PEST ANALYSIS OF MALAYSIA. The Multiple Racial Country

Now lets talk about Malaysia. This South East Asian Country is very dynamic, multiracial and highly cultural. We shall make a PEST Analysis of the Country and find some facts about them.

Political
Economical                        ANALYSIS
Social
Technological

Malay
Chinese
Indians

 MALAYSIA







Malaysia in the 21st century is confident in its economic achievements and aspires to be a leader amongst Asian nations. Since achieving independence in 1957, it has enjoyed substantial success in reducing the rate of poverty, which stood at 3.7 percent in 2007, accelerating growth, which was an impressive 6.5 in 2010, and maintaining a democratic political system. Malaysia ranks among nations today as an upper-middle-income country, and hopes to achieve developed-nation status by 2020. But Malaysia also suffers from a widening gap between the rich and poor, lagging standards in education, crime and corruption, and polarization between the country’s major ethnic groups.



PEST ANALYSIS OF MALAYSIA

PEST analysis of Malaysia refers to the analysis of its


• Political

• Economic

• Sociocultural

• Technological



FACTORS……

Malaysia political Analysis

Malaysia is a federal parliamentary monarchy, the Prime Minister of Malaysia is the head of government, and there is multi-party system. The Malaysian political system refers to all those regulations and practices and the structure of laws that show how the government is run. Malaysian political system has a unique foundation on which the country's machinery functions.


• The constitutional system

The Constitution of Malaysia was drafted based on the advice of the Reid Commission which conducted a study in 1956 . The Constitution came into force on August 27, 1957.

• Executive Branch

Malaysia, a federal constitutional elective monarchy, is nominally headed by the Paramount Ruler or Yang di-Pertuan Agong, commonly referred to as the King of Malaysia. Selected for a term of five-years from among the nine Sultans of the Malaystates, the king also is the leader of the Islamic faith in Malaysia. The other four states, which have titular Governors, do not participate in the selection. The political system of Malaysia is closely modeled on that of Westminster parliamentary system, a legacy of British colonial rule. Abdullah bin Ahmad Badawi has been the Prime Minister since 31 October 2003 chosen from the lower house of parliament. The Executive power is vested in the cabinet led by the prime minister. The members of the cabinet are all chosen from among members of both houses of Parliament and are responsible to that body

• Legislative Branch

Malaysia has a bicameral Parliament consisting of the Senate or Dewan Negara with 70 seats; 44 appointed by the paramount ruler, 26 appointed by the state legislatures and the House of Representatives or Dewan Rakyat with 219 seats; members of which are elected by popular vote to serve a term of five-years. The legislative power of the political system of Malaysia is divided between the federal and the state legislatures.

• Judicial Branch

The Malaysian legal system is based on English common law and most of the laws and the constitution are adapted from Indian law. There are the Federal Court, Court of Appeals, high courts, session's courts, magistrate's courts, and juvenile courts. The judges of the Federal Court are appointed by the paramount ruler on the advice of the prime minister. The federal government has authority over external affairs, defense, internal security, justice, federal citizenship, finance, commerce, industry, communications, transportation, and other matters.


• The Party in Power


The ruling party, which is also a coalition, is the Barisan Nasional (National Front) consisting of United Malays National Organization (UMNO) and 13 other parties, most of which are ethnically based. Other parties include Democratic Action Party (DAP), Parti Islam se Malaysia (PAS) and Parti Keadilan Rakyat (PKR). In total there are more than 30 registered political parties, all of which are represented in the federal parliament.


• State Governments


The state governments are led by chief ministers, nominated by the state assemblies and advising their respective sultans or governors. There are 13 states and three federal territories which are Kuala Lumpur, Labuan Island and the Putrajaya federal administrative territory. Each of these states has an assembly and government headed by a chief minister. Nine of these states have hereditary rulers, generally titled 'sultans', while the remaining four have appointed governors in counterpart positions.

