Here is your first Forum » Doing business in Malaysia

Historically, Malaysia has long benefited from its geographic position as a trading hub between different nations. Geopolitically well placed, the mainland part of Malaysia follows the coast of one of the most strategically important shipping routes in the world. Malaysia has used its geographical location to its advantage to become one of the largest exporters of various resources such as tin, rubber and palm oil.

Malaysia has managed to quickly transform its economy from being dependent on raw materials and agriculture into a fairly modern, competitive country. The service and manufacturing sector now accounts for about 75% of the country's GDP (51% in services and 22% in manufacturing in 2014), while the agricultural sector currently accounts for about 9% of GDP.

Overview of the Malaysian market
The total trade value of Malaysia in 2015 was estimated at US$376 billion. China remains Malaysia's most important trading partner with a market share of almost 16%. Singapore ranks second with around 13% market share, closely followed by the European Union with 10%. Almost 55% of Malaysia's imported goods are imported from the eastern part of Asia, with most being imported from China. Other countries with global economies (the United States, the EU and Japan) account for an estimated 26% of Malaysia's total imports.

Business challenges you may be facing
Malaysia often restricts free trade industries with special protections, such as automotive and agriculture. The country stands ready to protect strategic industries by imposing higher tariffs and various excessive taxes. Malaysia uses a system of import permits to reduce imports into protected domestic sectors.

Government restrictions disrupt foreign participation in various sectors of the economy, including government-issued contracts; financial, business and banking services; and telecommunications. Very often it is imperative to maintain a local business partner, usually a Bumiputra (ethnic Malay owned) company, in order to compete effectively in the market.

Malaysia's level of economic development is a key driver of consumer and business demand for products and services. Malaysian consumers are very price sensitive, although they are currently accustomed to several decades of rapid economic development. As a result, consumers are attracted to and familiar with global branded products, high standards of education, quality healthcare products and services, and environmentally friendly and biologically clean products. The World Bank currently considers Malaysia to be an upper-middle-income country.

Strategy Guide for Malaysian Market Entry
Many international business people think that hiring the services of a local dealer or agent is one of the most efficient first steps to entering the Malaysian market. A local distributor is usually responsible for taking care of customs matters, dealing with local wholesalers and retailers, marketing the goods directly to large companies with a large market share, and taking care of after-sales service. International service providers also usually benefit from dealing with local partners.

Sales direct to the Malaysian Government, Government Linked Companies (GLC) or for procurement in strategic economic sectors consistently favor Malaysian Agents or Joint Business Partners classified as Bumiputra (Malay) companies. The word Bumiputera itself defines a group of people who are ethnically Malay. A company can be classified as a Bumiputra company if it meets the following requirements:

Incorporated under the Companies Act, 1965;
Share capital from RM25,000;
Shareholders are 100% Bumiputra;
Board of Directors are at least 51% controlled by Bumiputra;
Upper management is at least 51% bumiputra;
Supporting staff are at least 51% Bumiputra.
In sectors of the economy that are not considered strategic and are not controlled by the government, companies, agents or dealers should be selected strictly on the basis of competitive considerations. However, as the Malaysian market is a very relational market, having a local presence or representative can impact the bottom line.