Malaysia - Background
Situated in Southeast Asia, Malaysia is a federal constitutional monarchy consisting of thirteen states and three federation territories with a land mass of 127,350 square miles. The nation is separated by the South China Sea into two areas; Malaysian Borneo and Peninsular Malaysia and has land borders with Thailand, Indonesia and Brunei.
Malaysia is considered to be a newly industrialised market economy. The market is an open one but the state still plays a significant role in managing the economy through its macroeconomic plans.
The economy of Malaysia is considered to be the 29th largest economy in the world and the third largest in South East Asia with gross domestic product standing at around $492 billion
The country has been experiencing a boom for some time now with GDP growing by an average of 6.5% in the last fifty years and Malaysia has one of the best economic records in Asia.
Malaysia is an exporter of natural and agricultural resources and is well endowed with natural resources in areas such as minerals, forestry and agriculture with the most valuable of exports being petroleum. At one time, Malaysia was the largest exporter of rubber, tin and palm oil. The country is still one of the main exporters of palm oil and natural rubber with other exports including cocoa, pepper, sawn timber, tobacco and pineapple.
Industry accounts for some $63.5 billion making up 48 percent of total GDP and the country are ranked as the 32nd largest manufacturer in the world. Manufacturing plays a major role in Malaysia’s economy though this role is now reduced in favour of services.
Petronas, the country’s national oil company, provides the government with around 40% of the federal budget in taxes, royalties and dividends.
As a part of the government’s efforts to diversify the economy, a big push has been made to attract tourists to the country and tourism has now become the third most important source of income in the country.
Kuala Lumpur is the country’s capital city, centre for government and the business and economic centre of the country. The city is home to many of the country’s insurance, finance and real estate businesses as well as being cultural arts and media centre. The city is also home to the iconic skyscraper, the Petronas Towers owned by the aforementioned national company.
At the time of writing, the Malaysian economy is continuing to grow but at a slightly slower rate than in previous years. With reduced investments and slowing exports, the outlook for Malaysia may not be as great as it has been but continued substantial growth is still forecast.
Malaysia - Opportunities
Malaysia is often quoted as being one of the easiest places to do business in Asia and having a well-trained and motivated workforce as well as a host of world class companies with which to do business makes it an exciting prospect for foreign investors looking to do business in the country and the wider South East Asia region.
The country recently rose to sixth place, in the World Bank’s ‘Doing Business’ report, in a list of 189 other economies, as one of the easiest places to conduct business in the world. Higher even than the UK.
Reports indicate that with a thriving and stable economy, Malaysia is a good place to do business; there already around 4,500 foreign companies in the country and setting up a business in Malaysia is a relatively straightforward affair.
The country is well placed, geographically with the knowledge driven economy of Singapore close by and a large consumer market in Indonesia, Malaysia is in a unique position in South East Asia for continuing growth. The home grown consumer demand is also growing with targets set to double income per head by 2020. Increasing disposable income is creating increasing demand for luxury goods and services.
The opportunities for foreign investors are wide and varied. Continuing large-scale government funded infrastructure projects provide opportunities for transport consultancy, project management, tunnelling and architectural design.
The government is also pursuing a plan to broaden the educational base of the population creating many opportunities in education and training. As well as academic education, skills training in particular industries are also in demand in areas such as oil and gas.
Other emerging opportunities for foreign business in Malaysia can be found in areas such as defence, the automotive industry, oil and gas, and foods and beverages.
In health and medicine; there are opportunities for medical equipment, preventative health care and health product manufacturing and the country also boasts a growing healthcare tourism industry.
Although Malaysia has its own agriculture industry it is still a net importer of food products and imports around 80% of its beef requirements. And opportunities exist in the supply of foods, cattle and related services as well as other foods.
Malaysia is fighting off the efforts of other countries in the region to provide the best environment to attract investment and trade. The government has introduced a range of measures to help attract foreign investment. It has relaxed many of the foreign ownership laws and has implemented a range of other incentives to attract foreign business.
The government has also been further investing in infrastructure to help facilitate efficient business, especially in the major centres and has recently implemented a liberalisation policy in the financial sector to attract more international financial institutions to the Malaysian market and the country is set to become the world’s centre for Islamic banking services.
Malaysia – Setting up in Business
Setting up in business in Malaysia us relatively straightforward and business trading formats, regulations and protocol is very similar to that of most western countries. Trading formats available include sole trader, partnerships and limited companies.
A foreign company can carry out business in Malaysia in two ways; by incorporating a local limited company or by registering the overseas company with the Companies Commission.
The procedure for the formation of a limited company is as follows:
1. Check the availability of the company name with the Companies Commission
The checking of availability of the company name and the payment for the reserving of the name can all be done on-line at the Companies Commission of Malaysia (CCM) website.
2. File the necessary company incorporation documents
The CCM provides a one-stop-shop service which enables the filing of all required documents and the necessary registration with the tax authorities, the employment provident fund and social security. The incorporation documents and information required for a new company include:
· The particulars of shareholders and directors.
· The completed registration form.
· A copy of the approval of the company name.
· The address of the location of the registered office.
3. Pay the Registration fee
A registration fee is payable which is a scale charge based upon the nominal share capital.
Spurred by high technology, capital intensive industries and a strong knowledge base, Malaysia is a country on the move and setting up a business in the country is not as an arduous task as it is some of its’ neighbouring countries. However, we do always recommend obtaining advice from reputable and reliable local legal specialists who will have the update information needed to ensure that all current requirements are met.
Growth rates in the country remain impressive, even though the economic downturn, and have remained in excess of 4% whilst comparable economies have only managed 1 to 2%.
The country offers a good location for setting up offshore operations in the manufacturing of advanced technology products for both regional and international markets and is one of the most technologically advanced countries in the region.
As with any country; anyone looking to do business in Malaysia should familiarise themselves with the cultural complexities of the country. Malaysia has a very diverse cultural makeup and the country is divided along ethnic lines, the main groups being; Malays, Chinese and Indians.
With such diversity of cultures come differences in ways of doing business, so a bit of homework will reap rewards in helping to build the all-important business relationships that are an integral part to doing business in Malaysia.