• TAXES


The major proportion of government revenue comes from taxes, totaling 76 percent of revenue in 1999 (46 percent from direct taxes and 30 percent from indirect taxes). In 1999, the income tax rate was 28 percent for both resident and non-resident companies; however, companies resident in Malaysia have tax exemption on income brought in from abroad. The Malaysian government has introduced a number of initiatives for manufacturing activities, tourism, the agricultural sector, transportation, and communication.




<揄Ž>

Malaysia Economic Analysis

To understand Malaysia’s economy, it is imperative to analyze one of the most important factors of the change which happened in the country’s economy during the 22 years when Dr Mahathir bin Mohamad was Prime Minister. During his term, Tun Dr Mahathir bin Mohamad, responsible for several other achievements, shifted the economic focus of the country from mainly agricultural to mainly industrial centring on the manufacture of computers and consumer electronics.



The result is apparent, with GDP growth reaching an average of over 6% per year for 16 years and which today continues a healthy growth, low unemployment figures of under 4% since 1992 and low inflation, despite the recent global rise in petroleum retail prices.



One of the most significant driving forces of the Malaysian economy today is the expansion in domestic demand, largely due to the private sector, a key player since 2003.



Forecasts

Analysis of the 2008 budget sees the economy in the long term being driven by the private sector, with important steps being implemented to reduce the cost of doing business, promoting national and foreign investment and promoting competitiveness. Several steps are being taken to improve the country’s competitiveness, including the introduction of a new business traveller visa as well as multiple entry visas for Chinese and Indian nationals which are likely to increase the demand for transitory residences (rental properties).
 Additionally, RM 858 million (€ 177 million or just under £ 124 million GBP) has been allocated to the Tourism sector with the goal of improving and diversifying the tourist attractions and upgrading tourist facilities. A Tourism Infrastructure Fund of RM 200 million has been created to further promote tourism activities in Sabah and Sarawak, the two Malaysian states which make up Malaysian
Borneo.

 As well as the announced 50% exemption on stamp duty tax for the purchase of one property whose purchase prices is under RM 250.000, the government also implemented a RM 50 million fund with the aim of providing financing guarantees for low income groups to purchase property through Bank Simpanan Nasional and Bank Islam. Additionally, contributors to Malaysia’s social security/retirement planning EPF will benefit from the government’s Home Financing Scheme which allow for monthly withdrawls from their EPF fund to finance the purchase of a house.
Note:

Malaysia currency is Malaysian Ringgit is (MY, MYS). The symbol for it is RM

 Low cost of living

The cost of living in Malaysia is still very low in comparison to western cities. For example, student rent can cost anywhere between RM 300 (€ 62 or £ 43) for shared accommodation to RM 1200 (€ 247 or £ 173) per month at the higher end of the spectrum.
 Meals traditionally can cost between RM 2.50 (€ 0.50 or £ 0.30p) for roadside meals up to RM 50 for a special occasion (€ 10.30 or £ 7.20).

 However if you really have something to celebrate, you could also spend as much as RM 250 (€ 50 or £ 30) for a luxury dining experience in a renowned Kuala Lumpur restaurant, winner of the “Best Oriental Restaurant” award in 2004 during the Malaysia Tourism Awards. Due to the modern atmosphere and culture variety in Malaysia, you can spend as much as your heart desires (or as little).
 Property market set for healthy growth

With all of the actions which the government in Malaysia are taking to promote foreign investment in real estate in Malaysia, as well as promoting the purchase of property by Malaysians, the value of real estate is likely to see considerable growth over the coming years. As the market has only really just opened up to overseas investors, now is the best time to enter the market.
 The commercial real estate sector is seeing substantial growth, with a major investment by local and foreign companies expanding their existing office locations, relocating to Malaysia or simply opening new ventures in the country. The government has created an environment which promotes national economic competitiveness and benefits the creation and operation of enterprises.
 This significant relocation has created a high demand for residential real estate, and with more incentives for companies set for 2008, there is no reason to assume things will change.
Incentives are not only planned for the corporate world of Malaysia though. In 2006, the real estate market was officially opened up to global property investors as the process for purchasing property was streamlined and simplified and further in 2007 as the government announced their decision to abolish Capital Gains Tax on real estate sales which take place after 31st March 2007.
 With a strong economy, healthy increase in commercial real estate and active promotion of the government for corporate and individual purchase of real estate, this market, still very much in its infancy, is coined as one of the favourites by major analysts. There are, of course areas which are considered favored locations and significantly more promising due to local submarket trends.  

