Global Business GuideMalaysia

Malaysia is the fifth largest recipient of foreign direct investment (FDI) inflows in the world, in accordance with the United Nations Conference on Trade and Development (UNCTAD) 2015 World Investment Report. In 2015, FDI inflows into Malaysia reached RM39.5 billion, 11.8 per cent higher than that recorded for 2014.

Malaysia ranked 18^th in the World Bank's 2016 Doing Business rankings, falling one place from 17^th in the year prior. This puts Malaysia as the second easiest country to do business among the ASEAN nations, behind only Singapore. The rankings recognised a number of reforms enacted in 2015 which made doing business easier. This included making paying taxes easier and less costly for companies by making electronic filing mandatory and reducing the property tax rate. Nevertheless, at the same time, Malaysia also increased the capital gains tax.

Key facts about starting a business in Malaysia:

• It takes, on average, three procedures and four days to start a new business in Malaysia; this process is detailed in the Doing Business in chapter
• The processing fee for an employment pass application is RM125, and the fees for the pass itself are up to RM300 per annum; employment regulations are discussed in detail in the Labour chapter
• Submitting and obtaining development approval through the One Stop Centre (OSC) for a construction permit takes approximately 30 days and costs MYR3,180
• Foreign companies operating in Malaysia must file statutory financial statements annually to the Registrar of Companies within two months of their AGM; further details can be found in the Audit chapter
• Companies that wish to list securities on the Bursa Malaysia can choose between the Main Market; for companies with a profit track record of three to five financial years or the ACE Market, for companies from all business sectors with promising growth potential; this is discussed further in the Finance chapter

Malaysia's attractiveness as an investment location can be attributed to a number of factors, including its liberal investment policy and abundant natural resources. Nevertheless, in order to make an informed decision, it is critical to understand the nuances of any local regime. The manner in which people conduct business in Malaysia may differ from the home countries of investors. Furthermore, variations on these distinctions may exist depending on the industry in which a company operates.

Malaysia's official language is Malay, officially known as Bahasa Malaysia. Hierarchy is central to Malaysian business culture. Business attire is conservative. A handshake is the typical business greeting and will be used at the beginning and end of a meeting. Punctuality is expected. Business cards will usually be presented after initial introductions. Gift giving is not expected as part of business interactions.

Those looking to establish a business in Malaysia may look across Southeast Asia for alternative options. However, Malaysia can be differentiated on the following factors:

• Malaysia has the third largest economy in Southeast Asia, after Indonesia and Thailand; GDP grew at a rate of five per cent in 2015
• Malaysia has an abundance of natural resources, including palm oil, rubber, oil and gas
• Malaysia offers a wide range of tax incentives for manufacturing projects; this is further detailed in the Tax chapter
• Ranked 10^th in the world for the quality of its transport infrastructure; further details can be found in the Infrastructure chapter
• Free industrial zones offer a number of incentives for export-oriented industries, including duty-free imports of raw materials; discussed further in the Trade chapter

While there are significant opportunities for investment in Malaysia, a number of challenges remain. One of the key issues facing companies is a shortage of skilled workers. This has become evident across industries such as logistics, manufacturing and agriculture.

This guide has been developed to provide businesses with an overview of Malaysia, its Legal regime, start-up and market entry considerations, tax and customs requirements and a general summary of the factors that may affect the decision to do business in Malaysia. However, the information contained in this document is generic in nature and you should not act or rely on it without obtaining specific professional advice.

Please note that the Global Business Guides may only be available in English.

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