Country Profiles: Malaysia and Indonesia

There are two emerging economies in Asia and these are Malaysia and Indonesia. Aside from the rhyming names there are many similarities that make it interesting to compare both countries. These two countries experienced hardships as a result of being under foreign domination. But the most impressive achievements of its people and political leaders is the creation of a new reality – one that is slowly erasing the stigma of poverty and transforming how they are being perceived by the international community.

Country Profile: Malaysia

Malaysia is a melting pot of culture because it is multi-ethnic like many of its Asian neighbours. It is also a multi-religious society and yet it must be pointed out that it is a Muslim nation because majority of its population adheres to Islam. At the same time a powerful Chinese community makes up the other part of the power structure in this country.

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From a geographical standpoint, the country is comprised of two regions and from a geopolitical standpoint “a federation of 13 states and three federal authorities” (World Factbook, 2011, p.1). It has now become a key tourist destination in Asia. This is due to the existence of tourist spots such as excellent beaches offering water sports and breathtaking sceneries.

Sixty percent of the population are ethnic Malays while twenty six percent are comprised of Chinese. The rest are Indians and other indigenous peoples (Richmond, 2007, p.45).

The Gross Domestic Product per capita is $14,700 (World Factbook, 2011, p.1). The GDP composition be sector is listed as follows: a) agriculture 9.1%; b) industry 41.6%; and c) services 49.3% (World Factbook, 2011, p.1). The Malays dominate the political realm while the Chinese control the business realm. The Indians on the other hand are the poorest in the country.

It is important to point out that “the United Kingdom is Malaysia’s largest market in Europe and comparatively speaking, Malaysia is the UK’s second largest market for goods in South East Asia, after Singapore” (Foreign & Commonwealth Office, 2011, p.1). This is not surprising because the United Kingdom has been a leading investor in Malaysia.

The cumulative investment made in the last thirty years is estimated to be over ?20 billion (Foreign & Commonwealth Office, 2011, p.1). The focus of UK Trade and Investment are in education, oil and gas, and defence (Foreign & Commonwealth Office, 2011, p.1). The success of Malaysia can be attributed to its trade and investments.

Although huge sums of money are coming in from the UK, the flow of investment flows in two directions because Malaysia is also investing in the UK. There are at least eighteen Malaysian companies that are listed on the London Stock Exchange. Malaysian companies have controlling interest in Wessex Water; Lotus; Laura Ashley and the Corus hotel chain to name a few (Foreign & Commonwealth Office, 2011, p.1). Malaysia is slowly emerging as a dominant economic force in Asia.

Country Profile: Indonesia

The economic status of the population is diverse ranging from “rural hunter-gatherers to modern urban elite” (BBC News, 2011, p.1). From a geographical standpoint Indonesia is comprised of thousands of islands big and small that are straddled in between Thailand and Australia.

It is a hot and humid country and the terrain is mostly coastal lowlands and the relative size of the country is comparable to Texas (World Factbook, 2011, p.1). The size of the country, its archipelagic nature, and its ethnical diversity can explain the difficulty of managing the nation and uniting the people towards a common goal.

In the decade of the 70’s General Suharto became the nation’s tyrannical ruler. The economic development of Indonesia was based on how Suharto distributed largesse to his family and supporters (Vickers, 2005, p.169). Another problematic aspect of Suharto’s rule is his insistence of army involvement. After Suharto’s ouster from power, the nation and its people began the painful and slow rebuilding process. The country’s new political leaders had to leverage its vast natural resources to improve its economic condition.

This nation has “weathered the global financial crisis because of its heavy reliance on domestic consumption as the driver of economic growth” (BBC News, 2011, p.1). Indonesia’s Gross Domestic Product per capita is $4,200 (World Factbook, 2011, p.1). The GDP composition by sector on the other hand is listed as follows: a) agriculture 16.5%; b) 46.4%; and c) services 37.1% (World Factbook, 2011, p.1).

Indonesia enjoy better standing than its neighbour Thailand but it is not at par yet with Malaysia and could not be compared to its second closest neighbour Australia in terms of economic prosperity. Nevertheless, the marked improvement of Indonesia over the past decades is an achievement in itself considering the problems it faced in the past.

The economy has stabilised due to reforms. As a result real GDP has grown by 6.1% in 2008 and is considered the fastest rate since the Asian financial crisis (Foreign & Commonwealth Office, 2011, p.1).

Indonesia could have gone to the next level and pave the way to become an economic force like Singapore and Malaysia but because of poor infrastructure, a complex regulatory environment and corruption, it underperforms. Foreign investments are not as robust as Malaysia and therefore economic growth is unnecessarily hampered.

Comparison

In the past Malaysia struggled to maintain stability. A country ravaged by foreign domination and weakened by decades of internal turmoil. However, in the present time many have acknowledged that this Asian nation is one of the most vibrant economies in the East. It is due to decades of industrial growth and the careful management of astute politicians. It is a success story that keeps on surprising many international observers. For the good of the Malaysian people and the Asian region, the positive trend must continue.

