As one of the most vibrant countries in Southeast Asia, Malaysia offers many advantages as an investment destination. This has been affirmed by robust growth in private investment in the country, which has expanded at a compounded annual growth rate of 13.9% from the start of the ETP in 2010 to RM146.1 billion (US$39.89 billion) in 2014.
From manufacturing to distribution or technical expertise in the services sector, the country offers opportunities and capabilities across the value chain. Whether investors want to utilise Malaysia as their target market or as a regional gateway, organisations and their employees alike will find a myriad of opportunities upon their arrival here.
Backed by its sound economic fundamentals and further favourable prospects ahead, the time is ripe for investors to join in on the Malaysian growth story.
Located at the heart of ASEAN, Malaysia offers a gateway to a regional market of over 600 million people. This is larger than the combined population of the US and Japan. It also boasts of a GDP of more than US$2 trillion.
Malaysia enjoys a politically stable environment, led by a democratically-elected coalition Government committed to the development of its economy. Through measures such as the ETP, the Government has pledged to implement the appropriate policies and provide its support for the creation of a conducive environment for business and investment. This allows investors to rest assured of a Government that is firm yet flexible enough to accommodate their needs.
Ease of starting a business
Starting a business in Malaysia only requires three procedures, 5.5 days and costs 7.2% of income per capita in fees , ensuring investors an efficient process when they choose to enter the market. This is compared to the East Asia and Pacific average of 7.3 procedures, 34.4 days and a cost of 27.7% of income per capita in fees.
Competitive tax rates
The percentage of the total corporate tax rate in Malaysia was 25% in 2014, compared to 30% in Australia, 34% in Brazil, 33.99% in India, 35.64% in Japan, 30% in the Philippines and 40% in the US.
The Malaysian Government continuously strives to provide a business-friendly environment to operate in. These efforts have been affirmed by the likes of the World Bank, which ranked the country the 18th best place in the world to conduct business in its Doing Business 2015 report. The World Bank's competitiveness criteria in the Doing Business ranking include ease of starting a business, licensing approvals, tax administration efficiency and ease of cross-border trading.
The country’s latest ranking is also a marked improvement from 23rd in 2010, placing it ahead of more developed economies including Switzerland (20th), Japan (29th) and France (31st). Malaysia also ranked third among East Asia and Pacific countries.
Wealth of natural resources
Malaysia is generously endowed with a wealth of natural resources which companies have competed to tap since the days of the British Empire. From the palm oil and rubber to oil and gas industries, the country offers opportunities for resource-rich downstream segments, while also possessing the capabilities to develop the more high-value upstream segments.
Access to credit
With a financial system characterised by a competitive banking market, accommodative credit policies and robust regulations, fundamentally sound organisations in Malaysia will find accessing financing in the country a breeze.
Malaysia is also recognised as a global leader in Islamic financial services, affording organisations access to liquidity through innovative and competitively priced financial products.
A flourishing domestic market
Domestic demand in Malaysia contributes to more than half of the country’s GDP. With the population’s growing disposable income as a result of the ETP’s emphasis on creating high-value jobs, coupled with the Government’s efforts to ease the cost of living, the market offers thriving opportunities for companies providing consumer goods and services.
A secure location for FDI
Investors have remained confident in Malaysia as a Foreign Direct Investment (FDI) destination despite declining FDI flows globally. The country recorded RM35.08 billion in FDI inflows in 2014. It has also been ranked the world’s top location for manufacturing on real estate provider Cushman & Wakefield’s Manufacturing Index 2014.
The Government’s efforts to provide free education have contributed to the development of a skilled workforce in the country. Coupled with the population’s command of the English language, organisations in Malaysia can expect accessibility to a valuable pool of local talent to help further their business ambitions. In July 2013, the country raised the minimum retirement age for private sector workers to 60 from 55 to help ensure a continued pool of skilled human capital.
