Labour and taxation

Malaysia’s rapid economic expansion has created a great demand for additional labour for the manufacturing, construction, and service sectors. Although the labour shortage has tended to increase wages—attracting many workers from rural regions—companies nevertheless have found it necessary to recruit foreign labour, primarily from Indonesia, the Philippines, Bangladesh, and Thailand. The presence of foreign workers in large numbers has become a source of social and political tension within Malaysia. Moreover, the rural-to-urban migration prompted by industrialization has led to severe labour shortages in the rural economy.

The primary role of the country’s fiscal system is to raise revenue for governmental expenditure, and the greater part of its revenue is raised through taxation. Direct (income) taxes on companies (including petroleum companies) and individuals constitute the primary source of tax revenue. Indirect taxes (e.g., customs and excise duties), however, also contribute significantly to the national budget.

Transportation

Although Malaysia’s transportation systems improved considerably in the second half of the 20th century, demand generally has continued to outstrip capacity. In addition, much more attention has been given to developing the infrastructure of Peninsular Malaysia than that of East Malaysia. The peninsula’s road network includes high-speed express highways and numerous hard-surfaced secondary roads; it is especially well developed in the major industrial states of the western region. The road network in Sarawak and Sabah is less extensive, with fewer paved roads. Malaysia’s small railway system is of much less significance than its roads and is confined primarily to the peninsula, where it runs from the southern tip (where it is connected to Singapore) northward to the border with Thailand. The country’s first light-rail transport was inaugurated in Kuala Lumpur in 1996. Since then, several monorail and express lines have opened in the Kuala Lumpur metropolitan area, and a private company has established regular and rapid commuter service on double-tracked, electrified lines between Kuala Lumpur, Port Kelang on the western coast, and several other cities nearby.

River transport is of great importance in East Malaysia, especially in Sarawak. In addition, Malaysia’s long and accessible coastlines have fostered maritime trade for more than a millennium. Several ports, notably Port Kelang (the principal port) and Penang on the Strait of Malacca, have become major container-handling facilities. Numerous other ports have been developed, including Tanjung Pelepas and Pasir Gudang in the southern state of Johor, Kuantan on the eastern coast of the peninsula, Kuching in Sarawak, and Kota Kinabalu in Sabah.

Air transport has grown rapidly, with passenger traffic increasing especially on the peninsula. An internal air network connects almost all Malaysian states. Airports in Penang, Kota Kinabalu, and Kuching have limited international service. In 1998 a new international airport opened in Sepang, about 30 miles (50 km) south of Kuala Lumpur, replacing the old international airport in Subang, about 15 miles (25 km) west of the capital city. The airport in Subang has continued to offer some domestic and specialized service.

Constitutional framework

Malaysia is a federal constitutional monarchy with a ceremonial head of state—a monarch—who bears the title Yang di-Pertuan Agong (“paramount ruler”) and who is elected from among nine hereditary state rulers for a five-year term. The Malaysian constitution, drafted in 1957 following the declaration of independence (from the British) by the states of what is now Peninsular Malaysia, provides for a bicameral federal legislature, consisting of the Senate (Dewan Negara) as the upper house and the House of Representatives (Dewan Rakyat) as the lower. The paramount ruler appoints a prime minister from among the members of the House of Representatives. On the advice of the prime minister, the monarch then appoints the other ministers who make up the cabinet. The number of ministers is not fixed, but all must be members of the federal parliament. The federal government also includes an independent judiciary and a politically neutral civil service.

The powers of the federal parliament are relatively broad and include the authority to legislate in matters concerning government finances, defense, foreign policy, internal security, the administration of justice, and citizenship. The constitution also provides that some issues may be addressed by either the federal legislature or a state legislature. Of the roughly 200 members of the House of Representatives, about two-thirds are from Peninsular Malaysia, one is from the federal territory of Labuan, and the remaining seats are divided fairly evenly between Sarawak and Sabah. Members are elected to office from single-member constituencies to terms of five years. The Senate consists of about six dozen members; of these, nearly two-thirds (including those from the federal territories of Kuala Lumpur and Labuan) are appointed by the paramount ruler on the recommendation of the prime minister, and the others are elected by the state legislative assemblies. Election to either house is by a simple majority, but amendments to the constitution require a two-thirds majority. A bill passed by both houses and sanctioned by the Yang di-Pertuan Agong becomes a federal law.