PESTLE analysis of Malaysia examines the political, economic, sociocultural, technological, environmental & legal factors influencing Malaysia to this day.
In this PESTLE analysis of Malaysia, you’ll see how a few of the political, economic, sociocultural, technological, environmental, and legal factors influence Malaysia to this day.
Malaysia's Political Factors
- A government of 9 sultans: Malaysia's constitution is interesting — it's made up of thirteen states, three federal territories, and a monarchy. The monarchy, consisting of a committee of sultans from the nine Malay kingdoms, is more of a figurehead, while the elected Prime Minister handles the majority of the country's policies and regulations.
- Connected to many worldwide organizations: You'll find Malaysia listed as a member of the Commonwealth of Nations, the UN, and the creator of the ASEAN and Organisation of Islamic Cooperation (OIC).
- Digital Governance and Regulatory Overreach: The growing involvement of the Malaysian government in digital governance reflects a broader shift towards increased regulatory control over online platforms. This shift highlights the government's efforts to manage digital spaces in a way that aligns with national interests. However, such regulatory actions can raise concerns about potential overreach, particularly when they are perceived as burdensome or unclear. This can impact international business relations, as multinational companies might see these regulations as obstacles, potentially deterring investment in Malaysia’s burgeoning tech sector. Balancing these regulations with the need for a business-friendly environment is crucial to maintaining the country’s competitive edge.
- Example: The introduction of Malaysia’s social media licensing plan exemplifies the potential challenges of increased government control in digital governance. Under this new regulation, social media platforms with over eight million users are required to apply for a license, a move intended to combat cybercrime and harmful online content. However, the lack of clarity and the perceived burden of compliance have sparked concerns among major tech companies like Google and Meta. These companies, through the Asia Internet Coalition, have publicly expressed that such regulations could stifle innovation and create an unwelcoming environment for digital businesses, potentially impacting Malaysia’s attractiveness as a destination for foreign investment. This situation illustrates how regulatory overreach in digital governance can have broader implications for international business relations.
- A friend and enemy to China: Although the country has had disputes about the South China Sea, Malaysia still has close ties with China. To manage these disputes, the two countries have worked together to sign various energy and defense agreements.
- Stable but corrupt political system: Overall, Malaysia is politically stable but corrupt. Citizens are expected to pay a fee (called a “sweetener”) to access hospitals, schools, and courts. Some political figures have recently arrested big-name people who are connected to politics, which has brought Malaysia’s corruption to the spotlight. The media — including print and television— isn't safe from governmental control either. Back in 2007, the government agency instructed radio and television stations to not broadcast speeches from oppositional leaders. It was a tough break for said oppositional leaders.
Malaysia's Economic Factors
- A middle-income country with hopes for more: Since Malaysia spent the last fifty years changing into a multi-sector economy, the country is considered middle-income. The Prime Minister is focusing on bringing Malaysia's income higher, which will bring more interest from investors in the pharmaceutical, technology, and med technology industries.
- Too many exports: Currently, Malaysia's economy is overly dependent on exports but the NAJIB administration plans to offset this problem by expanding into more domestic supply and demand products.
- The two profitable exports are volatile: Gas and oil are Malaysia's most profitable exports. When the energy prices worldwide are high, Malaysia benefits. But when it's low, Malaysia suffers. With many countries moving towards renewable energy sources and electric vehicles, it could be a problem for Malaysia's profits. The rising cost of fuel and gas is already cutting into Malaysia's export profits.
- Incredibly low unemployment rate: The unemployment rate is low — 3.2% in 2019, to be exact. The current economy is active and healthy, thanks to the more diversified income streams into knowledge and industrialized-based industries. The country does still benefit largely from exports — besides gas and diesel, palm oil, office machine parts, and integrated circuits are primary products — to China, Japan, Singapore, and the USA.
Malaysia's Social Factors
- A multi-diverse country: You’ll find many cultures in Malaysia — besides Malaysians, there are Indian and Chinese people living in the country too. Each group has retained their respective religions and way of life. Part of this is because, despite these groups sharing the same schools and workspaces, the majority will marry within their ethnicity rather than outside of it. This is likely because each group socializes within their own ethnic groups for their entire lives.
- If you own the latest car model, you're an elite in Malaysia: There can be quite a difference in social class with Malaysians. The highest of status goes overseas for schooling, has an abundance of familial money, and commands the English language. You can also tell someone is elite by their shopping habits. How and what they buy is often followed in the image of the Malay royalty — they purchase luxury clothes, expensive jewelry, and have a mobile phone. For your social status in Malaysia, it's more important to have the latest car than a home.
Malaysia's Technological Factors
- The Angkasa space program: Back in 2002, a new space program to grow Malaysia’s space education and experiments were developed. Called the Malaysian National Space Agency (Angkasa), it led to the development of the “RazakSAT” satellite. Later, three Malayans were chosen for the spaceflight program, and have been a prominent resource for the country's interstellar developments.
- Embracing technology by big brands: The majority of Malaysians have access to the internet, although it’s mostly via mobile networks. Because of the location, large companies like IBM, Google, and Intel, are embraced within Malaysia. You can find many of their products and brands within. As for social media, Malaysians tend to use the most common ones, including Facebook, Youtube, and Instagram.
- Moving into technology industries: The government is focusing on new initiatives to make Malaysia the preferred spot for hi-tech investments within the next five years. It could lead to new jobs, but it could also mean local workers may struggle to embrace the new technology industries.
Malaysia's Legal Factors
Malaysia follows the common law system. The country follows a legal framework which involves the protection of Malaysian citizen rights, but also follow state laws in specific areas.
Malaysia's Environmental Factors
- A massive land of flora, fauna, and mangroves: Malaysia has a wide range of flora and fauna. Between 50-70% of the country is made up of tropical rainforests. In fact, Malaysia is in the top five for the largest mangrove area in the world. But one of Malaysia’s biggest exports is palm oil, which has lead to mass deforestation and forest conversion. Mining too has affected the land — it’s polluted the rivers and colonized the land for new roads and means of transportation.
- Deforestation is impacting the land, animals, and citizens: However, like with many developing countries, the ecological landscape is suffering. The deforestation of forests, fauna, and other ecosystems in the country is threatened by urbanization. In fact, the deforestation rate in Malaysia is at the highest compared to other tropical nations. The land is used to develop new buildings, which is encroaching on the homes for animals and infecting the natural rivers with pollution. Malaysia has seen an uptick in flooding and landslides because of the deforestation of the land.
Final Thoughts on PESTLE Analysis of Malaysia
Malaysia is a beautiful country with multi-ethnic groups, amazing forestry, and hardworking people who are bettering themselves. But the country's political system is corrupted by questionable politicians who aren't afraid to bend the rules to stay in power.
With that said, the country is still politically stable. The economy is doing well — less than 4% of people are unemployed. The government is working to develop the tech and knowledge-based industries in the country to hopefully rely less on the exportation of gas and diesel. Hopefully, it can increase investments and domestic demand over the next few years.
