Malaysia

Originally published: Mar-30-2008

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Official Name: Federation of Malaysia

Internet Domain: .my
International Dialing Code: +60
Time Zone: MST (Malaysian Standard Time) = UTC+8 or GMT+8

Table of Contents

Location and Size

Malaysia is located in Southeastern Asia, and is a peninsula bordering Thailand and the northern one-third of the island of Borneo, bordering Indonesia, Brunei, and the South China Sea, south of Vietnam. The country is slightly larger than the U.S. state of New Mexico.

Government

Malaysia’s government is a federal parliamentary democracy with a constitutional monarch and a bicameral parliament, and is a member of the Commonwealth (formerly known as British Commonwealth). Malaysia is a federation of peninsular Malaysia, Sabah and Sarawak. Although the 2004 general elections were largely deemed transparent, some sources argue against the idea that Malaysia is an electoral democracy.

• Monarch: The country is nominally headed by King Yang di-Pertuan Agong. Kings are elected for 5-year terms from among the nine sultans of the peninsular Malaysian states. The king is also the leader of the Islamic faith in Malaysia.
• Executive Branch: Chief of State Paramount Ruler Sultan Mizan Zainal Abidin; Head of Governmen: Prime Minister Abdullah bin Ahmad Badawi; cabinet
• Legislative Branch: bicameral Parliament consisting of appointed Dewan Negara (Senate) and elected Dewan Rakyat (House of Representatives)
• Judicial Branch: Civil Courts include Federal Court, Court of Appeal, and High Courts of Malaya, Sabah and Sarawak. Sharia (Muslim) Law Courts deal with religious and family matters of Muslims only; decisions of Sharia courts cannot be appealed to civil courts.

Legal System

The legal system is based on English common law. Islamic law is applied to Muslims in matters of family law and religion. Malaysia has not accepted compulsory ICJ (International Court of Justice) jurisdiction. (What does this mean?)

The domestic legal system is accessible but generally requires any non-Malaysian citizen to make a large deposit before pursuing a case in the Malaysian courts. The courts can be slow and bureaucratic, so many firms choose to include mandatory arbitration clauses in their contracts. In addition, the judiciary is not truly independent as there are several known instances of selective prosecution, preferential treatment, and arbitrary or politically motivated verdicts.

People

Malaysia’s multi-ethnic, multi-religious society encompasses a majority Muslim population in most of its states and an economically-powerful Chinese community. Ethnic Malays benefit from positive discrimination in business, education and the civil service. The ethnic Malays dominate the political life, while the wealthiest group, the ethnic Chinese, hold the economic power. Political parties are largely based on ethnicity, locality or religion.

• Population: 24,821,286 (July 2007 est.)
• Population growth rate: 1.759% (2007 estimate)
• Languages: Bahasa Malaysia (official), English, Chinese (Cantonese, Mandarin, Hokkien, Hakka, Hainan, Foochow), Tamil, Telugu, Malayalam, Panjabi, Thai and several indigenous languages
• Literacy: 88.7%
• Ethnic Makeup: Malay 50.4%, Chinese 23.7%, indigenous 11%, Indian 7.1%, others 7.8% (2004 est.)
• Religions: Muslim, Buddhist, Christian, Hindu, Confucianism, Taoism, other traditional Chinese religions

Economy

Since its independence from Britain in 1957, Malaysia's economic record has been one of Asia's best. Malaysia is a politically stable with growth rates that are among the highest in Southeast Asia; the country has successfully sustained strong economic growth together with a stable currency and low inflation for the past three decades.

Malaysia began its transformation in the 1970s from a producer of raw materials into an emerging multi-sector economy. Since coming to office in 2003, the current Prime Minister has tried to move the economy farther up the value-added production chain by attracting investments in high technology industries, medical technology, and pharmaceuticals. The Government of Malaysia is continuing efforts to boost domestic demand to wean the economy off of its dependence on exports. Foreign trade accounts for more than double of the country’s GDP. The top three export partners are the USA, Singapore, and Japan.

Malaysia today is a middle-income country with a multi-sector economy based on services and manufacturing. Malaysia is one of the world's largest exporters of semiconductor devices, electrical goods, and information and communication technology (ICT) products. While Malaysia has one of the highest standards of living in SE Asia, despite long-term efforts of the government to improve the economic status of native ‘Malays’ through preferences, the Chinese have generally continued their long-standing dominance of the economy.
 

