What Keeps Malaysia's Economy Ticking? Here's A Look At 4 Of Our Biggest Industries
Malaysia heavily depends on the success of its palm oil, oil and gas, manufacturing, and services sectors.
By Dale John Wong — 26 Sep 2024, 04:05 PM
Have you ever wondered how Malaysia (as a country) makes money?
If your guess was tourism, oil and gas, or agriculture, all those are correct!
In fact, they are all part of our country's biggest revenue-generating industries. And when these industries do well, our country's economy benefits.
For instance, Bank Negara Malaysia (BNM) reported that the local economy experienced higher growth at the start of 2024 compared to 2023. This increase was caused by higher household spending, rising employment and wages, increased capital spending, and more exports.
1. Palm oil
As the world's second-largest producer of palm oil, Malaysia relies heavily on this resource for its gross domestic product (GDP) growth.
In 2022, Malaysia exported around 15 million metric tonnes of palm oil and palm oil-based products, valued at RM137 billion.
This sector contributes about RM40 billion annually to the GDP, reinforcing its position as a key part of the agricultural output and global trade.
2. Manufacturing
Made up of various sub-sectors, the manufacturing sector is one of the largest contributors to Malaysia’s economy and accounts for RM1.2 trillion of the GDP.
The automotive industry has 30 producers and over 600 component manufacturers. With key local players like Proton and Perodua, it contributes around RM40 billion to the GDP.
The chemicals sub-sector is projected to add RM40 billion by the end of the decade, according to International Trade and Industry (MITI) Minister Datuk Seri Tengku Zafrul Abdul Aziz, driven by enhanced integration and global competitiveness.
The Malaysian Investment Development Authority (Mida) said that the electrical and electronics (E&E) sub-sector alone made up 5.8% of the GDP in 2023, with a target of RM120 billion GDP contribution and RM495 billion in export earnings by 2025.
3. Services
The services sector, which includes tourism, finance, and ICT, makes up almost 55% of Malaysia's GDP.
In 2023, tourism in Malaysia generated US$16 billion (RM75 billion), making it a vital contributor.
Malaysia's finance sub-sector is recognised as one of the most stable in the region, with a five-year blueprint by BNM focused on market dynamism and stability.
The ICT market, valued at US$25.92 billion (RM121.72 billion), is another big player and reflects the country’s progress toward a knowledge-based economy.
4. Oil and gas
Malaysia has many natural resources and has heavily relied on them to keep the economy pumping even before independence.
Tin, which was first discovered in Larut, Perak, in 1848, was a major driver of the economy for more than a century.
But oil and gas (O&G) are now the mainstays, with PETRONAS currently the main driver of the sector locally.
Oil was first discovered on Canada Hill, Miri, by Marcus Samuel and Company, which was later renamed Shell, in 1910. The company dug the first oil well and pumped out 83 barrels daily.
Other major oil companies that have invested in the upstream segment of the O&G sector in Malaysia include Exxon-Mobil and Hess Corporation of the US, PTT Exploration and Production Public Co Ltd of Thailand, and EnQuest of the UK. A few of these have also worked closely with PETRONAS.
Today, O&G contributes around RM300 billion to the economy. It has successfully navigated the tricky global market to remain a major source of revenue and employment for Malaysians, reinforcing its economic and societal importance.
In states such as Sarawak, Sabah, Terengganu, and Johor, PETRONAS has been involved in training local vendors and its presence in those states has brought huge economic benefits to the local communities.
As one people, all Malaysians play a role in the nation's growth and share in its benefits
This starts with strong national policies which ensure that each state benefits from Malaysia's rich variety of resources.
While oil is mostly extracted in or off the coast of only a few states, even non-producers can share in its benefits.
Every state, even ones that don't have natural resources, can contribute equally to the economy. For instance, Penang and Selangor are leaders in the manufacturing sector, while Sabah, Sarawak and Johor are the largest producers of palm oil.
Altogether, these sectors contribute to the strength and stability of the nation's economy, and all Malaysians play a role in its growth while enjoying its benefits.
This article originally appeared on Free Malaysia Today, with rights to be republished on SAYS.
