Doing Business in Malaysia 2017 / 2018

BRITISH MALAYSIAN CHAMBER OF COMMERCE

Unlocking Opportunities

1 Foreword

Aurelia Silva Executive Director British Malaysian Chamber of Commerce (BMCC)

As a nation built on an ideological bedrock that As emerging markets compete to make their mark strives for progress and inclusiveness - Malaysia in the global arena, Malaysia is poised to become at the humble age of 60 has attained a reputable a regional powerhouse in the years to come. The stature in the South East Asian region attributed to BMCC is eager to invite UK companies to play its rapid economic growth and development. an active role in this outcome. Our team includes sector specialists with vast knowledge and expe- Malaysia’s numerous often global headline catch- rience across industries who are ready to advice ing economic endeavours have been a testament and support UK companies seeking route to the to its ambitious appetite to become an internation- market. ally recognised player. A country that can be de- scribed as one that continuously yearns to punch This tailor-made guide serves as a preliminary lit- above its weight across the multitude of home erature that attempts to describe Malaysia with rel- grown industries, with an unwavering attitude that DISCLAIMER evance and accuracy and to increase understand- has fuelled its modern era development thus far. ing of companies looking to expand their business This guide was produced by the British Malaysian into this beautiful part of South East Asia. Chamber of Commerce (BMCC). Whereas every Malaysia’s business etiquette and cultural values effort has been made to ensure that the informa- are derived from the relationship of Asian tradition given in this document is accurate, neither the tions with the inherited virtues of British govern- British Malaysian Chamber of Commerce nor its mental, legal and educational systems adopted as Departments (Overseas Partner Delivery) accept li- ability for any errors, omissions or misleading state- a result of the intimate past shared by both coun- ments, and no warranty is given or responsibility tries. This strong relationship that Malaysia and accepted as to the standing of any individual, firm, the UK enjoy is also reflected in their current eco- company or other organisation mentioned. nomic ties and a solid balance of bilateral investments. You may reuse this information (not including lo- gos, images and case studies) free of charges in any Today’s success of the country has been driven format or medium, under the condition to acknowl- largely by foreign investments through both port- edge the source of the information (i.e. BMCC) in folio and direct investments. Malaysia’s flourish- your product or application. ing and inclusive economy has been drawing the Any enquiries regarding this publication should be curiosity of foreign investors, exporters and ser- sent to our Enquiry Service by email: info@bmcc. vice providers alike. org.my or telephone: +60 (0)3 2163 1784 The British Malaysian Chamber of Commerce (Monday – Friday 09.00am-06.00pm) (BMCC) has been part of this success support- This publication is also available on our website at ing and guiding UK companies through the legal www.bmcc.org.my and regulatory systems and facilitating business matching with local partners. © BMCC Copyright 2017

2 3 Contents CONTENTS

3 Foreword 24 Mega Projects in Malaysia

6 Highlights - A Diverse Blend of UK Companies in Malaysia 26 Industry Analysis

27 • Financial Services 8 Trade Figures 28 • Outsource Malaysia - Business Services 29 • Healthcare 31 • Information, Communication & Technology 10 Malaysia - Economic Overview 32 • Oil & Gas 36 • Electrical & Electronics 37 • Food & Beverage 11 Global Competitiveness Index 38 • Manufacturing 39 • Infrastructure 40 • Education 12 Overall Outlook Malaysia 42 • Tourism

13 Monetary Outlook 44 Regional Development 14 ASEAN & AEC 46 Case Study 16 Malaysia Moving Forward - Economic Transformation Programme 47 New Business Incentives by MITI 17 12 National Key Economic Areas 48 Business Start-Up Considerations 18 11th Malaysia Plan 49 Business Etiquette 20 Greater Kuala Lumpur - Revitalising The Heart of Malaysia 50 Malaysian Free Trade Agreements 22 Bandar Malaysia 52 Sources

4 5 Highlights - A Diverse Blend of UK Companies in Malaysia Highlights A Diverse Blend of UK Companies in Malaysia

Banking Oil, Gas & Energy

Financial Solutions Professional Services

Education Healthcare & Bio-Pharmaceuticals

Retail Technology & Communications

Automobile | Aerospace & Defence Food & Beverage | Fashion & Lifestyle

6 7 Trade Figures

Trade Figures Total Imports to Malaysia by Sector

Total GDP: GDP Average Per capita: GDP growth: US$296.3 billion (2016) 10,878 4.5% – 5% Population 21st largest Member of the exporting country Commonwealth of Nations

16 Ranked 26th Ranked 23rd Active Free Trade The International World Bank’s with 4 more Property Rights Ease of doing Total Imports to Malaysia by Country under negotiations 30.1 Index 2016 Business Million

Currency: Ringgit RM Dominant Vernacular: Malaysia English (British), Bahasa Malaysia & Cantonese

Malaysia and Europe (Billions RM)

All Sources: MATRADE 1

2016 A.T. Kearney Global Services Location IndexTM

Source: A.T.Kearney 2

8 9 Malaysia - Economic Overview

Malaysia Global Economic Overview Competitiveness Index (GCI) As one of the four Asian tiger cub economies, Ma- With a stable political landscape, a legal system laysia has become the gold standard for developing compatible with that of the UK’s unhampering countries in the region. Its economy has shown weather cycles and overall economic maturity, Ma- great resilience as it sustained an average annual laysia is a conducive investment destination that Malaysia’s real GDP growth rate of 5.3% over the past 5 years remains significantly unsaturated. Rank: Score: (2012-2016) while weathering several global and regional economic storms. Continuing its upward trend, Malaysia makes its way into the top 20 for the first time since the cur- 20 5.2 Malaysia’s multifaceted economy has a thriving rent GCI (Global Competitiveness Index) method- service and manufacturing industry that has been ology was introduced in 2006. Malaysia remains cultivated and fostered by foreign direct invest- the highest ranked among the developing Asian ments which continues to create and sustain a economies. plethora of investment/business opportunities. Malaysia ranks in the top 50 of each of the 12 pillars, performing most strongly in goods, market ef-

Country WEF - Global World Bank - A.T. Kearney ficiency and financial market development. Competitive Ease of Doing Global Services Ranking Business Location Index (140) Ranking (190) (55)

Malaysia 20 23 3

Singapore 2 2 50

Thailand 32 46 6

Indonesia 41 91 5

Cambodia 90 131 NA

Myanmar 131 170 NA

Vietnam 56 82 11

Source: World Economic Forum 3

An export oriented economy where it accounts for 80% of its GDP (21st largest exporting country) and nestled in the heart of South East Asia between Thailand, Singapore, Philippines and Indonesia, Malaysia enjoys a geographic advantage as it plays an integral part in the region’s supply chain.

The government’s favourable attitude towards growth and development bolsters businesses and their operations. Government policies which have adequate regulation and limited bureaucracy cre- ates and facilitates a commerce-friendly environ- Port Klang is Malaysia’s largest port operator and the 12th busiest in the ment. world. (11.89 million TEU in 2015) 4

Source: World Economic Forum 5

10 11 Overall Outlook on Malaysia Monetary Outlook

In August 2016, Fitch Ratings rated Malaysia’s Malaysia has adopted a managed float exchange Long-Term Foreign - and Local-Currency Issuer rate regime against the US dollar. This was to allow Default Ratings (IDRs) at ‘A-’ with a Stable Out- the currency to float with reasonable magnitude look.* Fitch’s analyst attribute this to Malaysia’s with respect to economic events while being undis- Private consumption demand and continued spend- ruptive to international trade. This policy mitigates ing on strategic projects by the government and currency risk by retaining the currency close to its state-owned enterprises which are likely to support fair value. growth, countering some of the downside pressure from weak external demand. In 2016, the statutory corporate tax rate in Malaysia was been reduced to 24% from 25%. The reduc- According to the World Bank, Malaysia’s GDP tion in corporate tax rate was to induce the flow of growth would likely rebound to 4.3% in 2017 be- foreign direct investments into the country, a move Bank Negara Malaysia is the Central Bank of Malaysia. Established in 1959, fore accelerating further to 4.5% in 2018. The World that serves as an indication to Malaysia’s commit- its main purpose is to issue currency, act as banker and adviser to the Gov- ernment of Malaysia and to regulate the country’s financial institutions, credit Bank cites the Malaysian government’s accelerated ment to foreign investment. system and monetary policy. implementation of productivity-enhancing reforms and continues efforts to increase the quality of hu- The inflation rate in 2016 for Malaysia was 2.1%, man capital in the country for its success. an expected increase from previous years since the implementation of Goods and Services Tax (GST) These implementations are expected to create great- of 6%. Analyst forecast the inflation rate to increase er competition in the economy which will act as to a manageable 2.5% - 2.8% in 2017 amidst mar- the main driver to propel and secure the country’s ket uncertainties. position in the High-Income bracket. Maybank IB

Malaysia’s private consumption & spending is likely to support long- Research expects Malaysia’s unemployment rate to Bank Negara Malaysia (Malaysia’s Central Bank) term growth average at 3.5% in the coming years. has maintained the overnight policy rate at 3.00% in 2016. The central bank had cut the interest rate by a quarter percentage point from 3.25% to help spur economic growth within certain facets of the economy.

Overall, Malaysia’s monetary outlook remains pos- itive as indicated by Fitch’s Stable rating of Malay- sia’s long term economic outlook.