Inflation

Inflation in Malaysia is generally kept very low. For example during the years of 2002 and 2004, inflation was at a controlled low of 2% however due in large part to the global increase in retail prices of petroleum products, inflation rose in 2005 to 3% and again in 2006 to 3.9%, where it was kept by the government who made a commitment not to raise the retail price any further. The government is still carefully controlling the situation.
Economic expansion

With many incentives from the government to stimulate further economic growth and competitiveness amongst national and international companies operating in Malaysia, the healthy and steady growth of the country’s economy is set to continue for the years to come. The commercial real estate sector is increasing significantly each year as more and more companies relocate or open in Malaysia, the subsequent increase in residential property around these commercial hubs has also been significant. Malaysia, beneficial policies and the removal of several barriers has also increased the interest of international property investors in Malaysian property and the Tourism sector has seen steadily increasing figures in recent years.
Because the economy of Malaysia is focusing on and being driven by the private sector and internal growth rather than relying only on export products, the country’s economy is looking at very healthy years to come.
Malaysia Sociocultural Analysis

Malaysia is a country of Southeast Asia composed of two noncontiguous regions: West Malaysia on the Malay Peninsula and East Malaysia on the north coast of the island of Borneo.
 • Population distribution

Population distribution is uneven, with some 15 million residents concentrated in the lowlands of Peninsular Malaysia. Malaysia's population of approximately 24 million (2003) continues to grow at a rate of 1.9 percent per year. There is great diversity regarding the Malaysian population's ethnicities, linguistic groups, cultures and religions. The population of Malaysia can be divided into four major ethnic groups: the Malays, the Chinese, the Indians and the indigenous people. In addition, there are Europeans, Americans, Australians, Eurasians, Middle Easterners and Thais, as well as people of mixed ancestry.
Ethnic Malays and other indigenous peoples comprise 58 percent of the population.

• Language and religion

They are the largest, as well as the most homogeneous ethnic group, in the country in terms of culture, language and religion. They share a common culture and speak a common language - Malay - the official language of Malaysia. Almost all Malays are Muslims, and adherence to the religion is seen as an important factor distinguishing a Malay from a non-Malay. Indeed, by constitutional definition, all Malays are Muslim. Malays also enjoy certain privileges under the affirmative action program introduced in 1971, which was aimed at helping Malays who were economically disadvantaged at that time. There are favorable quotas for Malays entering universities and in the arena of employment. These privileges have been sources of conflicts between Malays and other ethnic groups in the country.
• Different ethnic groups
 The second largest ethnic group in Malaysia is Chinese, consisting of 24 percent of the population. The Chinese are ethnically homogeneous, but less so in terms of language and religion. They speak several different Chinese dialects, and there is no dominating religion among them; some are Buddhist or Taoist as well as a small number of Christians. The Chinese are largely outside of the political process, but they are very active and successful in business. Indeed, the Chinese have historically played an important role in trade and business in Malaysia. Considerable tension exists between the Malays and the Chinese as a result of success of the Chinese in business and their unfavorable political position in the country. The Indians constitute about 8 percent of the population in Malaysia, and most of them speak Tamil. The majority of the people in this ethnic group practice Hinduism; others practice Islam, Buddhism and Christianity.

