Country Overview

Malaysia is a federal constitutional monarchy in Southeast Asia. It consists of thirteen states

and three federal territories and has a total landmass of 329,847 square kilometers (127,350 sq
mi). It is separated by the South China Sea into two regions, Peninsular Malaysia and Malaysian
Borneo (also known as West and East Malaysia respectively). Land borders are shared with
Thailand, Indonesia, and Brunei, and maritime borders exist with Singapore, Vietnam, and the
Philippines. Peninsular Malaysia is connected to Singapore via a causeway and a bridge. The
capital city is Kuala Lumpur, while Putrajaya is the seat of the federal government. The
population as of 2009 stood at over 28 million.

The Economy of Malaysia is a growing and relatively open state-oriented and newly
industrialized market economy. The state plays a significant but declining role in guiding
economic activity through macroeconomic plans. In 2007, the economy of Malaysia was the 3rd
largest economy in South East Asia and 29th largest economy in the world by purchasing power
parity with gross domestic product for 2008 of $222 billion with a growth rate of 5% to 7% since
2007. In 2009, GDP per capita (PPP) of Malaysia stands at US$14,900. In 2009, the nominal GDP
was US$383.6 billion, and the nominal per capital GDP was US$8,100.

At present, Malaysia's industrial and service sectors are the 2 major pillars of the national
economy. However, agriculture and mining were the 2 dominant sectors during its early
history. Britain had slowly but steadily advanced into the region in the 18th and 19th centuries,
establishing control over the territory of what would become present-day Malaysia. The British
were attracted by the rich natural resources of this region and its convenient location along the
Strait of Malacca, which was the main sea route connecting the Far East with British India and
Europe. The British established large-scale plantations and introduced new commercial crops
(rubber in 1876, palm oil in 1917, and cocoa in the 1950s). They also developed a large mining
sector and encouraged migration of Chinese and Indian workers to these plantations and
mines.
In August 1957, the Federation of Malaya was granted independence within the
Commonwealth of Nations. In 1963, the Malaysian Federation was founded, comprising the
Federation of Malaya, Sabah, Sarawak, and the State of Singapore. Singapore, however, left in
1965.

Since achieving independence, the Federation of Malaysia faced a need to develop and to
diversify its economy, having a rapidly growing population. The country abandoned reliance on
the export of primary natural resources and agricultural products and established itself as a
rapidly industrializing country with a diversified export base.

In the 1970s, Malaysia began to imitate the four Asian Tiger economies (Republic of Korea
(South Korea), Republic of China (Taiwan), then British Crown Colony of Hong Kong and the
Republic of Singapore) and committed itself to a transition from being reliant on mining and
agriculture to an economy that depends more on manufacturing. In the 1970s, the
predominantly mining and agricultural based Malaysian economy began a transition towards a
more multi-sector economy. Since the 1980s the industrial sector has led Malaysia's growth. By
the beginning of the 21st century Malaysia had become one of the fastest growing economies
in Southeast Asia and third-richest state (after Brunei and Singapore) in the regional grouping
known as the Association of South East Asian Nations (ASEAN).

Central planning has been a major factor in the Malaysian economy, as government
expenditure was often used to stimulate the economy. The Malaysian government promoted
the free market with limited state intervention and export-oriented industrialization. Its exports
to the international market were used to promote efficient use of the country's resources and
generate hard currency, which was necessary for catching up and further developing into areas
of technological and industrial innovation. In the mid-1960s, Malaysia established 5-year
planning, targeting certain areas of economic growth and social changes, and allocating public
resources for priority sectors of the economy and for infrastructure development. Despite
these efforts, the government was reluctant to institute centralized control over the state's
economy. The 5-year plans became a basis for official development strategies. For example, the
recently completed "Seventh Plan" (1996-2000) targeted productivity growth and moved the
country towards capital-intensive, high-technology industries. The political and inter-communal
violence that had undermined the country's stability and security in the 1960s and 1970s gave
way to a period of remarkable stability. This has attracted international investors and greatly
contributed to the rapid economic growth of the 1980s and 1990s, especially in the
manufacturing and service sectors of the Malaysian economy. Unlike the government of
neighboring Indonesia, the Malaysian government has managed to keep its external debt at a
relatively moderate level. In 1998, external debt stood at US$42 billion, or 59 percent of GDP
with debt service payments of about US$6.0 billion. Estimates for the year 2000 estimated that
Malaysian official reserves stood at US$29.6 billion. However, the repatriation of the profits by
foreign investors may cause a problem for the Malaysian economy in the future.

