2015 Index of Economic Freedom


overall score70.8
world rank31
Rule of Law

Property Rights55.0

Freedom From Corruption50.0

Limited Government

Government Spending74.0

Fiscal Freedom84.4

Regulatory Efficiency

Business Freedom93.5

Labor Freedom75.7

Monetary Freedom80.8

Open Markets

Trade Freedom80.0

Investment Freedom55.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 29.6 million
  • GDP (PPP):
    • $525.7 billion
    • 4.7% growth
    • 4.2% 5-year compound annual growth
    • $17,748 per capita
  • Unemployment:
    • 3.2%
  • Inflation (CPI):
    • 2.1%
  • FDI Inflow:
    • $12.3 billion
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Malaysia’s economic freedom score is 70.8, making its economy the 31st freest in the 2015 Index. Its score has increased by 1.2 points since last year, with improvements in freedom from corruption, business freedom, and trade freedom outweighing declines in labor freedom and the management of government spending. Malaysia is ranked 8th out of 42 countries in the Asia–Pacific region, and its overall score is above the world and regional averages.

Malaysia has risen to the “mostly free” category. Since 2011, its economic freedom has advanced by 4.5 points, the third largest point increase in the Asia–Pacific region. Gains in six of the 10 economic freedoms have been led by double-digit increases in investment, financial, and business freedoms.

A relatively open economy, Malaysia is a vital part of the East Asian manufacturing network. The business environment encourages the development of a vibrant private sector. Malaysia scores well in the area of open markets measured by trade freedom, investment freedom, and financial freedom compared to the global averages. The financial sector is robust, and foreign investment is being permitted to a greater degree. While the rule of law remains weak, the government has taken steps to tackle corruption more effectively.



The United Malays National Organization (UMNO) has ruled the ethnically and religiously diverse constitutional monarchy of Malaysia since independence in 1957. Dissatisfaction with pro-Malay affirmative-action programs and corruption generated important opposition gains in the March 2008 elections. In the 2013 elections, the UMNO-led coalition retained power but failed for the first time to win more than 50 percent of the popular vote. The government maintains investments in such key sectors as banking, media, automobiles, and airlines. In 2014, a Malaysia Airlines plane was lost in the Indian Ocean, and another was shot down in Ukraine. Malaysia is a leading exporter of electronics and information technology products; other industries include agricultural products and automobiles.

Rule of LawView Methodology

Property Rights 55.0 Create a Graph using this measurement

Freedom From Corruption 50.0 Create a Graph using this measurement

The continuous 50-year hold on power by the United Malays National Organization and the other parties in the ruling coalition, government favoritism, blurred distinctions between public and private enterprises, and the imperfections of the bureaucratic system have encouraged the perpetuation of corruption in political and economic life. Judicial independence is compromised by extensive executive influence.

Limited GovernmentView Methodology

Malaysia’s top individual income tax rate is 26 percent, and its top corporate tax rate is 25 percent. Other taxes include a sales tax and a capital gains tax. Overall tax revenue amounts to 16.1 percent of domestic income. Government spending amounts to 29.5 percent of the domestic economy, and public debt is equal to 58 percent of gross domestic product.

Regulatory EfficiencyView Methodology

The regulatory framework generally facilitates entrepreneurial activity. With no minimum capital required, incorporating a business takes three procedures. Relatively flexible labor regulations support the development of an efficient labor market. In 2013, the government cut fuel subsidies and later hiked electricity tariffs to reduce budget deficits. Other economically distortionary subsidies and price controls remain in place.

Open MarketsView Methodology

Malaysia’s average tariff rate is 4.0 percent. Malaysia has benefited from unilateral tariff cuts and trade agreements that have reduced trade barriers. Foreign investment in many economic sectors is capped. Measures to open the financial sector to greater competition have been implemented, but state-owned enterprises retain sizable shares in the banking sector, including the two largest banks.

Country's Score Over Time

Bar Graph of Malaysia  Economic Freedom Scores Over a Time Period

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Regional Ranking

rank country overall change
1Hong Kong89.6-0.5
3New Zealand82.10.9
7South Korea71.50.3
8Malaysia 70.81.2
10Brunei Darussalam68.9-0.1
12Thailand 62.4-0.9
15Kyrgyz Republic 61.30.2
21Sri Lanka58.6-1.4
25Pakistan 55.60.4
27Bangladesh 53.9-0.2
29Papua New Guinea53.1-0.8
36Solomon Islands470.8
42North Korea1.30.3
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