M RahmanPESTEL analysis of Malaysia
This detailed PESTEL analysis of Malaysia aims to address some of the political, economic, social, technological, environmental, and legal factors that affect Malaysia today. Malaysia is a powerful country and one of the most vibrant economies in Southeast Asia. Kuala Lumpur is the national capital, while Putrajaya is the seat of the federal government.
Political factors affecting Malaysia
Malaysia is a federal constitutional monarchy that comprises of 13 states and 3 federal territories. The elected monarch is the head of state while the Prime Minister is the head of government. The monarch is elected by the sultans of the nine Malay kingdoms, and this position is rotated every five years (BBC, 2020).
Malaysia is a founding member of the ASEAN and the Organisation of Islamic Cooperation (OIC). It is also a member of the UN and the Commonwealth of Nations. It is a politically stable country. It pursues the principles of peace and neutrality in developing and implementing its foreign policies.
However, Malaysia has maritime and other disputes with some regional nations. It maintains close relations with superpower China though it’s disputes with the latter over South China Sea have drawn a lot of attention. However, both countries have been reported to have signed a series of energy and defence agreements to defuse tensions and take their relations to ‘new highs’.
Corruption is a major problem in Malaysia. According to some news reports, Malaysians accessing basic services such as schools, hospitals, and even courts are allegedly required to pay a ‘sweetener’. Political corruption has been on the spotlight recently with the arrests of some high-profile political figures.
Malaysia’s position was 61 out of 180 countries on Transparency International’s Corruption Perceptions Index in 2022 (Transparency International, 2023). This shows that it is far below countries such as Singapore and Hong Kong, although the rank is slightly better than the Southeast Asian average.
Economic factors affecting Malaysia
The next element to address in the PESTEL analysis of Malaysia is the economic environment. Malaysia’s GDP in 2021 was $$373,034 million. The GDP per capita in the same year was $11,408, which was higher than that in the previous year (Country Economy, 2023).
Malaysia has a healthy, robust, and industrialised economy. It is diversified and very robust with focus on industrialised, and knowledge-based industries. The economy has benefitted from the adoption of cutting-edge technology.
Malaysia is well on its way to achieving high-income status. However, to achieve the status finally, it must improve further on the level of labour productivity and the living standards of its citizens. The high-income status is likely to be materialised between 2024 and 2028.
Integrated circuits, refined petroleum, office machine parts, petroleum gas, and palm oil are the major exports of Malaysia which mostly end up in countries such as China, Singapore, the USA, Japan, and Hong Kong. The European Union and Thailand also attract a lot of Malaysian exports.
The primary imports of the Malaysia are integrated circuits, refined petroleum, crude petroleum, broadcasting equipment, and office machine parts which mostly come from countries such as China, Singapore, the USA, and Japan (OEC, 2023).
Malaysia receives a lot of FDI (Foreign direct investment) every year, and the main investing countries are Singapore, Hong Kong, Japan, and the Netherlands. The government regards FDI as part and parcel of its economic development.
Social factors affecting Malaysia
Malaysia is a multi-ethnic and multi-religious country. The major religion in the country is Islam. Other religions practised in the country are Buddhism, Taoism, Hinduism, Christianity, and Sikhism. Though divisions exist, communal harmony is a great feature of the country.
The major languages in Malaysia are Malay (official), English, Chinese dialects, Tamil, Telugu, and Malayalam (BBC, 2020). The current population is 33.5 million (Worldometer, 2023).
Malaysia is widely known for its friendly and welcoming people. It is home to various ethnic groups, each with their own unique traditions and customs. Despite this diversity, Malaysians are united by their love for the country and their desire to see it prosper.
Malaysian cuisine is a fusion of Chinese, Thai, Indian, and Malay influences. The food is known for its bold flavours and unique spices. Some of the most popular dishes in Malaysia include nasi lemak, laksa, mee goreng mamak, apam balik, ayam percik, roti john, and satay.
