KUALA LUMPUR, Malaysia (AP) _ When Nancy Reagan arrives Friday to meet with anti-drug activists, she will be preaching to the already converted: Malaysian law was amended two years ago to provide a mandatory death penalty for traffickers in what the Malays call ''dadah.''

Dadah, originally the generic Malay word for medicine or drugs, was chosen several years ago as an odious label for controlled substances that are abused.

Dr. Siti Hamsah, the prime minister's wife, attended a first ladies' conference on drug abuse sponsored by Mrs. Reagan in Washington last year and returned home to mobilize parents to fight dadah by keeping checks on children and counseling them.

Drug use is not new here, no modish copying of America or Europe. Opium and marijuana were widely used at the turn of the century, the government's Anti- Drug Task Force says. There were 75,000 registered opium smokers at the time the drug was outlawed after World War II.

Officials from Prime Minister Mohamad Mahathir on down say they regard drugs as Malaysia's most serious problem. They view it as a security threat that outranks even the battle against the Communist Party of Malaya, with which first the British and then independent Malaya fought a 12-year guerrilla war.

An estimated 2,500 insurgents remain in the jungles.

President Reagan was flying Friday from Bali to the Tokyo economic summit, but Mrs. Reagan scheduled brief visits with anti-drug activists in Kuala Lumpur and Bangkok before rejoining him in Japan.

Security around the first lady, which is normally heavy, will be extraordinary during the visits, according to reports. Her Secret Service detail has been doubled, the White House has flown its own cars into both Kuala Lumpur and Bangkok for use in motorcades, and U.S. frogmen are expected to swim alongside when she takes a boat ride in Bangkok, The Washington Post reported in today's editions.

Earlier this year, Malaysia proposed that the rest of the Association of Southeast Asian Nations - comprising Thailand, Indonesia, Singapore, the Philippines and Brunei - create a regional parents organization to battle drug abuse.

Malaysia sentenced 107 people to death for drug trafficking since 1975 and has already hanged 32 of them, Deputy Home Affairs Minister Radzi Sheikh Ahmad told parliament recently. Another 253 were sentenced to life imprisonment before the law was amended two years ago to make the death penalty mandatory for trafficking.

Trafficking, which means simple possession under the law here, carries the death sentence for those with half-an-ounce or more of heroin or morphine.

Welfare Services Minister Abu Hassan Omar estimates that about 3.2 percent of the country's 15 million people were involved in drug abuse. The authorities said there were 109,896 known addicts as of last November.

Social workers say that if every known addict had four or five friends involved with drugs, the number of abusers could exceed 500,000.

Radzi said special courts might have to be set up to clear the backlog of drug cases.

Official figures list 5,671 addicts arrested last year, including 82 foreigners. Radzi said 2,793 people were treated in rehabilitation centers last year, about 40 percent of them for the second or third time.

The pattern of drug use began to change 20 years ago when Malaysia became a route for heroin and opium going to the West. Most of it originates 1,200 miles north in the so-called Golden Triangle of Burma, Laos and Thailand.

Thailand, the key transit country for heroin from the triangle, has in recent years stepped up its anti-drug efforts and began in 1984 to destroy poppy fields, something long urged by the United States.

In addition to processing and smuggling refined drugs abroad, Malaysian dealers increasingly found local customers among tourists, hippies and finally a broad range of local people both in large communities and the countryside.

Most are hooked on cheap No. 3 heroin, which is sold in straws and smoked. An official in the state of Perlis along the Thai border said Malaysian addicts spend more than $1 million a day on their habits.

The Anti-Drug Task Force said more than 1,671 pounds of raw opium, 1,483 pounds of cannibis and 289 pounds of heroin were seized last year. Three processing labs were raided last year, bringing to 17 the number discovered since 1983.

Anti-drug laws that enable the authorities to detain suspects without trial were passed by parliament last year despite qualms expressed by opposition lawmakers and civil libertarians.

Suspected traffickers can be held for as long as two years before a review of their case is required. Additional two-year detention periods are allowed. The law has a five-year limit and then must be brought back to parliament for review.