From: OVERSEAS BUSINESS REPORTS (MALAYSIA)
University of Missouri-St. Louis
Match 25 DB Rec# - 30,205 Dataset-MARKET
Source : USDOC, International Trade Administration
Source key :IT
Program key :IT MARKET
Program :Market Research Reports
Update sched. :Monthly
ID number :IT MARKET 111108831
Title :MALAYSIA - OVERSEAS BUSINESS REPORT - OBR901000
Data type :TEXT
End year :1992
Date of record:09/18/1992
Keywords 1 :
| ASSOCIATION OF SOUTH EAST ASIA NATIONS
| EAST ASIA
| EAST ASIA & PACIFIC
| EAST ASIAN COUNTRIES
| EAST ASIAN GROUP
| PACIFIC RIM
| PACIFIC RIM COUNTRIES
| PACIFIC RIM GROUP
| SOUTHEAST ASIA
| SOUTHEAST ASIAN COUNTRIES
| SOUTHEAST ASIAN GROUP
MALAYSIA - OVERSEAS BUSINESS REPORT - OBR901000
Date: October 1990
Source: Internation Trade Administration, U.S. Dept. of Commerce
Number of pages: 34
Subject: The report discusses the economic and commercial climate in
Malaysia, with emphasis on information useful for potential U.S. sellers
and investors. It consists of the following sections:
Foreign Trade Outlook
Economic and Industry Trends
Marketing/Distribution and Sales Channels
Advertising and Research
Transportation, Communications and Utilities
Financing and Credit
Investment in the Coutnry
Intellectual Property Rights
Guidance for Business Travelers
Sources of Economic and Commercial Information
MARKETING IN MALAYSIA
Lisa Errion and Paul Carroll
Office of the Pacific Basin
with the Assistance of
US&FCS Kuala Lumpur
Table of Contents
Foreign Trade Outlook.......................................... 3
Overview--Promising Export Areas
Industry Trends................................................ 5
Sales and Distribution Channels................................ 10
Trading Companies--Wholesale and Retail Facilities--
Direct Procurement--Selecting an Agent--Agent Support--
Selling the Market--Training
Transportation, Communications, and Utilities.................. 14
Air Transportation--Highway Transportation--Rail
Advertising and Research....................................... 18
Banking and Credit............................................. 19
Currency--Exchange Control Regulations
Trade Regulations.............................................. 20
Tariff Structure--Import Controls
Investment in Malaysia......................................... 21
Foreign Investment--Government Policy on Investment--Invest-
ment Regulations--Investment Incentives--Free Trade Zones--
Land and Real Estate--Business Organization--Business Hours
Labor Force--Wages and Benefits--Unions
Intellectual Property Rights................................... 32
Guidance for Travelers......................................... 34
Entrance Requirements--Climate--Language--Holidays for l990
Sources of Economic and Commercial Information................. 35
U.S. Government Representation in Malaysia--Malaysian
Government Representation--Key Malaysian Government Ministries
--Associations in Sarawak & Sabah--Trade Organizations
Overseas Business Reports: $l4.00 a year ($3.50 additional for foreign
mailing); single copy price varies. Order from any of the Department of
Commerce district offices or from the Superintendent of Documents, U.S.
Government Printing Office, Washington, DC 20402. Single copies also
available from the Publication Sales Branch, Room 1617M, U.S. Department of
Commerce, Washington, DC 20230.
FOREIGN TRADE OUTLOOK
Malaysia, the second fastest growing economy in Southeast Asia, continues
to be a good and growing market for U.S. goods and services. Malaysia is a
relatively open market for a developing nation, with tariffs averaging 15
percent and virtually no exchange controls or non-tariff barriers. While
these factors have attracted competitors, many of whom have been active in
and committed to the Malaysian market for the long term, U.S. companies can
and should do more business.
U.S.-Malaysia trade grew sharply in 1988 and 1989. The United States is
Malaysia's second leading trading partner, after Japan, taking 17.4 percent
of Malaysia's exports and supplying 17.7 percent of its imports. In 1989,
U.S. exports to Malaysia grew 34 percent to $2.9 billion. U.S. imports
from Malaysia rose 33 percent to $4.7 billion. The United States ran a
$1.9 billion bilateral deficit with Malaysia in 1989.
The largest item in trade in both directions is electronic components
produced mainly by American firms from U.S. inputs and reexported to the
United States. In 1989, electronic components accounted for 46.7 percent
of American exports to Malaysia and 31.2 percent of U.S. imports from
Malaysia. Consumer electronics and telecommunications equipment, including
televisions and radios, accounted for 10.3 percent of U.S. imports from
Malaysia ($489 million). The United States is an important market for
Malaysian rubber ($197 million) and remains an important market for palm
oil, although imports fell from $52.7 million in 1988 to $43.7 million in
1989. Overall, about 85 percent of Malaysian exports to the United States
are manufactured goods, compared with 50 percent in 1980.
Malaysia has an open, trade-based economy. Malaysia's total two-way trade
is almost 120 percent of gross national product (GNP). Although its
population of 17.2 million is relatively small, it is also relatively
wealthy. Per capita income at about $2,000 is relatively high for a
developing country. One survey estimated that more than 70 percent of the
population has disposable income. In addition, Malaysia's free trade zones
and its membership in ASEAN (the six member Association of Southeast Asian
Nations) make it a viable base for regional marketing operations. Malaysia
also has a relatively stable political/economic environment; a tradition of
sound financial and budgetary management; a trainable, English-speaking and
productive labor force; and competitive incentives -- all of which make
Malaysia an attractive country for U.S. and other foreign investors.
PLEASE NOTE: Unless otherwise indicated, all $ symbols represent U.S.
dollars, Malaysian dollars are designated as M$.
Promising Export Areas
Telecommunications Equipment - For the last ten years, the Malaysian
Government has placed a high priority on developing and improving the
nation's telecommunications system. Billions of dollars have already been
spent. In 1987, the government telephone monopoly became the first major
utility to be privatized. The new company, Syarikat Telekom Malaysia,
continues to expand its basic coverage and value added offerings. Two
pilot ISDN contracts have also been signed. Industry sources estimate that
imports, already $300 million in 1988, are likely to grow at a 12 percent
rate over the next few years. Despite U.S. technologies, the U.S. share of
this market is less than 10 percent.
Computers and Peripherals - Imports of computers and peripherals are
running at record levels with record growth rates. In 1989, imports
totaled more than $300 million, 15 percent above 1988. Growth in 1990
should be even higher. The United States probably has the largest share of
this market. Malaysians are aware of automated data processing (ADP)
techniques and technology. For example, all banks are computerized, and
there are some 1,500 automatic teller machines in place in three national
networks, an indication of the level of technology with which Malaysians
are familiar. Software piracy is still a problem and restricts software
sales, although Malaysian Government enforcement efforts have helped double
the sales of some legitimate programs. Anticipated enhanced copyright
protection should open this segment of the market significantly.
Building Equipment and Supplies - The Malaysian building and construction
industry is clearly recovering from its worst decline. The 1985-86
recession had a serious impact on overvalued properties and development
projects, leaving a number of residential and commercial developments
literally abandoned. Confidence has returned with many new and abandoned
projects being started or revitalized. Already there are some indications
of material and labor shortages. The continued growth in the economy
should also continue to put the construction industry on a sound footing.
General Consumer Goods - Malaysia's recovery from recession and continued
strong growth have apparently stimulated strongly increased consumer
demand. Vehicle sales in 1989 about doubled 1988's volume. While consumer
goods are only some 20 percent of imports, overall imports increased about
30 percent in 1988 and 1989, indicating strong increases in volume.
Consumer confidence indices are at record levels as well. The government
shows no sign of considering increasing tariffs to control these imports;
in fact, some tariffs, such as those on chocolates, have been cut in half
over the last two years. A number of other informal indicators, such as
food and beverage sales in hotels and spot retail sales reports, also
appear to show strong increases in consumer demand. Some American consumer
products, such as several branded lines of apparel and athletic footwear,
are doing well, indicating possibilities for other U.S. consumer goods.
Oil and Gas Equipment - Essential to the extraction and development of one
of Malaysia's primary resources and foreign exchange earners, oil and gas
equipment will continue to have a high priority in Malaysia. Real growth
in this sector is projected at 14 percent per year through 1992.
