1998 Dr Mohamad sacked Anwar Ibrahim as finance minister and deputy prime minister. He was subsequently imprisoned on charges of corruption and sodomy.
Shortly after he was expelled from the government, Anwar Ibrahim unsuccessfully challenged Mahathir Mohamad authority and power within UMNO. He remained in prison until 2004, when he was released on the orders of the then prime minister Abdullah Badawi. In the 2013 elections Anwar became leader of the opposition while Dr Mohamad supported Razak.
Though Dr Mohamad supported Razak’s candidature for the prime minister’s post, he became disillusioned with him because of his inept handling of the economy and the shadow of corruption that hung over him. When Dr Mohamad realized that UMNO paid no heed to his criticism of Razak, he quit the organization in 2016 and formed his own outfit, Parti Pribumi Bersatu Malaysia. As the 2018 elections approached, he joined hands with the opposition Pakatan Harapan and became chairman of the coalition. He entered the fray for the prime minister’s post and on 9 May 2018 won a historic victory. At 92, Mahathir Mohamad is the world’s oldest sitting head of government. During the election campaign Dr Mohamad had promised that he would seek Anwar Ibrahim’s pardon, get him released from prison and help in his political rehabilitation by handing over power to him after two years.
Islamic Finance in Malaysia
Islamic Economy is a high-growth segment. According to the State of the Global Islamic Economy Report 2016/17 released by Thomson Reuters, Islamic Economy was estimated to be worth $1.9 trillion in 2015. The global Islamic financial industry stood at $2.29 billion at the end of December 2016. Islamic Economy has several distinct but interelated sectors, including Islamic Finance, Halal food, Halal travel, and Islamic fashion and Halal pharmaceuticals and cosmetics.
The top 10 countries where Islamic Economy has a highly significant presence include, in order of ranking, Malaysia, UAE, Bahrain, Saudi Arabia, Oman, Pakistan, Kuwait, Qatar, Jordan and Indonesia. Malaysia, UAE and Bahrain continue to lead in the index of global Islamic Economy. Malaysia, which has a large asset base, advanced governance and the highest awareness scores, is 35 points ahead of the UAE. Saudi Arabia, Iran and Malaysia lead the Islamic banking industry by holding almost 65% of global Islamic financial assets. In addition to these countries, Islamic Economy is significantly represented in Singapore, Brunei, Sudan, Iran and Bangladesh. According to projections by Thomson Reuters, Islamic financial assets will be worth $3.2 trillion by 2020.
Islamic finance is increasingly becoming a mainstream component of the global banking system. Currently, more than 600 Islamic financial institutions exist in over 90 countries across the world, with an asset holding size of more than $ 2 trillion. About 80 per cent of the Islamic financial assets worldwide are managed by Islamic banks or the Islamic units of conventional banks. Ernst and Young, an international consulting and accounting firm, estimates that Islamic financial assets grew at an annual rate of 17.6 per cent between 2009 and 2013 and will grow by an average of 19.7 per cent a year in the coming years. Iran holds the world’s largest level of Islamic financial assets valued at over $518 billion and accounts for at least 37 per cent of Islamic financial assets worldwide. Seven out of ten Islamic banks in the world are Iranian. Saudi Arabia s share in global Islamic financial assets is 18.5 per cent, followed by Malaysia with 10 per cent and UAE with 7.36 per cent. Malaysia and the Gulf Cooperation Council states (Kuwait, Bahrain, Qatar, Oman, United Arab Emirates and Saudi Arabia) form the hub of the global Islamic finance network. In the Islamic banking sector, Malaysia ranks third worldwide, after Iran and Saudi Arabia, with total assets of $204.4 billion at the end of 2017.
Over the past three decades, Malaysia has played a pioneering role in creating and expanding Islamic financial institutions. There are at present 16 fully-fledged Islamic financial institutions in the country. Malaysia’s sukuk market is the world’s biggest with a 60% share of the international sukuk market. Malaysia is the leader in the Islamic wealth management industry with assets worth $28.3 billion, or 36.5% of global assets at the end of 2017.
The biggest name in Islamic banking in Malaysia is Bank Islam Malaysia Berhad, which was set up in 1983. Since its establishment Bank Islam has registered a remarkable growth and expansion. It now offers more than 70 innovative and sophisticated Islamic financial products and services. It has more than 134 branches across the country, which serve over five million customers in Malaysia and worldwide.
Islam has always been an inalienable part of the collective consciousness of Malaysia. There have been several Islamic movements of revival and revitalization. Darul Arqam is an influential Malaysia-based Islamic grassroots movement in Southeast Asia. Founded in 1968 by Shaykh Ashaari Muhammad al-Tamimi, the movement aims at the reform, revitalization and renewal of the religious and social life of Muslims in accordance with Islamic principles. In pursuance of this goal, Darul Arqam has established hundreds of Islamic schools across the country. It carries out a wide range of activities and programs, including publishing newspapers and magazines, running an advertising agency and managing an Islamic medical centre in Kuala Lumpur. In 1979, Darul Arqam began expanding its networks outside Malaysia. Offices of the organization were opened in Indonesia, Singapore, Thailand, Brunei, the Philippines, Central Asia, Middle East, Australia, New Zealand, US, Europe and China. The influence of the Darul Arqam on the religious, social and political life of Muslims in Malaysia as well as in South East Asia has been widespread.
In the early 1980s Dr Mahathir Mohamad conceived of a world class educational institution which would conform to the highest academic standards and at the same time would be suffused with Islamic values and ideals. His vision found fruition in the establishment of the International Islamic University at Kuala Lumpur in 1983. The university is sponsored by eight Muslim nations, including Malaysia, Bangladesh, Pakistan, Turkey, Egypt, Saudi Arabia, Libya and Maldives. Since its establishment, 60,785 students have been awarded graduate and Master’s degrees in various disciplines. The faculty and students are drawn from Malaysia as well as from other countries.