PESTEL analysis of Malaysia

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PESTEL 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, 2019). 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.

Malaysia is a politically stable country. It pursues the principles of peace and neutrality in developing and implementing its foreign policies. However, it 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 Gabriel (2019), 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 ranked 61st out of 180 countries on Transparency International’s Corruption Perceptions Index in 2018. It shows that the country 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. According to the projection by International Monetary Fund (IMF), Malaysia is number 37 in the ranking of global GDP. Its GDP in 2018 was $358,579 million. The GDP per capita of the country in the same year was $11,072, which was higher than that in 2017 (Country Economy, 2018).

Malaysia has a healthy, robust, and industrialised economy. As of August 2019, the unemployment rate in the country is 3.3%. Malaysian economy is diversified and very robust with focus on industrialised, and knowledge-based industries. The economy has benefitted from the adoption of cutting-edge technology. According to IMF (2018) Malaysia is well on its way to achieving high-income status (IMF, 2018). However, to achieve the status finally, it must improve further on the level of labour productivity and the living standards of its citizens.

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 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, 2019). Malaysia received RM21.7 billion in Foreign Direct Investment (FDI) in the first quarter of 2019. This is the highest realised FDI inflow in the country’s history (Jessinta, 2019).

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 are Malay (official), English, Chinese dialects, Tamil, Telugu, and Malayalam (BBC, 2019). As of 2018, the total population of the country is 32.4 million.

Malaysia is ethnically diverse and has a rich cultural life. 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. It is also worth noting that the government limits freedom of speech by directly and indirectly controlling almost all the media (Faoite, 2016).

Technological factors affecting Malaysia

Malaysia is one of most digitally connected societies in the world (Kumar 2019). Approximately, 80% of its residents have access to the Internet, mostly through mobile networks. 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.

It is worth noting that Malaysia aims to become the preferred destination for high-tech investment by 2025. The government has taken a number of 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 digital technology (Shah, 2019).

Environmental factors affecting Malaysia

Malaysia is a beautiful holiday destination. Approximately 25.83 million tourists arrived in the country in 2018. However, this figure fell short of the target of 26.4 million. Dynamic cities, delicious food, stunning beaches, weather, and friendly people are some of the factors that attract tourists to the country. 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 the country 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.

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Last update: 01 November 2019


BBC (2019) Malaysia country profile, available at: (accessed 28 October 2019)

Country Economy (2018) Malaysia GDP – Gross Domestic Product, available at: (accessed 27 October 2019)

Gabriel, C. (2019) Cleaning up corruption in Malaysia goes beyond Najib, available at: (accessed 27 October 2019)

IMF (2018) Malaysia’s Economy: Getting Closer to High-Income Status, available at: (accessed 27 October 2019)

Jessinta, E. (2019) Malaysia records historical high in FDI inflow, available at: (accessed 27 October 2019)

Kumar, A. (2019) How technology is shaping Malaysia’s economy, available at: (accessed 31 October 2019)

OEC (2019) Malaysia, available at: (accessed 27 October 2019)

Shah, S. (2019) Local employers worry about shortage of digitally skilled workers, says JobStreet, available at: (accessed 01 November 2019)

Photo credit: Pixabay

Author: M Rahman

M Rahman writes extensively online with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He is a graduate of Leeds Metropolitan University and London South Bank University.