Source: World Bank 6

Datuk Muhammad bin Ibrahim (left) was appointed the Governor of Bank *Malaysia’s rating of ‘A-’ reflects its strong net external creditor position, real GDP growth that remains stronger than the median of ‘A’ rated peers and a current Negara in 2016, replacing Tan Sri Dato’ Dr. Zeti Akhtar Aziz (right) who held account that is still in surplus although it has been narrowing the post for sixteen years.

12 13 ASEAN & AEC ASEAN & AEC Foreign Direct Investment Net Inflows, Intra- and Extra-ASEAN

Value in US$ million; share to total in percent

Association of South East Asian Nation (ASE- AN) is a trading bloc that has been a driving force for regional and global growth. The bloc has 10 member countries (Brunei Darussalam, Cambo- dia, Indonesia, Lao Pdr, Malaysia, Myanmar, Phil- ippines, Singapore, Thailand, and Vietnam). With Source: ASEAN Foreign Direct Investment Statistics Database as of 05 October 2016 7 (Data is compiled from submission of ASEAN Central Banks and National Statistical Offices through the ASEAN Working Group on International Investment 9% of global population (600 million people) and a Statistics (WGIIS). nominal GDP of US$2.31 trillion the ASEAN bloc has experienced a growth rate of 5.2% (year 2015) which outpaced the global average.

2016 saw the establishment of the ASEAN Eco- nomic Community (AEC). AEC’s chief aim is to unify ASEAN markets to create a single market for the flow of goods, services, investment and labour. AEC is one of 3 pillars which make up the ASEAN community, while the ASEAN Political and Secu- rity Community (APSC) and ASEAN Socio-Cul- tural Community (ASCC) are the remaining two pillars.

2016 saw numerous advancements towards the 4 Pillars of AEC inception of AEC, among these was the establishment of National Trade Repositories (NTRs) of all the ASEAN member states, allowing traders to get Single Market & Production Base easier access and better compliance with prescribed regulations. The bloc also saw the full ratification of the ASEAN Open Skies agreements, allowing unlimited air transport for passengers and cargo in Competitive Economic Region international airports of certain ASEAN member countries.

Besides the continuing efforts in designing and im- Equitable Economic Development plementing instruments towards the AEC creation, the regional bloc is now involved in negotiations Picture: (Left to Right) Malaysia’s Prime Minister Najib Razak, Myanmar’s State Counsellor & Foreign Minister Aung San Suu Kyi, Thailand’s Prime Minister Prayut Chan-O-Cha, Vietnam’s Prime Minister Nguyen Xuan Phuc, Philippine President Rodrigo Duterte, Sin- to create trade deal pacts with its trade partners gapore’s Prime Minister Lee Hsien Loong, Brunei Sultan Hassanal Bolkiah, Cambodia’s Prime Minister Hun Sen, Indonesia’s President through the Regional Comprehensive Economic Fully Integrated Region In The Joko Widodo and Laos Prime Minister Thongloun Sisoulith join hands during the opening ceremony at the ASEAN leaders’ Summit in 8 Partnership (RCEP), which involves the ten ASE- Global Economy Manila on April 29, 2017 AN member states and six other economies includ-

14 15 Malaysia Moving Forward 12 National Key Economic Areas

Malaysia will leverage its competitive advantages by prioritising investment and policy support behind a limited number of key growth engines. Hence, the Economic Transformation Programme focusses on 12 National Key Economic Areas (NKEAs) as announced in the Tenth Malaysia Plan. These NKEAs will receive priori- tised government support including funding, top talent and Prime Ministerial attention.

The government’s relentless efforts to achieve its vision of becoming a high income nation by the year 2020 had led to aggressive policies and pro- Agriculture Business Services Communications, Content & Infrastructure grammes. One such programme would be the ETP (Economic Transformation Programme).

The programme’s goal is to create a GNI per capita of US$15,000.00 and it attempts to achieve this goal by attracting a total private and government investments of US$444 billion across 12 National Key Economic Areas (NKEAs).

These 12 NKEAs have been identified as sectors with tremendous growth potential, comprising Education Electrical & Electronics Financial Services of Energy, Palm Oil, Rubber, Financial Services, Tourism, Business Services, Electronics & Electri- cal, Whole Sale and Retail, Education, Healthcare, Communication Content, and Agriculture.

The success of this initiative is expected to create approximately over 3 million jobs. Malaysia is also set to complete the first phase of its official financial district (Tun Razak Exchange) by 2017. The district is expected to attract over 250 foreign financial institutions and is said to create over 40,000 jobs. Greater Kuala Lumpur / Klang Valley Healthcare Oil, Gas & Energy

Likewise many other industries are also expected to thrive in Malaysia which will be disclosed comprehensively in the Industry Analysis section in the latter part of this summary report.

Picture: South Korean Air Force ‘Black Eagles’ flies past the Petronas Twin Towers

Palm Oil & Rubber Tourism Wholesale & Retail

16 Source: Pemandu 9 17 11th Malaysia Plan

11th Malaysia Plan

Aligned with the ETP, Malaysia’s Prime Minis- As part of the alleviation of the B40, an affordable ter Dato’ Seri Najib Bin Razak had unveiled 11th housing scheme has been set up. In tandem with Malaysia plan (11th MP) in May 2015. The 11th that the overall improvement towards essential MP is a road map that is expected to steer Malaysia public services such as healthcare, education, and through the final leg before reaching vision 2020. public transport is also a priority of the B40 strat- The 11th MP will be acting as a development blue- egy. print that will be applied from the year 2016 – 2020. Improvements in these public sectors are disclosed Several keystone indicators are set between the comprehensively in the latter part of this report periods to ensure the country is on course towards achieving vision 2020. The plan is built on four vital premises. The first premise is unlocking the potential of productivity to ensure sustainable growth; the second is promoting investments; the third is increasing export efforts to improve on trade balance and the fourth will be ensuring fiscal prudence and balance. Picture: An artist’s envisioning of the revitalised environment surrounding the converging point between the Klang and Gombak Rivers, inspired by the Beautification Masterplan10 From 2016 – 2020 the Malaysian economy will “ 60% of the 3 million be geared towards achieving the goals and targets mentioned above. The strategy adopted by 11th MP jobs that will be created is informally termed as (B40). during the 11th MP will

B40, short for bottom 40% is an important focus of require TVET-related skills. ” KEY TARGETS • Reach a monthly household income of the 11th MP, where policies and investments are set US$ 3,011 by 2020 from 2014’s US$ 1,755 to alleviate the socio-economic status of the bottom 40% of the country. As part of the B40 plan there • Achieve 5-6% real GDP growth per annum • Lower federal government debt to GDP will be significant investments into Technological from 2016 - 2020 from 53.3% to 45% by 2020 Vocational Education and Training (TVET). • Achieve approximately 6.4% growth in • Increase share of employees compensa- The Malaysian government identified that the 60% average domestic consumption per annum tion to GDP from 34.9% in 2015 to at least of the 3 million jobs that will be created during the from 2016 - 2020 40% in 2020 11th MP will require TVET-related skills, therefore • Attain approximately US$ 85 billion in there has been significant investments from both • Ensure that the average worker’s produc- private investment from 2016 - 2020 tivity level reaches RM 92,300 in 2020 public and private sectors into TVET related insti- from RM 77,100 in 2015 tutions.

Six Strategic Thrusts

1 2 3 4 5 6

18 Source: Economic Planning Unit11 19 Greater Kuala Lumpur Greater Kuala Lumpur Revitalising the heart of Malaysia Attracting 100 of the World’s Most Dynamic The project is divided into three parts: Firms within Priority Sectors 1. River Cleaning: A 110km stretch of Klang Invest KL, a government agency, is mandated to River will be cleaned to raise the water standard champion this initiative, this EPP aims to transform to recreational standards. Greater KL into one of the world’s top investment destinations by attracting 10 multinational com- 2. River Beautification: The economic viabili- panies (MNC) a year to establish their operations ty of the area will be improved, specifically a in designated commercial zones within the region. 10.7km tract along the Klang and Gombak river This EPP also supports the ETP by focusing on corridors, and beautification plans will revolve drawing MNCs operating within the 12 National around landmarks such as Dataran Merdeka, Key Economic Areas (NKEAs). Invest KL will fo- Bangunan Sultan Abdul Samad and Masjid cus on quality investments from areas such as ser- Jamek. The areas involved in the River Beauti- vice and knowledge intensive industries, high-tech- fication phase cover 11 precincts. nology industries, and green and alternative energy technologies to support Malaysia’s transition into a 3. Land Development: Areas adjoining the river high-income economy corridor will be developed under a master plan to spur economic investment.

