Forming a Company in Malaysia @ Asia Business Set Up


Malaysia Business Formation
Difficulty starting a business and dealing with licenses makes Malaysia business formation challenging, and this is reflected in the country's 20th place ranking in the World Bank's Doing Business 2008 Survey. That said, Malaysia offers considerable potential for foreign investors. With a population of 27 million, the natural resources-rich country is currently ranked the world’s 33rd largest economy, and has enjoyed 6 consecutive years of economic growth exceeding 5%. The following is an overview of Malaysia's business environment and its implications for Malaysia business formation.
1.	Malaysia’s economic growth is driven by i) higher international natural resource and commodity prices, especially crude oil and palm oil ii) low inflation averaging 1.8% between 2002 and 2006, encouraging local investment and iii) the transition to a value added, hi-tech economy.
2.	Despite its location in a potentially volatile part of the world, in 2007 foreign direct investment into Malaysia reached US$9.5 billion (US$6 billion in 2006), the highest level in 10 years. As evidence of this, large corporations such as Intel, Microsoft and Motorola expanded operations in Malaysia in 2007, proving the increased popularity of Malaysia business formation among global organisations.
3.	Malaysia has enjoyed annual trade surpluses since 1997. Annual trade surpluses encourage foreign investors choosing Malaysia business formation to set up export-orientated industries.
4.	However, Malaysia's economy is vulnerable to i) tensions among Malaysia’s ethnic groups, exacerbated by the government’s policy of giving preferential treatment to businesses owned by ethnic Malays (bumiputra) when tendering state contracts ii) regulatory obstacles faced by foreign investors, including a lengthy investment approval process iii) a chronic shortage of skilled labour in hi-tech sectors and iv) increasing competition from the neighbouring countries of Thailand and Vietnam.
5.	Because Malaysia is a developing country with an evolving legal and regulatory environment, some foreign investors are discouraged from Malaysia business formation, particularly when conducting international trade. Despite its economic advances, Malaysia is considered a high-corruption country in Transparency International's 2008 Corruption Perceptions Index, where it ranks the world's 47th least corrupt country.
6.	Furthermore, Malaysia has restrictive policies which hinder economic freedom and international trade. For example, 2008 Index of Economic Freedom by The Heritage Foundation rates Malaysia poorly as the world’s 51th freest economy, using criteria such as freedoms enjoyed in business, trade, monetary, financial, investment and labour markets. That said, Malaysia is a member of the World Trade Organisation (WTO) and Association of Southeast Asian Nations (ASEAN) and has signed free trade agreements (FTAs) with a limited network of countries around the world.
7.	Despite point 6. above, Malaysia has a strategic geographical location in the heart of southeast Asia, thus stimulating Malaysia business formation. Peninsular Malaysia, for example, lies in the same time zone as major southeast Asian trading economies such as Singapore and Hong Kong, as well as China, and only 2 hours ahead of India.
8.	For more detailed information on the economic background to Malaysia business formation, purchase our Asia Business Setup book, contact email@healyconsultants.com or call us in Singapore at (+65) 6735 0120.
More information
For more detailed information on how establishing a company in Malaysia please refer to Healy Consultants' Asia Business Setup guide.
Contact Us
For more information on how establishing a company in Malaysia, email email@healyconsultants.com or call us in Singapore at (+65) 6735 0120.
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