Malaysia's easing of its production sharing contract (PSC) conditions has
produced almost 30 new PSCs since 1985. With exploration work well under
way or completed, some drilling has already begun and more is in the
pipeline. Malaysia continues to be nearly 100 percent dependent on
imported equipment and less equipment and services are being supplied from
regional bases elsewhere. U.S. companies presently control approximately
50 percent of the market.
Chemicals and Petrochemicals - Malaysia imports over 90 percent of its
chemical needs. Imports exceed $600 million and should continue to grow at
approximately a 10 percent rate for the next few years. U.S. market share
is only about 15 percent. In the next five years, Malaysia will develop
its own petrochemical industry, largely based on new production of natural
gas. Several major projects, including polypropylene, polyethylene, MTBE,
and middle distillates plants, are going ahead.
Water Resources Equipment - The Government of Malaysia continues to place a
high priority on its efforts to expand the country's infrastructure,
including providing piped, treated water to all urban and many rural
areas. Despite an overall fiscal policy of austerity, the government is
borrowing and investing in this sector. Several major water supply,
sewerage, drainage, and irrigation projects are to be carried out during
the next three years. With limited domestic production, there are good
prospects for increasing imports of water resource equipment. Total demand
in this sector should increase by 8 percent over the nest three years.
U.S. companies' market share is less than 5 percent.
Since independence in 1951, Malaysia has moved from a largely
agricultural-based economy to a well-diversified economy, exporting
manufactured goods such as telecommunications equipment, electrical
machinery, and electronic components and commodities like rubber, tin, oil,
liquified natural gas, palm oil, and timber. In 1989, real GDP grew 8.5
percent, following an 8.7 percent growth in 1988. Manufacturing accounted
for about 25 percent of GDP in 1989. Agriculture, the country's second
largest sector, accounted for 20 percent of GDP in 1989.
The growth of the export-oriented manufacturing sector has been a key
factor in Malaysia's recent economic prosperity and was largely responsible
for pulling Malaysia out of its worst recession since independence.
Brought on by the 1985-86 collapse of the prices of Malaysia's key
commodity exports, the recession caused negative growth rates and put off
Manufacturing represented 25.6 percent of GDP in 1989 and contributed about
41 percent to the growth of GDP. Manufacturing output is increasing at the
rate of 13 percent; the production of electrical machinery grew at about
8 percent in 1989. Malaysia is the world's third largest producer of
integrated circuits and other semiconductor devices after the United States
and Japan. The local industry, dominated by American and Japanese
multinational corporations, boomed from mid-1986 to mid-1988, but it saw
slower growth in the second half of 1988 and in 1989. Output of
televisions, air conditioners, and radios grew rapidly. The rubber
products sector expanded about 26 percent in 1989, after growing
75.6 percent in 1988. Malaysia is the world's largest exporter of natural
Virtually all U.S. semiconductor producers have operations in Malaysia. At
first, these operations were primarily engaged in assembly and test
operations, but because of their success, they have moved into more
upstream activities such as wafer fabrication and production of lead
frames, as well as downstream activities such as the production of
computers and peripherals, telecommunications equipment, and consumer
Minerals - Output was up 6.9 percent in 1989, after increasing 6.3 percent
Oil and Gas - Oil production averaged about 583,000 barrels per day (bpd)
in 1989, an increase of 7.6 percent over 1988's 541,900 bpd. Liquified
natural gas (LNG) output was about
6.5 million metric tons (MT) in 1989, up 4.8 percent from 1988. More than
80 percent of Malaysia's gas output is exported as LNG to Japan. Malaysia
began work in 1988 on a 450-mile pipeline to deliver offshore gas to the
industrial and population centers in Malaysia and Singapore. Completion is
set for 1991.
Tin - After a 4.9 percent decline in 1988, Malaysian tin output grew about
3.8 percent to 30,000 MT in 1989. Malaysia is still the world's largest
producer of tin, but output is unlikely to ever regain the 1980's level of
61,400 MT annually. In cooperation with other tin producers, Malaysia
agreed to limit its exports as part of a program to assist the market's
recovery from the 1985 collapse of the International Tin Council. Higher
tin prices and falling stocks may bring an early end to the restrictions.
Agriculture was traditionally the largest sector in Malaysia until it was
overtaken by the manufacturing sector in 1987. Malaysia remains an
important commodity producer, and six commodities still account for 45
percent of Malaysia's exports -- petroleum, palm oil, rubber, tin, timber,
and cocoa. A
20 percent decline in Malaysia's terms of trade in 1985-86 cost the country
more than $3 billion annually in lost commodity earnings and drove the
economy into a severe recession, reducing national income, government
revenues, consumer spending, and investment. 1987 brought a recovery in
commodity prices along with a boom in exports of manufactured products,
lifting Malaysia out of its recession. That recovery has continued to
Timber - Production of saw logs and timber increased about
3.3 percent in 1989 to 37.8 million cubic meters, while that of sawn timber
increased about 3.7 percent to 6.9 million cubic meters. The main markets
for Malaysian timber are Japan, Taiwan, and South Korea. Malaysia's
National Forestry Policy calls for a reduction in logging from natural
4.8 million cubic meters per year after 1995.
Palm Oil - Palm oil output increased 11 percent to 5 million MT in 1988,
and output was expected to increase to 5.6 million MT in 1989. A vegetable
oil used for cooking in many countries, palm oil is also a base for the
production of margarine, soap, and other oil-based products. Malaysia
produces 59 percent of the world's palm oil and has given significant
attention to improving its methods and capacity for both producing and
processing palm oil. In 1979, the Malaysian Government established the
Palm Oil Research Institute of Malaysia (PORIM) to undertake research into
production and utilization of palm oil. PORIM has since published
extensive findings on nutritional and other properties of palm oil.
Rubber - Malaysia produces 33 percent of the world's natural rubber, and
output increased 5 percent in 1988 to 1.7 million MT. Phenomenal growth in
world demand for latex products in response to the AIDS crisis has brought
a sharp growth in investments in latex production facilities in Malaysia.
Cocoa - Despite low world prices, cocoa production continued its rapid
expansion with output up 77 percent over 1986 to 231,000 MT. Malaysia was
the world's third largest cocoa producer in 1988.
The construction industry expanded 2.5 percent in 1988, following three
years in which output declined 30 percent because of a recession-induced
glut of commercial property. Growth of 8.5 percent is estimated for 1989,
due to rising commercial rents and strong housing demand.
The New Economic Policy (NEP) is the Malaysian Government's basic political
and economic policy within which all business enterprises in Malaysia must
operate. The policy's stated goals are to reduce and eradicate poverty by
raising the income level of all Malaysians and to restructure Malaysian
society so as to eliminate the identification of race with economic
function. Established in 1971, the NEP is a collection of policies that in
practice mean that "bumiputras" (literally "princes of the soil," they are
ethnic Malays and other indigenous peoples) will get a larger slice of the
expanding economic pie. One of the specific objectives of the NEP has been
to achieve a corporate equity ratio of 30 percent bumiputra, 40 percent
other Malaysians, and 30 percent foreign by 1990. The government
established various trusts that were provided government funds to purchase
foreign-owned shareholdings on behalf of the bumiputra population. Foreign
firms have been urged to restructure their equity in line with the NEP
guidelines. Given the mid-1980s economic recession, it is generally
acknowledged that the NEP's goals dealing with the redistribution of
corporate equity cannot be achieved by 1990. However, two of the NEP's
specific objectives have probably already been met -- to reduce the poverty
rate to 16 percent and expand bumiputra employment to their proportion of
the population. Bumiputra employment in the managerial and professional
sectors, however, is projected at no higher than 28 percent.
The Malaysian Government has used "Five Year Plans" as the macroeconomic
tool to carry out the socio-economic objectives of the NEP. Since 1965,
there have been five plans. The Fifth Malaysia Plan covers the period from
1986-90 and is near its close. Taking effect in a period of economic
crisis, this plan contained a relaxation of the strict equity restrictions
on investment that had previously been in place, the purpose being to
encourage increased foreign investment. The plan opened a window of
opportunity for investors in the economy's export sectors, allowing them to
own up to 100 percent if they exported at least 50 percent or employed more
than 350 full-time Malaysian workers. The Malaysian Government has pledged
that such firms will never be required to restructure their equity. In
1988, the government established a National Economic Consultative
Commission (NECC) to review the NEP and make recommendations on economic
policy beyond 1990. The NECC has more than 150 members representing
political parties, business, labor, professional groups, and individuals.