Developing an Efficient Solid Waste Manage- ment System

Championed by Department of National Solid 9 ENTRY POINT PROJECTS (EPP) Waste Management (JPSPN) This EPP has identified four initiatives to develop an efficient solid waste management system, thus enhancing the liveability of Greater KL/KV. They are: 1. Attracting 100 of the World’s Most Kuala Lumpur, capital city of Malaysia – centre This enhanced region is made up of Kuala Lumpur, Dynamic Firms within Priority Sectors point from which economic growth and prosperity Putrajaya, Klang, Kajang, Subang Jaya, Selayang, • Encouraging greater implementation of the Re- emanated from. The city stands testament to Malay- Shah Alam, Ampang Jaya and Sepang. Greater 2. Attracting Internal and External Talent duce, Reuse, Recycle (3R) programme. sia’s economic progress, with towering skyscrapers Kuala Lumpur is geared towards adding new fa- matched with equally impressive infrastructure, cades and improving on existing ones, allowing the 3. High-Speed Rail Connection to Singapore • Increasing waste treatment capacity to reduce the city has certainly been moulded to be a bastion city to remain globally competitive. EPP or Entry reliance on landfills. 4. Building an Integrated Urban Mass Rapid for commerce. With increasing inflow of FDI and Point Projects plays a vital role in the success of the Transit System the rapid expansion of credit, Kuala Lumpur, like greater KL initiative. many other rapidly expanding cities will have to • Improving the governance of solid waste management and public cleaning services. 5. Revitalising the Klang River into a Heritage broaden its geographical mark. and Commercial Centre • Assessing the potential of new technological Emulating initiative such as the Greater London, “Greater Kuala Lumpur 6. Greener Kuala Lumpur in 2010 the Malaysian government together with developments such as automatic waste collec- several of its delivery agencies rolled out Greater represents a crucial com- tion and the use of deep bins. 7. Creating Iconic Places and Attractions Kuala Lumpur. As the capital and commercial heart ponent in the plan to of the country, the Greater Kuala Lumpur (KL) rep- • This EPP known as the River of Life (RoL) 8. Creating a Comprehensive Pedestrian resents a crucial component in the plan to transform transform Malaysia into project, aims to transform specific areas with- Network Malaysia into a high-income nation by 2020 – made in Kuala Lumpur facing the Klang River into a high-income nation by 9. Developing an Efficient Solid Waste evident by its inclusion in pemandu’s NKEA. The a vibrant waterfront with high economic and Management System overall aim is to transform the region into a world- 2020” commercial value. This project falls under the class metropolis that will boast top standards in ev- purview of several ministerial departments and ery area from business infrastructure to liveability. is undertaken by American development giant AECOM.

20 21 Bandar Malaysia

Integrating all conceivably comprehensive aspects Amidst its plans to construct a concrete jungle to of the highest living standards, Bandar Malaysia, exhibit the pinnacles of architectural virtuosity, the literally translated as ‘Malaysia Town’ will seek to importance of flora has not be neglected. A public provide an idealistic and romanticised environment park with a lavish waterfront will be a central fea- that will serve as a self-sustaining hub for businesses, ture in Bandar Malaysia, enlivening the urban me- education, leisure and residential harmony. This en- tropolis with lush greeneries, exercise and amuse- visaged co-existence is more than a mere farfetched ment amenities as well as boulevards for the casual chimera, for Malaysia’s ever-growing reputation as stroll or cycling indulgence of fresh air. an exemplary multi-cultural nation-state possesses the resources and exuberance to turn fantasies into Conceptually, a township as diverse as Bandar Ma- realities. When completed Bandar Malaysia will laysia would be incomplete without dependable stand in contrast to the upcoming financial district public transit systems. As a major component, a Tun Razak Exchange. terminus shall be based there for the upcoming KL-Singapore High-Speed Rail project, providing a As a commercial nucleus of culture, food, fashion swift one-stop solution to the nation’s capital. Two and festivities, state-of-the-art shopping complexes MRT lines, a KTM terminal, Bus Rapid Transits to draw both foreign and local tourists have been and an Express Rail Link are also in the works. planned. Sophisticated and elegant office structures will be raised to facilitate domestic and international entrepreneurship while primary to tertiary academic institutions shall be motivated by innovative and futuristic vantages to foster knowledge in tandem with creativity.

Bandar Malaysia June the 22nd, 2015 was the day state owned investment arm 1MDB announced its vision of Ban- dar Malaysia to the public, inviting developers across the globe to invest and be a part of this grand aspiration, with property consultants CH Williams Talhar and Wong administering construction pro- ceedings.

The prime purpose for this project is to transform and elevate the Klang Valley, as part of its Great- er Kuala Lumpur endeavour. Geographically proposed to replace and expand around the old Sungai Besi Airport, the site of Bandar Malaysia will be located 3.5 kilometres away from the Petronas Twin Towers, covering a land mass of 486 acres. It also aims to provide affordable urban liveability without forsaking safety and eco-friendliness.

Picture: An artist’s vision of Bandar Malaysia 12 Picture: An artist’s impression of the KL-Singapore High-Speed Rail terminal upon completion 13

22 23 Mega Projects in Malaysia

Mega Projects in Malaysia

KL – Singapore Warisan Merdeka High Speed Rail Project Warisan Merdeka or formerly known as KL118 is a 118-storey, 682-metre (2,238-foot) mega skyscraper currently under construction in Kuala Lumpur. When completed in 2019, the tower will be the tallest building in Malay- sia and the third tallest in the world. It Picture: Singaporean and Malaysian Prime will consist of 400,000 square metres Ministers Lee Hsein Loong and Najib Razak witnessing the signing of the high-speed rail (4,300,000 square feet) of residential, MOU in Putrajaya on 19th July 2016.14 hotel and commercial space. The building will consist of 100 storeys of rent- able space, including 80 storeys of office space, 12 storeys of hotel rooms, 5 Singapore and Malaysia have officially agreed to build a high-speed rail link between Kuala Lumpur and storeys of hotel residences and a retail Singapore. Construction is set to commence in 2017 and is slated to begin operations in 2026. The service is business centre expected to shave time by land between Singapore and Kuala Lumpur to 90 minutes, compared with more than four hours by car. According to MyHSR (the agency in charge of the Malaysian share of the project), Picture: An artists conceptualisation of Warisan Merdeka16 the tender documents for the systems package - for the actual rail track and train carriages will be issued end of 2017 and bids will be evaluated in 2018.

East Coast Rail Link (ECRL)

Picture: China’s national rail operator China Railway Corp showcasing models of its high speed trains in Kuala Lumpur.15

Malaysia and China have signed the framework financing agreement and engineering, procurement, construction (EPC) contract for the RM55bil East Coast Railway Line (ECRL) project. Construction of the five-year project is scheduled to start in 2017. The first phase of the 600km rail line will be from the Klang Valley to Kuantan, second from Kuantan to Kuala Terengganu, and third from Kuala Terengganu to Kota Baru and Tumpat.

24 25 Industry Analysis INDUSTRY Financial Services Malaysia’s financial sector is dominated by its In late 2016, Bank Negara Malaysia (Central Bank thriving Islamic Finance. Islamic Finance are finan- of Malaysia) issued the Financial Technology Regu- cial services that adheres to Islamic/Syariah laws. latory Sandbox Framework. the regulatory sandbox. ANALYSIS The defining feature of this service is its low risk profile where instruments are asset backed, has The Sandbox allows regulatory flexibilities to be minimal leverage and institutions do not indulge in granted to financial institutions and FinTech com- speculative trading. panies to experiment with FinTech solutions in a live controlled environment which is accompanied According to the Asian Banker Research Group, by the appropriate safeguards, for a limited period. there are over 300 Islamic financial institutions worldwide across 75 countries. Globally, Islamic The implementation of the framework is indicative Finance makes up US$1.67 Trillion which is 1% of of Malaysia’s continuous liberalisation effort in the all the US$124 Trillion financial assets. financial service industry; which was deeply regu- lated and relatively static since the 1998 financial Malaysia’s Islamic Banking industry holds US$69 crisis. billion in assets which is 6% of the Global Islamic Banking Market. Malaysia’s Islamic Banking In- dustry is experiencing a growth rate of 18-20% an- Founded in 1960, Maybank nually which is the fastest growing industry within (Malayan Banking Berhad) is the financial sector. In tandem with Islamic Bank- Malaysia’s largest bank by mar- ing, Takaful (Islamic Insurance) is also a prominent ket capitalisation and total as- form of Islamic finance in Malaysia with a market sets. cap of 12% and a growth rate of 18%.

At a net profit of US$ 1.75 bil- Malaysia’s attitude and aspiration on its financial lion for 2015 with key operating sector is best represented by the commissioning home markets in Malaysia, Sin- of the Tun Razak Exchange. A dedicated financial gapore and Indonesia, Maybank district located in Kuala Lumpur which mirrors the is one of the largest banks in aesthetics and functionality of New York’s wall Southeast Asia.17 street and London’s financial district. A US$8 billion development programme which is set to have its first phase completed in 2017.

