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Economic Powerhouse Malaysia Marks Half Century of Independence
The Washington Diplomat / September 2007

By Larry Luxner

Malaysia, which celebrates its 50th anniversary of independence Aug. 31, is a "progressive Muslim country" that prides itself on its parliamentary democracy system, its booming economy and warm political ties with the United States.

That's the word from Rajmah Hussain Malaysia's dynamic, petite ambassador in Washington.

"We have very good leadership," she told the Diplomat in an interview last month. "Since Malaysia became independent [from Britain] in 1957, we have had a succession of prime ministers who are very visionary. Each of them had their own vision of how the country should move forward, which is what has brought Malaysia to where it is now."

Where it is now is certainly impressive, at least by economic standards.

Malaysia's 27 million people enjoy a per-capita income of $5,300, by far the highest in Southeast Asia outside of the city-states of Singapore and Brunei. Between 1991 and 2005, the Southeast Asian country saw average economic growth of 6.2% per year. This year, the economy is expected to grow by 6%. Unemployment, meanwhile, is only 3.5% and inflation is a negligible 3.0%.

Despite its relatively small population, Malaysia now ranks as one of the top 10 trading partners of the United States, and is this nation's 18th largest export market. Two-way trade between the U.S. and Malaysia reached $44 billion in 2005, and 78% of Malaysia's $27.7 billion in 2005 exports consisted of electronics.

More significantly, the United States has consistently been the largest foreign investor in Malaysia, with $674 million in U.S. investment reported in 2006 alone. Today, some 130 companies on the Fortune 500 list have a business presence in Malaysia, representing cumulative investments exceeding $30 billion.

In the manufacturing sector, U.S. companies boosted their investments to $1.4 billion in 2005, a 380% increase from the $290 million invested in that sector a year earlier. The strong presence of U.S. companies in Malaysia can also be seen in the electronics industry, where they account for 25% of the country's total electronics and electrical exports.

Among well-known U.S. firms operating here are Dell, Intel, Motorola, Western Digital, AMD, Freescale Semiconductors and Texas Instruments.

"We have put a lot of emphasis on trade and investment, and are standards are very much international. Of course, there are certain areas where we need to improve," said Hussain, 56.

"We are now into our ninth five-year plan, which have brought the country forward. When we became independent, we were depending on commodities like rubber, tin and palm oil. But over the years, we've developed our manufacturing sector. We have a vision of achieving developed-country status by the year 2020."

This rapid growth came to a screeching halt in 1997, when the Asian financial crisis erupted, sending economies across the region into a tailspin.

"Our prime minister at the time [Mahathir Mohamed] said it was because of currency manipulation," she said. "He then came up with a policy decision that got us out of the crisis very fast. Initially, other countries criticized us for doing that. But now we've been proven right."

Since that financial meltdown 10 years ago, Malaysia has completely recovered. In addition to being the world's largest producer of rubber and tin, it's also one of the world's top exporters of semiconductor devices, computer hard disks, audio and video products and room air-conditioners.

Its economic success is symbolized by the Petronas Towers, whose 88-story spires rise 1,486 feet over downtown Kuala Lumpur. The Petronas Towers headquarters of Malaysia's state-run Petronas oil monopoly remained the world's tallest skyscrapers from the time of completion in 1996 until 2003, when they were overtaken by the 1,667-foot-high Taipei 101 tower in Taiwan.

Tourism is a key source of foreign exchange for Malaysia, which in 2006 welcomed 17.5 million tourists 174,000 of them Americans. This year, which has been designated "Visit Malaysia Year" in honor of the country's 50th anniversary of independence, even more are expected.

To keep investment dollars flowing into Malaysia despite competition from lower-wage China, the government is reducing the effective corporate tax rate from the current 28% to 26% over the next two years. That'll make Malaysia's tax rate more competitive than many of its regional competitors including Vietnam (28%), Thailand (30%), China (33%), India and the Philippines (each 35%).

Since 2006, Malaysia has also been pushing hard for a free-trade agreement with the United States. Five rounds of negotiations have been held so far, and 19 working groups have been set up on a variety of issues ranging from financial services and textiles to agriculture and e-commerce.

"Once concluded, a Malaysia-U.S. free-trade agreement will help further strengthen bilateral economic ties by providing business opportunities for the private sectors of both our countries," she said. "It will lay the foundation for increased business collaborations. Given the size and importance of our economic interactions, naturally an FTA between Malaysia and the United States should not be expected to be plain sailing. But what's important is that both sides must remain resolutely committed to negotiations."