The NECC will most likely recommend a continuation of the NEP in some form
The Malaysian Government uses economic planning to work toward development
goals as well as socio-economic ones. The Fifth Malaysia Plan and Medium-
and Long-Term Industrial Master Plan Malaysia (1986-95) outline the future
pattern of Malaysia's economic development.
The Fifth Malaysia Plan emphasizes public sector consolidation,
rationalization, and completion of ongoing projects. It renounces new
major public sector initiatives and, instead, places greater emphasis on
the private sector, calling for the privatization of certain
government-held industries and utilities. Given the economic recession and
continuing budgetary conservatism, many of the projects outlined in the
plan have been placed on hold or shelved indefinitely. Overall spending
targets have been reduced from M$70 billion to less than M$50 billion.
The Industrial Master Plan, prepared by the United Nations Industrial
Development Organization (UNIDO), identifies 12 priority industrial product
groups for development and export over the next 15 years. By identifying
prime opportunities for growth and investment, the Master Plan should help
to focus government and private sector efforts. However, the shortage of
public and private sector funds may delay development of the industries
highlighted in the plan. These include:
INDUSTRY MAJOR ITEMS
rubber tires; latex products
palm oil oleo chemicals, fat products
food cocoa products, canned fruits and
vegetables, animal feeds
wood furniture, moldings, rubber work products
chemicals fertilizers, petrochemicals
nonferrous metals fabricated aluminum, copper, tin products
nonmetallic mineral cement and composite products
products float glass
electronics/electrical consumer products, parts and
machinery components, foundries
iron and steel flat products, light/heavy
transport equipment passenger cars, motorcycles
SALES AND DISTRIBUTION CHANNELS
The marketing of imported goods in Malaysia is primarily conducted by
trading companies that operate sales outlets in the principal cities. They
regard Peninsular Malaysia and Sabah and Sarawak as a composite market to
be cultivated by branches and traveling salespeople. Although some of
these firms are headquartered in Singapore with branches in Malaysia, many
have head offices in Kuala Lumpur.
The entire range of importing services is available in Malaysia. The
larger houses provide the full gamut of marketing services. They import
for their own account; maintain inventories of goods and spare parts;
provide maintenance services; sell or process indent orders for delivery to
customers, including end-users; and sell to wholesalers and retailers. A
few of the small and medium-sized companies offer the same services but
most operate as indent merchants, placing and handling import orders for
the account of others.
Among the major trading companies are several firms owned and managed by
foreign nationals that operate mostly as branches. These include several
branches of U.S.-owned firms. A typical major trading company may
represent several hundred foreign suppliers and be involved in the
marketing of several thousand individual product items. It may sell to
factories and other producing enterprises, to government agencies owning
and operating public facilities, to construction and building companies,
and to wholesale and retail outlets.
A large number of small and medium-sized locally owned and managed trading
firms and a smaller number of locally owned major firms now account for
about one-half of Malaysia's foreign trade. Such firms are usually owned
by Chinese Malaysians and to a lesser extent by Indian Malaysians.
Participation in foreign trade by Malays is small, but it is being
encouraged by government authorities.
Many of these small and medium-sized firms are well diversified in the
range of products they handle; however, some prefer a specialization such
as electrical equipment; medical and scientific instruments and equipment;
and motor vehicles, parts, and supplies. These firms also take orders from
customers, sell to end-users, and engage in wholesale and retail trade.
Mainly, such firms are located in the cities of Ipoh, Penang, and Mallaca
and in Kuching and Kota Kinabalu. Their import activities are for the
benefit of local customers or end-users in these cities and the adjacent
markets. For example, Ipoh, in the heart of the tin mining region and
close to the rice bowl sections of West Malaysia, is served by trading
firms specializing in mining and rice farming equipment and supplies, as
well as by branches of the large trading firms specializing in mining and
rice farming equipment and supplies, and by branches of the large trading
complexes having countryside marketing facilities.
There are other variations in the distribution pattern. A large department
store may operate as an importer/retailer and also import through indent
orders placed with trading companies representing foreign suppliers whose
merchandise the store requires. Retail dealers specializing in food and
other shelf goods follow the same patterns. There are instances of local
sales branches maintained by foreign manufacturers who staff them with
local management and technical personnel, though maintaining home office
management and supervision in residence or by frequent visits as the case
requires, and who provide full sales and service facilities. U.S. firms
are included in this category.
The greater portion of the foreign goods moving into and out of Sabah and
Sarawak is handled by trading firms headquartered in Singapore and
Peninsular Malaysia. The area is served through branch sales outlets or by
salespeople who make frequent visits to small local dealers and
distributors, or end-users. Only a small amount of international trade is
conducted directly between foreign suppliers and strictly local East
Malaysian importers and distributors. Branch sales offices of Malaysian
and Singaporean trading firms are often given autonomy in arranging import
transactions with foreign suppliers who have agency contracts with parent
firms or on a single basis.
Wholesale and Retail Facilities
Wholesale and retail facilities range from the most modern warehouses and
department stores to small single-owner shops. Modern, Western-style
retail outlets are increasing in popularity as are U.S. merchandising
Wholesalers usually grant credit to those retailers who agree to stock
their products. Generally, the trading companies handle the wholesaling
and to some degree the retailing functions. They maintain large warehouse
complexes in connection with their trading activities; the retail market is
supplied from these facilities.
There is direct infrastructure equipment procurement by government agencies
for power, water, irrigation, and transport development. These purchases
are arranged with foreign suppliers in response to international
tendering. Direct transactions are waning, however, as it becomes clearer
to foreign suppliers that dealing through a competent local agent or
distributor greatly enhances their chances of making sales to government
Selecting an Agent
Trading companies serving foreign suppliers in these markets are generally
capable of effective sales techniques; however, foreign suppliers often
face the problem of inadequate agency selling performance. A contributing
factor is the overcommitment by local distributors, particularly the larger
firms, in representation of foreign suppliers. The result is that they
give appropriate attention only to some of the more saleable products they
handle and ignore those that require more effort to sell. Foreign
suppliers, including many American exporters, have learned to cope with
this situation by making a careful search for more flexible agents, often
found among the trading firms that are not overcommitted, and by providing
their own market promotion and development. The agent should be a local --
not a third-country -- agent. A visit to Malaysia by a company executive
to select an agent and to learn firsthand the subtleties of the culture,
government policies, and the market is a wise investment of company
resources, particularly in view of increasing competition from other
Despite the problems in finding a suitable marketing outlet, foreign
suppliers are making successful representation arrangements and selling
their products. This success is based largely on a genuine interest in
exporting, an awareness of the market situation, careful selection and
training of agents, active support in a sales campaign, and appropriate
monitoring of distributor performance. The implementation by a supplier of
a marketing program should be a continuing process in which there is room
for restructuring of an agency arrangement and sales campaign.
While follow-up attention to the distributor and his performance by the
U.S. supplier is a key factor in the success of the agency arrangement, an
important and probably more difficult requirement is to make the
distributor feel he is a member of the supplier's firm. All of the support
elements are needed in such a relationship. Probably the most vital
element is technical and training support. Effective marketing of hard
goods in Malaysia through a local distributor demands full assistance from
the U.S. supplier in all phases of selling, particularly in identification
of requirements, installation, operation, and maintenance of facilities and
equipment, as well as sales training and use of equipment. To give this
supplier role proper meaning, frequent contact between the U.S. supplier
and the local distributor is essential.
Selling the Market
Import and distributing firms that have advanced to the role of "selling
the market" have often had the benefit of advice and help from foreign
suppliers who understand and apply this concept. The conversion from a
habit of order filling to a role of finding buyers has been and continues
to be a gradual process, and success is found in proportion to the
competitive spirit and market development interest shown by the supplier.
Thus, a foreign supplier who has found a likely distributor or agent in
these markets should anticipate working with the agent to advance selling
techniques in pursuing an effective market development program.