This massive state funded project is expected to be not just the country’s financial centre but a regional financial hub – the likes of Singapore and Shang- CONTACT DETAILS hai. The 70 acre area is set to host over 250 of the world’s leading financial firms, which is expected BANK NEGARA MALAYSIA ASSOCIATION OF ISLAMIC to create an estimated 500,000 jobs of which 40,000 BANKING INSTITUTIONS are highly skilled knowledge workers within the fi- Jalan Kuching, MALAYSIA 50480, Kuala Lumpur nancial sector. 4th Floor, Menara Bumiputra, WEBSITE: 21 Jalan Melaka, www.bnm.gov.my 50100 Kuala Lumpur, Malaysia EMAIL: [email protected] Website: aibim.com

EMAIL: [email protected]

26 27 Industry Analysis Industry Analysis

Outsource Malaysia – Business Services Healthcare

The Shared Services and Outsourcing (SSO) sec- SHARED SERVICES ENJOY THE Malaysia’s healthcare sector operates in a two-tier tor has been one of the standouts of Malaysia’s eco- FOLLOWING UNDER MALAYSIA’S system (Government and private sector). While the THE HEALTHCARE INDUSTRY nomic story over the years. Not only has Malaysia MSC STATUS PROGRAMME local healthcare industry has long been dominated HAS BEEN HIGHLIGHTED AS AN been consistently ranked as one of the top three by the public sector, growth in private healthcare NKEA & THE FOLLOWING STRIDES most attractive destinations for business shared ser- • Unrestricted employment of local and services has been exponential over the past decade. HAS BEEN MADE vices and outsourcing by global management con- foreign knowledge workers In the interest of creating the necessary conditions sulting firm AT Kearney, but the sector has outper- for the private healthcare industry to thrive as a key • Freedom of ownership by being exempted There have been efforts in the contract re- formed job creation targets as well. from local ownership requirements economic sector, the government has been lending its weight to expedite growth in private segment of search industry for new drug development and Asia has been experiencing the highest growth Malaysia is a regional leader in the business ser- • World-class physical and information the industry. rate in this industry with an annual growth rate vices sector and is well positioned to move up the infrastructure of 30%. Lucenxia commenced the first clinical value chain and increase its export of services. The trial for automatic peritoneal dialysis devices in • Competitive financial incentives, includ- country is now a key global player in the fields of Malaysia, and has since launched the INTELLIS ing no income tax for up to 10 years, shared services and outsourcing (SSO) and avia- in 2016. Working with eight hospitals, Lucenxia or an investment tax allowance, and no tion maintenance, repair and overhaul (MRO), and has already completed 29 clinical trials. is also experiencing significant growth in the data duties on import of multimedia equipment centre, green technology and pure-play engineering • Freedom to source capital globally and fields. The health care system in Malaysia also the right to borrow funds globally launched the Diagnostic Service Nexus which attempts to reduce waiting time for radiolo- A state-of-the-art Sedenak Iskandar Data Hub was • Intellectual property protection and cyber gists diagnostic services by coordinating and officially announced in 2015. The 700-acre site laws in the Iskandar Region will be equipped with ad- distributing workload between the private and government hospitals with the help of telera- vanced infrastructure, high-capacity power and • No internet censorship The affordable and user-friendly Lucenxia INTELLIS is Malaysia’s first auto- diology systems. GE healthcare has been as- reliable connectivity, and has been earmarked for mated peritoneal dialysis machine with telemedicine capabilities that enables patients with Chronic Kidney Disease (CKD) to be treated at home. 19 sisting with the implementation of this system. local and global data centre companies. • Globally-competitive telecommunications tariff This hub, together with key data centre investments Medical Tourism As a result of imminent patent expiration on by leading companies such as Huawei and VADS major drugs, Malaysia endeavours to seize this Bhd (a TM subsidiary), further establishes Johor Patients without Borders estimated that approxi- opportunity by being a manufacturer and ex- as Malaysia’s second location for data centres after mately 700,000 people travel to Malaysia annually porter of prevalent drugs in the global market. Cyberjaya. for medical related purposes, making Malaysia one of the top destinations for medical tourism. There are over 250 private hospitals in Malaysia. Howev- er, only hospitals that are well-equipped and catered to receive and handle medical tourism are approved

CONTACT DETAILS and registered to be a participating medical tourism provider in Malaysia. CONTACT DETAILS

MULTIMEDIA DEVELOPMENT OUTSOURCING MALAYSIA CORPORATION SDN BHD The Malaysian Healthcare Travel Council (MHTC) MINISTRY OF HEALTH (MOH) ASSOCIATION OF PRIVATE (MDEC) 1106, Block B, HOSPITALS MALAYSIA (APHM) Phileo Damansara 2, introduced the Elite Partners programme to high- Block E1, E6, E7 & E10 MSC Malaysia Client Contact 15, Jln 16/11, light and effectively promote healthcare institutions Kompleks E, No.43, 2nd Floor, Centre (CLiC), 46350 Petaling Jaya Pusat Pentadbiran Jalan Mamanda 9, Ampang Point, MSC Malaysia Headquaters, Malaysia of excellence that also cater to the needs of interna- Kerajaan Persekutuan, 68000 Ampang, Selangor, Malaysia 2360 Persiaran APEC, tional patients. There are currently 22 selected hos- 62590 Putrajaya 63000 Cyberjaya, WEBSITE: WEBSITE: Selangor Malaysia www.outsourcingmalaysia.org.my pitals and ambulatory care service providers on this WEBSITE: www,hospitals-malaysia.org list. Through 2016, Malaysia generated RM588.6 www.moh.gov.my Launched in 2014 by NTT MSC Sdn Bhd, the Rimba Digital 2 is Malaysia’s WEBSITE: EMAIL: Email: 18 fourth state-of-the-art data centre located in Cyberjaya. www.mscmalaysia.my [email protected] million in healthcare travel revenue for the period Email: [email protected] January to September 2016 at an average response [email protected] EMAIL: [email protected] rate of 79 percent.

28 29 Industry Analysis

Information, Communication & Technology

Telekom Malaysia Berhad (TM) is Malaysia’s The ICT industry in Malaysia serves as a chassis leading telecommunications company. on which its knowledge based economy is built on. This is in an integral part of the economy as it plays From its origins as the national telco for fixed a vital role in both the private and public sectors. lines, radio and television, TM has grown to become the largest broadband service provider in Malaysia. There are promising opportunities in the IT services area, as the government is implementing measures TM’s introduction of UniFi, the nation’s first to nurture Malaysia into a regional service hub. high-speed broadband service recorded a total Outsourcing in key verticals such as banking and of 2.23 million subscribers in 2014. Its success rate in the first 24 months since its 2010 financial services is attracting investment in data launch has been acknowledged as one of the centres and other infrastructures. fastest turnovers with the lowest cost in the Picture: British High Commissioner to Malaysia H.E Vicki Treadell and Ma- world. 20 Key priority areas include e-commerce, creative laysia Digital Economy Corporation (MDEC) Chief Executive Officer Da- tuk Yasmin Mahmood shake hands during the signing of an MoU between technology, cloud computing, Internet-of-Things MDEC and the Department for International Trade. (IoT) and Big Data Analytics (BDA). The signing of this partnership is to further advance and collaborate towards the promotion of Cloud Computing, Big Data Analysis, the Internet of Things, Cybersecurity, e-Commerce, FinTech and Artificial Intelligence.21 Digital Media

Digital Media is booming in Malaysia, a country with 67% internet penetration that is set to increase further with emerging adoption of mobile devices and social media. The mobile entertainment segment is the primary contributor of premium content revenues growth, which is likely to be driven by mobile gaming and music-based content.

There is a growing demand for digital media/e-commerce in other National Key Economic Areas (NKEAs) such as network security, e-learning and edutainment solutions, telecommunications, e-government and e-health.

Cloud Computing CONTACT DETAILS Cloud computing is expected to gain momentum, MINISTRY OF SCIENCE THE NATIONAL ICT ASSOCIA- with growing investments in data centres and ICT TECHNOLOGY & INNOVATION TION OF MALAYSIA infrastructure in Malaysia. This model is becoming (MOSTI) 1106 & 1107, Block B Phileo an important part of most organisations. Aras 1-7, Blok C4 & C, Damansara 2, No. 15, Jalan 16/11 Kompleks C, Pusat Pentadbiran 463350 Petaling Jaya, Selangor, Kerajaan Persekutuan, Malaysia Business-process outsourcing needs are expanding 62662, Putrajaya, Malaysia in Malaysia and providing a base for cloud comput- WEBSITE: WEBSITE: www.pikom.org.my ing growth and IT security solutions. Data centre www.mosti.gov.my and cloud computing-related services and infra- Email: Email: [email protected] structure revenue grew by 21 percent from 2014 to [email protected] 2015.

30 31 Industry Analysis Industry Analysis

Oil & Gas PETRONAS has outlined 11 core initiatives to achieve Coral 2.0’s objectives ccounting for 20% of the national GDP, the oil, A OIL STORAGE & TRADING 1. Low Cost Drilling 8. Warehouse Centralisation gas and the alternate energy sector plays a vital role in Malaysia’s economy. The growth rate of this This initiative will consolidate and centralise ware- industry is expected to be at 5% annually. All oil To complement the storage and trading The initiative will drive reduction of drilling costs hubs in Singapore, Malaysia is setting up houses, expand Vendor Managed Inventory (VMI) and gas resources in Malaysia are vested with state- through optimisation of planning & well design, its own oil storage and trading hub across concept and reduce inventory holding costs. owned oil company PETRONAS. operational practices, logistic operations and appli- the country. This will not only improve cation of new or fit-for-purpose technology. efficiency but will also allow Malaysia to 9. Cost Driver Benchmarking - (OPEX) The FDIs’ are expected to allow the diffusion of actively participate in the regional and 2. Surplus Materials Management technology and knowledge transfer that will bol- global oil & gas supply chain. Drive cost savings for asset O&M and G&A cost ster Malaysia’s position, making it a key player in categories through collaboration in cost driver the Global Oil & Gas sector. An example of this A reduction of surplus material through improved benchmarking & analysis. initiative would be the joint venture partnership REJUVENATION & RECOVERY planning, inventory management and monitoring

between Atlas Hall and Oiltools AS to provide oil by PACs will be the focus under this initiative. 10. Cost Driver Benchmarking - (CAPEX) tools/machinery products and services in the ASE- Heavy investments have been made into 3. Re-Negotiations Current Contracts AN region. technologies that will allow the extraction of oil from wells that have been considered Establish CAPEX benchmarking across PA contractors & standardise CAPEX KPIs to reduce cap- The following are examples of strides and efforts matured. These technologies will extend An initiative to drive rationalisation of tenders & ital expenditure. currently being made in the sector. the expected lifecycles of an oil well’s contract rates / prices to enable better economics of boosting output. E&P activities, ensuring continuity of development & production operations. 11. Late Field Optimisation

