Malaysia was recently thrown into the spotlight over the missing Malaysia Airlines airliner. For a country long used to staying out of international headlines, the experience didn’t go over very well. Regardless, President Obama is set to visit the country soon, marking the first time a sitting U.S. President has visited the country in decades.
Prime Minister Najib is now promising a bigger international role for Malaysia in both political and economic terms. The Prime Minister recently cited efforts to broker peace deals with Muslim insurgents in both the Philippines and Thailand as evidence of Malaysia’s growing clout.
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Malaysia aims to go from regional to global power
Malaysia is already a regional power and one of the most important members of the ASEAN coalition. The country has enjoyed decades of solid economic growth and Kuala Lumpur is emerging as a major international hub that may someday rival Hong Kong and Singapore. Still, Malaysia has rarely been on the world stage.
Further, past leaders have taken a strong stance against the United States and its allies, mostly due to their support for Israel. Malaysia is a moderate Muslim country and has generally sided with other Muslim countries in international affairs. America’s intrusions into Middle Eastern affairs have often been a focal point of Malaysian leaders looking to lambast the United States.
Trade deals in Malaysia’s future?
Malaysia has long kept its markets somewhat closed to foreign competitors. While it is easy to find international brands, from Gucci to Ford Motor Company (NYSE:F), in Malaysia, tariffs on many imports can be extremely high. A $25,000 dollar Honda Accord can cost upwards of $70,000 dollars in the country. Locally made Proton cars, on the other hand, are far cheaper but are of questionable quality.
Prime Minister Najib has been far more aggressive then his predecessors in terms of modernizing and liberalizing the economy. By international standards, however, Malaysia still remains a relatively protectionist market. The government has also shown a heavy historical preference to ethnic Malays at the expense of Indian and Chinese citizens. This has created rifts within the country and to a lesser extent on the international stage.
Trade deals with the United States and other global powers, however, could finally open Malaysia up to increased competition and trade. The country is currently at risk of falling into a middle income trap in which wages are too high to compete with cheaper neighbors but skills too low to compete with advanced countries. Liberalizing the economy could potentially help.