It is comparable to Indonesia because while Malaysia was ruled by British, Indonesia on the other hand was dominated by the Dutch for many centuries. At the same both countries experienced the same thing after wrestling independence from foreign overlords – both countries were ruled for many decades by a dictator. In the case of Indonesia General Suharto came to power in 1965 and reluctantly relinquished it only in 1998.

The most problematic aspect of Suharto’s rule is his insistence of army involvement in all levels of government that has resulted in corruption (BBC News, 2011, p.1). The forced evacuation of people fostered conflict. Nevertheless, Suharto did something right by allow technocrats to run the economy and therefore ensuring modest economic success.

Another important criterion for comparison is the fact that both countries are known to be Muslim nations. But Malaysia managed to control the rise of extremists while Indonesia has become a playground for Islamic terrorists. In 2002 for instance a massive bomb went on in Bali, Indonesia, a world class resort frequented by many Westerners.

This event tarnished the reputation of Indonesia and it can be argued that the government’s inability to curb terrorist activities is a major hindrance to their continued growth. It is therefore important to study Malaysia and how it was able to maintain an image of stability and peace even if it is also a nation with a significant Muslim population.

Another important criterion for comparison is the utilisation of natural and human resources to foster economic growth. Malaysia is an exporter of electronics; oil and gas; and palm oil and rubber. Indonesia on the other hand, exports agricultural products such as rice and cassava. One revealing point of comparison is the oil reserves and the capacity to export crude oil.

The proven oil reserves of Indonesia are 4.05 billion barrels as of 2010 estimates. ts oil exports are a modest 322,000 barrels per day as of 2009 estimates. Consider for a fact that Malaysia’s proven oil reserves is lesser at 2.9 billion barrels as of 2010 estimates. However, its oil exports are higher at 511,900 barrels per day as of 2007 estimates. This means that Indonesia can boast significant amounts of natural resources and yet it is unable to efficiently harness them.

There is a big difference in the way both countries are being managed. Nevertheless, the economic reforms and financial success of the two countries cannot be denied especially if compared to Thailand, Laos, and Cambodia. One possible clue to the emergence of these two economic powers in Asia is the fact that both countries succeeded in weaning their respective economies from overdependence on agricultural exports. It can be argued that more money can be made in other pursuits.

It is therefore important to discover that the GDP composition per sector of the Malaysia and Indonesia are quite similar. Malaysia’s GDP in the agriculture sector is 9.1% while Indonesia is 16.5%. Malaysia’s GDP in the industry sector is 41.6% while Indonesia is 46.4%. Malaysia’s GDP in the service sector is 49.3% while Indonesia is 48.9%.

This is clear evidence that both countries are serious in changing their economic make-up and investing more in industrialisation and preparing its people to compete in a highly global world. But Malaysia is farther ahead in the field; consider for instance that the HDI for Malaysia is 57 while Indonesia is 108 (United Nations Development Programme, 2011, p.1).

Conclusion

There is a good reason to compare Malaysia and Indonesia. Both countries have similar economic backgrounds being dominated by foreign overlords and suffered under the hands of a dictator. However, the political leaders were able to turn the economy around after they earned their independence.

Indonesia was mismanaged more badly than Malaysia. Thus, it may explain why the economic development lags behind that of Malaysia. The political leaders in both countries succeed in developing an economy that is not dependent on imports. The best example is the use of their oil reserves to fuel the energy needs of the nation. At the same time both countries succeeded in industrialising the economy so that Malaysia and Indonesia are gearing towards a service oriented economy.

References

BBC News. (2011). Indonesia Country Profile. BBC News. Retrieved from
http://news.bbc.co.uk/2/hi/country_profiles/1260544.stm

BBC News. (2011). Malaysia Country Profile. BBC News. Retrieved from
http://news.bbc.co.uk/2/hi/asia-pacific/country_profiles/1304569.stm

Foreign & Commonwealth Office. (2011). Asia and Oceania. Foreign & Commonwealth Office. Retrieved from http://www.fco.gov.uk/en/travel-and-living-abroad/travel-advice-by-country/country-profile/asia-oceania/indonesia/?profile=economy

Richmond, S. (2007). Malaysia, Singapore and Brunei. London: Lonely Planet.

United Nations Development Programme. (2011). International Human Development Indicators: Malaysia. Retrieved from http://hdrstats.undp.org/en/countries/profiles/MYS.html

United Nations Development Programme. (2011). International Human Development Indicators: Indonesia. Retrieved from http://hdrstats.undp.org/en/countries/profiles/IDN.html

Vickers, A. (2005). A History of Modern Indonesia. Cambridge: Cambridge University Press.

World Factbook. (2011). Indonesia. Central Intelligence Agency. Retrieved from
https://www.cia.gov/library/publications/the-world-factbook/geos/id.html

World Factbook. (2011). Malaysia. Central Intelligence Agency. Retrieved from
https://www.cia.gov/library/publications/the-world-factbook/geos/id.html

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