Foreign trading firms have gradually substituted locals for foreign sales
staff and have trained them in selling methods and product know-how. Also,
supervisory and management positions in these firms are being increasingly
filled by promotion from within. Sales techniques by the foreign trading
firms have spilled over into local trading firms as sales personnel have
transferred to better job opportunities.
Foreign trading firms have frequently supplemented on-the-job sales
training with training abroad in the headquarters of the foreign suppliers
that they represent. This training, generally financed by suppliers,
includes product orientation and application by exposure of trainees to the
manufacturing processes in plants of suppliers. In addition, local talent
for selling positions in foreign-owned and local establishments is
increasingly drawn from college graduates who have received degrees in
business administration and other specialties from universities in
Malaysia, the United States, the United Kingdom, Canada, or Australia.
Sales training of local sales staffs is also provided by company
representatives of foreign suppliers who are stationed in Malaysia or make
frequent visits to the areas from company headquarters or from regional
marketing offices. This training is available to sales personnel of local
as well as foreign trading firms.
Product expertise, vital in the sale of machinery and equipment, is not
widely available among the sales staffs of local distributors. While this
situation is being corrected by increased education and training, foreign
suppliers of machinery and equipment frequently augment the product
know-how and engineering skills of their agent with an office in the region.
TRANSPORTATION, COMMUNICATIONS, AND UTILITIES
The Malaysian Government attaches considerable importance to the
accommodation of international air flights and to the expansion of domestic
aviation. In 1988, the government-owned Malaysian Airline System (MAS)
added six B747's to its fleet of 20 jets and 9 F50's to its fleet of 15
The airports at Kuala Lumpur, Penang, Kota Baharu, Kota Kinabalu, and
Kuching are international airports and equipped to handle wide-body
aircraft. Airports for domestic flights in Peninsular Malaysia are located
in Kuala Trengganu, Kuantan, Alor Star, Ipoh, and Malacca. There are
projects under way to upgrade the Langkawi Airport to allow landing for
A300 aircraft in order to accommodate the increased tourist traffic, as
well as a project to improve the runway at Penang. MAS serves the United
States, Japan, India, Australia, the Middle East, the People's Republic of
China, as well as four cities in Europe.
The highway network generally serves all the settled areas in Malaysia,
connecting principal commercial centers and reaching into the newly settled
areas opened up by the Federal Land Development Authority. The highway
network includes links of commercial and strategic importance between the
settled western areas of Peninsular Malaysia and its less populated east
coast. There are links between Batu Pahat and Mersing, between the west
coast through Kuantan to the east coast, and in the north from east to west
through Butterworth and Kota Bahru.
Under the Third Malaysian Plan, M$1.3 billion was allocated to implementing
road programs in Peninsular Malaysia. The construction of the Kuala
Lumpur-Sereban, Kuala Lumpur-Karah, and Jerangau-Johore highways was
completed. The Kuala Krai-Gua Musang, Johore Bahru-Senai, and
Kuantan-Segamet are the newest highways. Although the last two years'
budgetary constraints have caused a suspension of some major projects that
were in the planning stage, progress has been made on those projects that
were started under the Fourth Malaysian Plan. The Fourth Malaysian Plan
included the construction of approximately 22,670 kilometers of roads in
Peninsular Malaysia, 4,020 kilometers in Sabah, and 2,720 kilometers in
Sarawak. In addition to these urban highway projects, some feeder road
projects have been undertaken. Further construction also includes paving
1,056 kilometers of truck roads. Of particular importance is progress on
the North-South Toll Expressway. A total of 175 kilometers has been
opened, easing traffic congestion on the Federal Route 1. Such programs
are helping to expand and improve the Malaysian highway transport network.
Malaysian Railways, the sole railroad system, is owned by the Government of
Malaysia. Under the Fourth Malaysia Plan, M$599 million was allocated to
the railway sector in order to continue programs began in 1971. Investment
in rolling stock such as wagons, passenger coaches, and shunting
locomotives is helping to improve services.
Investment in the Fifth Malaysian Plan focused on improving freight and
passenger services and upgrading safety. Productivity increased and costs
decreased due to investment in mechanization of track maintenance
services. In addition, Malaysian Railways streamlined its organizational
structure to improve efficiency and performance. Although the
transportation industry as a whole expanded, Malaysian Railways has lost a
portion of its market to the improved road transportation system.
The railway system operates in Peninsular Malaysia and Sabah. In
Peninsular Malaysia, the main line extends from Singapore through Johore
City, Kuala Lumpur, Ipoh, and Prai, before going on to Bangkok, Thailand.
There are also branches that stem from the main line and connect with Port
Kelang, Port Dickson, Telek Anson, Port Weld, and Butterworth. In
addition, there is a 327 mile line along the east coast to the Thailand
Malaysia's government-owned telecommunications system is modern and
efficient. It is one of the government services slated for privatization.
All the principal cities and towns are linked by telephone, and calls may
be placed immediately to most points by direct dialing. Overseas radio and
telephone service between Malaysia and most foreign countries is
available. Telephone and telegraphic connections can be made through the
Southeast Asian Commonwealth Communications System (SEACOM) to the
Commonwealth Global System. Thus, there is direct dialing between Kuala
Lumpur and the United Kingdom, the United States, Canada, Australia, and
Japan. The SEACOM system reaches Kota Kinabalu in Sabah and Brunei. A
troposcatter station in Sarawak provides high-quality telephone channels
and permits automatic or semiautomatic dialing into all of Peninsular
Malaysia's main towns through the trunk dialing system. Telex service has
been on the decrease due to the upgrading of other newer and more
sophisticated communication services.
An effective telegraph system serves all of Malysia's principal cities.
Local and overseas telegrams are accepted at main telegraph offices, post
offices, hotels, and by private phones. Overseas telegrams from Malaysia
are sent by the Malaysian Telecommunications Department using radioteletype
facilities. Telegrams to Hong Kong and Kota Kinabalu are transmitted
directly from Kuala Lumpur via SEACOM cable. To all other countries, they
are transmitted by the Singapore Telecommunications Department via
submarine telegraphic cable or short-wave radio.
Malaysia entered the space link age by opening a Satellite Communications
Earth Station in Kuantan in 1970. This facility links Malaysia to Tokyo
via an INTELSAT III Satellite. The satellite provides a high-quality
overseas service for telephone, telegraph, and telex circuits. Recently,
this satellite station was replaced to upgrade its services.
Under the Fifth Malaysia Plan, 230,000 additional telephones were installed
by 1988, increasing the telephone-population ratio to 8:6. In the remote
areas, services were upgraded by an investment in the Automatic Telephone
Using Radio System (ATUR). In addition there was an expansion of overseas
telecommunications links, and the installation of optical fiber in the
submarine cable between Sabah, Sarawak, and Peninsular Malaysia.
The domestic radio and communications system reaches a wide audience
through the languages of Malay, various Chinese dialects, and English.
Please refer to the "Advertising and Research" section of this publication
for further information.
The Malaysian postal service sends out two deliveries daily in the larger
commercial centers. Between 1986 and 1988, the Postal Department opened 34
new post offices, 111 mini-post offices, and 93 postal agencies servicing
an additional 450,000 people and easing the pressure from the 59 million
additional mail and freight handled by the mail service. On average the
Malaysian mail service now handles 1,359 million pieces of mail a year.
Airmail service between Malaysia and the outside world is considered
Approximately 49 percent of the electrical capacity comes from
petroleum-fired power stations, about 26 percent from hydroelectric
facilities, and 25 percent from gas-fired turbines. In order to ensure an
adequate supply of electricity for industry and to reduce the dependency on
oil-generated facilities, the government has decided to diversify into
gas-, hydro-, and coal-powered stations. It has already shown success in
this project by increasing the percentage of gas used in the generation of
electricity from 8.9 percent in 1985 to approximately 25.4 percent in
1988. It hopes that by the year 2000, Malaysia will use 40 percent hydro
power, 48 percent non-oil fuels, and 12 percent fuel oil. Nuclear energy
is not being seriously considered by the Malaysian Government.
