Top 10 challenges of doing business in Malaysia

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Malaysia is a country on the move, spurred by high technology, a strong knowledge-base and capital-intensive industries. But having prior knowledge of the investment environment and information on the legal, accounting and taxation framework is essential for overseas firms.

Home to a dynamic business environment, technologically innovative firms and a well-developed infrastructure, Malaysia is a country on the move. But doing business can be quite a challenge without local knowledge of the investment environment.

Backed by strong private investment and consumption, growth rates of over 4% have become commonplace in Malaysia and are expected to stay consistently strong. Compared with other medium-to-high income economies where economic growth rates stand at 1 to 2%, this is a strong validation of the country’s potential.

Malaysia, strategically located in the heart of Southeast Asia, offers a cost-competitive location for investors intending to set up offshore operations for the manufacture of advanced technological products for regional and international markets. It is one of the most technologically developed countries among industrialising nations in the ASEAN region, and its modern infrastructure is designed to serve the business community.

One of the most appealing aspects of Malaysia is that its high growth economy is backed up by a strong business environment. The World Bank and International Finance Corporation (IFC) rank it in 12th place in the world for ease of doing business, but companies should be aware that there are still several hurdles to overcome when setting up in the country.

Starting a Business

There are three procedures involved when setting up a business in Malaysia which should take under a week to complete. An application should be sent to the Companies Commission of Malaysia (CCM) on the prescribed form (13A) to ensure the availability of the proposed company's name, before the Company Secretary prepares company incorporation documents and files with the Companies Commission of Malaysia (CCM) one-stop shop.

Dealing with Construction Permits

Obtaining construction permits is by far the most arduous part of doing business in Malaysia. Companies must complete some 37 procedures before the correct registration processes are complete, taking an average of 140 days to complete.

Getting Electricity

Most procedures when getting electrical connection will be carried out with Tenaga Nasional Berhad (TNB), which will conduct a site visit, provide an estimate, conduct external connection and install meters.

Registering Property

Registering property requires a lawyer to conduct necessary searches and a sales-purchase agreement to be signed in their presence. The Memorandum of Transfer (14A) must then be sent to the Stamp Office for adjudication and evaluated by JPPH (Jabatan Penilaian Dan Perkhidmatan Harta), before stamp duty is paid and the transfer is registered at the Land Office/Registry.

Getting Credit 

The World Bank and IFC rank Malaysia in number one position in the world for ease of getting credit, with a good public registry and private bureau coverage.

Protecting Investors

Thanks to the strong regulatory environment, investors are assured of good protection in the summer. Once again, Malaysia ranks within the top five in the world in this category.  

Paying Taxes

There are 13 tax payments to be made each year taking an average of 133 hours of company time to process. Taxes on interest, real estate and vehicles should be considered on top of corporate income rates and employee contributions.

Trading Across Borders

The cost of trading across borders is extremely cheap in Malaysia, underlining its position as a manufacturing centre in the heart of Asia. However, it takes over 10 days to export and eight to import, with a large amount of documents to be prepared.  

Enforcing Contracts and Resolving Insolvency

It takes 425 days to enforce a contract, which involves navigating 29 procedures in total. Resolving insolvency takes 1.5 years on average, with a recovery rate of 45 cents on the dollar.

Culture

Malaysia's population of over 19 million inhabitants presents the external business traveller with a wealth of cultural dilemmas. The three most prominent ethnic groups are Malays, Chinese and Indian, and these varying cultures heavily influence the Malaysian approach to business.

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We have the local knowledge to help you navigate these minefields. Whether you want to set up in Malaysia or just want to streamline your Malaysian operations, talk to us.