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Doing Business in Malaysia
Printable version


Business Environment
 
 .  Location
 .  People
 .  The Government
 .  General Business Environment
   
Economy
 
 .  The Economy
 .  Infrastructure
 .  Human Resource
   

Location

   
Malaysia is strategically located in the heart of Southeast Asia, one of the world's fastest growing trade and economic regions. Located between the Indian Ocean and the South China Sea, and at the southernmost tip of the Asian Continent, this dynamic young nation is well serviced by all major air and shipping lines. Easy accessibility to the rest of the world has today made Malaysia an attractive centre for trade, investment and tourism.

Peninsular Malaysia stretches from Thailand in the north to Singapore in the south, while the states of Sabah and Sarawak straddle the northern and western coast of Borneo. About four-fifths of Malaysia's approximate land area of 330,000 sq. km is covered by tropical rain forests, while major land uses include the cultivation of rice, rubber and oil palm.

Malaysia lies in the equatorial zone where no seasons mark the passing of the months. The days are generally warm and sunny with temperatures averaging 26C (80 F). The wet north-east and south-west monsoons which blow from October till March and from May till September respectively, bring much rain to Malaysia, especially along the coastal areas.

   

People

   
Malaysia is a multiracial country with Malays, Chinese, Indians and other races making up Malaysia's cosmopolitan population of over 25.5 million (2004) people.

The national language is Bahasa Malaysia and English is widely used in commerce and industry. Other major languages spoken include Chinese dialects and Tamil. Though Islam is the official religion, the people are free to practice religions of their own choice.
   

The Government

   
Malaysia gained independence from the British in 1957. Malaysia is made up of 13 states and the federal territories of Kuala Lumpur and Labuan. Nine of these states have sovereign monarchs or sultans. Every five years, a unique system of rotation allows the nine sultans to elect a King, the Yang diPertuan Agong, from among themselves.

Malaysia has practised democracy as a constitutional monarchy since independence. The country has a centralised system of government. Parliament consists of the King, the House of Representatives and the Senate. The House of Representatives comprise elected Members of Parliament (MPs) with each member representing a geographical constituency. MPs are elected at a general election every five years.

The current ruling coalition, Barisan Nasional commands a two-thirds majority in Parliament and has been the ruling party since independence. This has ensured a strong, stable government committed to the development of the Country.

This provides political stability which is important to investors in Malaysia where all Government policies are clearly planned and laid out providing investors with a high degree of certainty for their future planning.

   

General Business Environment

 
International corporations are comfortable doing business in Malaysia's comprehensive and well-developed business infrastructure where English is widely used. Legal and accounting practices in Malaysia are derived from the British system and would be acceptable to most companies doing international business.

The government's "Malaysia Incorporated" approach provides effective channels of consultation between the public and private sectors. This can be seen in the many business organisations in Malaysia which have regular dialogues with the Government. Investors to Malaysia will be able to get assistance from these business associations.

The general business environment is detailed as follows:
 .  Banking And Finance
 .  The Capital Market
 .  Investment Opportunities
 .  Quality Of Life
 
 .  Banking And Finance
  A well-developed financial and banking sector has also enhanced Malaysia's position as a prime investment location and export base in Asia.

Sophisticated financial facilities are available through 37 domestic and foreign commercial banks, merchant banks, finance companies and discount houses. There are also about 35 representative offices of foreign banks in Malaysia.

Banking hours are from 9 am to 4 pm on Mondays to Fridays, and 9:30 am to 11:30 am on Saturdays except for the first Saturday of each month when banks are closed. All commercial banks are authorised foreign exchange dealers, and licensed moneychangers are found in urban areas and key entry/exit points.

In 1990, to complement the existing financial system in Kuala Lumpur, an international offshore financial centre (IOFC) was established in the federal territory of Labuan, off the north-west coast of Borneo. Labuan aims to be a major centre for offshore banking, insurance and trust activities in Asia-Pacific region.

