Starting a Business in Malaysia

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Starting a Business in Malaysia

Malaysia is strategically located in the heart of Southeast Asia and it is one of Asia’s most vibrant economies, Malaysia offers a dynamic business environment with advanced technologies and well-developed infrastructure – a combination that makes for a compelling business case for companies and investors alike.

Economy of Malaysia

Malaysia is a relatively open state-oriented and newly industrialised market economy. The state plays a significant but declining role in guiding economic activity through macroeconomic plans. Malaysia has had one of the best economic records in Asia, with GDP growing an average 6.5 per cent annually from 1957 to 2005. Malaysia’s economy in 2014–2015 was one of the most competitive in Asia, ranking 6th in Asia and 20th in the world, higher than countries like Australia, France and South Korea. In 2014, Malaysia’s economy grew 6%, the second highest growth in ASEAN behind the Philippines’ growth of 6.1%.

Malaysia is also the 39th largest economy in the world. In 2015, Malaysia’s economy was one of the most competitive in the world, ranking 14th in the world and 5th for countries with a population of over 20 million, higher than countries like Australia, United Kingdom, South Korea and Japan.

Malaysia has had one of the best economic records in Asia

According to a June 2013 report by the World Bank, Malaysia ranks 6th in the world in the Ease of doing business index, Malaysia’s strengths in the ranking includes getting credit (ranked 1st), protecting investors (ranked 4th) and doing trade across borders (ranked 5th). Weaknesses include dealing with construction permits (ranked 43rd). The study ranks 189 countries in all aspect of doing business. In the investor protection category of the survey, Malaysia had scored a perfect 10 for the extent of disclosure, nine for director liability and seven for shareholder suits. Malaysia is behind Singapore, Hong Kong and New Zealand in investor protection category of the survey.

The 2016 edition of the World Bank’s ‘Ease of doing business’ report ranks Malaysia at 18 in the world, and the second in SE Asia – behind Singapore, but ahead of other regional powerhouses such as Thailand (49th in the world) and Indonesia (109th in the world). Malaysia also provides tax incentives to technology-based businesses through the MSC (Multimedia Super Corridor) body. In 2015, Malaysia was the 6th most attractive country for foreign investors, ranked in the Baseline Profitability Index (BPI) published by Foreign Policy Magazine.

The government is moving towards a more business friendly environment by setting up a special task force to facilitate business called PEMUDAH, which means “simplifier” in Malay. Highlights includes easing restrictions and requirement to hire expatriates, shorten time to do land transfers and increasing the limit of sugar storage (a controlled item in Malaysia) for companies.

International trade, facilitated by the shipping route in adjacent Strait of Malacca, and manufacturing are the key sectors. Malaysia is an exporter of natural and agricultural resources, and petroleum is a major export. Malaysia has once been the largest producer of tin, rubber and palm oil in the world. Manufacturing has a large influence in the country’s economy, although Malaysia’s economic structure has been moving away from it. Malaysia remains one of the world’s largest producers of palm oil.

Malaysia GDP
Malaysia GDP

Malaysian Economic Indicators

Malaysia GDP Growth Rate

Malaysia is a developing economy in Asia which, in recent years, has successfully transformed from an exporter of raw materials into a diversified economy. The largest sector of the economy is services, accounting for around 54 percent of GDP. Manufacturing sector has been growing in recent years and now accounts for 25 percent of GDP and more than 60 percent of total exports. Mining and quarrying constitutes 9 percent of GDP and agriculture 9 percent.

Malaysia GDP Growth Rate
Source: Department of Statistics, Malaysia
Malaysia Interest Rate

In Malaysia, the interest rate decisions are taken by The Central Bank of Malaysia (Bank Negara Malaysia). The official interest rate is the Overnight Policy Rate.

Malaysia Interest Rate
Source: Central Bank of Malaysia
Malaysia Inflation Rate

In Malaysia, the most important categories in the consumer price index are Food and non-alcoholic beverages (30 percent of total weight) and Housing, water, electricity, gas and other fuels (23 percent of total weight). Others include: Transport (15 percent); Communication (6 percent); Recreation and culture (5 percent) and Furnishings, household equipment and routine household maintenance (4 percent). The remaining components are Restaurants and hotels at 3.2 percent and miscellaneous goods and services at 6.3 percent.

Malaysia Inflation Rate
Source: Department of Statistics, Malaysia
Malaysia Unemployment Rate

In Malaysia, the unemployment rate measures the number of people actively looking for a job as a percentage of the labour force.

