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In a region that has recently experienced significant amounts of interest and investment, Malaysia has worked over the last several decades to transform itself from a developing economy into one of the region's most attractive business hubs.
By overhauling many of its market mechanisms to include extensive liberalization policies, the country is attracting foreign investment inflow in to a number of industries and sectors, including financial services, logistics, and ICT. Additionally, Malaysia has become a strategic center for Islamic banking, which helps to further solidify itself as a leader in a niche market.
INDUSTRY FRAMEWORK
Malaysia defines its industry into three broad categories: indigenous small businesses, large Malaysian corporations, and local operations of multinational corporations. According to a 2014 PwC report, indigenous small businesses were once concentrated in light industry, wholesale and retail distribution, and trading, though have now moved toward small- and medium-scale industries (SMIs) via recent government initiatives. Large Malaysian corporations are primarily listed on Bursa Malaysia and count government trust agencies as majority shareholders.
FOREIGN INVESTMENT
Malaysia recognizes the importance of foreign investment and actively works to foster an environment to facilitate such inflows. PwC suggests that the limit on foreign equity of ownership of Islamic and investment banks, insurance companies and takaful operations had risen from 49% in 2009 to 70% as of 2014. Moreover, the government's decision to allow 100% foreign ownership for fund management companies and 7% foreign ownership for unit trust management companies and stockbrokers in June 2009 has also increased interest. In June 2014, Malaysia allowed for 100% foreign equity ownership for unit trust management companies, as well as opening the market for new foreign unit trust management companies. Additionally, under the repeal of the Guidelines for the Acquisition of Interest, Mergers and Takeovers by Local and Foreign Interest that was in effect as of June 30th, 2009, the Foreign Investment Committee (FIC) no longer imposes the 3% Bumiputra equity threshold in an acquired Malaysian company.
Malaysia has signed investment guarantee agreements (IGAs) with many countries, which aim to protect against nationalization and expropriation, ensure prompt and adequate compensation in the event of nationalization or expropriation, provide free transfer of profits, capital, and other fees, and ensures the settlement of investment disputes.
REGULATORY FRAMEWORK
The 1998 Malaysian Code on Take-Overs and Mergers regulates all mergers and acquisitions, with the legal framework enacted by the Securities Commission (Amendment) Act of 1995, according to PwC. After implementing a new Code in 2010 that sought to update the 1998 Code, several significant changes have helped to change the way in which M&As occur. These include increased coverage for foreign incorporated companies and real estate investment trusts (REITs) listed on the Malaysian stock exchange, which is a shift from the previous law that only explicitly covered public companies. The code also stipulates that the settlement period after accepting a takeover offer has been reduced in order to ensure that it returns to business as usual as quickly as possible given the disruptive nature mergers have on all parties involved. Finally, the Code outlines a clear mechanism of “arrangement, compromise, amalgamation, and selection capital reductions will have the same effects as takeover offers governed by the SC to ensure there will be no gray areas or loopholes."
ACCOUNTING
Any foreign company wishing to establish or conduct business in Malaysia is required by the Companies Act 1965 to register with the Registrar of Companies. This requires all accounting records of any foreign company's operations within Malaysia to be kept solely in the country so as to provide sufficient explanation for any transactions and financial decisions, according to the PwC report. Foreign companies are required to register a statement with the Registrar of Companies that show the size of any assets it maintains and liabilities associated.
TAXATION
Principal taxes in Malaysia are income and petroleum income tax, while taxes on transactions include a customs and goods and services tax. Malaysia does not have a capital gains tax except for real property gains tax (RPGT), which, according to PwC, is a tax on gains arising from the disposal of real property or shares in real property companies (RPC). Income tax is imposed on any income earned from Malaysia with the exception of resident companies conducting air/sea transport, banking, or insurance business, which are then subject to taxes on a world income scope.
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TABLE OF CONTENTS
Inside Perspective
Y.A.B. Dato’ Sri Mohd Najib bin Tun Abdul Razak, Prime Minister, Malaysia
Y.A.B. Dato' Sri Mohd Najib bin Tun Abdul Razak, Prime Minister of Malaysia, on the broad picture for Malaysia's future, its regional obligations and role, and the importance of constant improvement and development.
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Didier Reynders, Deputy Prime Minister and Minister of Foreign Affairs and European Affairs , Belgium
TBY talks to Didier Reynders, Deputy Prime Minister and Minister of Foreign Affairs and European Affairs of Belgium, on the potential for trade growth, the impending FTA with the EU, and Malaysia's role as gateway to the South-East Asian market.
read articleFocus: Chairmanship of ASEAN
In The Driver’s Seat
Malaysia's chairmanship of the world's seventh largest economy, ASEAN, marks a high-water mark for the organization. With a population of 600 million people and GDP of $2.4 trillion, the 10-nation trading bloc is implementing the final action lines of the blueprint to create a fully-integrated ASEAN community.
read articleFocus: Middle Income Trap
Danger Up Ahead
Under the leadership of Tun Mahathir in the 1990s, Malaysia set out its vision to become a developed nation by 2020—defined by achieving a per-capita income of $15,000—however, the country's rate of growth in recent years has slowed leading to fears that it may be heading into a middle-income trap.
read articleInterview
Dato’ Khairussaleh Ramli, Group Managing Director & CEO, RHB Banking Group
TBY talks to Dato' Khairussaleh Ramli, Group Managing Director & CEO of RHB Banking Group, on Malaysia's prominent role in promoting Islamic finance worldwide, and the challenges the country faces in the sukuk market.