 .  The Capital Market
  The Kuala Lumpur Stock Exchange (KLSE) has evolved into one of the world's foremost emerging markets, supported by rapid economic growth, strong company profitability and marked increases in foreign capital inflows. The US-based International Finance Corporation has rated the KLSE as one of the top five among the world's emerging markets in terms of market capitalisation.

The Kuala Lumpur Commodity Exchange continues to introduce new measures to increase the volume of trade and liquidity of its existing futures contracts. It is today the largest commodity futures exchange in the ASEAN region.
   
 .  Investment Opportunities
  Malaysia offers manufacturers a competitive edge in various sectors. These include the following:
   
 
 -  Resource-based industries i.e. industries which utilise Malaysia's abundant resources such as rubber, palm oil, timber, tin, oil and gas, cocoa, and clay to manufacture high value-added products, especially those for export markets.
   
 -  Electronic components such as chip, capacitors, chip resistors, digital tape /disk mechanisms, switches, printed circuit boards, magnetic heads, lead frames and cathode ray tubes.
   
 -  Audio-visual products such as audio, TV and video equipment and telephone sets. Computers and computer peripherals, telecommunications equipment, CAD/CAM equipment, robotics and office equipment.
   
 -  Industrial machinery and parts, machine tools and related engineering industries.
   
 -  Ancillary and supporting industries supplying parts and components, which provide the important linkages that support the established larger industries.
   
 -  Precision products such as medical instruments, musical instruments, photographic and optical goods, watches and clocks.
   
 -  Agro-based industries such as the cultivation and processing of fruits, vegetables, livestock and aquatic products.
   
Manufacturers will find that most of the inputs and services they require are available in Malaysia, while production equipment is increasingly being manufactured within the country.
   
 .  Quality Of Life
 
Malaysia offers very comfortable living conditions. The country's cultural heritage is truly varied and very open towards foreign cultures, thus making Malaysia among the most delightful and hospitable places in the world to work and live in.

For expatriates, Malaysia is at once a home-away-from-home, as well as a fascinating adventure. Gracious bungalows and elegant condominiums. American, British, Japanese, Taiwanese and German international schools provide all the education needs for the expatriate community. A summary of the various facilites available are listed that make Malaysia a truly beautiful place to live in:

  Recreational and sports facilities
  Churches, mosques and temples
  Supermarkets, departmental stores and boutiques.
  Museums, art galleries, theatres and restaurants.
   
A cosmopolitan air of sophistication exists side by side with an exotic atmosphere that is inherently Malaysian.

For those drawn to nature, Malaysia has an almost limitless number of options. Hill resorts, national parks, island getaways, sandy beaches and warm tropical waters offer adventure to outdoor enthusiasts all the year round. Malaysia's rain forests are among the oldest in the world and never cease to delight jungle trackers and nature lovers.
   

The Economy

   
The Malaysian economy maintained its momentum growing 7.2% in 2004, after expanding 5.2% and 4.1% in 2003 and 2002 respectively. The better than expected expansion in 2004 was fuelled primarily by the private sector, as the public sector remained committed to fiscal consolidation. The key economic growth areas were the manufacturing, particularly the electronics and chemical industries, services and agriculture sectors. The recovery of the global electronics sector boosted Malaysian exports to the U.S., Malaysia's principal trade and investment partner. The consensus among public and private sector analysts is that the economy will continue to grow by at least 6.0% to 6.5% in 2005, on strong domestic demand and global growth in major countries and regional economies but with reservations on continued high oil prices. Although Malaysia is a net exporter of oil, the significant and rapid hike in oil prices has increased the government's burden on oil subsidies to domestic consumers. The government has maintained the Malaysian ringgit pegged at an exchange rate of RM3.8/U.S.$1.0 since September 1998.

Malaysia remains an important trading partner for the United States. In 2003, bilateral trade between the United States and Malaysia totalled U.S.$36.4 billion. U.S. exports to Malaysia were U.S.$10.9 billion, and U.S. imports from Malaysia were U.S.$25.4 billion in that year. Malaysia was the United States' 10th-largest trading partner and its 16th-largest export market. During the first 6 months of 2004, U.S. exports to Malaysia totalled U.S.$5.5 billion while the United States imported U.S.$13 billion from Malaysia.