Through the 1970s and 1980s, water supply expanded rapidly. By 1988 74.6
percent of the population had piped water. In urban areas the coverage was
94.8 percent. The coverage in the rural areas was lower, being on average
61.6 percent with Kedah, Kelantan, and Sarawak having the lowest coverage.
The Fifth Malaysia Plan stresses the completion of ongoing projects which
are directed towards improving the water supply in the rural areas and
ADVERTISING AND RESEARCH
Advertising as a sales tool is widely used in Malaysia. There are several
advertising and public relations firms that will assist the U.S. exporter
and his/her agent in media presentations. The most effective media
advertising is done in the daily newspaper. These publications have a wide
circulation and reach readers in the major local languages. While Malay is
the national language, most of the business community can be reached in the
English language press. The principal English language newspapers are the
New Straits Times and the Sunday Times. Other publications include the
Malay Mail, the Asian Wall Street Journal, and Business Times.
Advertising in American publications also reaches the Malaysian market.
U.S. consumer and trade journals have a wide circulation -- often reaching
a worldwide readership, particularly among the more affluent business and
professional customers, many of whom are headquartered in Malaysia.
Radio and television are being used increasingly by distributors to
advertise consumer goods. Rising family incomes make these media very
popular methods of advertising. The majority of the population listens
daily to Malaysian radio broadcasts. Television operates over three
channels offering a full range of programming. Both radio and television
offer commercial "spots."
In addition, all types of advertising familiar to the exporter are
available in Malaysia. The type of promotion will depend upon the product
and the target market. Flyers, billboards, store displays, television,
radio, and newspapers are all used as successful marketing techniques.
The Advertising Standards Authority is the agency that administers and
updates the Code of Advertising Practices and sets guidelines for "legal,
decent, honest, and truthful" advertising. Recent revisions in the code
ban all television liquor advertisements, place time restrictions on
advertising some products, restrict cigarette advertising, and ban
advertisement in general that feature scantily dressed women, Malaysians
who look like foreign celebrities, and children.
Market research, as it is known in the developed economies, is recognized
as an essential and effective marketing tool in Malaysia that is used with
increasing frequency and with very satisfactory results. Several firms,
including Asian ones, supply this service and have developed an acceptable
competence in professional market research. These firms are constantly
expanding their activities to meet the growing demand for their expertise.
Market research firms based in Singapore and Hong Kong also take on
commissions in Malaysia.
Although professional market investigation services are available, many
local trading firms conduct market inquiries on a rule-of-thumb basis.
While the results are often good, they vary according to the competence of
the firms and the staffs responsible for market planning and development.
Business organizations, both government and private, may also be helpful as
sources of market information.
There are several chambers of commerce organized on an ethnic basis. They
have good membership support and are loosely tied into a single united
chamber in an effort to achieve a consolidated approach when representing
the viewpoint of private enterprise in its relations with the government.
The largest chambers have been organized by ethnic Chinese businesspeople
and are located in Kuala Lumpur, Ipoh, and Penang. Membership includes a
large number of importers and exporters.
BANKING AND CREDIT
The Malaysian currency is the ringgit, or Malaysian dollar. The external
value of the ringgit is based on its relationship to a weighted basket of
the currencies of Malaysia's major trading partners, including the United
States. The ringgit exchange rate in terms of the U.S. dollar, the
intervention currency, is determined in the foreign exchange market. Bank
Negara, Malaysia's Central Bank, intervenes in order to promote relative
stability in the value of the ringgit in relation to the basket of
currencies. Rates for all other currencies are determined on the basis of
the Malaysian dollar vs. U.S. dollar rate and U.S. dollar rates for those
currencies in markets abroad.
Exchange Control Regulations
Malaysia has a very liberal foreign exchange regime. Payments, including
repatriation of capital and remittance of profits, are freely permitted.
Payments to countries outside Malaysia may be made in any foreign currency
other than the currencies of Israel and South Africa. Payments within
Malaysia must be made in ringgit.
Regarding remittances abroad, no permission is required for payments in
foreign currency up to M$10,000. Individual foreign exchange transactions
above M$10,000 require an exchange control license. For transactions up to
M$10 million, the license is obtained upon completion of a simple reporting
form, which is approved by any commercial bank without reference to the
Controller of Foreign Exchange provided that, in the case of payments of
interest or repayments of principal on borrowings from nonresidents, the
borrowings have been obtained with the approval of the Controller, and the
payments are consistent with the approved terms and conditions of the
Though originally based on the Customs Cooperation Council Nomenclature
(CCCN), the Malaysian tariff nomenclature is now in accord with the
International Convention on the Harmonized Commodity Description and Coding
System (HS). Therefore the 1988 Custom Order, which became effective on
January 1, 1989, is based on the Harmonized System. This tariff schedule
applies to all of Malaysia, and all items with the exception of certain
goods, mainly petroleum products and live animals. The exception also
extends to goods either manufactured locally or abroad that are transported
between the three areas of Malaysia (Peninsular Malaysia, Sabah, and
All custom areas base their ad valorem value on the c.i.f. value of the
product. An ad valorem tariff is one which is calculated according to
value, or as a percentage of the value of goods cleared through customs.
The Malaysian ad valorem rate ranges from zero to 75 percent, although only
a few items are dutiable at over 25 percent. The breakdown according to
categories of goods on average are: basic foods, less than 5 percent;
capital goods, 5 percent; intermediate goods and transportation equipment,
usually less than 20 percent; consumer goods, up to about 60 percent; and
importation of motor vehicles, a 100 percent tariff. In addition, an
importer of motor vehicles needs to have an Approved Permit (AP). These
are only granted to firms whose ownership is 100 percent bumiputras. In
general, the tariff rates in Malaysia are low compared with other Southeast
In Malaysia, duties are stated and paid in Malaysian currency at the time
the goods are cleared through Customs. Conversion of foreign currencies
into Malaysian currency will be done according to current market prices.
A 5 percent surtax is levied on the c.i.f. value of goods inclusive of
import duty and sales tax. This sales tax is currently at 10 percent.
Samples that do not have any commercial value may be admitted into Malaysia
duty free. Samples with a commercial value are subject to prevailing
duties. Samples subject to a duty may be brought into Malaysia upon
deposit of duty by commercial travelers. The deposit is refunded if the
sample are exported within three months, or within such further time as the
authorities may grant.
Most goods enter Malaysia under an open general license, but some are
subject to the 1987 Custom (Prohibition of Imports) Order's licensing
provision, which is issued by the Comptroller of Customs. The open general
license is an authorization by the Government of Malaysia to import (or
export) specified goods without recourse to a specific validated license
for each transaction. The Comptroller of Customs administers trade
INVESTMENT IN MALAYSIA
Principal foreign investors in Malaysia are Japan, Singapore, the United
States, the United Kingdom, Taiwan, and Hong Kong.
A 1988 survey by the American Embassy revealed that firms with American
participation had $4.8 billion in assets in Malaysia at the end of 1987.
The portion attributable to American ownership is $4.6 billion, reflecting
the fact that a large portion of the firms are 100 percent U.S.-owned. The
petroleum sector accounts for $2.9 billion in total investment
(63 percent of the total), mainly constituted by Exxon's offshore oil and
gas production subsidiary. Manufacturing investment totals $895 million
(20 percent), concentrated in the electronic components subsector ($727
million). U.S. investors planned a further investment of $436 million in
1988 and $358 million in 1989, with the petroleum and manufacturing sectors
again accounting for the largest share. The American Business Council
represents the interests of American firms in Malaysia with the Malaysian
Government Policy on Investment
The Malaysian Government's attitude towards foreign investment is largely
dependent on the type of investment, when the investment was made, and the
extent to which there is Malaysian and bumiputra participation in the
investment. Despite the New Economic Policy (NEP) goal of limiting foreign
ownership of incorporated businesses to 30 percent by the year 1990, the
government encourages foreign investment.
The government maintains a favorable climate for foreign investment in
Malaysia in manufacturing and agro-industrial enterprises to meet the
country's economic development goals. Malaysia's investment incentives are
competitive with those of other countries. The government has established
the Malaysian Industrial Development Authority (MIDA) to promote foreign
investment in Malaysia. MIDA works with both foreign and domestic
investors in developing their proposals, processing investment
applications, and coordinating permits and licenses. Foreign firms
interested in investing in Malaysia should initially consult with MIDA.