Despite its economic achievements, Malaysia still has a long way to go before it can call itself a true democracy.

"Malaysians choose their leaders in elections that are free but not fair," said Freedom House in its "Freedom in the World 2005" report.

"Malaysia has a parliamentary government within a federal system. Executive power is vested in a prime minister and cabinet," said the Washington-based non-governmental organization, noting that the ruling Barisan National (BN) coalition has won at least a two-thirds majority in all 11 general elections since 1957.

"Mahathir's 22-year tenure was marked by a steady concentation of power in the prime minister's hands; parliament's role as a deliberative body has deterioriated over the years, as legislation proposed by opposition parties tends not to be given serious consideration. Opposition parties face serious obstacles, such as unequal access to the media an restrictions on campaigning, and on freedom of assembly, that leave them unable to compete on equal terms with the BN."

Corruption is also a major problem, according to Freedom House, with bribery and cronyism particularly widespread in the ruling BN coalition. However, this may be changing under the leadership of Malaysia's current prime minister, Abdullah Ahmad Badawi, who came into office in March 2004.

"We are a very progressive Muslim country, and Prime Minister Abdullah is promoting this concept of civilizational Islam," Hussain explained. "It's not a new religion, just an approach to the practice of Islam which focuses on the development of the Muslim ummah [world unity] as much as spiritual development."

Hussain, who has a bachelor's degree in economics, a master's in politics and a doctorate in international relations all from the University of London, is a career diplomat who's served in six Malaysian embassies abroad four of them at the ambassadorial level.

"As a woman and a Muslim, I'm proud of my religion," she said. "I've served as ambassador in Paris and Geneva, and nothing in the last 31 years has prevented me from accomplishing my duties as a diplomat."

One of Hussain's great joys is cooking, which explains her excitement at hosting a July 19 reception at the embassy on the theme of "Malaysia: The Truly Asian Kitchen." Several hundred diplomats showed up at the outdoor event, which featured traditional Malaysian cuisine catered by five Washington-area Malaysian restaurants.

Sometimes, because of her diminutive size, Hussain isn't always taken seriously.

"Most people think I'm either the wife or the daughter, never the ambassador herself," she says. "And if I go somewhere with a male colleagure, they think he's the ambassador."

Yet the only time Hussain really has a problem is when she's trying to board a flight at any U.S. airport. For some reason, her name and her background automatically trigger a thorough screening of the highest level, despite her status as a diplomat.

But Hussain the first woman among the 11 ambassadors Malaysia has sent to Washington since independence says she knows about the war on terrorism all too well.

"We have had years of dealing with so-called terrorism, especially during British colonial rule when we had problems with communist insurgencies," she said. "But our government was able to overcome problems related to that. Our approach is that you have to go to the root causes of terrorism."

In her mind, the Arab-Israeli conflict has a lot to do with so-called Islamic fundamentalism. She told President Bush as much during a recent state dinner.

"I told the president it would be his legacy to solve the Palestinian issue," she said. "Every year, the White House hosts an Iftar dinner, and that's when I met him and we had a long conversation on the issue of the Middle East. It's a major issue that has to be addressed."

Although Malaysia's state religion is Islam, and 60% of its people profess that religion, the country's Christians, Hindus, Buddhists and others are free to follow their own beliefs. While the country has not generally had problems with fundamentalism certainly not to the extent of nearby Indonesia and the Philippines it's not taking any chances.

In 2003, Malaysia's Ministry of Foreign Affairs officially launched the Southeast Asia Regional Center for Counter-Terrorism (SEARCCT). The agency's role will be to "organize capacity-building and public awareness programs; produce briefs, situation reports and research; and to promote information-sharing and networking."

According to Hussain, "we are monitoring the situation very carefully, and in case there's evidence of extremist activities, the government will take action. That's why the situation is pretty calm in Malaysia."

She also pointed out out her country's coordination with the Department of Homeland Security, saying "our two intelligence and law-enforcement agencies work closely together, though this form of cooperation is not publicly reported."

Even so, Hussain isn't afraid to criticize U.S. foreign policy, especially when it comes to the war in Iraq.

"I think mistakes have been made in the past. The United States should consider withdrawing and let the Iraqis choose their own destiny," she said. "It's true the United States has done irreparable damage. That's why it's important for this country to build bridges. The image of the U.S. has dipped in many countries, particularly Muslim ones. This is due to a misunderstanding of what Islam is all about. Islam is not a terrorist religion, but when it's portrayed that way in the United States, then Muslims like us will resent it."

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