Malaysia Unemployment Rate
Source: Department of Statistics, Malaysia
Malaysia Government Debt to GDP

Malaysia recorded a government debt equivalent to 52.50 percent of the country’s Gross Domestic Product in 2019. Generally, Government debt as a percent of GDP is used by investors to measure a country ability to make future payments on its debt, thus affecting the country borrowing costs and government bond yields.

Malaysia Government Debt to GDP
Source: Ministry of Finance, Malaysia
Malaysia Balance of Trade

International trade plays a large role in Malaysian economy. Since 1998, Malaysia have been reporting consistent trade surpluses, mainly due to rise in exports of electrical and electronics products. In 2015, the biggest trade surpluses were recorded with Hong Kong, Singapore, Japan, and United States while the biggest trade deficits with China and Taiwan.

Malaysia Balance of Trade
Source: Department of Statistics, Malaysia
Malaysian Currency Ringgit

The USDMYR spot exchange rate specifies how much one currency, the USD, is currently worth in terms of the other, the MYR.

Malaysian Ringgit

Malaysian Stock Market

The FTSE Bursa Malaysia KLCI, also known as the FBM KLCI, is a major stock market index which tracks the performance of 30 largest companies by full market capitalization listed on the Main Board of the Bursa Malaysia. It is a free-float (minimum of 15%), capitalization-weighted stock market index. The KLCI Index has a base value of 100 as of January 2, 1977.

Malaysian Stock Market

Malaysia Ease of Doing Business

Malaysia is ranked 12 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. The rank of Malaysia improved to 12 in 2019 from 15 in 2018. The Ease of doing business index ranks countries against each other based on how the regulatory environment is conducive to business operation stronger protections of property rights. Economies with a high rank (1 to 20) have simpler and more friendly regulations for businesses.

Malaysia Ease of Doing Business
Source: World Bank
Malaysia Business Confidence

Business Confidence in Malaysia decreased to 60 points in the second quarter of 2020 from 81 points in the first quarter of 2020.

In Malaysia, the Business Conditions Index survey covers 11 industries represented by 350 manufacturing businesses incorporated locally and overseas. Questions posed in the survey cover production level, new order bookings, sales performances, inventory build-up and new job openings. A value above 100 indicates expected improvement in conditions, a value below 100 shows lack of confidence and 100 indicates neutrality.

Malaysia Business Confidence
Source: Malaysian Institute of Economics Research
Malaysia Consumer Confidence

Consumer Confidence in Malaysia increased to 90 points in the second quarter of 2020 from 51.10 points in the first quarter of 2020.

In Malaysia, the Consumer Sentiments Index survey is conducted quarterly on a sample of over 1200 households. Respondents are asked to evaluate on their household’s current and expected financial positions and their employment outlook. Questions relating to plans to buy houses, new or used cars and other major consumer durable are also asked. A value above 100 indicates expected improvement in conditions, a value below 100 shows lack of confidence and 100 indicates neutrality.

Malaysia Consumer Confidence
Source: Malaysian Institute of Economic Research
Malaysia Bank Lending Rate

Bank Lending Rate in Malaysia remained unchanged at 3.64 percent in September from 3.64 percent in August of 2020. In Malaysia, the bank lending rate is the average rate of interest charged on loans by commercial banks to private individuals and companies.

Malaysia Bank Lending Rate
Source: Central Bank of Malaysia
Malaysia Corruption Rank

Malaysia is the 51 least corrupt nation out of 180 countries, according to the 2019 Corruption Perceptions Index reported by Transparency International. The Corruption Perceptions Index ranks countries and territories based on how corrupt their public sector is perceived to be. A country or territory’s rank indicates its position relative to the other countries and territories in the index.

Malaysia Corruption Rank
Source: Transparency International
Malaysian Credit Rating

Standard & Poor’s credit rating for Malaysia stands at A- with negative outlook. Moody’s credit rating for Malaysia was last set at A3 with stable outlook. Fitch’s credit rating for Malaysia was last reported at A- with negative outlook. In general, a credit rating is used by sovereign wealth funds, pension funds and other investors to gauge the credit worthiness of Malaysia thus having a big impact on the country’s borrowing costs. This page includes the government debt credit rating for Malaysia as reported by major credit rating agencies.

Bursa Malaysia
Bursa Malaysia

Taxation in Malaysia

Corporate tax Personal income tax VAT or sales tax Social Security Rate for Companies Social Security Rate for Employees
24% (highest rate)
18% (lowest rate)
0 – 28% + 11% for EPF + 1.2% for SOCSO 10% (standard rate for goods)
7% (services)
5% (reduced rate for goods)
12% 11%

How to Start a Business in Malaysia

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