The Malaysian Government is more restrictive with regard to foreign
investment in the financial services sector. Foreign commercial banks,
insurance companies, and stockbrokers are encouraged under the NEP to
restructure their equity, and recently foreign banks were notified that
they will be required to incorporate locally by 1994. Foreign commercial
banks face a number of discriminatory restrictions in areas such as
branching and access to the electronic funds transfer system. The
government limits new foreign investors to holding no more than 30 percent
of the equity in a financial institution.
In 1986, the government decided to actively seek increased foreign
investment. In part, this desire was prompted by the 1985-86 recession and
a renewed emphasis on the private sector as the "engine of growth." As a
result, the government has significantly liberalized its regulations
affecting foreign investment in a number of areas. Guidelines on foreign
equity participation were liberalized in 1986 along with access to credit
markets, foreign exchange controls, and the ability of foreign firms to
Launched in 1970, the New Economic Policy will expire at the end of 1990.
Nearly all observers expect the NEP to be continued in some form after
1990. It is worth noting, however, that the share of corporate equity held
by foreigners stands at 25 percent, below the 30 percent ceiling provided
in the NEP and is not likely to reach that level in the future. Whatever
form the NEP takes after 1990, it is likely that the Malaysian Government
will continue to encourage foreign investment in Malaysia.
General - The Industrial Coordination Act of 1975 (ICA) requires that all
manufacturing companies with more than M$2.5 million in shareholders'
funds or employing 75 or more full-time employees obtain a manufacturing
license. The ICA applies to both Malaysian and foreign-owned companies. A
manufacturing license will specify the products to be produced, the
quantities approved, and any special conditions (including performance
requirements and investment incentives). Expansion requires no new license
if 80 percent or more of the output is exported. Diversification beyond
the product lines originally approved or expansion of production for the
domestic market beyond the level originally licensed requires an amendment
to the original license. License applications and any amendments are
processed by MIDA and reviewed by the Inter-Ministerial Action Committee on
Investment. Final approval is by the Secretary General of the Ministry of
Trade and Industry.
Equity Participation - New and more liberal guidelines on foreign equity
participation were announced by Prime Minister Mahathir in September 1986.
They apply to new investments for which application is made between October
1, 1986 and December 31, 1990. Under the new guidelines, a foreign
investor can hold 100 percent of the equity of a Malaysian subsidiary by
meeting either of two conditions: 1) export 50 percent or more of the
output (including sales to free trade zones or licensed manufacturing
warehouses); and 2) employ 350 or more full-time Malaysian workers. In
addition, the company's products must not compete with products being
produced locally for the domestic market. These guidelines do not apply to
existing investments, but do apply to the amount of equity in any
expansion. The Malaysian Government has pledged that new investors during
this period will never be required to restructure their equity at any time
as long as they continue to meet the conditions of the original license.
For companies exporting 20-49 percent of their production, foreign equity
of between 30 and 51 percent can be approved depending on such factors as
the level of technology, size of investment, employment, location, spin-off
effects, etc. For companies exporting less than 20 percent of their
production, foreign equity is limited to 30 percent in most cases. Foreign
equity up to 51 percent may still be approved for high technology or
priority products for the domestic market.
Where the foreign investor does not take 100 percent of the equity, the
Malaysian equity will normally be distributed according to the following
guidelines: for projects initiated by the foreign investor, the first 30
percent of equity not held by the foreign investor will be reserved for
bumiputras. For projects initiated by bumiputras on a joint-venture basis,
the entire portion of the equity will be reserved for bumiputras. If
bumiputras are not able to take up the balance, the Ministry of Trade and
Industry will allocate part to non-bumiputras. For projects initiated by
non-bumiputras on a joint-venture basis, the first 30 percent of equity
will be allocated to the non-bumiputras involved and the balance, if any,
reserved for bumiputras. Under special circumstances, the Ministry of
Trade and Industry can permit the non-bumiputras to take up the entire
nonforeign portion of the equity.
Employment Policy - Malaysia's policy is to ensure that Malaysian citizens
are eventually trained and employed at all levels. Foreign companies are
permitted to bring in expatriate personnel on a permanent basis for key
posts and on a limited basis for executive posts that require professional
qualifications not currently available and for nonexecutive posts that
require technical skills and experience not currently available. New
investments with paid-up foreign capital of $2 million or more for which
application is made between October 1, 1986 and December 31, 1990 are
guaranteed five expatriate positions, some of which may be designated key
posts. Additional positions may be approved if justified.
Most American firms operating in Malaysia find it possible to operate with
one of two key posts filled by expatriate personnel because of the
availability of qualified administrative and technical personnel. Some of
the largest American firms in Malaysia have no expatriate personnel.
All firms operating in Malaysia are expected to employ and train Malaysian
and bumiputra personnel so that employment at all levels reflects the
ethnic breakdown of the country. As a result, firms are under pressure to
increase the bumiputra proportion of their employees, especially at
professional levels. Firms still find it difficult to recruit experienced
bumiputra personnel at management levels, but the situation is improving as
the number of bumiputra university graduates grows.
Malaysia provides a number of tax incentives to investors, both foreign and
Malaysian. These incentives have been modified over time, most recently in
the Promotion of Investments Act of 1986. The principal investment
incentives are Pioneer Status and Investment Tax Allowance. An enterprise
may qualify for one or the other of these incentives, but not both.
Normally, an investor will be accorded the one that is most beneficial to
the particular enterprise. These two incentives are available to investors
in manufacturing, agriculture, and tourism. The most widely used
investment incentive programs are:
Pioneer Status: provides 100 percent relief from Malaysian income tax and
development tax for a period of five years from the start of operations.
The tax relief period may be extended for an additional five years if the
company meets certain criteria established by the Ministry of Trade and
Industry. For integrated agricultural enterprises, pioneer status may be
extended only for the processing portion of the investment.
Investment Tax Allowance: exempts a company from Malaysian income tax and
development tax equal to an agreed percentage of qualifying capital
expenditures (up to 100 percent) incurred during a period of up to five
years from the start of operations.
Other incentive programs include: location incentive; equity/employment
incentive; accelerated depreciation, reinvestment, and export allowances;
double deductions for promotion of exports, training, and export credit
insurance premiums; research and development incentive; tariff protection;
and exemptions from customs duties on machinery, equipment, raw materials,
and components. These incentives are generally available only for
investments in the manufacturing and agricultural sectors.
Free Trade Zones
Free trade zones (FTZs) are areas designed for manufacturing companies
producing or assembling products principally or wholly for export. Customs
minimal, and all machinery and raw materials and components directly used
in production may be imported duty free. Malaysia established nine FTZs
under the Free Trade Zone Act of 1971. They are largely administered by
the state economic development corporations of the states in which they are
located, which currently include Penang, Malacca, Selangor, and Johore.
Both foreign and domestic firms may locate in FTZs, and are eligible for
the full range of investment incentives offered by the Malaysian
Government. In order to locate in a FTZ, a firm must export at least 80
percent of its output, and any production to be sold in Malaysia is subject
to normal customs duties.
Malaysia also has a number of licensed manufacturing warehouses (LMW) to
enable companies to establish factories mainly for the export market in
areas where establishment of an FTZ is not practical. In effect, a single
factory site can become a miniature FTZ. Firms that establish a LMW
receive essentially the same benefits as those locating in a FTZ.
Labuan Island, off the state of Sabah, and Langkawi Island, off the state
of Kedah, are Malaysia's only free ports. Acquired from Sabah by the
Federal Government in 1983, Labuan is the site of several heavy industries
based on Sabah's extensive offshore gas deposits. Langkawi became a free
port in 1987, and most of its development has been in the tourist industry.