Currency: Ringgit (MYR)

• MYR per USD: 3.19157 (March 30, 2008)
• MYR per EUR: 5.04262 (March 30, 2008)

Leading Markets (2006): US 18.8%, Singapore 15.4%, Japan 8.9%, China 7.2%, Thailand 5.3%, Hong Kong 4.9%

Leading Exports-commodities: electronic equipment, petroleum and liquefied natural gas, wood and wood products, palm oil, rubber, textiles, chemicals

Leading Suppliers (2006): Japan 13.3%, US 12.6%, China 12.2%, Singapore 11.7%, Thailand 5.5%, Taiwan 5.5%, South Korea 5.4%, Germany 4.4%

Leading Imports-commodities: electronics, machinery, petroleum products, plastics, vehicles, iron and steel products, chemicals

Top Industries: rubber and oil palm processing and manufacturing, light manufacturing, electronics, tin mining and smelting, logging, timber processing, petroleum production and refining

Top Agricultural Products: rubber, palm oil, cocoa, rice, timber, coconuts, pepper
 

Economic Indicators

(e) estimate (f) forecast

Comparative Economic Indicators - 20067 estimate

Credit and Collections

• Collection Experience: Fair-Good
• Exchange Delays: 3 months
• Preferred Credit Terms: Unconfirmed letter of credit
• Minimum Credit Terms: Sight draft

Dispute Resolution: Malaysia is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The domestic legal system is accessible but generally requires any non-Malaysian citizen to make a large deposit before pursuing a case in the Malaysian courts, and can be slow and bureaucratic. Many firms choose to include mandatory arbitration clauses in their contracts.

Risk Assessment

Coface Country Risk Rating: A2 -- The political and economic situation is good. A basically stable and efficient business environment nonetheless leaves room for improvement. Corporate default probability is low on average.

According to Coface: In view of the slowdown in the United States, which provides a market for 20% of Malaysian exports, growth could slow slightly in 2008. The upward trend will nonetheless continue thanks to the diversification of the economy. Besides the electronics sector, which represents 53% of exports, the retail trade, financial services, construction, tourism, and a farm sector buoyed by high raw material prices have supported growth. As a result, the Coface payment experience has remained good and claim collection is effective.

Ducroire Delcredere Political Risk Rating: 1 – lowest risk
Ducroire Delcredere Commercial Risk Rating: B – medium risk

Business Climate

Generally, the Government of Malaysia encourages foreign direct investment and an openness to international trade. The country's stable economy and good infrastructure have attracted large inflows of FDI, and although the country faces strong competition from China and India, economic prospects remain promising.

An impediment to economic growth is Malaysia’s complex network of racial preferences to promote the acquisition of economic assets by the native Malays. It should also be noted that a number of restrictions exist on the operation of foreign investors in Malaysia.

Economic Freedom: According to the 2008 Index of Economic Freedom, Malaysia's economy is 64.5% free, making it the world's 51st freest economy. It ranks 8th freest out of 30 countries in the Asia–Pacific region, and its overall score is higher than the regional average.

Political Stability: Malaysia is a politically stable country.

Transparency of Regulatory System: Malaysia’s Official Secrets Act makes it a crime to divulge the contents of any proposed law or regulation before it comes into effect. This denies stakeholders an opportunity for input into the drafting of legislation that affects their interests. U.S. companies have indicated that they would welcome improvements in the transparency of government decision-making and procedures, including government tenders.

In addition to secrecy laws regarding proposed new legislation, Malaysia maintains a complex network of practices for which no documentation is available. In response to U.S. government requests for a list of laws and regulations pertaining to market access in various sectors, one government official responded that ministries and agencies were “not in a position to make available an exhaustive list of the laws and regulations pertaining to their respective sectors,” in part because these were “still being streamlined and in some cases being developed,” and in part because “a number of market access issues are addressed by way of administrative circulars/guidelines/polices which not may be stated explicitly in any document.”

Patents and Brands: One local law firm reports that cases involving intellectual property rights generally take five to eight years, with more complex patent infringement cases taking ten to fifteen years.

Conversion and Transfer Policies: All payments to other countries must be made through authorized foreign exchange dealers in foreign currency. Onshore banks must record the amount and purpose of each cross-border transfer over Ringgit 50,000 (approximately USD 14,124).

Corruption: The centralized Malaysian political system suffers from bureaucratic delays, which generate many opportunities for corruption. According to the Business Anti-Corruption Portal, there is a widespread perception of corruption as common among the nation’s political and business elite, and bribery and other corrupt practices constitute serious problems for businesses operating in Malaysia. In the Global Competitiveness Report 2007, Malaysian business leaders rank corruption as the second most problematic factor for doing business in the country.

In recent years, both business organizations and the government have introduced corporate codes of conduct which address anti-corruption issues, and there seems to be enhanced awareness about the disadvantages of corruption. Still, the Malaysian economy is perceived by foreign businessmen to be more corrupt in 2007 than in 2006. It should also be noted that while many of the prosperous Malaysian companies are nominally privately-owned, in many ways they remain ‘political businesses’ that owe their growth to the preferential treatment they receive from the ruling party, if not outright ownership by political officials.

Political Violence: Malaysia has experienced little political violence since ethnic rioting in 1969, which led to the establishment of the National Economic Policy, a program designed to give the native Malay majority a larger stake in the economy.

For more detailed information on these topics, visit the 2007 Investment Climate Statement – Malaysia, of the U.S. Department of State and the Business Anti-Corruption Portal – Malaysia Country Profile.