Non-Malay indigenous groups make up 10 percent of the Malaysian population and they tend to live in Eastern Malaysia. As such, more than half of Sarawak's population and about two-thirds of Sabah's population are composed of non-Malay indigenous groups. They are divided into dozens of ethnic groups, but they share some general patterns of living and culture. Until the 20th century, most practiced traditional beliefs, but since then, many have become Christian or Muslim. The indigenous Malaysians known as the Orang Asli constitute the smallest such ethnic group. The Orang Asli is subdivided into several groups, each speaking a different language from the other groups. Most of them believe in traditional religions, but some have converted to Islam. The "other" category includes Europeans, Americans, Australians, Eurasians, Middle Easterners, Thais, as well as Malaysians of mixed ethnic and national backgrounds.
Group Total
 

Malay, Peninsular

9,041,091

Han Chinese, Hokkien

1,848,211

Tamil

1,743,922

Han Chinese, Hakka

1,679,027

Han Chinese, Cantonese

1,355,541

Banjar Malay

1,237,615

Han Chinese, Teochew

974,573

Han Chinese, Mandarin

958,467

Minangkabau

874,536

Indonesian

772,558

Iban

666,034

Filipino

442,933

Han Chinese, Hainanese

380,781

Han Chinese, Min Bei

373,337

Malay, East Malaysia

271,979

Han Chinese, Min Dong

249,413

Straits Chinese

236,918

Nepalese

217,587

Tausug

201,797

Dusun, Central

191,146



• Birth rate

The population of Malaysia has a healthy life expectancy at birth of 71.7 years (74.5 for males, and 69.01 for females). The infant mortality rate of Malaysia is 19 deaths per 1,000 live births.
• Literacy rate

In terms of literacy rate in Malaysia, 88.9 percent (85.4 percent for females and 92.4 percent for males), age 15 and over, can read and write.

• Conflicts due to different groups

In Malaysia there many different kinds of religion, different kinds of ethnic groups, different culture and many more. The likelihood of problems increases when the cultural differences are severe and when the various cultural groups are nearly equal in size but in Malaysia, people are open and knows the sensitivity of talking about different people’s culture, religion and different ethnic groups. In Malaysia, there’s minority conflicts and remain peaceful though there are many different ethnic groups. But most of all many malaysian know how to work together.
• The Government and Women's Equality

The Government of Malaysia has committed itself to women's equality and taken a number of initiatives to promote this:

By agreeing to the commitments set forth in the Beijing Platform for Action at the UN Fourth World Conference on Women (1995), the Government promised to:

1. Enhance the national machinery for women's advancement.

2. Increase women's participation in decision-making.

3. Safeguard women's rights to health, education and social well being.

4. Remove legal obstacles and gender discriminatory practices.

Key demographic rates

Population growth rate:

1.78% (2006 data)

Age Structure:

• 0–14 years: 32.2% (male 4,118,086/female 3,884,403)

• 15–64 years: 62.9% (male 7,838,166/female 7,785,833)

• 65 years and over: 4.8% (male 526,967/female 667,831) (2007 est.)

Crude birth rate:

For 2006 is around 18.7 and increase over 2005 (18.3) but well below the rates registered for 2004 (19.1)

Crude death rate:

In 2006 stood at 4.5, relatively unchanged since 2004

Net migration rate:

0 migrant(s)/1,000 population (2000 est.)

Human sex ratio:

• at birth: 1.07 male(s)/female

• under 15 years: 1.06 male(s)/female

• 15–64 years: 1.01 male(s)/female

• 65 years and over: 0.79 male(s)/female

• Total population: 1.01 male(s)/female (2005 est.)

Infant mortality rate:

6.6 deaths/1,000 live births (2006 data)

Life expectancy at birth:

• total population: 74.05 years (at 1:1 male-to-female ratio)

• male: 71.8 years (2006 data)

• female: 76.3 years (2006 data)

Total fertility rate:

• 2.7 children born/woman (2010 est.)

• 2.98 children born/woman (2008 est.)

• 3.01 children born/woman (2007 est.)

• 3.04 children born/woman (2006 est.)

• 3.07 children born/woman (2005 est.)