Land and Real Estate
In West Malaysia, all dealings in land other than land for mining are
governed by the National Land Code of 1965. The code established uniform
land laws for all of the individual states of West Malaysia, which continue
to have the responsibility for controlling land ownership. The code also
provides methods by which land may be made security for debts. Land and
real estate dealings in East Malaysia are governed by the Sabah and Sarawak
With certain specific exceptions, there is no basic restriction on land
ownership in Malaysia. Land may be acquired by persons or companies
domestically outside Malaysia provided they conform in all respects to
existing land laws. Title to land is derived either from a grant by the
Crown or from rights granted as the result of duly recognized and
registered clearing and cultivation. Most land is held by long-term lease
ranging from 33 to 99 years, subject to the payment of fixed annual
rental. The present policy of the state governments is to transfer land by
lease rather than by perpetual grant. All states have the power to acquire
any land that may be needed for public purpose, but a fair and reasonable
compensation must be paid. Title under the various land codes conveys
surface rights only, with state governments retaining all rights to
minerals below the surface.
Four types of businesses may be set up in Malaysia:
1. Private companies
2. Public companies
3. Branches of foreign companies
4. Sole proprietorship and partnerships
Three types of companies may be incorporated under the Companies Act:
1. A company limited by shares
2. A company limited by guarantee
3. An unlimited company with or without share capital
In a company limited by shares, the liability of a member is limited to a
specific amount undertaken. In a company limited by guarantee, the
liability of members is limited to a specified amount undertaken to be
contributed to assets on the company's termination. These are generally
nonprofit organizations. An unlimited company has no limit on the
liability of the members and resembles a general partnership in this
Private companies, denoted as "Sendirian Berhad" or "Sdn. Bhd.," may be
limited or unlimited. A private limited company restricts the right to
transfer its shares, limits its membership to no more than 50, prohibits
public subscription to its shares, and prohibits invitation to the public
to deposit money with the company for fixed periods or payable by call.
Public limited companies, denoted as "Berhad" or "Bhd.," are companies
whose shares may be offered to the public for subscription. Companies may
apply to the stock exchange for permission to have their shares listed.
Companies incorporated outside Malaysia that do business in Malaysia are
classed as foreign companies by the Companies Act. Before local
establishment, a foreign company is required to deposit the following with
the Companies Registry:
1. A certified copy of its certificate of incorporation
2. A certified copy of the charter, statutes, and/or articles of the
company that define its constitution.
3. A list of its directors and secretary
4. A memorandum of appointment stating the names and addresses of two or
more persons resident in Malaysia authorized to act legally and
responsibly on the company's behalf
Partnerships and sole proprietorships must register with the Registration
of Businesses before they can begin to operate. There is a registration
fee and an annual renewal fee.
All companies must register with the Registrar of Companies by submitting
to them the following forms:
1. Memorandum and Articles of Association
2. Statutory declaration of compliance with the Companies Act
3. Certificate of identity
4. Consent to act as director
5. Statutory declaration by persons before appointments as directors
Companies pay registration fees based on the amount of authorized capital,
and both filing and stamping fees apply for submission of the above
The Companies Act requires that the secretary and a minimum of two
directors must have their principal or only place of residence in Malaysia,
and company auditors must be approved by the Malaysian Government.
Companies must also hold a general meeting within 18 months of
incorporation, followed by one per year thereafter.
The addresses for the Registration of Businesses (ROB) and Registrar of
Companies (ROC) are as follows:
Pejabat Pendaftaran Perniagaan Pendaftar Syarikat
Tingkat Mezzanin Tingkat 16
Bangunan KUWASA Bangunan KUWASA
Jalan Raja Luat Jalan Raja Luat
50350 Kuala Lumpur, Malaysia 50350 Kuala Lumpur, Malaysia
Government offices and most businesses have hours of 8:00 a.m. - 12:45 p.m.
and 2:00 p.m. - 4:15 p.m. from Monday through Thursday. On Friday, hours
are generally 8:00 a.m. - 12:15 p.m. and 2:00 p.m. - 4:15 p.m. and on
Saturday, from 8:00 a.m. - 12:45 p.m.
In the states of Kelantan, Trengganu, Johor, Perlis, and Kedah, the weekend
is observed on Thursday and Friday.
Malaysia has 16.9 million people, of mixed ethnic Malay, Chinese, and
Indian background. The population is growing at an annual rate of 2.4
percent. Malaysia's population density is low, compared with other
countries in Southeast Asia.
The labor force is growing approximately 2.8 percent per year and is
projected to exceed 6.4 million in 1989. Total employment by the end of
1988 was estimated at 6.1 million. Employment is greatest in the
agricultural, mining, and manufacturing sectors, with the manufacturing
sector by far the largest employment growth area, with annual growth
running at 10 percent. Unemployment has been running between 7 and 8
percent since 1985 and is concentrated among people in the 15-24 year old
age group. Labor shortages remain, however, especially in the plantation
sector and in other areas away from the urban centers. One employment
problem that continues to receive priority attention from the government is
that of graduate unemployment. Many university graduates, including those
educated abroad, have found it difficult to find jobs commensurate with
their educations. The expansion of Malaysian universities and the return
of the first large batches of students from abroad coincided with the
recession as firms cut back on hiring. Even graduates in such fields as
engineering, accounting, and physical sciences which were previously in
great demand are finding jobs scarce.
One of the major economic goals set forth under the New Economic Plan is
eliminating the identification of race with economic function. To
implement this policy, companies are given goals for employing bumiputras
that they are expected to reach over several years. This policy has been
generally successful. There are now many more Malays in manufacturing,
services, retail trade, and other professions.
Wages and Benefits
Wages in Malaysia are well below levels prevailing in industrialized
countries, but substantially higher than any of its neighbors except
Singapore. There is no national minimum wage. Minimum wage legislation
covers only certain classes of employees: retail clerks, hotel and
restaurant employees, cinema workers, and stevedores not employed directly
by a port authority. Minimum monthly wages for these workers are in the
$70-$90 range in urban areas and 10-15 percent lower for rural areas.
Approximately 125,000 workers are covered by these wage councils.
Establishment of wage councils for other categories of workers is being
The effective minimum monthly wage for unskilled labor in the Kuala
Lumpur-Petaling Jaya area is M$225 (US$86) per month. In the retail
sector, wages below M$250 (US$95) per month are very rare. The lowest
salary on the government's pay schedule is M$285 ($108) per month. Average
wages for semiskilled production workers are M$600-M$700 ($228-$267) per
month, with many skilled workers making more than M$1,000 ($380) per
month. In 1985, an estimated 18.4 percent of the population was below the
An official survey of industry reported that in 1987 average earnings of
unskilled workers rose 5.9 percent and 3.5 percent for management staff,
compared with 6.7 percent and 4.3 percent, respectively, in 1986.
Collective agreements negotiated in 1988 provided for an average pay
increase of 4.8 percent over three years. Collective agreements in the
manufacturing sector provided an average increase of 6.9 percent in 1988.
With inflation running at 1 percent per annum, these agreements represented
a small increase in real earnings.
Three government programs protect Malaysian workers against loss of income
because of sickness, injury, death, or old age. There is no welfare
program or unemployment compensation in Malaysia, although employers are
required by law to pay employees termination benefits.
The Social Security Organization (SOCSO) provides cash benefits to insured
employees who sustain temporary disability, or to the heirs of victims of
fatal industrial accidents. At the end of 1988, 3.7 million workers were
covered by SOCSO. Financial support for SOCSO is shared by employees and
employers, who contribute 0.5 percent and 1.75 percent of their monthly
The Employee Provident Fund (EPF) provides old-age benefits for most
workers. EPF contributions are 9 percent of wages from the employee and 11
percent from the employer, although many large employers contribute more
under their collective agreement or compensation plan. EPF is fully funded
with contributions and accrued interest being credited to the individual's
account. The amount accumulated becomes available in a lump sum or in
installments at retirement (age 55), if the contributor becomes disabled,
or if he or she permanently leaves Malaysia and Singapore. At the end of
1988, total membership of the EPF was 5.3 million people and the fund's
assets reached M$36.5 billion. The majority of the fund is invested in
A third program of support for workers is the Government Pension Scheme,
which provides pensions to civil servants who retire at age 55, retire on
medical grounds, or are required by the government to retire. Civil
servants may also be entitled to a disability allowance if they retire as a
result of a service-connected disability. Widows and minor children are
also eligible for a derivative pension if the employee dies in service or
after retirement. The pension scheme is noncontributory, and all pension
payments are charged to general revenue of the Federal Government.
As of the end of 1988, there were 392 individual unions in Malaysia with
616,626 registered members, an increase of 10,000 over the figure for
1987. Unions are organized among workers in a particular trade,
occupation, or industry, or similar trades, occupations, or industries.
