Despite a slowdown of economic growth in 2013, Malaysia’s long-term economic potential remains strong, according to Maplecroft’s latest Country Risk Report. However, the report points out that Malaysia will still need to diversify its economy to ensure long-term stability.
Malaysia offers substantial opportunities to investors, particularly in the energy and high-end export manufacturing sectors as the country is focused on moving up the value chain and becoming a high-income nation by 2020.
The ambitious targets are supported by high quality infrastructure and a largely pro-investment business environment. Nonetheless, challenges to rule of law as well as racially discriminatory policies present significant impediments for investors.
Much of the country’s growth over the past five years has stemmed from favorable demand for hydrocarbons and agricultural commodities. This overdependence on commodity-based revenue exposes Malaysia to external risks and could derail economic growth.
The report note that the implementation of international labour standards remains poor, presenting high reputational risks to investors and companies sourcing products from Malaysia.
Ethnic minorities experience entrenched societal, economic and political discrimination such as barriers to accessing education, social welfare, land ownership and business permits.
Furthermore, restrictions on the freedom of expression and religion have driven an overall decline in Malaysia’s human rights landscape over the last three years and contributed to rising social tension.