Several months ago, I had the pleasure of attending an informative conference held in New York City on Malaysia-U.S. business opportunities and of speaking with the Honorable Muhyiddin Yassin, Malaysia's Minister of International Trade & Industry. I posed the following questions:
AD- I understand that Malaysia is targeting the electronics and semiconductor industries with Freescale Semiconductor and Dell already there. What is Malaysia doing to increase this investment?
YASSIN- Malaysia continues to provide a conducive business environment not only for greenfield investments, but also for existing companies to expand and diversify their operations, including the provision of incentives such as a "reinvestment allowance." In addition, the government has reduced the corporate tax from 27 percent in 2007 to 26 percent in 2008, and this rate will be further reduced to 25 percent in 2009. Besides these measures, the government has undertaken measures to improve the public sector delivery system and, together with its 12 regional offices in Malaysia, MIDA "handholds" investors in the implementation of their projects.
AD- What opportunities exist for other U.S. companies in particular to invest in Malaysia?
YASSIN- The United States is among the major investors in Malaysia's manufacturing sector, and we continue to welcome American investments in high technology and high-value-added investments and related activities. American companies can explore business opportunities in the electronics industry, particularly in the manufacture of electronic components, consumer electronics, and electronics manufacturing services (EMS) sectors; petroleum and related products; aerospace and related services industries; and in the renewable energy sector. Besides manufacturing operations, American companies are also welcome to set up their regional operations in Malaysia by establishing operational headquarters, international procurement centers, and regional distribution centers.
AD- Can you describe the major tax incentives?
YASSIN- There are actually two primary ones: Pioneer Status, which allows a tax holiday for five to 10 years, and ITA (Investment Tax Allowance), under which a company may deduct its capital expenditures from profits. Companies normally opt for ITA if the project is capital-intensive in nature requiring a long gestation period.
AD- Must certain investment and employment figures be met in order to receive these incentives?
YASSIN- There are no minimum investment or employment requirements. However, it is important that the product be a "promoted activity," although capital-intensive projects and technology and knowledge-based activities could enjoy more attractive incentive packages.
AD- How are the companies that are already established in Malaysia helping the country to develop its knowledge economy?
YASSIN- In addition to creating employment and contributing toward the growth of local supporting industries, these companies bring management expertise and technology transfer to Malaysia. They also create diverse spin-off benefits to various sectors of the economy, particularly in the services sector.
AD- Are joint ventures with Malaysian companies possible?
YASSIN- Yes. In fact, this is strongly encouraged by the government so that Malaysian companies may benefit from such collaborations, particularly in technology, skills training, and market development. But 100 percent foreign ownership is allowed by the government.
AD- Do free-trade zones exist where goods can be imported and exported duty-free?
YASSIN- Our Free Industrial Zones (FIZs) - currently 15 exist - enable export-oriented companies to enjoy duty-free imports of raw materials, component parts, and machinery and equipment that is required in the manufacturing process, and there exist minimal formalities for exporting the finished products. Companies can also avail themselves of License Manufacturing Warehouses set up in a specific location instead of in an FIZ.
AD- Which countries are the primary investors in Malaysia at this point?
YASSIN- The major sources of foreign investment are from Japan, the United States, Germany, and Singapore. On a cumulative basis, the United States is the second-largest investor in the manufacturing sector after Japan.
AD- Will U.S. companies need to be aware of particular governmental or legal requirements for FDI in Malaysia?
YASSIN- No. All Malaysia's legislation pertaining to business and ethics is transparent and conforms to international standards. Malaysia's legislation, rules and regulations, as well as business contracts are written in English.
AD- Who would be the point of contact for helping these U.S. companies facilitate their investment in Malaysia? That is, is it a "one-stop shop" or are there multiple entities that must be dealt with?
YASSIN- MIDA is the first point of contact for all foreign investors. We have also established the Advisory Services Center (ASC) to reduce the time it takes to answer investors' inquiries and to expedite their investigative studies. MIDA's One-Stop Center works closely to monitor and oversee the implementation of projects at the state and local levels.
AD- What safeguards are in place to protect intellectual property (IP)?
YASSIN- Malaysia undertakes stringent measures to protect intellectual property. Malaysia has adequate domestic legislation and enforcement measures to protect intellectual property. Malaysia is also a signatory to major IP treaties and a member of the World Intellectual Property Organization and has recently established an Intellectual Property Court.
AD- How does investing in Malaysia compare with investing in other areas in the region, e.g., Singapore or Hong Kong?
YASSIN- Malaysia is very cost-competitive in comparison to other countries in the region. For example, according to the 2008 global survey conducted by DTZ Property Consultant, it costs only $3,120 annually to set up a workstation for an employee in Kuala Lumpur, compared to $16,200 in Singapore and $27,540 in Hong Kong. Additionally, a UK study of office rents ranks Kuala Lumpur the fifth least expensive among 80 major global cities.
AD- How can U.S. companies use Malaysia as a gateway to China, India, and other Asian markets?
YASSIN- companies can take advantage of the ASEAN Free Trade Area (AFTA); almost all tariffs in ASEAN, of which Malaysia is a member, will be eliminated when AFTA is fully realized in 2010. ASEAN will become an Economic Community by 2015; this single market will allow the free flow of goods, services, investment, and skilled labor.
AD- How easy is it for a company to move its products and people in and out?
YASSIN- Malaysia is ranked the 19th most globalized economy by AT Kearney. Its global trade to GNP is more than 200 percent. Malaysia is also pursuing free-trade negotiations bilaterally with several countries, besides being a member of the WTO and part of AFTA.
AD- What is the state of the nation's infrastructure?
YASSIN- Malaysia has one of the best developed infrastructures in Southeast Asia. We have even established a Malaysian Logistics Council Committee to strengthen the nation's logistics industry. In fact, Malaysia is becoming very popular for regional distribution centers.
AD- Is there anything else you would like to add that we have not touched upon?
YASSIN- I would like your readers to know that Malaysia is one of the most advanced and safest countries in the world. We have been welcoming foreign investors for the last 50 years, and many of these firms have expanded quite rapidly. We have a probusiness government, reasonable business and living costs, a 92 percent literacy rate, excellent schools and hospitals, and overall good quality of life. Basically, to know Malaysia is to love Malaysia!