Malaysia was ranked 19th out of 144 countries on the World Economic Forum’s Global Competitiveness Report 2014-2015 for labour market efficiency. The country outperformed economies such as Australia (56th), Brazil (109th), China (37th), India (112th), Indonesia (110th) and Japan (22nd).
With the comparative salaries of its workforce, Malaysia offers a compelling proposition for companies seeking the most value out of their investments.
According to the 2015 Hays Asia Salary Guide, the average annual salary of finance directors/chief financial officers of multinational companies in Malaysia starts at RM480,000 (US$31,020) compared to HK$1.4 million (US$180,578) in Hong Kong and CNY1 million (US$161,214) in China.
The report also shows the average annual salary for management positions in the IT sector range up to RM240,000 (US$65,532) in Malaysia, compared to SG$260,000 (US$191,466) in Singapore and CNY600,000 (US$96,725) in China, while in the oil and gas sector, a petroleum engineer at the managerial level earns an average annual salary of around RM300,000 (US$81,913) in Malaysia, against SG$250,000 (US$184,099) in Singapore and CNY400,000 (US$64,480) in China.
Strong investor protection
Investors accessing the Malaysian market benefit from the country’s strong investor protection policies, which have been further affirmed by the country’s 5th place ranking on the World Bank’s Doing Business 2015 investor protection index.
The country has also taken measures to ensure the security of foreign investments, signing Investment Guarantee Agreements (IGA) with 58 countries which include members of the Association of Southeast Asian Nations (ASEAN) and the Organisation of Islamic Cooperation (OIC). The Agreements protect foreign companies against nationalisation and expropriation, ensure prompt and adequate compensation in the event of nationalisation or expropriation, and free transfer of profits, capital and other fees.
In addition, Malaysia established the Kuala Lumpur Regional Centre for Arbitration in 1978, which provides an efficient and confidential system for the settlement of trade, commerce and investment disputes within the region.
Multi-cultural and multi-lingual population
The diversity of cultures in Malaysia does not just represent a great source of pride for the country, but offers organisations a vibrant pool of talent that is multi-lingual and culturally conscious. This provides a valuable asset for companies looking to use Malaysia as a hub to reach markets such as China, India and Indonesia.
The country has also been rated as the most proficient in the use of the English language among Asian countries where English is not the primary language by the UK’s Education First (EF). The latest EF English Proficiency Index, meanwhile, ranked Malaysia 12th globally and first in the Asian region.
In addition to its diversity of cultures, Malaysia makes a compelling destination to live in and play. The capital Kuala Lumpur (KL), and its neighbouring cities, suburbs and towns that make up the Klang Valley, offer a wealth of options for a resident and their family’s food and beverage, entertainment, education and housing needs.
To further improve liveability in Malaysia, the Government has also made efforts to address the country’s crime rate such as through the Government Transformation Programme’s Reducing Crime Ministerial Key Result Area, and develop a reliable and convenient transportation system, such as through the Mass Rapid Transit (MRT) Entry Point Project under the ETP’s Greater KL/Klang Valley National Key Economic Area.
Competitive rental prices
At an average price of US$15.10 per square metre per month (sqm/mth), rental prices for prime office space in Kuala Lumpur’s city centre are the lowest in the Asia-Pacific region, according to Knight Frank’s 4Q2014 Asia-Pacific Prime Office Rental Index.
In comparison, prime office rents cost an average of US$167.60/sqm/mth in central Hong Kong, US$44.50/sqm/mth in Shanghai and US$81.90/sqm/mth in Singapore.
Efficient business environment
The World Economic Forum placed Malaysia 20th out of 144 countries ranked for competitiveness in its Global Competitiveness Report 2014-2015, four notches higher than in the previous year. This put Malaysia ahead of other countries such as Australia (22nd), Indonesia (34th) and South Korea (26th). The report also ranked the country highly for its goods market efficiency and financial market development.