Universities in the UK will maintain or even increase their numbers of Malaysian students in the face of growing international competition, attracting as many as 12,000 by 2015, according to a report commissioned by the British Council.
The prediction is good news for a sector that is becoming increasingly reliant on overseas student income.
The report, Malaysia - Outlook for International Student Mobility, warns that the UK's prospects of attracting Malaysian students have been "harmed" by the rise of private providers there and aggressive competition from Australian universities.
However, it says that the UK's position will be protected by the pound's continuing weakness in the currency markets and the perception in Malaysia that British degrees are superior to their Australian and American counterparts.
"The key issue for Malaysian students is employability," said Pat Killingley, director of educational services at the British Council. "So the message for UK institutions is the value of British qualifications in terms of students' employment prospects and careers. That is where we have an edge."
The analysis, one of a series of country reports compiled by the Economist Intelligence Unit, charts the dramatic growth in demand for higher education in Malaysia.
In 2000, the country had 16 universities and 15 polytechnics. By 2008, it had 35 universities, 37 polytechnics and 24 university colleges. Over the same period, student numbers rose from 664,000 to 873,000.
However, the report adds that Malaysia's public universities face problems. Positive-discrimination policies instituted in the early 1970s to support the native ethnic-Malay majority have led to race-based admissions quotas in public universities. This has meant that "universities have had to accept some Malay students even if technically they are not of the required standard", the report says.
In addition, "a sense of entitlement has bred complacency among Malay students", affecting their employability - there were 60,000 unemployed public university graduates in 2007.
The report adds that "Malaysia's public university system has been crippled by space constraints, a lack of financing and poor quality".
'Cherished colonial legacy'
These problems have encouraged students to seek university courses outside the public sector - either abroad or among the growing ranks of private institutions at home.
The report says: "The UK is ... considered the most prestigious destination for Malaysian students. Much of this is owing to a cherished colonial legacy.
"The UK university 'brands' are more highly regarded than Australia's or even most of those of the US."
The report states that the most likely scenario will see Malaysia's economy contracting this year, but growing again in 2010 and returning to a trend of more than 4 per cent annual growth by 2013.
In the period 2011-20, demand for higher education will keep growing, it adds.
The report forecasts that the UK will increase its share of the Malaysian student market from .5 per cent in 2006 to almost 30 per cent by 2015, although there will be a short-term dip in 2009 as a result of the downturn in global trade.
But in the longer term, the "substantial projected decline in the value of the pound" will help keep the UK competitive in cost terms.
The report predicts an increase in Malaysian enrolments on British courses to 10,500 by 2010 and 12,000 by 2015.
The report will be available to buy from September at: www.britishcouncil.org/eumd
"After I spent my first stint in the UK, I had a better view of the educational environment here.
"I valued the different points of view that were encouraged. If I had studied in America, it would have been a very US-centric point of view." - A Malaysian student who studied at undergraduate and postgraduate level in the UK
"There are already three generations of Malaysian students who have been educated (in Britain).
"Because of our close relations, there is no problem in terms of a UK degree being recognised in Malaysia." - The director of an organisation that serves Malaysian students living in Britain.