Just 50 Malaysian students - down from 5,000 - can study in Britain this year, MARA, the Malayasian government-funded agency for preparing and sponsoring higher education students has decided. The cutback was ordered in response to the Asian financial crisis.
British universities are being hit particularly hard by the slump in the number of Malays studying overseas. Last year more than 16,500 Malays were enrolled at British universities, more than twice the number from any other Far Eastern country.
This week universities confirmed that they have lost millions of pounds in tuition fees as a result of the slump. Middlesex University, the biggest recruiter of Malaysian students, has a total of just 236 students this year, down from 550 last year, according to its director of international education, Joel Gladstone. Many of these are funded privately.
The fall in student numbers will cost the university about Pounds 2 million, he added. The university is now diversifying to attract students from other countries including Israel, India, China and Brazil.
Portsmouth University has a similar number of Malaysian students. But the number of new entrants has dropped by a third, according to Michael Asteris, the university's international director. Business studies has been harder hit than other subjects because this course can be provided in Malaysia, he added.
Other countries which attract Malaysian students are not so badly hit, according to the Malaysian education minister, Sri Najib Tun Razak.
For example, he believes that Australia is unlikely to be as seriously affected as European countries. Speaking during a visit to Melbourne, Mr Najib said any decline in Malaysians going to Australia would be partly countered by private students turning away from Britain and America and opting instead for the cheaper Australian universities.
Mr Najib confirmed that Prime Minister Mahatir Mohammed would shortly issue a licence to another Australian university to open a full branch campus in Malaysia. The new licence is likely to go to La Trobe, Deakin or Curtin universities or the University of Sydney, all of which have well-established Malaysian twinning operations.
Earlier this year, Monash University became one of the first foreign higher education institutions to be given a licence to establish a full off-shore campus in Kuala Lumpur. More than 450 students were enrolled when the campus opened in July.
* Additional reporting by Alison Goddard