Malaysia, a middle-income country, has transformed itself since the 1970s from a producer of raw materials into an emerging multi-sector economy.
Under current Prime Minister NAJIB, Malaysia is attempting to achieve high-income status by 2020 and to move farther up the value-added production chain by attracting investments in Islamic finance, high technology industries, biotechnology, and services.
NAJIB's Economic Transformation Program (ETP) is a series of projects and policy measures intended to accelerate the country's economic growth. The government has also taken steps to liberalize some services sub-sectors.
The NAJIB administration also is continuing efforts to boost domestic demand and reduce the economy's dependence on exports. Nevertheless, exports — particularly of electronics, oil and gas, palm oil and rubber — remain a significant driver of the economy.
As an oil and gas exporter, Malaysia has profited from higher world energy prices, although the rising cost of domestic gasoline and diesel fuel, combined with strained government finances, has forced Kuala Lumpur to begin to reduce government subsidies.
The government is also trying to lessen its dependence on state oil producer Petronas. The oil and gas sector supplies about 35% of government revenue in 2011.
Bank Negera Malaysia (central bank) maintains healthy foreign exchange reserves, and a well-developed regulatory regime has limited Malaysia's exposure to riskier financial instruments and the global financial crisis.
Nevertheless, Malaysia could be vulnerable to a fall in commodity prices or a general slowdown in global economic activity because exports are a major component of GDP.
In order to attract increased investment, NAJIB has raised possible revisions to the special economic and social preferences accorded to ethnic Malays under the New Economic Policy of 1970, but he has encountered significant opposition, especially from Malay nationalists and other vested interests.