Technological analysis of Malaysia

• Phone Lines Per Thousand

Malaysia while having made tremendous strides in developing its telecommunications infrastructure is still in its infancy and is considered as having a low "teledensity" rate. Presently the country has only 16.6 per 100 people which is targeted to be increased to a penetration rate of 45 lines per 100 by the year 2005. The current Malaysia telephone penetration rate is at 166 telephones per thousand, up from a previous rate of 93 telephones per thousand in 1990. The GoM is actively promoting policies to increase this rate by encouraging growth in the entire telecommunications industry, including the fixed line market and has issued eight new licenses for new telecommunications companies to enter the market.. With this advent of new companies it is expected that the penetration will continue to grow, with an estimated penetration rate of 24.7 phone lines per 100 by the turn of the century.
 FIXED-LINE SERVICES OPERATORS

Company Number of Customers

Telekom Malaysia 3.5 million subscribers

Binariang Not available yet (license only)

Celcom Not available yet (license only)

Time Telekom 5,000 subscribers

Mutiara Telecommunications Not available yet (license only)

Syarikat Telefon Wireless 4,000 subscribers

Source: Star Graphics, July 1996

• Fiber trunks and Phone Cables

Malaysia presently has an adequate copper analog system that is being replaced and expanded upon by a new digital fiber optic cable network as demand for capacity increases. This will allow the introduction of advanced telecommunications services in the country. Currently the only fiber-trunks constitute the backbone of the major telecommunications exchanges.
• T1, ISDN and other high speed services

T-1 service and ISDN service was recently introduced by one of the telecommunications licensee’s Telekom Malaysia and is still quite low. The penetration rate rise is rising and this is mainly attributed to the upgrading of current infrastructure and the implementation of new technologies such as digital, fiber optics, broadband, wireless and cellular, ATM and ISDN.
 • Mobile Phones, PCS and Cellular Systems

One area of Malaysia’s telecommunications industry that has been prospering is the wireless phone market; Malaysians cellular penetration rate is about 6% - or about 1 million users, one of the highest in the region. The cellular market continues to grow and has an anticipated growth rate of 30% over the next three years reaching a total of about 2.5 million handset users by the year 2005.

From the present base of, or a rise from a current rate of 35 cellular phones per thousand people to 165 by the year 2000.One estimate, by the Malaysian cellular industry, pegs the growth rate at around 20,000 new subscribers per month. There is concern as to what the saturation point is but a penetration rate of 40% is not uncommon in countries where wireless service has been available for a long time as in Australia and the Nordic regions.

Five new networks were launched in 1995 - two Global System for Mobile telecommunication (GSM) networks (Binariang and Celcom) and three Personal Communication Networks (Mutiara, Sapura Digital and MRCB Telecommunications). PCN is an enhanced version of the European GSM. There were many concerns regarding these duplicate networks about the cost of the networks and the commercial viability of having five domestic service networks, five international gateways, and eight cellular networks in a country of 19.3 million people.
Cellular Service Technology Subscribers in Malaysia

Wireless Technology

Year ART 450 ART 900 AMPS 800 PCN GSM Total

1990 54,616 23,315 - - - 77,931

1991 70,917 60,761 - - - 131,678

1992 83,118 123,330 - - - 206,448

1993 89,028 251,046 - - - 340,074

1994 96,730 442,890 32,100 - - 571,720

1995 96,345 561,314 149,580 39,729 25,820 872,788

Composition of Cellular Service Technology Subscribers 1995



• Main Service Providers

Telekom Malaysia Berhad (TMB)

Telekom Malaysia Berhad (TMB) is the dominant telecommunication service provider. TMB has more than 3 million customers and has embarked on a multibillion ringgit investment program to upgrade and modernize its network. The company plans to modernize its existing infrastructure by installing state-of-the-art digital technology. TMB first introduced cellular communication in the country in 1985 via the Atur 450.

Cellular Communications (M) Sdn Bhd (CELCOM)

Celcom is one of the GSM licensees and operates under the brand name of Celcom GSM and ART 900. The ART 900 system was introduced in 1989. Binariang Sdn Bhd Binariang is recognized as a dominant player in the industry. The cellular division operates under the brand name Maxis which uses GSM technology. GSM licensees Binariang and Celcom share about 70,000 subscribers between them. Today, the three PCN operators have attracted a total of 80,000 subscribers in less than a year.
Mobikom Berhad

Mobikom operates the Mobifon 800 service which uses both analog and digital technology, introducing the system in 1994. However this service has not been widely accepted due to the relatively high price of dual mode handsets as compare to other analog sets.