read articleInterview
Dato’ Dr. Adnan Alias, CEO, Islamic Banking and Finance Institute Malaysia (IBFIM)
TBY talks to Dato' Dr. Adnan Alias, CEO of the Islamic Banking and Finance Institute Malaysia (IBFIM), on supporting the bonds segment, training Malaysian workers, and the country's prominent role in global Islamic finance.
read articleFocus: Islamic Finance
It’s All About the Sukuk
Malaysia continues to assert its position as a world leader in Islamic finance. Accounting for around 67% of global sukuk issuances, Malaysia is the largest sukuk issuer in the world. It is a pioneer in the Islamic finance industry, as the first country to issue sovereign sukuk in 2002 and to list an Islamic real estate trust (REIT) on its Stock Exchange in 2006.
read articleInterview
David Fike, President, General Insurance for Zurich Insurance Malaysia Berhad
TBY talks to David Fike, President of General Insurance for Zurich Insurance Malaysia Berhad, on the evolution of the company, Malaysia's strategic importance, and upcoming opportunities for the insurance industry.
read articleInterview
Maen Razouqi, Vice President and General Manager , Brunei, Malaysia & Philippines for Schlumberger
TBY talks to Maen Razouqi, Vice President and General Manager of Brunei, Malaysia & Philippines for Schlumberger, on investing in the future, leveraging foreign partnerships, and the factors of success for operating in Malaysia.
read articleInterview
Datuk Dr. Mohd Yusoff, President & CEO, Malaysian Industry – Government Group for High Technology (MIGHT)
TBY talks to Datuk Dr. Mohd Yusoff, President & CEO of the Malaysian Industry – Government Group for High Technology (MIGHT), on pursuing growth in the high technology sector, increasing the economic role of high technology exports, and establishing Malaysia as a regional leader in the aerospace industry.
read articleFocus: E&E
Plug & Play
At the forefront of Malaysia's manufacturing sector is the electrical and electronics (E&E) industry. E&E has been highlighted as one of the 12 National Key Economic Areas (NKEAs) under the government's Economic Transformation Programme (ETP) to propel Malaysia into a developed nation.
read articleInterview
Y.B. Datuk Raymond Tan Shu Kiah, Minister , Industrial Development for Sabah,
TBY talks to Y.B. Datuk Raymond Tan Shu Kiah, Minister of Industrial Development for Sabah, on moving towards sustainability in Sabah's industrial sector, attracting outside investors, and increasing connectivity within the wider region.
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Y.B. Datuk Teo Chee Kang, Minister , Special Tasks for Sabah’s Chief Minister’s Department
TBY talks to Y.B. Datuk Teo Chee Kang, Minister of Special Tasks for Sabah's Chief Minister's Department, on future government policy, investing in infrastructure, and spreading economic prosperity.
read articleInterview
Datuk Mohd. Basri Abd. Gafa, President, Federation of Sabah Industries
TBY talks to Datuk Mohd. Basri Abd. Gafar, President of the Federation of Sabah Industries, on the state of industry in Sabah, supporting new business development, and the future of the region within the ASEAN economic network.
read articleInterview
Y.B. Datuk Seri Panglima Masidi Manjun, Minister , Tourism, Culture and Environment, Sabah
TBY talks to Y.B. Datuk Seri Panglima Masidi Manjun, Minister of Tourism, Culture and Environment, Sabah, on developing tourism in the face of environmental concerns, tax restrictions, and challenging macroeconomic trends.
read articleFocus: E-Government
Stream That Line
In a drive to improve the efficiency and effectiveness of public sector delivery, which is one of the supporting policies under the Economic Transformation Programme (ETP), the government of Malaysia is increasing the number of services available to the public online.
read articleInterview
Y.B. Datuk Joseph Entulu Anak Belaun, Minister , Prime Minister’s Department of the Malaysian Administrative Modernisation and Management Planning Unit (MAMPU)
TBY talks to Y.B. Datuk Joseph Entulu Anak Belaun, Minister in the Prime Minister's Department of the Malaysian Administrative Modernisation and Management Planning Unit (MAMPU), on upgrades in the public services sector, overcoming challenges to modernization, and big data.
read articleFocus: The Role of PPPs
All The Best
Since the introduction of the 1981 Malaysian Incorporated concept, which set out a new approach to national development based on the notion of joint ownership of the country by the public and private sectors, the country has seen a steady rise in the number of public-private partnership (PPP) projects.
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Ahmad Shahizam bin Mohd Shariff, CEO, Pantai Operations Division of Parkway Pantai
TBY talks to Ahmad Shahizam bin Mohd Shariff, CEO of Pantai Operations Division of Parkway Pantai, on Malaysia's strategic position in their global operations, how to boost medical tourism, and collaborating with higher learning institutions.
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Tan Sri Dato’ Dr. Michael O.K. Yeoh, CEO, Asian Strategy and Leadership Institute (ASLI)
TBY talks to Tan Sri Dato' Dr. Michael O.K. Yeoh, CEO and Director of the Asian Strategy and Leadership Institute (ASLI), on recent initiatives, the Center for Public Policy Studies, and the organization's goals.
read articleFocus: Halal Tourism
A Welcome Host
With 5.6 million Muslim tourist arrivals in 2014, roughly 20% of all visitors to Malaysia in 2014, and the number one position on the Global Muslim Travel Index 2015, halal tourism is a fast-growing niche market that is poised to drive the country's already well-established tourism industry.
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