Malaysia has successfully developed from a commodity-based economy to one focused on manufacturing. Today the Government of Malaysia seeks to make the leap to a knowledge-based economy. At independence, Malaysia inherited an economy dominated by two commodities - rubber and tin. In the 40 years thereafter, Malaysia's economic record has been one of Asia's best. From the early 1980s through the mid-1990s, the economy experienced a period of broad diversification and sustained rapid growth averaging almost 8% annually. New foreign and domestic investment played a significant role in the transformation of Malaysia's economy. Manufacturing grew from 13.9% of GDP in 1970 to 30.9 % in 2004, while agriculture and mining, which together had accounted for 42.7% of GDP in 1970, dropped to 8.4% and 7.2 %, respectively, in 2004. Malaysia is one of the world's largest exporters of semiconductor devices, electrical goods and appliances, and the government has ambitious plans to make Malaysia a leading producer and developer of high-tech products, including software. Malaysia is a major destination for outsourcing after China and India.

The Malaysian Government encourages Foreign Direct Investment (FDI), and the United States continues to be one of the largest sources of new investment in Malaysia. In 2003, the Malaysian Government approved U.S. $574 million in new manufacturing investment by U.S. companies, with the bulk in the electronics and electrical sectors. The cumulative value of U.S. private investment in Malaysia exceeds U.S.$20 billion, 60% of which is in the oil and gas and petrochemical sectors with the rest in manufacturing, especially semiconductors and other electronic products.

   
Economy
 .  Manufacturing
 .  Agriculture
 .  Oil And Gas
   
 .  Manufacturing
  The manufacturing sector is the star performer of the Malaysian economy with a growth rate of 10.2% in 2004 and contributions of 30.9% to GDP and 72.6% to total exports. This sector provided the main impetus for growth during the past two decades and is expected to expand at a rate of 10.5% annually during the new millennium. This rate of growth would raise its share in GDP to 37.2% by the year 2010 while manufactured exports are projected to account for 81.8% of total exports.

The country's current emphasis is on high technology, capital-intensive and skill-oriented industries. The government encourages direct foreign investment with its advantages of capital inflow, technology and marketing know-how. At the same time, it is promoting the development of an indigenous industrial base for long-term sustainable industrialisation.
   
 .  Agriculture
  Agriculture, the traditional mainstay of the Malaysian economy, is still a major sector accounting for 8.4% of GDP and 8.1% of exports in 2004. The sector is projected to grow at 4.5% annually during the first ten years of the new millennium. Agricultural development is now geared towards commercial cultivation, the production of high value food crops (especially fruits and vegetables), floriculture, livestock and fisheries the further development of agro-based industries, and the expanded integration of agriculture with the manufacturing sector. The National Agriculture Policy promotes the generation of new high yielding varieties, clones and breeds, and new products and processes; and increased mechanisation of farming activities.
   
 .  Oil And Gas
  The oil and gas sector has emerged as the nation's top primary commodity export earner since Malaysia's fields began production in 1978. The country's proven reserves of oil stand at 3.3 billion barrels, while its proven gas reserves total 67.7 trillion standard cubic feet. Malaysia's national oil company PETRONAS is one of the world's leading oil companies with operations in 42 countries. Malaysia's first LNG plant, located in Bintulu Sarawak, has expanded its capacity to 14 million tonnes a year, making it the world's largest LNG complex.
   

Infrastructure

   
Malaysia's developed infrastructure is one of the main attributes that has placed it among South East Asia's most rapidly industrialising nations. New initiatives are constantly being taken by the government to upgrade infrastructure development in line with the country's economic growth, while privatisation has provided for increased efficiency.