Coral 2.0 ENCOURAGING INVESTMENTS 4. Joint Sourcing of Services The initiative aims to optimise the operations and IN THE SECTOR maintenance of ageing facilities without compro- CORAL 2.0 is a five-year programme from 2015 Drive incremental savings for services through mising safety and integrity. until 2019. Cost Reduction Alliance 2.0 or better Through the ETP, Malaysia has postured joint sourcing and implementation of innovative known as CORAL 2.0 is a long-term industry wide itself to facilitate investments (MNCs set- sourcing strategies & processes. programme driven by PETRONAS with an aim to ting up regional or global upstream hubs) inculcate cost-conscious mindset across Upstream in the oil & gas services and equipment 5. Joint Sourcing of Materials Malaysia. (OGSE) industry. Substantial tax incentives are given to investors in said industry. To drive incremental saving for materials through CORAL 2.0 will support sustainability of the oil joint sourcing and innovative sourcing strategies. and gas industry in the country and prepare for future industry challenges by optimising cost, in- 6. Technical Standards creasing efficiency and driving industry innovation across all operators. Drive competitive & standardised design for platform types, systems, equipment and components to CONTACT DETAILS There are 3 objectives of Coral 2.0; to inculcate optimise project CAPEX and shorten project dura- MALAYSIA OIL & GAS SERVICE PETROLIAM NASIONAL cost-conscious mindset, to benchmark efficiency tion. COUNCIL (MOGSC) BERHAD (PETRONAS) with best-in-class performance, to increase collab- Level 23, Menara 3, PETRONAS, Tower 1, oration and innovation as well as infuse global best 7. Logistic Control Tower Kuala Lumpur City Center, PETRONAS Twin Towers, practices. 50088 Kuala Lumpur, Malaysia Kuala Lumpur City Centre, 50088 Kuala Lumpur Malaysia Establish common planning and scheduling of lo- WEBSITE: gistics resources across PA Contractors in order to www.mogsc.org.my WEBSITE: www.petronas.com.my maximise asset utilisation by expending PCSB’s Email: Control Tower concept. [email protected] Email: [email protected] Petronas has grown to become Malaysia’s largest petroleum retail network with over 1,000 gas stations nationwide

32 33 The Dulang B Platform is an offshore oil rig in the state of Terrenganu and has been in operation since 1991 by Petronas Carigali (NOC).

Currently operating on 4 platforms with a total of 148 wells, the Dulang field is located in block PM6 of the Malaysian peninsular, 130km from the mainland and was originally discovered in 1981 by EPMI Esso Malaysia.

Malaysia produced about 697,000 barrels of oil per day in 2014, most of which was extracted from offshore fields. Over the course of more than two decades since 1991, production in the country fluctuated between 650,000 and 850,000 barrels per day. According to the U.S. EIA, recent down- ward production trends can be attributed largely to declining output on aging oil fields. The Ma- laysian government is responding by encouraging investment in recovery technology and new field development.

Malaysia remains the second largest oil and natural gas producer in Southeast Asia, the second largest exporter of liquefied natural gas globally, and is strategically located amid important routes for seaborne energy trade. 22-24

34 35 Industry Analysis Industry Analysis

Electrical & Electronics Food & Beverages

he food and beverage sector is a relatively new Top 10 Food Destinations (2015) n industry conceived during the country’s infan- T A Electrical and Electronics 2.0 is an ETP initiative sector to Malaysia. Yet with a market size of US$6 cy, the Electrical and Electronics sector is still one Country Global Rank to reinvigorate the sector by elevating and shifting billion and a growth rate of 7%-10%, the sector is of most successful sectors in the country. Responsi- its roles and objectives, allowing the industry to poised on becoming a relevant one. Malaysia, over Taiwan, China 1 ble for 33% of all export and 27% of employment, be resilient while maintaining its robust features. the last decade, has earned itself a reputation of the sector has been the driving force of Malaysia. E&E 2.0 attempts to move the industry from sole- becoming a food lover’s haven. This is due to the Phillippines 2 Early investments from Japan and South Korea in ly manufacturing to high-value activities such as wide variety of exotic cuisines available which are the sector initially revolved around manufacturing Italy 3 design, assembly, packaging and the provision of derived from the country’s diverse ethnic makeup of Consumer Electronic, Electronic components total solution. and its corresponding cultural composition. Thailand 4 and Industrial Electronics. Japan 5 Current trend suggests that the sector is experiencing a paradigm shift. The integration of classical Malaysia 6 Opportunities Asian style “food stalls” with a more western style Hong Kong 7 restaurant is producing a nuance of food and ser- As Malaysia moves forward, the E&E segment is vice in an industry that is uniquely Malaysian. The India 8 focused on deepening and strengthening the three sector is expected to continue to thrive as the young major ecosystems of semiconductors, solar and brand-conscious middle class grows. Greece 9 light emitting diode (LED) technologies. Vietnam 10

Semiconductors are expected to continue spear- 26 Night Life, Bars & Clubs Source: CNN Travel heading the growth of the E&E industry in Malay- sia and will continue to benefit from growing global World Health Organisation (WHO) ranked Malay- demand for mobile devices (smartphones, tablets), sia as the 10th largest consumer of alcohol prod- storage devices (cloud computing, data centres, ucts. This is apparent in the ubiquity of night clubs personal data drives), optoelectronics (photonics, and bars in Malaysia. This also shows the harmonic fibre optics, LEDs) and embedded technology (in- blend and tolerance between the different ethnic tegrated circuits, PCBs, LEDs). groups in the country. Malaysia is now gaining prominence as a produc- The surge in alcohol consumption is also the result tion hub for LED manufacturers. The development of the growing middle class. Alcohol sale is regu- and production of LED clusters in the country cover lated in the country; however, these regulations are semiconductor devices for LED, wafer fabrication, Picture: The Osram Opto chip plant in operation at Penang. The German company is expanding its operations to the state of Kedah, with construc- not intrusive. lighting products and solutions. LED applications tions underway on a 9.6 hectare plot of land. 25 Picture: A typical night crowd at Jalan Alor, one of Malaysia’s many famous include vehicle lighting, backlights and displays. and popular food markets. Halal Food Processing & Distributing Osram Opto Semiconductors is investing RM4.67 billion to construct a new LED chip plant in Kulim, CONTACT DETAILS With Muslim majority population (66%) the halal CONTACT DETAILS Kedah. Construction has kicked off in the first food industry has a strong appeal in the country. quarter of 2016. THE ELECTRICAL AND FEDERATION OF MALAYSIAN JABATAN KEMAJUAN THE MALAYSIAN ELECTRONICS ASSOCIATION MANUFACTURERS Halal foods are prepared in a distinct manner which ISLAM MALAYSIA FOOD AND BEVERAGE OF MALAYSIA adheres to Islamic teachings. The global halal food EXECUTIVES ASSOCIATION The plant is set to be the largest and latest six-inch Wisma FMM, industry generates US$560 billion. Recognising its HAB Halal Division, LED chip production site in the world. It is part of 5-B, Jalan Gelugor, No 3 Persiaran Dagan, PJU 9, Aras 1 & 3, Menara PJH, 14-2, Jalan 4A/27A, Off Jalan Kenanga, Bandar Sri Damansara 52200 Kuala potential, Malaysia aims to be a key player in the No. 2 Jalan Tun Abdul Razak, Section 2, Wangsa Maju, the group’s new investment that will transform it 55200 Kuala Lumpur, Lumpur, Malaysia industry by becoming a hub for producing, market- Presint 2, 62100 Putrajaya, 53300 Kuala Lumpur, into a global semiconductor player. Malaysia Malaysia Malaysia WEBSITE: ing, certifying, and reference for halal food prod- E&E 2.0 WEBSITE: www.fmm.org.my WEBSITE WEBSITE www.teeam.org.my ucts. www.halal.gov.my www.mfbea.org.my Email: Email: [email protected] EMAIL EMAIL [email protected] [email protected] [email protected]

