Malaysia's economic prospects have been dented by the global economic downturn, which has hit export markets hard. In March 2009 the government unveiled a $16bn economic stimulus plan as it sought to stave off a deep recession.
Concerns have been raised that the drive towards further industrialisation could pose a serious threat to the environment. The Borneo rainforest is under pressure from palm oil plantations, and environmental campaigners have expressed misgivings over wholesale logging in the state of Sarawak.
Environmental activists have also objected to plans for a rare earths processing plant in the state of Pahang.
The country also faces the challenge of sustaining stability in the face of religious differences and the ethnic wealth gap.
Malaysia's human rights record has come in for international criticism. Internal security laws allow suspects to be detained without charge or trial.