Malaysia is located in Southeast Asia on a verge of the South China Sea and Indian Ocean. 80% of population lives on a peninsular and islandic area including the North Borneo.  Thanks to its variety of cultures and religions as well as the large system of incentives for the foreign investors, Malaysia is considered to be a very promising market for those who are interested in foreign expansion. More information about the consulting services for Malaysia can be found here. 

Malaysia is an independent country since 1957. Since then it registers rapid economical growth. It’s in the very top in the region, next to Indonesia and Thailand, but is registered as a developing country. It’s a member state of ASEAN and Organization of Islamic Cooperation.

Malaysia borders Brunei, Indonesia and Thailand and through sea travel – Philippines, Singapore and Vietnam. Its climate is tropical and tied to the large amplitude of rain connected with monsoons and high temperature that averages at 28 Celsius.

Malaysia’s natural resources are oil, gas, zinc, cobalt, iron, wood, rubber and palm oil and they strengthen its capabilities for export and import. In 2018 it was the 35^th largest economy in terms of GDP, 20^th – due to its exports, and 26^th – imports.

Oil, one of the most important natural resources in Malaysia, is extracted in Sabah, Sarawak and Terengganu, most notably by Petronas (Petroliam Nasional Berhad), Exxon-Mobil and Royal Dutch Shell. In 2016 Malaysia was ranked 28^th  in the global statistics of the deposits.

Malaysia used to be one of the largest producents of zinc and rubber, as well as cocoa, pepper, pineapples and tabaco. Since the 60’s it manages a large monoculture of oil palms, that currently amount to 70% of its arable lands (53% of those are located on Borneo). Due to the uniform character of the plantations the grounds are prone to the erosion and fires, which burden the local farmers and producers.

The population of Malaysia is 31.5 million people, mostly Muslims. 78% of them live in the cities. The capital city, Kuala Lumpur, is a home to more than 1,8 million people. The official language is bahasa melayu and English is widely used and spoken. Unemployment rate is around 3.3%. Malaysia employs more than 3.5 million foreign workers, who amount to 20% of its workforce, mostly from Bangladesh, Myanmar, Philippines, India, Indonesia, Nepal and Pakistan.

In 2019 69.3% of Malaysian population was Malay, 22.8% – Chinese, and 6.9% – Hindu. The country is mostly Muslim (61.3%). Other major religious groups are the Buddhists – 19.8%, Christians – 9.2%, Hinduists – 6.3%, Confucians and Taoists – 1.3%. Distinctively promalayan governmental policy, which is implemented via the Constitution, leads to the so called ‘positive discrimination’ that gives the native people the financial advantages and support with their businesses.

Due to the variety of preferences and traditions in Malaysia, it imports many goods and produces that meet the needs of its population, especially in the food and cosmetic markets.

In 2018 Malaysian export was worth 270 billion dollars. The most important types of goods were microchips (55.5 billion dollars), oil (19.1 billion dollars), gas (11.4 billion dollars), palm oil (28 billion dollars). Its most important business partners for the export were Singapore (36.8 billion dollars), China (36.1 billion dollars), United States (28.3 billion dollars), Hong Kong (19.5 billion dollars) and Japan (17.2 billion dollars).

In 2018 Malaysia imported goods that were worth 212 billion dollars, mostly microchips (29,6 billion dollars), refined and crude oil (20,4 and 6,97 billion dollars), office equipment (3,93 billion dollars), transmitters (3,85 billion dollars) from China (45 billion dollars), Singapore (32,3 billion dollars), Japan (13,6 billion dollars), United States (12,4 billion dollars) and Thailand (11,8 billion dollars).

One of the Malaysian economic major projects was Vision 2020 (Wawasan 2020) introduced in 1991. The government was aiming at structural reforms that were meant to push the country into the rapid economic growth. 9 fillars: psychological freedom and development, mature democratic society, morality, tolerance, fight with the inequality and strong economy were not fulfilled. In 2019 the government admitted, that there was not enough time to fulfill the promises, mostly due to the global financial crisis and geopolitical changes in the international landscape.

11th Malaysian Plan for 2016-2020 was directed at the education, healthcare and improving the lives of people who live in villages. New economic policy, introduced during the administration of Pakatan Harapan, was meant to be implemented in 2020, but it was postponed after February 2020 due to the political changes after the election.

In 2019 a Shared Prosperity Vision of 2030 was introduced, focusing on the inequality and economic issues. So called B40 group of the poorest 40% of the population, majority of whom are Malay, is supposed to gain new privileges. The Vision aims at the GDP growth of 4,7% every year. Challenges that will make implementation of the program harder are the Covid-19 pandemic, trade war between China and the United States, drastic changes in the prices of oil and regional geopolitical problems.

Government of Malaysia is carrying out numerous infrastructural programs tied to the new roads and sea ports, such as the one in Melaka.

Between 2010 and 2018 foreign capital in Malaysia was around 9-12 billion dollars. World Investment Report UNCTAD from 2020 shows, that between 2017 and 2019 it dropped by 7,6 billion dollars. Large, international corporations such as Japanese IHH Healthcare Mitsui or Austrian Seb Upstream are still present and their capital is still enriching the local healthcare and mining industry.

Foreign investors are coming to Malaysia mostly from China, Singapore, Japan and the United States. China is a leader in the last 4 years, mostly due to its extensive projects in the Malaysian mining industry.

Malaysia is valued for its business environment and strategic location that allows foreign investors to enter other markets of the ASEAN. Various incentives, tax reliefs, special statutes are also offered. In 2020 Malaysia was ranked 12^th in the Doing Business 2020 report thanks to its highly qualified workforce.

In 2018 bilateral trade between Malaysia and the EU was 39.8 billion dollars, and in 2019 – roughly 40 billion dollars. UE remains the 3^rd biggest business partner of the country, next to China and Singapore, which amounts to 11,6% of all of the trade conducted there. In 2018 Malaysia was 23^rd largest business partner of UE.

UE and Malaysia trade mostly semi-finished and finished industrial goods that amount to 90% of all of the trade. UE exports mostly machines and electric parts, as well as rubber, animal and plant oils. In 2018 Malaysia was cooperating with Netherlands, Germany, Great Britain and France.

UE is trying to reduce the usage of palm oil in the biofuels, which had a negative impacts on the relations with Malaysia, 2^nd largest producer of this resource. This decision also affected the negotiations about a free trade agreement, which were meant to be resumed after it was halted in 2012. The other important issues deal with the regulations of halal products, key sectors and ‘positive discrimination’ of the native citizens.

Protectionism and prioritising the companies which belong to the native Malay (Bumiputera) are among the most challenging issues that can make doing business in Malaysia much harder for foreign investor interested in the expansion. Rampant bureaucracy, licensing and accreditation systems, especially in the food sector are also present.

Malaysian regulations concerning halal are among the most restrictive in the world. Malaysia is not acknowledging  the certificates approved in other countries. Goods such as pork and alcohol, as well as the cosmetics that have it in them, need to be properly licensed.

Key sectors in Malaysia are connected to its natural resources such as rubber, palm oil, zinc, wood, oil and gas. The most promising sectors are biotechnology, electronics, transport, renewable sources of energy, tourism, cosmetics, healthcare, construction and space travel. In some sectors the government has the monopoly in, mostly in certain production branches as well as in finance, legislation, accounting and construction.