Malaysia believes in investing in infrastructural facilities to provide a conducive environment for investors.
 .  Good Roads
 .  International Airports
 .  Well-equipped Seaports
 .  Multimedia Super Corridor (MSC)
 .  Modern Telecommunications
 .  Well-developed Industrial Parks
   
 .  Good Roads
  Malaysia's highway network is the backbone of the country's transport system: 90% of passenger and cargo movements are by road. Well-maintained roads link all parts of the country. This is complemented by railways which traverse the west and east coasts of Peninsular Malaysia.
   
 .  International Airports
  Malaysia's six international airports - Kuala Lumpur International Airport (KLIA) at Sepang, Sultan Abdul Aziz Shah at Subang, Bayan Lepas in Penang, Senai in Johor, Kota Kinabalu and Kuching are serviced by the world's major airlines. The highly sophisticated KLIA airport was commissioned to meet the rapid expansion of trade and industry with a total capacity for up to 100 million passengers per year. The national carrier, Malaysia Airlines, as well as numerous international airlines provide air cargo services.
   
 .  Well-equipped Seaports
  There are six major ports in Malaysia - Port Klang, Penang, Johor, Kuantan and Kemaman in Peninsular Malaysia and Bintulu Port in Sarawak. The ports in the peninsula are well equipped to handle international container traffic, while Bintulu Port caters mainly to the LNG industry. More than 90% of Malaysia's international trade is conducted through seaports.
   
 .  Multimedia Super Corridor (MSC)
  Realising the important role of information technology (IT) as a catalyst for national development, the Government has initiated the construction of the Multimedia Super Corridor. This 15-by-50-kilometre zone extends south from Kuala Lumpur, embracing Cyberjaya, a dedicated "intelligent" city for multimedia companies, and Putrajaya, the new national capital.

The Corridor will be supported by world class physical and information infrastructure. The private sector, especially leading multimedia companies, are being encouraged to locate there to undertake remote manufacturing as well as introducing high value-added IT goods and services, thereby enabling Malaysia to become a regional IT hub.

Currently there are close to 500 multinational and foreign companies operating from the MSC. Malaysia has also become a "call centre" hub for many companies.
   
 .  Modern Telecommunications
  Malaysia's telecommunications network has seen impressive expansion and upgrading in recent years, and is now one of the most well developed among the industrialising countries of the Asia Pacific. International communications have been facilitated by the introduction of state-of-the-art technology in telephone, telex, telefax and video conferencing services as well as other data transmission and networking facilities. The latest digital and fibre optic technology is now being used to provide high quality telecommunication services at affordable prices.

Malaysia's first satellite, MEASAT was placed into orbit in January 1996 marking the country's entry into space age communications. MEASAT will provide integrated voice, video and data services, greatly increasing Malaysia's capacity to exchange information with all parts of the world.
   
 .  Well-developed Industrial Parks
  In Malaysia, suitable sites for industries are provided with about 200 industrial estates and parks located throughout the country. These industrial sites are equipped with basic infrastructural facilities such as roads, electricity, water and telecommunications.

To cater for the needs of export-oriented industries, export-processing zones called Free Trade Zones (FTZs) have been developed where customs formalities are reduced to the minimum. Companies in FTZs are allowed duty free import of raw materials, components and parts, and machinery directly required in the manufacturing process. Specialised parks have been and are being developed to cater to the needs of specific industries.
   

Human Resource

   
One of Malaysia's greatest asset is its people. They make up a pool of young, educated and highly productive workers. The country's labour force comprises 9.1 million people, 60% of whom are below 35. Wage rates are competitive compared to other countries in the region.

Nine universities and numerous technical and vocational institutions provide a stable supply of trainable labour to support industrial growth. In 2003, more than 90,000 Malaysian students were enrolled in tertiary education institutions abroad.

The government has established the Human Resource Development Fund to facilitate companies in carrying out training for their employees. Manufacturers who contribute to this fund will be eligible to apply for grants to defray or subsidise costs incurred in the training of their workers, especially in new and emerging skills.

To ensure industrial harmony, Malaysia's labour laws set out minimum standards to safeguard the interests and spell out the rights and responsibilities of employers and employees. These provide a legal framework for the orderly conduct of industrial relations in the country.

 

 
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