People lead a much more affluent lifestyle compared to their counterparts in many upper-middle income countries. The major factors contributing to this affluent lifestyle are low national income tax, almost free health care system, social welfare system, and a low cost of local food, fuel, and household products.
However, alcohol abuse among teenagers is an issue of grave concern. Likewise, the government’s tight grip on media is also a concern. Other issues that have drawn a lot of attention are corruption, gender inequality, and food insecurity.
Technological factors affecting Malaysia
Technology is a key part of this PESTEL analysis of Malaysia. Malaysia is one of most digitally connected societies in the world. Approximately, 88% of its residents used the Internet in 2020. The usage rate is expected to reach around 89.6% by the end of 2025 (Statista, 2022).
Malaysia has been a great place for international tech companies due to its strategic location, tech savvy work force, and IT infrastructure. Many companies such as IBM, HP, Intel, Google, Amazon, and Cisco are well established in the country. The leading social media in use in the country are Facebook, Twitter, Pinterest, Instagram, and YouTube.
Indeed, Malaysia is rapidly developing in terms of technology. It is very evident from Cyberjaya city that has been designed to be a hub for technology and innovation. It is home to many tech companies and is known for its advanced infrastructure.
It is worth noting that Malaysia aims to become the preferred destination for high-tech investment by 2025. The government has taken several initiatives to achieve that goal as well. However, many employers in Malaysia are concerned with the shortage of locally skilled talents to work and face the demands and challenges of the booming transformation of the digital technology.
Environmental factors affecting Malaysia
Malaysia is a beautiful holiday destination. Dynamic cities, delicious food, stunning beaches, weather, and friendly people are some of the factors that attract tourists to the country. No wonder why many international tourists visit it every year.
However, it is worth noting that deforestation, climate related natural disasters, air pollution, excessive waste production and river pollution, and escalating carbon dioxide emissions are some of the environmental challenges facing Malaysia today.
Legal factors affecting Malaysia
The last element to address in the PESTEL analysis of Malaysia is the legal landscape of the country. However, it is worth noting that due to the limited scope of the article, the discussion here is somewhat limited. Malaysia is mostly a common law country, with a separate Islamic law (mostly civil laws) system. The Employment Act (1955) is the main legislation on labour matters in the country.
Malaysia has a written constitution that outlines the rights and responsibilities of its citizens. The legal system is overseen by the Federal Court, which is the highest court in the land.
Summary of PESTEL analysis of Malaysia
To conclude, Malaysia is a beautiful country; however, it is often overlooked by many international tourists. It has so much to offer such as diverse culture, delicious cuisine, and stunning natural beauty. However, it needs to do more to eradicate corruption, and to deal with environmental challenges.
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Last update: 15 March 2023
References:
BBC (2020) Malaysia country profile, available at: https://www.bbc.co.uk/news/world-asia-pacific-15356257 (accessed 10 March 2023)
Country Economy (2023) Malaysia GDP – Gross Domestic Product, available at: https://countryeconomy.com/gdp/malaysia (accessed 10 March 2023)
OEC (2023) Malaysia, available at: https://oec.world/en/profile/country/mys/ (accessed 11 March 2023)
Transparency International (2023) Corruption perception index, available at: https://www.transparency.org/en/cpi/2022 (accessed 12 March 2023)
Statista (2022) Internet user penetration in Malaysia, available at: https://www.statista.com/statistics/975058/internet-penetration-rate-in-malaysia/ (accessed 11 March 2023)
Worldometer (2023) Malaysia population, available at: https://www.worldometers.info/world-population/malaysia-population/ (accessed 11 March 2023)
Author: M Rahman
M Rahman writes extensively online and offline with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He holds an MSc in Tourism & Hospitality from the University of Sunderland. Also, graduated from Leeds Metropolitan University with a BA in Business & Management Studies and completed a DTLLS (Diploma in Teaching in the Life-Long Learning Sector) from London South Bank University.
