The economy of Malaysia once relied principally on the production of raw materials for export, most importantly petroleum, natural rubber, tin, palm oil, and timber. Recently, however, the manufacturing sector has grown in importance, helping the nation’s economy expand 7.3 percent annually in the period 1990-1999. Tourism has also become an important sector in Malaysia’s economy. In 1997 Malaysia’s annual budget included revenues of about $23.1 billion and expenditures of about $19.72 billion. The value of gross domestic product (GDP) was $79 billion in 1999. Services accounted for 43 percent of the GDP; industry, including mining and construction, 46 percent; and agriculture, forestry, and fishing, 11 percent.
Malaysia's systems of public finance—auditing and organization of accounts, parliamentary control, and revenue collection—are generally based on British principles. The primary role of the country's fiscal system is to raise revenue for governmental expenditure, rather than being a mechanism to manipulate the pace of economic activity, the level of employment, or prices. The greater part of government revenues are raised by taxation—roughly equally divided between direct (income) taxes and indirect taxes (e.g., customs and excise duties).
Malaysia's rapid economic expansion has created a great demand for additional labour for the manufacturing and service sectors. The labour shortage has tended to increase wages. Nonetheless, there has been a relatively limited flow of workers from East to Peninsular Malaysia despite the economic incentives, prompting interest in recruiting foreign workers.
Government-industry cooperation, a strong work ethic, mastery of high technology, and a comparatively small defense allocation (1% of GDP) have helped Japan advance with extraordinary rapidity to the rank of second most technologically powerful economy in the world after the US and third largest economy in the world after the US and China. One notable characteristic of the economy is the working together of manufacturers, suppliers, and distributors in closely-knit groups called keiretsu. A second basic feature has been the guarantee of lifetime employment for a substantial portion of the urban labor force. Both features are now eroding. Industry, the most important sector of the economy, is heavily dependent on imported raw materials and fuels. The much smaller agricultural sector is highly subsidized and protected, with crop yields among the highest in the world. Usually self-sufficient in rice, Japan must import about 50% of its requirements of other grain and fodder crops. Japan maintains one of the world's largest fishing fleets and accounts for nearly 15% of the global catch. For three decades overall real economic growth had been spectacular: a 10% average in the 1960s, a 5% average in the 1970s, and a 4% average in the 1980s. Growth slowed markedly in the 1990s largely because of the aftereffects of overinvestment during the late 1980s and contractionary domestic policies intended to wring speculative excesses from the stock and real estate markets. Government efforts to revive economic growth have met little success and were further hampered in late 2000 by the slowing of the US and Asian economies. The crowding of habitable land area and the aging of the population are two major long-run problems. Robotics constitutes a key long-term economic strength, with Japan possessing 410,000 of the world's 720,000 "working robots".
