Malaysia's Business Environment Undermined by Political Interference, Dependence on Commodities

Despite a slowdown of economic growth in 2013, Malaysia’s long-term economic potential remains strong, according to Maplecroft's latest Country Report for Malaysia.

However, as the report points out, Malaysia will still need to diversify its economy to ensure long-term stability.

Much of the country’s growth over the past five years has stemmed from favourable demand for hydrocarbons and agricultural commodities such as palm oil.

This overdependence on commodity-based revenue exposes Malaysia to external risks and could derail economic growth.

Maplecroft notes that Malaysia offers substantial opportunities to investors, particularly in the energy and retail sectors as the country focuses on moving up the value chain and becoming a high-income nation by 2020.

These ambitious targets are supported by developed infrastructure and a largely pro-investment business environment.

Nonetheless, challenges to rule of law – such as political interference over the judiciary and corruption – as well as affirmative action 'bumiputera' policies present significant impediments for investors.

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