Doing Business in Malaysia -Advice

Doing Business in Malaysia – An Overview

Doing Business in Malaysia. Since gaining independence in 1957, Malaysia has evolved from an economy focused on agriculture and commodities to one with a strong manufacturing and services sector. The country is now a leading exporter of electrical appliances and electronic components, making it a prime location for those interested in doing business in Malaysia.

In 2024, Malaysia’s GDP is expected to grow by 4.4%, maintaining its status as a stable economy within Asia. The country is ranked among the top 40 GDP economies globally and holds the 24th position in the World Bank’s ease of doing business rankings. Malaysia benefits from a stable government, a strong rule of law, and an effective regulatory system.

With a population of 33.46 million, 43% of which are under 25 years old, Malaysia aims to position itself as a pro-business leader in Southeast Asia. The government has invested heavily in infrastructure, liberalized the financial services sector, and eased foreign ownership laws in manufacturing to attract international businesses.

Business Culture in Malaysia

For those looking to start doing business in Malaysia, it is essential to understand the local business culture, which requires patience, politeness, and time. Business negotiations are often lengthy and detailed, necessitating patience. Good etiquette and respect are paramount; for instance, it is customary to show respect to senior business members before junior ones during meetings.

Malaysians value relationship-building before engaging in business, and this should be accounted for in any negotiations.

Establishing a Business in Malaysia

To enter the Malaysian market, companies can use local agents or distributors, or set up a company. Foreign companies must register or incorporate locally through the Companies Commission of Malaysia (SSM). Business formation options include:

Sole proprietorship or partnership
Private limited company or unlimited company (‘Sendirian Berhad’ or ‘Sdn. Bhd.’)

Depending on the industry, a local partner may be necessary. For instance, government procurement projects often require a certified ‘Bumiputra’ status company with prior Ministry of Finance approval.

Banking and Finance

The Malaysian Ringgit (RM) is the legal tender. The country has eight local banks, regulated by Bank Negara Malaysia (BNM), which oversees commercial, investment, and Islamic banking, as well as money brokering.

Exports to Malaysia can be financed through cash in advance, open accounts, or letters of credit issued by Malaysian banks. So, for those doing business in Malaysia, financing is readily available to Malaysian importers, and exporters can obtain credit ratings from the Rating Agency Malaysia Berhad and the Malaysian Rating Corp. Berhad.

Tariffs and Non-Tariff Barriers

Tariffs

The Royal Customs and Excise Department manages customs and tax in Malaysia. Tariff duties range from 2% to 60%, with higher duties on luxury items and goods competing with local products. Imports are also subject to a 6% Goods and Services Tax (GST).

Non-Tariff Barriers

Certain controlled items require import licenses. A restrictive licensing regime applies to heavy construction equipment, electrical appliances, and iron and steel products. The Royal Malaysian Customs Department’s website lists prohibited and restricted items.

Prior permits from the Malaysian Department of Agriculture are required for items like plants, seeds, and soil. Special requirements govern the importation of drugs, pharmaceuticals, and food additives, all of which are subject to inspection. Machinery and electric motors must meet safety requirements and be approved by the Chief Inspector of Machinery and the Chief Electrical Inspector.

Product Certification, Labeling, and Packaging

Labeling regulations are detailed in the Labelling and Food Declaration Guide issued by the Ministry of Health.

Quoting and Payment Methods

Quotes are preferably in Ringgit Malaysia (RM), CIF (cost, insurance, and freight). Therefore, payment is typically by letter of credit. Secured payment terms such as 100% prepayment, letters of credit, or sight drafts are recommended for new customers.

Documentation and Clearance Requirements

When doing business in Malaysia, the required documentation includes:

Customs declaration form (Customs Form No. 1)
Bill of lading or Airway Bill
Commercial invoice
Delivery letter
Insurance certificate
Leaflet, catalog, or related documents
Letter of credit (if used)
Packing list
Permits, licenses/certifications
Proof of fare payment

Submit completed Customs forms to Customs offices where you import or export goods. Pay all duties and taxes in advance.

Doing Business in Malaysia – Business Risks

Companies operating in Malaysia should adhere to high standards of corporate behavior and familiarize themselves with local laws and penalties for bribery of foreign officials.

Intellectual Property Protection

In 2023, Malaysia ranked 31st out of 130 countries in Intellectual Property Rights (IPR) by the International Property Rights Index Report. The Intellectual Property Corporation of Malaysia (MyIPO) oversees IP in Malaysia.

Dispute Resolution

Malaysia’s legal system is based on the English legal system. Hiring a legal representative is standard practice for dispute resolution.

Quality Control Inspections

Goodada offers comprehensive quality control (QC) inspections in Malaysia. So, while doing business in Malaysia, Our services ensure that your products meet the required standards and specifications before they reach the market. For more information about our QC inspection services in Malaysia, visit Goodada Quality Control Inspections.

Useful Web Resources

Doing Business in Malaysia – About the Author

So, Aidan Conaty is the founder of Goodada & TCI China. He has a background in Supply Chain Consultancy and is a qualified accountant.

If you have any questions, please get in touch with me below.

Contact Person: Aidan Conaty

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