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| Malaysia Business Formation | |||||||
Difficulty starting a business and dealing with licenses makes Malaysia business formation challenging, and this is reflected in the country's 21st place ranking in the World Bank's Doing Business 2011 Survey.
That said, Malaysia business formation offers significant potential for foreign investors. With a population of 27 million, the naturally resources-rich country is ranked the world’s 38th largest economy (IMF 2010 figures), and had enjoyed 6 consecutive years of economic growth exceeding 5%, ending in 2009 with the global recession. The following is an overview of Malaysia's business environment and its implications for Malaysia business formation.
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| 1. | Malaysia has enjoyed annual trade surpluses since 1997. Annual trade surpluses encourage foreign investors choosing Malaysia business formation to set up export-orientated industries. | ||||||
| 2. | Economic growth is an important consideration when considering Malaysia business formation. 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 2.0% between 2009 and 2011, encouraging local investment and iii) the transition to a value added, hi-tech economy.
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| 3. | Despite its location in a potentially volatile part of the world, in 2010 foreign direct investment into Malaysia reached US$7 billion (US$1.4 billion in 2009), the highest level in 10 years. As evidence of this, large corporations such as Intel, Microsoft and Motorola have been expanding operations in Malaysia since 2007, proving the increased popularity of Malaysia business formation among global organizations.
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| 4. | Furthermore, Malaysia has restrictive policies that hinder economic freedom and international trade. For example, 2011 Index of Economic Freedom by The Heritage Foundation rates Malaysia poorly as the world’s 53rd freest economy, using criteria such as freedoms enjoyed in business, trade, monetary, financial, investment and labour markets. That said, the fact that Malaysia is a member of the World Trade Organization (WTO), the Association of Southeast Asian Nations (ASEAN) and
has also signed free trade agreements (FTAs)
with a limited network of countries around the world is a positive influence for Malaysia business formation.
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| 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 2010 Corruption Perceptions Index, where it ranks the world's 56th least corrupt country. | ||||||
| 6. | 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. | ||||||
| 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.
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| 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 further information on Malaysia business formation please refer to Healy Consultants' Asia Business Setup guide.
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| Contact Us | |||||||
For more information on Malaysia business formation, email email@healyconsultants.com or call us in Singapore at (+65) 6735 0120. | |||||||
Back to Malaysia Company Formation page | |||||||