"City of Lights" - Putrajaya, Malaysia

Business Customs and Protocol

All correspondence with government officials must be in the language of Bahasa Malaysia.

Appointments: The majority of Malaysian businesspeople can be expected to be punctual. Most government officials, however, have a more of a relaxed attitude toward time. Although punctuality is not always a priority in Malaysia, you should still arrive on time for appointments as making a Malaysian executive wait can result in “loss of face,” which has negative consequences in this culture.

Business Cards: Business cards should be printed in English. Since a high proportion of Malaysian businesspeople are Chinese, it will be an asset to have the reverse side of your card translated into Chinese. Gold ink is the most prestigious color for Chinese characters. Ensure that your business card outlines your education, professional qualifications, and business title. After the necessary introductions are made, offer your card to everyone present. Present your card with both hands. Do not write on another person's business card.

Business Attire: Avoid wearing yellow because it is the color reserved for Malaysian royalty.
Because of the heat and humidity, business dress in Malaysia is often casual. However, as a foreigner, you should dress conservatively until you are certain of the degree of formality expected. Standard formal office wear for men is dark trousers and a light-colored long-sleeved shirt and tie, without a jacket. The safest option for a male business traveler is to wear a suit jacket and tie, and remove them if it seems appropriate. Standard business attire for women includes dresses and light-colored, long-sleeved blouses and skirts. Pantsuits or slacks may be inappropriate in some Malaysian offices. Women must be sensitive to Muslim and Hindu beliefs, and, consequently, wear blouses that cover at least their upper arms. Skirts should be knee-length or longer.

Names and Titles: Most businesspeople should be addressed with a title and name. If a person does not have a professional title, like “Professor”, “Doctor”, “Engineer” etc., a Westerner may use courtesy titles such as “Mr.” or “Mrs.” During an introduction, make a point of repeating the title and name of the person; ask if you are pronouncing everything correctly. Follow the Malaysian's lead as to the degree of formality.

Conversation: In Malaysia, as with many Southeast Asian cultures, it is perfectly acceptable to ask people questions about their weight, income, marital status, and related subjects, and you may be subjected to these questions. If you don't wish to answer personal inquiries, side-step these questions as graciously as possible. Do not express annoyance, outrage, or similar feelings that will cause the questioner to “lose face.”

Gifts: Gifts are usually reserved for friends. Before giving a gift of any kind, you must first establish a personal relationship with the recipient. Otherwise, the gift may very well be perceived as a bribe.

Meetings and Negotiations: Malaysians do business only with people they know and like. Establishing a productive business relationship requires a long-term commitment and you will have to be prepared to make several trips to Malaysia before the decision-making stage. Expect negotiations to be slow and protracted.

When answering a question that requires a decision, Malaysians are often quick to answer “yes”, even if they don't mean it. This is because they must find a way to deliver the “no” politely, without “loss of face.” Qualified answers are usually an indication of a “no.” For example, an answer of “Yes, but...” means “no”, as does “That might be difficult...” Another way of indicating “no” is to deliberately ignore your question. Sucking in air through the teeth is used to indicate that there is a serious problem, even if on the surface, what is being said sounds positive. The aversion of Malaysians to saying “no” sometimes results in the “no” answer being delivered by a third party.

Acceptable Public Conduct: With the exception of handshakes, there is no public contact between the sexes in Malaysia. Conversely, physical contact between people of the same sex is perfectly acceptable. Feet are believed to be unclean. Never move or touch anything with your feet. Never point your feet at another person. Apologize should your shoes or feet touch another person.

Sources for further information on Malaysia

American Malaysian Chamber of Commerce

Doing Business in Malaysia: A Country Commercial Guide, U.S. Department of Commerce (PDF)

Embassy of Malaysia (Ministry of Foreign Affairs) in Washington, DC

Embassy of the United States in Kuala Lumpur
http://malaysia.usembassy.gov/

Malaysia, Business in Asia.com

Malaysia, US-ASEAN Business Council, Inc.

Malaysian Industrial Development Authority

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"City of Lights" photo © Benedict NG
Image from BigStockPhoto.com

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This information is provided by ABC-Amega Inc. Providing international receivable management and debt collection services for exporters to more than 200 countries including Malaysia. For further information, contact info@abc-amega.com.

This report represents a compilation of information from a wide variety of reputable sources.

Economic Indicators: Variety of sources including the CIA World Factbook, COFACE Country Ratings, Economist Country Briefings, Federation of International Trade Associations (FITA) Country Profiles.

Risk Assessment information: Provided with permission by Coface Country Rating. Also Belgian credit insurance company Ducroire Delcredere

Information on credit terms and the probability of prompt payment are provided, with permission, from Overseas Press and Consultants (OP&C) as published in IOMA's Report on "Managing Credit, Receivables & Collections," December 2007.

Historical Exchange Rates: OANDA.com The Currency Site.