36 37 Industry Analysis Industry Analysis Manufacturing Infrastructure

2016 Global Manufacturing Competitiveness Index (GMCI) The manufacturing sector is considered the sec- To facilitate Malaysia’s Vision 2020, there has Mass Rapid Transit (MRT) Rank Country Index Score tor that paved the way to the modern-day Malaysia. (High =100/Low = 10) been an emphasis on the country’s infrastructure. Manufacturing in Malaysia began during the late 1 China 100.0 The government, in an attempt to induce foreign 70’s as the economy transitioned from an agrarian 2 United States 99.5 and domestic investments have allocated significant economy. Ever since, the sector is an integral part of 3 Germany 93.9 funds into the country’s infrastructure. Bloomberg Malaysian economy which accounts for over 20% 4 Japan 80.4 reported that Malaysia’s investments into its infra- of total GDP. Over the years due to the lower labour 5 South Korea 76.7 structure grew from US$ 6 billion in 2003 to US$ costs offered by countries like China, Malaysia has 6 United Kingdom 75.8 16 billion in 2013 and they have projected that lost some of its competitive advantage in the sector. 7 Taiwan 72.9 these figures will grow at 9% annually until 2023. 8 Mexico 69.5 The following incentives are made available for 9 Canada 68.7 The MRT project was commenced in 2011. It is a companies setting up their manufacturing plants in 10 Singapore 68.4 Renewable Energy rail network line that has completed its first phase Malaysia: 11 India 67.2 in late 2016. This system is expected to mitigate the 12 Switzerland 63.6 traffic congestion in Kuala Lumpur. The MRT will Pioneer Status 13 Sweden 62.1 also integrate with existing railway networks, fur- This status will give a 70% tax exemption of statu- 14 Thailand 60.4 ther improving the reach and capabilities of inner tory income for the first 5 years of operations. (Pi- 15 Poland 59.1 and outer city railway travel. oneer status is earned when criteria pertaining the 16 Turkey 59.0 level of value-added output, technology adoption 17 Malaysia 59.0 Pan Borneo Highway and industrial linkage) 18 Vietnam 56.5 19 Indonesia 55.8 Investment Tax Allowance (ITA) 20 Netherlands 55.7 Picture: The Amcorp Gemas 10.25MW Solar Power Plant holds the Malaysia Book of Records for the Largest Grid Connected Solar Farm in the country.28 This will allow firms to have a 60% allowance for Source: Deloitte 27 the first 5 years of operations on qualifying capital Export Earnings Regulation expenditure (Plant, Machiney, etc) For the period, Jan – Dec 2015, a total of 128 projects in renewable energy with total investments In December 2016, Bank Negara Malaysia (BNM) No Import Restriction of RM1.37 billion were approved incentives, of announced that Malaysian exporters (Malaysian The import of raw materials for manufacturing pur- which RM1.35 billion were from domestic sourc- Based) must only retain up to 25% of their export poses from licensed manufacturers are not taxed es (98.3%) and RM23.3 million were from foreign proceeds in foreign currency, while the remainder The Pan Borneo Highway is a road network on Bor- (1.7%). In comparison, for 2014 a total of 70 proj- (75%) must be converted into ringgit. The new reg- neo Island connecting two Malaysian states, Sabah No Equity Covenants ects in renewable energy were approved incentives ulation is to boost liquidity and encourage more and Sarawak, with Brunei. The length of the entire There are no restrictions on foreign equity owner- with total investments of RM1.22 billion. domestic trade of the ringgit. To allow Malaysian highway is expected to be about 2,083 kilometres ship manufacturers to meet their foreign currency obli- (1,294 mi) for the Malaysian section. The first phase For those investments in renewable energy projects gations, exporters are allowed to hedge up to six of Pan Borneo Highway in Sabah, involving a 706 approved incentives in 2015, 84 projects (RM489.7 months of their foreign currency obligations. km stretch from Sindumin to Tawau, will be fully million) will generate energy from solar power, 33 completed by Dec 31, 2021. projects (RM461.7 million) from bio-gas, 4 projects CONTACT DETAILS (RM331.1 million) from mini hydro and 7 projects (RM94.3 million) from biomass as the sources of CONTACT DETAILS MALAYSIAN RUBBER GLOVE FEDERATION OF MALAYSIAN energy generation. MANUFACTURERS ASSOCIA- MANUFACTURERS CORPORATE COMMUNICATION PEMANDU TION (MARGMA) UNIT, MINISTRY OF WORKS Wisma FMM, MALAYSIA Jabatan Perdana Menteri, Unit 1313 & 1311, No 3 Persiaran Dagan, Aras 3, Blok Timur, 13th Floor, Block A, PJU 9, Bandar Sri Damansara, Block B, 6th Floor, Bangunan Pentadbiran Damansara Intan, 1 Jalan SS20/27, 52200 Kuala Lumpur, Kompleks Kerja Raya, Kerajaan Persekutuan, 47400 Petaling Jaya, Selangor, Malaysia Jalan Sultan Salahuddin, 62502 Putrajaya, Malaysia Malaysia 50580 Kuala Lumpur, Malaysia WEBSITE WEBSITE Picture: BMCC Executive Director, Aurelia Silva (far right) visits the Dyson WEBSITE www.fmm.org.my WEBSITE www.pemandu.gov.my manufacturing plant in Johor together with Richard Graham MP, (second from www.margma.com.my www.kkr.gov.my/en left) the UK Prime Minister’s Trade Envoy to Malaysia. Dyson is a successful EMAIL EMAIL example of the many British companies that have shifted their manufacturing, EMAIL [email protected] EMAIL [email protected] research and development to Malaysia. [email protected] [email protected]

38 39 Industry Analysis Industry Analysis

Education To achieve this, the Ministry of Education has proposed the 10-shift initiative. The 10 shifts are criteria to the blueprint establishment to enhance Education has always been a deeply contentious the education system in the country. matter nationally, with a general consensus that the system needs to be improved. The government By purpose of examples, the following are 3 of the understands that education plays a leading role in 10 shifts drafted in the Education Blueprint 2015- achieving its goal of becoming a service oriented 2025. economy and has opened up the education system and encourages foreign investments at all levels of Holistic, Entrepreneurial & Balanced Graduates education (primary to tertiary). Malaysia has been experiencing a growing dis- Malaysia’s education system operates in a two-ti- Picture: H.E. Victoria Treadell CMG MVO, British High Commissioner to Ma- equilibrium in terms of graduate competency and laysia (centre) together with students from Heriott Watt University at the launch er system (private and public). Due to quality de- industry requirements. It has been apparent in of the “Education is GREAT” campaign. preciation in public education, the demand on the the recent decades that local graduates are falling private system (often UK-based) has significantly short of industry demand. To tackle this issue, the increased. Universities such as Nottingham and ministry has deployed the following measures: Southampton establishing their campuses in Ma- The National Education Blueprint (2013 - 2025) identifies 11 operational and strategic shifts to transform the education sys- laysia and the prevalence of GCE A-Levels are in- tem in Malaysia, covering pre-school to upper secondary. • Enhancing the student learning experience dicative of the growing demand. • Devising an integrated cumulative grade point average CGPA In 2013, the Ministry began developing the Malay- • Creating opportunities for students and sia Education Blueprint 2015–2025. This is a major academic staff to acquire entrepreneurial skills initiative to overhaul the policies of higher education system in Malaysia. The higher education is Talent Excellence revamped and is positioned to produce Value-Driv- en Talent. The current system that Higher Learning Institu- tions operates on is in rigid form and has adopted Education Blueprint Aspiration a one size fit all programme. To steer away from this silo model the following measures are taken:

• Positioning HLIs according to their recognised areas of institutional excellence • Enabling HLIs to develop multi-track career pathway • Providing best practise guidelines

Innovation Ecosystem CONTACT DETAILS Malaysia recognises that in order to be globally competitive it must be innovating and be in the NATIONAL ASSOCIATION DEPARTMENT OF HIGHER OF PRIVATE EDUCATION EDUCATION MALAYSIA forefront of scientific advancements. To invig- INSTITUTIONS (NAPEI) orate this path, the government seeks to play an Ministry of Education Malaysia Secretariat: Level 9, No 2, Tower 2 active role in the following ways. C-M09, Suria Offices, Jalan P 5/6, Precint 5, Jalan PJU 10/4C, 62200 Putrajaya, Malaysia Damansara Damai, 47830 Petaling • Identifying areas that have good innovation Jaya, WEBSITE • Incentivising HLIs to establish supporting Selangor, Malaysia www.jpt.mohe.gov.my systems for the commercialisation of ideas WEBSITE www.napei.org.my

Source Ministry of Education 29 40 41 Industry Analysis

Tourism

The Langkawi Sky Bridge rests Having its own dedicated ministry, the tourism Tourist Arrivals to Malaysia by Region upon the peak of Machinchang sector has been Malaysia’s towering source of rev- mountain, 2,170ft above sea lev- enue. Contributing almost 15% to GDP, the indus- el. At 125m long suspended from try is one of the most flourishing ones and has a a single pylon 82m high, it is the growth rate of 5.3% annually. longest free span and curved bridge in the world. This sector is the second largest foreign exchange earner for Malaysia (first being manufacturing). The island of Langkawi is one The halal and medical tourism (mentioned earlier) of the most popular tourist des- are significant contributors to this sector. Tourism tinations and was given a World is the fastest growing sector for ASEAN after man- Geopark status by UNESCO. 31 ufacturing.

Parallel to cultural diversity and tradition, Malay- sia is also recognised as a shopping destination, in 2014 Kuala Lumpur ranked No.4 on CNN’s top 12 shopping cities. The retail sector is evident to this as in 2014 the sales turnover was 96.2 billion and Source: Malaysia Economic Planning Unit 30 its projected growth rate is 5.5%.

Malaysia’s competitiveness as a leading tourism destination in the region was recognised via numerous awards in 2015 with India’s leading luxury and travel magazine ‘Travel + Leisure’ crowning Ma- laysia as the “Best International Destination – Food and Drinks 2014” in April 2015.

The country’s attractiveness as a shopping haven continued to increase and it was ranked the second most popular shopping city in the world for Mus- lim tourists by the Muslim Travel Shopping Index (MTSI) 2015.

Acting as a crucible for a rich tapestry of culture and tradition, Malaysia had always maintained its uniqueness while being quintessentially Asian.

