Imagine wandering around in Kuala Lumpur, the capital city of Malaysia, with your friends. You decided to stop by a mall to do a little shopping, until one of your friends mentioned that the economy in Malaysia is different than in Indonesia, followed by another one comparing Malaysia’s economy with other countries. Then, you started to wonder, what makes Malaysia’s economy different from other countries? Is it better? Is there something special behind Malaysia’s economic activities?
Fortunately, I’m going to help explain the answer to your questions.
In 2024, Malaysia’s economic field is ranked 34th most competitive country economy in the world by nominal. Not just that, Malaysia is ranked 5th in Southeast Asia’s top growing economies. (data source: The Edge Malaysia and Seasia.co)
For those who are wondering, GDP means Gross Domestic Product and is the standard measure of the worth added created through the production of products and services in a country during a certain phase. In Indonesia, it’s called PDB which means Produk Domestik Bruto.
Malaysia’s economy is known for its diversity, growth, and export-oriented manufacturing. In Southeast Asia, Malaysia’s economy is one of the most diversified and fastest-growing. It has transformed from a low-income to upper-middle-income country in a single generation! This country is a major producer rubber and palm oil, and is in fact one of world’s largest sources of commercial hardwoods. Malaysia is also a key player in global supply chains, particularly in semiconductor production. In Malaysia, there are also some prominent foreign companies with a significant presence we all know well today such as Nestle, Panasonic, Phillips, Coca-Cola and many more operating in various sectors like food and technology.
According to the data from Ministry of Finance, Malaysia, the economy of 2025 with constant prices since 2015, demands RM 2,810,355 using 37.9% of it for private consumption, 33.8% for the export of goods, 10.1% for private investments, 7.9% for public consumption, 7.5% for exports of services and 2,8% for public investment.
But what are the supporting factors that helps Malaysia’s economy to become what it is today? How much is the public involved? Well, the following are the factors that supports Malaysia’s economy, such as.
- Business Fields
Businesses in Malaysia support its economy by contributing GDP, providing jobs and paying taxes. Local businesses contribute to GDP through services, manufacturing, construction, wholesale and trading. Strong businesses pay taxes that go towards vital services such as schools, roads, fire stations, and police stations.
- Public’s Purchasing Power
This supports Malaysia’s economy by stimulating demands, encouraging investments and promoting social responsibility. Strong purchasing power, due to rising household incomes and an expanding middle class, has supported the retail sector. In times of crisis, low interest rates make borrowing cheaper, which boosts investments, protects jobs and income.
- Society’s Minimum wage
A higher minimum wage directly boosts the income of low-wage earners. This leads to increased consumer spending, which is a significant driver of economic growth. When people have more money, they tend to spend it on goods and services, stimulating demand and supporting businesses.
We should also get to know the country’s investment in order secure their citizen’s buying power and longevity, which supports its economic field. What are those supporting investments?
- Health and Education
A strong education system supports the development of diverse industries, reducing reliance on specific sectors. On the other hand, a robust healthcare system increases economic stability by weakening the impact of health crises, as demonstrated during the COVID-19 pandemic. It attracts foreign investment, as businesses prioritize locations with reliable healthcare infrastructure.
- Pension Fund
Pension fund acts as a significant source of long-term investment capital, channeling funds from working citizens into various sectors like stocks and bonds. This stimulates economic growth.
Other than making an investment to improve their country’s economy value, the state also has a way to control taxes in order to maintain people’s purchasing power. Wait, how does controlling taxes support the country’s economy?
Controlling taxes in Malaysia supports the economy by generating incomes for essential government spending on infrastructure, education, and social programs, while also influencing business behavior by encouraging investment, innovation, and job creation through strategic tax inducement. This helps improve Malaysia’s economy growth.
In the past three (3) years, Malaysia’s economy experienced growth, with 2022 being the highest growth at 8.7%, followed by 3.7% in 2023, and 5.1% in 2024. In 2022, the economy grew 8.7% making a strong recovery from the previous year (2021). Then on 2023, the growth rate decreased to 3.7%, still positive but lower than the previous year. With the help of continued expansion in domestic demand and a rebound in exports, the economy of 2024 expanded to 5.1%.
