2023 Index of Economic Freedom

Malaysia

OVERALL SCORE67.3
WORLD RANK42
Rule of Law

Property Rights65.4

Judicial Effectiveness57.6

Government Integrity51.6

Government Size

Tax Burden83.9

Government Spending82.4

Fiscal Health64.5

Regulatory Efficiency

Business Freedom70.3

Labor Freedom58.0

Monetary Freedom81.1

Open Markets

Trade Freedom83.0

Investment Freedom60.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 32.8 million
  • GDP (PPP):
    • $970.7 billion
    • 2.5% 5-year compound annual growth
    • $29,686 per capita
  • Unemployment:
    • 4.5%
  • Inflation (CPI):
    • 2.5%
  • FDI Inflow:
  • Public Debt:
    • 69.0%

Malaysia’s economic freedom score is 67.3, making its economy the 42nd freest in the 2023 Index. Its score is 0.8 point lower than last year. Malaysia is ranked 8th out of 39 countries in the Asia–Pacific region, and its overall score is above the world and regional averages.

The economy has shown a moderate degree of resilience. Implementation of policies to support open markets and encourage a vibrant private sector is enhancing investment flows and improving entrepreneurial vitality. However, Malaysia has not done enough to promote the effective rule of law or to enhance and modernize its legal framework.

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Background

Malaysia is a multicultural democracy that has undergone multiple changes in leadership since its elections in 2018. The current governing coalition remains fragile, and it is expected that elections will be held either late in 2022 or in 2023. Malaysia has experienced healthy economic growth during the past decade. Exports account for more than 65 percent of the country’s GDP and for a significant share of its labor market. Principal exports include consumer electronics, petroleum, chemicals, and palm oil.

Rule of Law

Property Rights 65.4 Create a Graph using this measurement

Judicial Effectiveness 57.6 Create a Graph using this measurement

Government Integrity 51.6 Create a Graph using this measurement

The overall rule of law is relatively well respected in Malaysia. The country’s property rights score is above the world average; its judicial effectiveness score is above the world average; and its government integrity score is above the world average.

Government Size

The top individual and corporate tax rates are, respectively, 30 percent and 24 percent. The tax burden equals 11.4 percent of GDP. Three-year government spending and budget balance averages are, respectively, 24.2 percent and –4.0 percent of GDP. Public debt equals 69.0 percent of GDP.

Regulatory Efficiency

Greater regulatory efficiency has been implemented in recent years, and licensing requirements are now less time-consuming and bureaucratic. Labor regulations are now more modern and flexible, but the labor market remains fragmented. The most recent available inflation rate is 2.5 percent.

Open Markets

The trade-weighted average tariff rate is 3.5 percent. The government has taken steps to liberalize foreign investment policies, but for some sectors, restrictions are still in place. Regulatory adjustments in the financial sector include the easing of limits on foreign ownership.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Singapore83.9-0.5
2Taiwan80.70.6
3New Zealand78.9-1.7
4Australia74.8-2.9
5South Korea73.7-0.9
6Japan69.3-0.6
7Samoa68.30.0
8Malaysia67.3-0.8
9Brunei Darussalam65.70.9
10Indonesia63.5-0.9
11Micronesia62.61.6
12Vanuatu62.1-0.8
13Kazakhstan62.1-2.3
14Vietnam61.81.2
15Mongolia61.7-2.2
16Thailand60.6-2.6
17Tonga60-0.8
18Philippines59.3-1.8
19Bhutan59-0.3
20Kiribati58.8-0.4
21Fiji581.6
22Solomon Islands56.90.4
23Uzbekistan56.50.8
24Cambodia56.5-0.6
25Kyrgyz Republic55.80.0
26Bangladesh54.41.7
27India52.9-1.0
28Sri Lanka52.2-1.1
29Papua New Guinea51.7-2.9
30Nepal51.41.7
31Tajikistan50.60.9
32Laos50.31.1
33Pakistan49.40.6
34China48.30.3
35Timor-Leste47.20.9
36Maldives46.6-0.7
37Turkmenistan46.50.3
38Burma46.5-3.1
39North Korea2.9-0.1
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