Sapura Digital Sdn Bhd

Sapura Digital is the other PCN service operator which uses the ADAM (or Advanced Digital Access for Mobile Telecommunication) brand. (Sapura Digital was recently merged with Time Telekom). Digital technology is fast gaining momentum in the country. Demand for digital mobile handsets has seen a fall in prices. Cellular market in the country continues to grow with an anticipated average growth of 30 per cent for the next three years reaching a total of about 2.5 million handset users by 2005. There is a higher penetration/rate of growth for the cellular phone market as opposed to the paging industry. One estimate puts the growth rate at around 20,000 new subscribers a month (a portion is attributed to CELCOM's already established ART 900 analog service).

 Current Technology Market Share

Technology Market Share

ART 900 64 %

AMPS 800 17 %

ATUR 45 11 %

PCN 5 %

GSM 3 %

Source: Jabatan Telekom Malaysia


Paging Market

Industry sources estimate the total market potential for the paging industry to be 500,000 subscribers, but currently there are about 150,000 (1995) subscribers in Malaysia, the penetration rate in 1995 was about 1 per cent as compared to Singapore's 20 per cent. Analysts therefore see great potential for the paging market. Operators expect the paging penetration rate to reach five per cent by the end of 1998. Industry sources have expressed the opinion that the market would be more effective if the industry were consolidated, providing improved and standardized paging services.

Malaysia has a total of 38 paging licensees. Eight of the 38 companies with local paging licenses have also been awarded nationwide licenses. Only 20 of the licensed companies currently serve the market as growth of the paging industry has been slower than that of the cellular market. Most operators offer regional coverage but have established roaming arrangements with each other allowing subscribers to have national coverage.. The market is in a stage of decline as reflected in the number of pagers sold over the years as number of paging customers have migrated to other modes of communication such as the cellular phones.. The quantity of licenses issued have made it difficult to control prices, which are dictated by customers, hurting the profitability of many paging companies and slowing the introduction of new features.

Electcoms Sdn Bhd is the dominant paging operator in the country with a market share of about 35 per cent. Other major companies include Komtel Sdn Bhd, Easycall, Hutchinson Paging and Kilatcom. Komtel with a market share of about 28 per cent, has a total subscriber base of 46,000 and operates about six networks. Easycall holds about 20 per cent of the market share and has a subscriber base of 34,000.



Number of Paging Subscribers for 1990-1995

Year 1990 1991 1992 1993 1994 1995

Number 42,442 62,000 80,000 109,000 128,818 149,268

 Regional Market Share for Radio Paging

Region No. of Subscribers Market Share

Central 98,731 67 %

Northern 21,176 14%

Southern 19,787 13 %

Eastern 4,510 3 %

Sarawak 2,860 2 %

Sabah 2,204 1 %

Source: Jabatan Telekom Malaysia



Satellites, Earth Stations and Teleports

Malaysia has developed its own satellite network with the launch of its own satellite (MEASAT1) in January 1996. The result was the immediate and simultaneous point to point and point to multi-point telephone is presently available throughout Malaysia’s islands.

Measat is owned and operated by Binariang Satellite Systems Sdn Bhd (BSS), a subsidiary of Binariang Sdn Bhd. Measat 2 was launched in late October of 1996. Measat 1 has 5 Ku-band and 12 C-band transponders while Measat 2 has 9 Ku-band and 12 C-band transponders (with a double capacity equivalent to 6 transponders). The C band service will provide commercial and economic benefits to all regional network operators who require broadband capacity for video, data and voice service.

Measat's satellites are from Hughes, USA Radio Television Malaysia (RTM), the government radio/television station will lease two 36 MHz C band transponders on a full-time basis and one additional 36 MHz C band transponder for occasional use. Subscribers will be able to receive communication, entertainment and information from the 20 TV and eight radio Direct-To-User (DTU) services. Binariang has a license to own and manage satellites for 20 years without restriction on the number of satellites that may be launched. Binariang is investing about US$236 million in these two satellites along with ground facilities located in Langkawi.