Unions are not allowed to organize workers in industries outside their
primary one. As a result, Malaysian private sector unions are generally
organized on industry or company lines. It is not uncommon for more than
one union to be represented in a single employer, but the different unions
represent quite different classes of employees.
After growing steadily up to 1983, trade union membership stagnated from
1983-87. There was a net gain of 10,000 members in 1988. Union membership
has failed to match the growth in employment in the 1980s, resulting in a
drop in the level of unionization to 10.1 percent in 1988 compared with
11.3 percent in 1985.
The National Union of Plantation Workers (NUPW) is by far the largest union
in Malaysia, accounting for nearly a seventh of all organized workers. A
decline in its membership, from 120,000 in 1980 to only 83,000 in 1988, has
offset gains made by other unions.
The trade union movement is organized into two main bodies -- the Malaysian
Trade Unions Congress (MTUC) and the Congress of Unions of Employees in the
Public and Civil Services (CUEPACS). At the end of 1988, 142 unions with
303,000 members were affiliated with the MTUC. However, 40 unions with
50,000 members were behind on their affiliation fees and not in benefit.
The CUEPACS groups together 55 unions with about 110,000 members employed
by the federal and state governments and statutory bodies. An increasing
number of CUEPACS affiliates are also members of MTUC.
Several large national unions, including the National Union of Petroleum
and Chemical Workers, the National Union of Bank Employees, and the
National Union of Commercial Workers, do not belong to either group.
A contentious issue over the past two years has been that of in-house
unions. At the end of 1987, 210 in-house unions represented 189,000
workers, up from 199 in-house unions representing 180,974 workers in 1986.
Most in-house unions are in the public sector, although the privatization
of the telecommunications department and other government services has
moved a number of in-house unions into the private sector. The Malaysian
Government sees in-house unions as creating a better industrial relations
climate between employers and workers, in part because one union would
represent all workers in a firm. The leaders of the national unions see
them as weakening their own unions and reducing the protection union
membership affords a worker.
INTELLECTUAL PROPERTY RIGHTS
Infringements of intellectual property rights in Malaysia are prevalent,
but to a lesser degree than in many other Asian countries. Since the early
1980s, the government has enacted a series of laws that have greatly
strengthened protection for intellectual property in Malaysia. Although
Malaysia is a member of the World Intellectual Property Organization, it
has not yet joined the Berne Convention or the Universal Copyright
Convention. The Malaysian Government understands the importance of
intellectual property protection for encouraging foreign investment as well
as protecting local producers.
Copyrights - Malaysia passed a new copyright law in 1987 that strengthens
protection and explicitly extends coverage to computer software. The new
law took effect in December 1987 and has already significantly reduced
audio and computer software piracy. Malaysia does not yet provide adequate
protection to foreign works but has presented its documents in order to
accede to the Berne Convention.
Patents - Malaysia passed a new patent law in 1983 and implemented it in
1986. The law has strong penalties for violators and sound implementing
procedures, however the registration and technical review offices are
backlogged. The United States has provided technical assistance and
training in the United States and Malaysia to help the government set up
its own patent system. The new law and strong administrative support for
it in the government has ended any major problems with pirated
pharmaceutical products. Patents registered in Malaysia generally have a
duration of 15 years and may have longer duration under certain
circumstances. A person who has neither his domicile nor his residence in
Malaysia must use a local patent agent to proceed before the Patent
Registration Office or institute suit.
Trademarks - Any person who registers or applies for protection of a
trademark in a foreign country designated by the Malaysian Government is
entitled to registration of that trademark in Malaysia, provided that
application for registration is made within six months from the date of
registration in the foreign country concerned.
The Ministry of Finance coordinates the Malaysian Government's tax system
through the Inland Revenue Department and the Customs and Excise
Department. The major public revenues of the Government of Malaysia are
provided by income taxes on companies and individuals; indirect taxes such
as sales tax, service tax, and customs and excise duties; estate and stamp
duties; and real property gains tax. The Malaysian tax year is the
Income Tax - Income taxable in Malaysia includes that obtained from gains
or profits from a business; gains or profits from employment; dividends,
interest, or discounts; rents, royalties, or premiums, pensions, annuities,
or other periodic payments; and any other gains or profit. For residents
of Malaysia, both income from Malaysia and income remitted from outside
Malaysia are subject to taxation. For nonresidents, only income from
Malaysia is taxable. Generally, nonresidents are not subject to tax on
income from employment in Malaysia if the period of employment is less than
60 days. There is no tax on capital gains, with the exception of a tax on
the gain from real property held less than five years.
Development Tax - Development tax is payable at the rate of
4 percent on net income from business or property rental sources.
Sales Tax - In l990, the 5 percent sales tax on certain foodstuffs,
building materials, pewterware, sporting goods, and household equipment was
eliminated. The tax remains on a range of items, however.
GUIDANCE FOR TRAVELERS
Passports are required for all visitors to Malaysia. Visas are not
required for purposes of business, tourism, transit, or social visits for a
period of stay of less than three months. Those desiring clearance for
stays of longer duration or those seeking employment, education, or
research should consult the Embassy of Malaysia in Washington, DC.
Visitors staying for more than one year are required to obtain a national
registration card. Health conditions and facilities for medical care are
good. Water is safe to drink, except in some of the more remote rural
areas and small towns.
There are no limits on the amount of U.S. currency, travelers checks, or
letters of credit brought into the country. Visitors are allowed to depart
with all of the U.S. currency brought with them provided that any amount
more than M$5,000 was declared by the visitor and formally noted by the
customs authorities upon arrival.
Many goods entering Malaysia are not subject to import tariffs and used
portable goods in the possession of visitors are normally exempt from
import duty. In general, household and personal effects may be brought
into Malaysia duty free. Customs may require registration of articles such
as expensive cameras and watches and such personal items may not be sold
within a three-month stay.
The temperature and humidity readings are in the high ranges, and the
average annual rainfall is about 100 inches. There are no appreciable
seasonal variations in temperature. The difference between daytime and
nighttime temperature runs about 15 to 20 degrees throughout the year. The
humidity rises at night, but it is considerably dissipated during sunny
days. Rainfall generally lasts for a short period followed by clearing
skies and is more frequent between April and October.
Exceptions to these conditions exist both in the less populated east coast
area of Peninsular Malaysia, which is subject to monsoon rains during the
April to October period, and in the highlands, which have an average annual
rainfall of up to 200 inches. The climate in Sabah and Sarawak is
tropical with monsoons. Daytime temperature in the settled areas of
Sarawak averages 85 degrees with high humidity, and the average annual
rainfall is from 120 to 160 inches. In Sabah, daytime temperature in the
coastal areas ranges from approximately 74 to 88 degrees, and at night the
temperature is about 72 degrees. Rainfall ranges from 60 to 160 inches.
The national language is Bahasa Malaysia. As Malaysia is a former British
colony, English is widely spoken, and many publications and mass media
programs continue to be produced in English. Other major languages include
Chinese (Cantonese, Hokkien, and Mandarin) and Tamil.
Holidays for 1990
New Year's Day January 1
Chinese New Year January 26 - 29*
Kuala Lumpur City Day February 1
Hari Raya Puasa April 26 - 27*
Malaysian Labor Day May 1
Wesak Day May 9*
Birthday of His Majesty the
Yang DiPertuan Agung June 6
Hari Raya Haji July 3*
Awal Muharram July 23*
Malaysian National Day August 31
Prophet Muhammad's Birthday October 1*
Deepavali October 17*
Christmas Day December 25
SOURCES OF ECONOMIC AND COMMERCIAL INFORMATION
U.S. Government Representation in Malaysia
The U.S. Embassy is located at 376 Jalan Tun Razak, Luala Lumpur, Malaysia
50400, telephone 60-3-248-9011, fax 60-3-243-2450. Foreign Commercial
Service officers are available to assist American business representatives
* Dates will change in subsequent years in accordance with Muslim
and Chinese calendars.
Malaysian Government Representation
Encik Mohammad Ab. Halim Ab. Rahman
Consulate General of Malaysia
630 Third Avenue, 11th Floor
New York, New York l00l7