Foreign Direct Investment in Malaysia
FDI in Figures
Global FDI inflows into Malaysia increased a lot in the 1990's, but the net flows of FDI have been negative since 2006, this is a reflect of the policies encouraging the internationalization of companies and the mistrust of investors regarding the profit repatriation earned by foreign enterprises. It seems that the re-investment of profits from the existing multinationals, which are already installed in Malaysia, constitutes the essential components of the FDI income. The authorities want to make of Malaysia a foothold access to the ASEAN market and in order to promote this, the country offers various incentives to foreign companies, notably the status of pioneer company and tax reductions associated to the investment. The country benefits from a high-skilled and English speaking workforce. However, the government maintains a large discretionary power for authorizing investment projects and uses it to obtain the maximum profit from foreign participation and demands agreements that are advantageous in matters of transferring technologies or creating joint ventures.
Country Comparison For the Protection of Investors
|Malaysia||East Asia & Pacific||United States||Germany|
|Index of Transaction Transparency*||10.0||5.2||7.0||5.0|
|Index of Manager’s Responsibility**||9.0||4.5||9.0||5.0|
|Index of Shareholders’ Power***||7.0||6.3||9.0||5.0|
|Index of Investor Protection****||8.7||5.3||8.3||5.0|
Source: Doing Business
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.
|Foreign Direct Investment||2007||2008||2009|
|FDI Inward Flow (million USD)||8,538||7,318||1,381|
|FDI Stock (million USD)||76,612||73,262||74,643|
|Performance Index*, Ranking on 141 Economies||74||79||123|
|Potential Index**, Ranking on 141 Economies||39||37||-|
|Number of Greenfield Investments***||171||212||158|
|FDI Inwards (in % of GFCF****)||21.2||16.8||2.8|
|FDI Stock (in % of GDP)||41.2||33.1||39.0|
Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.
Why You Should Choose to Invest in Malaysia
- Strong Points
- The main factors that make FDI attractive are:
- A liberal and transparent investment policy;
- Competitive costs;
- Rationalization of public services;
- Attractive investment incentives;
- Developed infrastructures;
- A strategic location linked to the proximity of the main Asian markets;
- Significant resources;
- Growing spending power.
- Weak Points
- Malaysia's weak points are red tape and a shortage of qualified worker.
- Government Measures to Motivate or Restrict FDI
- The Malaysian governement encourages FDI by a number of incentive mesures particularly towards industries exporting "high-tech" products and back office operations services. In 2003, the government launched a program to boost the economy, which extended the total number of years of tax exemption from 10 to 15 for "pioneer" companies and from 5 to 10 years for priority companies. Firms which benefit from the "Multimedia Super Corridor" (MSC) program have easy taxes and regulations terms.
In order to face the crisis, the government adopted different mesures: supporting company balance-sheets, maintaining the redistribution of the oil annuities (subsidies for basic products and the education and hospital systems, and major construction policies), strengthening of the financial system and economic liberalization. At the same time, in order to favor the transfer of technology and facilitate the influx, into the country, of qualified staff, Malaysia is looking to liberalize the expatriate employment regime in the manufacturing sector.
- Bilateral Investment Conventions Signed By Malaysia
- Malaysia has negotiated bilateral FTAs at the same time as the negotiations within the framework of ASEAN, and is in talks with Japan, India, Korea, Australia, New Zealand and Pakistan. It has signed a framework agreement on trade and investment with the United States.
Procedures Relative to Foreign Investment
- Freedom of Establishment
- Acquisition of Holdings
- A majority holding interest in the capital of a company in Malaysia is legal. It is authorised up to 51% for projects exporting between 51% and 79 % of the production. Between 30% and 51% for projects exporting 20% to 50% of the production.
- Obligation to Declare
- The agency for the promotion of foreign investment in the country allows you to find out about the authorizations needed to set up business.
- Competent Organization For the Declaration
Companies Commission of Malaysia (SSM)
- Requests For Specific Authorizations
- Foreign holdings are limited in radio/television broadcasting, distribution of water and electricity, banks, healthcare, hydrocarbons, the automobile industry, Stock Exchange and leasing companies. In the health sector, private hospital services require a joint venture and holdings in equity capital have a 30% ceiling.
- Investment Aid Agency
Malaysian Industrial Development Authority (MIDA)
- Tenders, Projects and Public Procurement
Tenders Info, Tenders in Malaysia
Asian Development Bank, Procurement Plans in Asia
DgMarket, Tenders Worldwide
- Other Useful Resources
National Chamber of Commerce and Industry of Malaysia
Companies Commission of Malaysia (SSM)
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