Malaysia is a federal constitutional monarchy with a parliamentary democracy and has developed into an upper-middle-income nation with a diversified economy ranking as Southeast Asia's third-largest by nominal GDP. The country has successfully transitioned from a commodity-based economy to a more balanced structure combining natural resources, manufacturing, and services sectors. Key economic sectors include palm oil production (world's second-largest producer), manufacturing (electronics, automotive assembly, textiles), petroleum and natural gas extraction, financial services, tourism, and increasingly, digital economy initiatives. As a regional business and manufacturing hub, Malaysia hosts major production facilities for global electronics companies while developing domestic champions including Petronas (oil and gas), Genting Group (gaming and hospitality), Maybank and Public Bank (financial services), and AirAsia (aviation). The economy benefits from abundant natural resources, strategic location along major shipping routes, ethnic and cultural diversity fostering international business connections, and relatively developed infrastructure, though it faces significant challenges including the middle-income trap, corruption and governance issues, brain drain, dependence on commodity price fluctuations, environmental concerns from palm oil expansion, and intensifying regional competition from manufacturing powerhouses like [[Vietnam]] and [[Thailand]], while competing with [[Singapore 1]] for financial services and [[Indonesia]] in palm oil markets.