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Doing business in Malaysia

Historically, Malaysia has long benefited from its geographic location as a trading hub between different nations. Well positioned geopolitically, the mainland part of Malaysia follows the coast with one of the most strategically important shipping routes in the world. Malaysia has taken advantage of its geographic location to become one of the largest exporters of multiple resources such as tin, rubber and palm oil.

Malaysia has managed to quickly turn its economy from reliance on raw materials and agriculture into a fairly modern, competitive country. The service and manufacturing sectors now estimate around 75% of the country's GDP (51% in services and 22% in manufacturing in 2014) while the agriculture sector currently estimates around 9% of GDP.

Overview of the Malaysian market The total trade value of Malaysia was estimated at $ 376 billion in 2015. China remains Malaysia's most important trading partner with a market share of almost 16%. Singapore ranks second with around 13% market share, closely followed by the European Union with 10%. Almost 55% of Malaysia's imported goods are brought from East Asia, with the majority being imported from China. Other global economies (the United States, the EU and Japan) estimate 26% of total imports in Malaysia.

Business challenges you may face Malaysia often restricts free trade industries with special protection, such as the automotive and agricultural industries. The country is ready to protect strategic industries by imposing higher tariffs and various excessive taxes. Malaysia uses an import permit system to reduce imports into protected domestic sectors.

State restrictions disrupt foreign participation in various sectors of the economy, including government contracts; Financial, business and banking services; and telecommunications. Often times, it is imperative to have a local business partner, usually a Bumiputra (owned by ethnic Malays) company, in order to compete effectively in the marketplace.

Malaysia's economic development is a key driver of consumer and business demand for products and services. Malaysian consumers are quite price sensitive, although they are currently used to decades of rapid economic development. As a result, consumers are attracted to and familiar with global branded products, high standards of education, quality health products and services, and environmentally friendly and bio-clean products. The World Bank currently regards Malaysia as an upper-middle-income country.

Malaysian Market Entry Strategy Guide Many international business professionals feel that using a local distributor or agent is one of the most efficient first steps to entering the Malaysian market. A local distributor usually takes care of customs matters, takes care of the local wholesalers and retailers, markets the goods directly to large companies with a large market share, and takes care of after-sales service. International service providers also generally benefit from dealing with local partners.

Selling direct to the Government of Malaysia, Government Linked Companies (GLC), or for sourcing in strategic economic sectors, always prefers Malaysian agents or joint business partners classified as Bumiputra (Malay) companies. The word Bumiputera itself defines a group of people who are ethnically Malay. A company can be classified as a Bumiputra company if it meets the following requirements:

ncorporated under the Companies Act, 1965; Share capital starting from RM 25,000; Shareholders are 100% Bumiputra; Board of Directors are controlled by at least 51% by Bumiputra; Upper management are at least 51% Bumiputra; Supporting Staff are at least 51% Bumiputra. In sectors of economy, which are not considered strategic neither are controlled by the government, companies, agents, or distributors should be selected strictly based on competitive considerations. However, since the Malaysian market is a very relationship-oriented market, having a local presence or local agent can influence the final outcome. http://www.confiduss.com/en/jurisdictions/malaysia/business/