There are few actions the citizens of Malaysia can do to support and even increase the country’s economy growth rate. Actions such as..
- Buying domestic products
This action supports the economy by keeping money circulating within the country, improves local businesses, helps creating jobs and toughen the overall economic infrastructure.
- Paying taxes
With paying taxes, the money goes to the government which will be managed again to support local businesses, strengthening its economic growth.
- Launch job vacancies by opening a business even from small things
By opening businesses for those incapables, we will be helping them earn money that they can spend on domestic products, which can then help support its economy.
As a foreigner in Malaysia and someone who loves to buy items, I love to buy its domestic products. I do realize that some of the products is more expensive than the others even if they are very similar. Like that one time I wanted to buy a keychain in Pasar Seni, a small handmade knitted cactus keychain costs Rm50. Comparing it to the cactus keychain I found elsewhere, it was less than Rm10. Now I understand, it’s the quality that makes a difference.
The presence of Indonesian brands in Malaysia can indirectly support the Malaysian economy through increased consumer spending and potential investments. There are some well-known Indonesian brands sold in various stores such as Indomie/ Mi Sedap, Kecap Manis ABC, WARDAH Cosmetic and Buttonscarves. Malaysia also holds several economic appeals for Indonesia, making it a significant partner for trade and investment. Appeals such as..
- Both Country’s Strong Bilateral Trade Relationship
- Malaysia’s Economic and Stability Growth
- Skilled Workforce from the citizens of Malaysia
Talking about the economy happening between Malaysia and Indonesia, there is a question that pops into mind: Does Malaysia’s economic attractiveness exceed Indonesia’s economic attractiveness? In what respect? Well, there are some areas were Malaysia does exceed Indonesia’s economic attractiveness, and there are some areas where it’s the other way around.
Malaysia consistently ranks higher than Indonesia in global ease of doing business indices. This suggests a more streamlined regulatory environment, lower bureaucratic hurdles, and a more predictable business climate. Malaysia also generally enjoys a higher degree of political stability compared to Indonesia. This can be a significant factor for investors seeking long-term security and predictable policy frameworks.
On the other hand, Indonesia has a much larger population and a rapidly growing middle class, presenting a huge potential consumer market. Its overall GDP is also larger and is projected to grow significantly, making it a very attractive long-term investment destination for many. Not only that, Indonesia is also rich in natural resources, which can be a major draw for industries reliant on these commodities.
Malaysia will continue to be a significant economic attraction in the region because it is known for its relatively good political stability compared to some of its neighboring countries. This creates a safer and more predictable environment for investors and businesses. Government policies that support investment and economic growth are also attractive. What’s more, Malaysia has a more advanced and well-maintained infrastructure, including ports, airports, highways and telecommunications networks. This reduces operational costs and increases business efficiency.
For its future trends, Malaysia is actively developing its digital economy, with significant investments in digital infrastructure, e-commerce, fintech and related industries. This will create new growth opportunities and attract investment in the technology sector.
Even with its strong economy, Malaysia still need its support from its citizens and a strong policy. So, what can we do to support? Here are ways we can do to help support the country’s economy..
- Buy Local Products
Choose Malaysian-made goods and services whenever possible. This supports local industries, creates jobs, and keeps money within the country. Look for the “Made in Malaysia” label.
- Invest in Local Companies
Consider investing in Malaysian companies through the stock market or other investment platforms. This provides capital for businesses to grow and expand.
- Travel Domestically
Explore Malaysia’s diverse attractions and travel within the country. This directly supports the local tourism industry, including hotels, transportation, and tourist destinations.
Malaysia’s economy is not only dependent on the physical products produced, but is also greatly influenced by Malaysia’s overall branding. The positive image and perception of Malaysia in the eyes of the world has a significant impact on various aspects of the economy.