CONTACT DETAILS

MALAYSIA RETAIL MINISTRY OF TOURISM ASSOCIATION AND CULTURE MALAYSIA

A-11-11 &A-11-12, Level 11, No.2, Tower 1, Jalan P5/6, Tower A, Menara UOA Bangsar, 62200 Putrajaya, Malaysia No 5 Jalan Bangsar Utama 1, 59000 Kuala Lumpur, Malaysia WEBSITE www.motac.gov.my/en/ WEBSITE www.mra.com.my EMAIL [email protected] EMAIL [email protected]

42 43 Regional Development Regional Development

East Coast Economic Region (ECER) Sabah Development Corridor Investment prospects: Investment prospects: • Abundant natural resources; Oil & Gas have long been a major economic • Sabah’s strategic location is able to cap- contributor in the Region, and has now italise on the aggressive growth experi- matured to include petro-chemical-based Sarawak Corridor enced in the North East Asian Region. manufacturing and related industries. of Renewable Energy • Almost 30% of Malaysia’s oil palm pro- • Large pool of quality human resource; duction comes from Sabah. significant portion of Malaysia’s skilled Investment prospects: human capital is expected to move there. • Mature oil, gas and energy industry. • The region’s development hinges on • The ECER covers 51% of Peninsular the copious amount of energy resources • With 32 ethnic groups Sabah has always Malaysia’s land area which gives it tre- available in its central region. Hydro- been a top tourist destination. mendous growth potential. power (28,000 MW), coal (1.46 billion tonnes) and natural gas (40.9 trillion square cubic feet). Investment into power generation is expected to yield good returns.

• Increase in demand for skilled personnel in the areas of engineering & energy.

• To facilitate growth in these region, substansial investment is being made in infrastructure with emphasis on industrial class transport and communication. Southern Corridor

Investment prospects:

Northern Corridor • Located near 3 major ports: Pasir Gudang Port, Port of Jantung Pelepas and Tan- jung Langsat Port. Investment prospects: • 6 hour flight travel time to major cities • Regional nnabler for private sector such as: Bangalore, Dubai, Hong Kong, participation: new growth sectors such Seoul, Shanghai, Taipei and Tokyo. as LEDs, automotive, aerospace, machinery / automation, medical devices • Current private and public investments and biotechnology / engineering-driven are worth RM 158.13 billion agriculture. (as of December 2014).

• Readily available skilled & industry-relevant workforce.

• Excellent market outreach via experienced logistics network.

• The Malaysian Government has in- vested RM 20 billion into the northern corridor to improve its international and regional connectivity.

44 45 Case Study New Business Incentives Provided by Coller IP and PlaTCOM Ventures at the forefront in IP valuation in Malaysia The Ministry of International Trade & Industry (MITI)

Coller IP, one of the UK’s leading IP firms in IP MITI’s (Ministry of International Trade and TAX EXEMPTION ON STATUTORY INCOME FOR INDUSTRIAL ESTATE strategy, valuation, monetisation and training, was Industry) ever expanding attempt to promote for- OPERATORS selected to provide training in IP valuation to PlaT- eign investments into Malaysia has led to several COM Ventures, Malaysia. noteworthy incentives. These incentives as out- Companies that proactively engage in the upkeep- lined by the minister are placed to lure FDI while ing and upbringing of facilities within the vicinities PlaTCOM Ventures Sdn Bhd is the national tech- adding value to the domestic economy. These in- of their respective industrial park - such as roads, nology commercialisation platform of Malaysia. It centives were introduced under the Malaysian street lamps, database system or any common fa- is a wholly-owned subsidiary company of Agensi 2015 budget for investors and companies. cilities utilised by the occupants of the park will Inovasi Malaysia (AIM) formed in collaboration be eligible for a 100% tax exemption on statutory with SME Corporation Malaysia under one of its The following are the new incentives that were in- income for 5 years. six High Impact Programmes (HIPs) in SME Mas- troduced: ter Plan 2012-2020. Picture: (Center) Lawrence Bickers and Marco Thio of Coller IP with the CAPITAL ALLOWANCES FOR AUTOMATION SOLUTIONS ON LABOUR BMCC Trade Team, Sridaran Sabapathy (left) and Sulita Levaux (right). INTENSIVE INDUSTRIES The training was completed in September 2016. The BMCC provided trade assistance to Coller IP during their initial visit to Malaysia. STAMP DUTY EXEMPTION FOR SETTING UP OPERATIONS IN REMOTE Jim Asher and Lawrence Bickers (Head of IP Valu- AREAS WITHIN MALAYSIA Adoption and diffusion of automation through ation & Managing Director respectively), provided technology integration on processes that are labour a personal training program to the staff of PlaT- To seed growth and development in rural parts intensive reward companies with 200% capital al- COM Ventures and will continue to provide sup- of Malaysia, the Ministry wavers stamp duty on lowance of their first capital expenditure. Automa- port in the future. The training enables PlaTCOM transfer or lease of land or building utilised in option in what is considered to be labour intensive Ventures to provide IP valuation services to further erations that are based in less developed parts of industries such as (rubber products, plastics, wood, stimulate Malaysia’s growing SME community in Malaysia. In tandem, rural area setup and operation furniture and textiles) are eligible to receive 200% pursuing IP driven innovation and allow access to will also enable tax exemption on costs that were capital allowance on their first RM 4million ex- IP-backed funding. incurred as a result of technical advice, assistance penditures incurred within assessment year 2015 services or royalty pertaining to manufacturing or to 2017. Coller IP and PlaTCOM Ventures will continue to service activities; available up to December 2020. work together to stimulate and support IP activi- Lastly these companies are given import duty ex- ties in Malaysia. This training follow’s Coller IP’s emption on raw materials, components,machinery Industries that were not specified above are eligi- growing presence in Asia to support the IP develop- and equipment. ble to received 200% capital allowance on their ments in South East Asia. first RM 2 Million expenditure incurred between assessments 2015 to 2020. Together with stipula- ZERO CORPORATE TAX FOR SETTING UP REGIONAL OR GLOBAL HUB tions mentioned above companies must also be operating in Malaysia for at least 36 months. Companies that set up their regional or global base Lawrence Bickers, Dr. Viraj Perera, in Malaysia will be entitled to zero corporate tax Managing Director of Coller IP CEO Executive Director of PlaTCOM Ventures for up to 10 years if the following stipulations are adhered to. Companies must have a paid-up capi- “Our IP Valuation training programme enables “Coller IP has been recognised as one of the tal of >RM 2.5million and an annual sale of RM organisations to develop their own resources to leading IP services providers in the UK. The 300million. The tax reduction is divided into 3 conduct business in the wider Intellectual Asset training provided by Coller IP on IP valuation classification; 1st is Tier 1 where companies that sphere. We focus on the practical application of to PlaTCOM staff will greatly enable us to con- spend >RM10 Million enjoy zero corporate tax for valuation concepts to everyday IP problems us- duct IP valuations for Malaysian and regional 10 years. Tier 2 where RM 5million is spent, a cor- ing real life examples provided by those attend- entities. We will continue to collaborate with porate tax rate of 5% is imposed while Tier 3 is ing the programme. PlaTCOM has a key role in Coller IP to bring better value to the Malaysian where expenditure amounts to RM 3Million and a Malaysia and we are delighted to be in collabo- IP landscape.” corporate tax rate of 10% is imposed. MITI is tasked with ensuring continuous macroeconomic development and ration to assist them fulfil their mission.” inflow of investment into the country besides spurring Malaysia’s exports, particularly from the private sector.

46 47 Business Start-Up Considerations Business Etiquette

alaysian law stipulates that all foreign compa- alaysia is a highly diversified country where M To Form A Private Limited Company, M nies must be either registered in Malaysia or incor- business etiquette varies. Although the Malaysian The Following Are Required porated as a local company in order to be able to business world has largely succeeded in establishing a unified ethos, it is important to understand the trade within the country. All businesses must reg- • A minimum of two subscribers to the shares ister with the Companies Commission of Malaysia of the company sensitivities when interacting with people from (CCM). • A minimum of two directors with their principal a broad range of backgrounds. or only place of residence in Malaysia Business firms can be categorised into 2 types: • A company secretary

SOLE-PROPRIETORSHIPS AND PARTNERSHIPS Before You Can Start A Business Important To: In Malaysia, You Businesses that can be registered under the Regis- • Address people formally and denote proper respect tration of Businesses Act 1956 at CCM are either • Must be at least 18 years of age • Must not be an undischarged bankrupt sole-proprietorships or partnerships. • Exchange business cards after the initial • Must not been convicted of an offence within a introductions period of 5 years before the appointment A sole-proprietorship is a business owned by a sin- • Must be a resident of Malaysia • Recognising titles such as Dato’, Tan Sri, Datuk and gle owner. A partnership is a business owned by Tun which are equivalents of knighthoods and two or more people, but does not have more than damehoods bestowed by the royalties of Malaysia 20 partners.

PRIVATE LIMITED AND UNLIMITED COMPANIES As a Muslim majority country, it is important to Businesses that can be incorporated under the Com- observe business etiquette with respect to Islamic panies Act 1965 are: practices.

• A company limited by shares If your associates in Malaysia are not Muslims, it is • An unlimited company common to have meetings and arrangement styles that resemble those of Western business practices A company that has share capital can form a private e.g. cocktail networking, pub nights, etc. limited company. In Malaysia, private limited companies have the term ‘Sendirian Berhad’ or a suffix Since Malaysia is a multi-cultural society, it is best ‘Sdn. Bhd’ equivalent to ‘Ltd’. practice to politely ask your counterparts if they are observing any cultural/religious creeds and plan ac- The owners of such a company are usually not re- cordingly. sponsible for its liabilities, unless they are the direct result of an owner’s wrong doing. The set-up The Following Are Key Points To of a foreign company could take 14 – 21 days while Adhere To When Interacting With local companies only takes a day. Muslim Counterparts

Many companies engage local agents and distrib- • Do not arrange meetings in restaurants that are NOT certified Halal utors as an effective route to market. Franchising is a frequently exercised option and a number of • Do not serve alcoholic drinks UK brands have a presence in Malaysia including Marks & Spencers and Harrods. • If it is possible, avoid plan meetings on Friday afternoons between (12.30pm – 2pm) as Muslim men will be engaged in prayers during this time of the day. Picture: The Putra Mosque is the principal mosque of Putrajaya, Malaysia. Situated next to Perdana Putra which houses the Prime Minister’s office, the mosque can accomodate 15,000 worshippers at any one time.

48 49 Malaysian FTAs

Malaysian Free Trade Agreements (FTAs) ESSENTIAL WEBSITE FOR EXPORTERS There are currently 21 free trade agreements that are in effect or under negotiations: http://exportbritain.org.uk/ http://www.businessopportunities.ukti.gov.uk/home.html

TAX, CUSTOMS & REGULATIONS ASEAN-EU Free Trade Agreement ASEAN-Japan Comprehensive Economic http://www.customs.gov.my/ NEGOTIATIONS LAUNCHED Partnership http://www.hasil.gov.my/ SIGNED AND IN EFFECT ASEAN-Hong Kong, China Free Trade Agreement MALAYSIA’S ECONOMIC TRANSFORMATION PLAN NEGOTIATIONS LAUNCHED ASEAN-People’s Republic of China Comprehen- http://etp.pemandu.gov.my/ sive Economic Co-operation Agreement Malaysia-EU Free Trade Agreement SIGNED AND IN EFFECT BANK NEGARA (CENTRAL BANK) NEGOTIATIONS LAUNCHED http://www.bnm.gov.my/ ASEAN-[Republic of] Korea Comprehensive Malaysia-European Free Trade Association Free Economic Co-operation Agreement GUIDE TO MALAYSIA REGIONAL DEVELOPMENT Trade Agreement SIGNED AND IN EFFECT http://www.mycorridor.malaysia.gov.my/IC/SCORE/ Pages/default.aspx NEGOTIATIONS LAUNCHED Japan-Malaysia Economic Partnership Agreement COUNTRY GUIDE Regional Comprehensive Economic Partnership SIGNED AND IN EFFECT http://www.nationsonline.org/oneworld/malaysia.htm NEGOTIATIONS LAUNCHED Malaysia-Australia Free Trade Agreement Trans-Pacific Partnership (TPP) SIGNED AND IN EFFECT NEGOTIATIONS LAUNCHED Malaysia-Chile Free Trade Agreement United States-Malaysia Free Trade Agreement SIGNED AND IN EFFECT NEGOTIATIONS LAUNCHED Malaysia-India Comprehensive Economic Malaysia-Turkey Free Trade Agreement Co-operation Agreement SIGNED BUT NOT YET IN EFFECT SIGNED AND IN EFFECT

ASEAN Free Trade Area Malaysia-New Zealand Free Trade Agreement SIGNED BUT NOT YET IN EFFECT SIGNED AND IN EFFECT

ASEAN-Australia and New Zealand Free Trade Malaysia-Pakistan Closer Economic Partnership Agreement Agreement SIGNED AND IN EFFECT SIGNED AND IN EFFECT

ASEAN-India Comprehensive Economic Preferential Tariff Arrangement-Group of Eight Co-operation Agreement Developing Countries SIGNED AND IN EFFECT SIGNED AND IN EFFECT

50 51 SOURCES ADDITIONAL SOURCES

1. www.matrade.gov.my ASIA REGIONAL INTEGRATION CENTRE http://aric.adb.org/fta-country 2. https://www.atkearney.com/strategic-it/global-services-location-index DEPARTMENT OF STATISTICS MALAYSIA 3. https://www.weforum.org/events/world-economic-forum-on-asean-2016 https://www.statistics.gov.my/

4. http://www.worldshipping.org/about-the-industry/global-trade/top-50-world-container-ports FOREIGN POLICY STUDY GROUP http://www.spf.org/db les/46677e1abea.pdf 5. http://reports.weforum.org/global-competitiveness-report-2014-2015/economies/#economy=MYS GLOBAL STATISTICS 6. http://www.worldbank.org/?cid=ECR_GA_HPlaunch_searchad_EN_EXTP&gclid=COe7pqftvtQCFc6FaAodhD4HsA http://www.geohive.com/

7. http://asean.org/?static_post=foreign-direct-investment-statistics IMF http://www.imf.org/external/index.htm 8. http://www.philstar.com/headlines/2017/04/29/1695093/southeast-asian-leaders-wrestle-over-china-summit INVEST KL 9. http://etp.pemandu.gov.my/annualreport2011/12_National_Key_Economic_Areas-@-12_National_Key_Economic_Areas.aspx http://www.investkl.com/

10. http://etp.pemandu.gov.my/Greater_Kuala_Lumpur_Klang_Valley-@-Greater_Kuala_Lumpur_-_EPP_5-;_Revitalising_the_Klang_and_ INVEST IN ASEAN Gombak_Rivers_into_a_Heritage_and_Commercial_Centre.aspx http://investasean.asean.org/index.php/page/view/ reasons-for- Invest ASEAN

11. http://www.epu.gov.my/en/rmk/eleventh-malaysia-plan-2016-2020 MICCI http://www.micci.com/page20/page20.html 12. http://www.thestar.com.my/business/business-news/2015/06/27/consortium-to-build-bandar-malaysia/ MIDA 13. http://www.bandarmalaysia.my/wp-content/uploads/2015/09/bm_bandarcity_stationview.jpg http://www.mida.gov.my/home/

14. http://www.straitstimes.com/singapore/spore-kl-rail-link-could-hit-tracks-in-10-years-time MINISTRY OF DOMESTIC TRADE, CO-OPERATIVES AND CONSUMERISM http://www.kpdnkk.gov.my/kpdnkkv3/index.php?lang=en 15. http://www.thestar.com.my/business/business-news/2016/10/31/malaysia-and-china-to-sign-rm55bil-east-coast-railway-contract-on-tuesday/ MINISTRY OF FINANCE MALAYSIA 16. http://www.kl118.com.my/ http://www.treasury.gov.my/?lang=en

17. https://en.wikipedia.org/wiki/Maybank MINISTRY OF INTERNATIONAL TRADE AND INDUSTRY http://www.miti.gov.my/ 18. http://nakano-const.com/index.php/projects/ MY CORRIDOR - STRATEGIC INVESTMENT ZONE 19. http://www.lucenxia.com.my/ http://www.mycorridor.malaysia.gov.my/IC/Pages/ Introduction.aspx

20. https://www.tm.com.my/AboutTM/CorporateResponsibility/Documents/TM2011_CSR.pdf NEW MANDALA http://asiapaci c.anu.edu.au/newmandala/ 21. https://www.nst.com.my/news/2016/06/149316/mdec-uk-partner-and-develop-ict-ecosystem PWC 22. http://www.subseaiq.com/data/Project.aspx?project_id=1444&AspxAutoDetectCookieSupport=1 http://www.pwc.com/my/en/

23. http://abarrelfull.wikidot.com/malaysia-oil-and-gas-profile THE ECONOMIST - ECONOMIST INTELLIGENCE UNIT http://www.eiu.com/home.aspx 24. http://www.investopedia.com/articles/markets/100515/biggest-oil-producers-asia.asp THE EDGE BUSINESS NEWS 25. http://www.ledsmagazine.com/articles/2009/12/osram-led-chip-plant-in-penang-now-in-operation.html http://www.theedgemarkets.com/my

26. http://edition.cnn.com/travel/article/world-best-food-culinary-journeys/index.html TUN RAZAK EXCHANGE http://trx.my/ 27. https://www2.deloitte.com/global/en/pages/manufacturing/articles/global-manufacturing-competitiveness-index.html UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT (UNCTAD) 28. http://www.amcorpproperties.com/html/details.aspx?ID=6&PID=31&NID=124&Type=News http://unctad.org/en/pages/ newsdetails.aspx?OriginalVersionID=692

29. http://www.moe.gov.my/images/dasar-kpm/articlefile_file_003108.pdf WORD TRAVEL AND TOURISM COUNCIL http://www.wttc.org/-/media/ les/reports/economic%20 impact%20research/country%20reports/malaysia2014.pdf 30. http://www.epu.gov.my/sites/default/files/MEIF%202016.pdf

31. http://www.panoramalangkawi.com/skybridge/

52 53 Established in 1963, the British Malaysian Chamber of Commerce (BMCC) has been driven by the sole ordinance of advancing bilateral trade relations between the UK and Malaysia.

Through the arm of BMCC Trade Team represented by dedicated sector specialists, the Chamber of- fers bilateral trade assistance and is principally a one-stop shop providing a soft landing for UK firms in Malaysia, offering market research, knowledge exchange, ad- vise through legal and regulatory systems, risk management and the facilitation of business matching with local partners, clients and sup- pliers.

BRITISH MALAYSIAN CHAMBER OF COMMERCE (BMCC)

4TH FLOOR, EAST BLOCK WISMA SELANGOR DREDGING 142-B JALAN AMPANG 50450 Kuala Lumpur Malaysia

Tel: +603 2163 1784 Fax: +603 2163 1781 Email: [email protected]

Web: www.bmcc.org.my