The structure of the Malaysian economy has changed during the last 2 decades. According to
the World Bank, the proportion of manufactured production grew from roughly 20 percent of
GDP in the early 1980s to 31.5 percent of GDP in the late 1990s. Manufactured products
accounted for around 85 percent of gross export earnings in 1999, with electronic goods
becoming one of the most important products. The role of mining has steadily declined during
the last few decades (Malaysia was one of the world's largest exporters of tin in the 1970s),
now contributing just 7 percent of GDP. Malaysia continues, however, to export tin, gold,
bauxite, ilmenite (a titanium ore), oil, and gas. Meanwhile, the role of agriculture in the
country's economy has also been declining, although it provides employment to large numbers
of Malaysians. Nevertheless, Malaysia remains one of the world's leading exporters of rubber
and timber and produces almost half the world's palm oil. Tourism is another important and
rapidly growing sector of the economy, with about 7.5 million tourists visiting the country in
1999 and contributing RM10 billion to the national economy.

Malaysia has a very diverse economy. The manufacturing sector is dominated by large
multinational corporations, with a heavy Japanese presence among the largest companies.
Meanwhile, the agricultural sector is dominated by medium and small firms. In East Malaysia,
Sabah, and Sarawak, and in some northern states, many farmers are still engaged in
subsistence agriculture. In the service sector, especially in retail trade, large international
superstores such as Marks and Spencer, SOGO, and Yaohan are complemented by a number of
medium and small enterprises.

International trade, facilitated by the adjacent Strait of Malacca shipping route and
manufacturing are both key sectors of the country's economy. Malaysia is an exporter of
natural and agricultural resources, the most valuable exported resource being petroleum. At
one time, it was the largest producer of tin, rubber and palm oil in the world. Manufacturing
has a large influence in the country's economy, although Malaysia’s economic structure has
been moving away from it. In an effort to diversify the economy and make Malaysia’s economy
less dependent on exported goods, the government has pushed to increase tourism in
Malaysia. As a result, tourism has become Malaysia’s third largest source of income from
foreign exchange, although it is threatened by the negative effects of the growing industrial
economy, with large amounts of air and water pollution along with deforestation affecting
tourism. The country has developed itself into a centre of Islamic banking, and is the country
with the highest numbers of female workers in Islamic banking. Knowledge-based services are
also expanding

Rapid economic growth and stability brought economic prosperity to a large proportion of the
population, especially in urban areas. It also helped to keep unemployment at a very low 3
percent (for comparison, unemployment in the United States was 4.2 percent in 1999). In some
sectors, Malaysia has begun to experience a shortage of labor. In the late 1990s, there was an
inflow of large numbers of foreign workers through legal and illegal channels from neighboring
Indonesia, with whom Malaysia shares some linguistic and cultural similarities, and from
Bangladesh, the Philippines, and Burma (Myanmar). This inflow is sometimes blamed for
existing criminal activities and black market operations.

Drugs are another important issue; Malaysia is situated very close to the so-called "Golden
Triangle" (an area between Burma, Laos, and Thailand) that is the world's largest producer of
illicit drugs such as opium. Malaysia is among the few countries in the world to have adopted
the death penalty for possession and sale of drugs. However, neither organized crime nor the
black market has had a significant impact on the national economy.
Due to the tremendous economic growth and its ability to preserve stability and promote its
multicultural environment, Malaysia has become an increasingly popular destination for
tourists from Europe, Japan, and North America. Malaysian tropical forests and beaches,
colorful festivals in major cities, and luxurious hotels provide a vibrant environment for the
development of hospitality businesses.

Country Analysis

Law and Regulations

Malaysia practices Parliamentary Democracy with Constitutional Monarchy and His Royal
Highness is the Paramount Ruler. The Federal Constitution was legislated with the setting up of
conditions for this system to exist. One of the conditions of Parliamentary Democracy is the
division of the administrative power into three parts ‐ legislative, judiciary and administrative or
executive. Malaysia is also a country that practices a system of democracy based on the
Federation system. Accordingly, all of the states have agreed to form the country of Malaysia.
Each state has surrendered part of its power, such as finance, defense, education, foreign
affairs and others, as stated in the Malaysian Constitution, and which is administered by the
Central Government. There are matters that are under the power of the state and each state
administers power over those matters. The hereditary rulers are Heads of State of their own
state and carry out their duties with the advice of their own Chief Minister. The Parliament is
the legislative authority for the Federation and, in this capacity; it makes laws applicable to the
Federation as a whole. Parliament passes federal laws, makes amendments to existing federal
laws, examines government policies, approves government expenditure and approves new
taxes. The Parliament also serves as the forum for criticism and focus of public opinion on
national affairs.

A resident individual in Malaysia is chargeable to income tax on income accruing in or derived

from Malaysia or received in Malaysia from outside Malaysia. A non-resident individual is
chargeable on the income accruing in or derived from Malaysia. The rate of tax depends on the
individual’s resident status, which is determined by the duration of his stay in the country as
stipulated under sec. 7 of the Income Tax Act 1967. Generally, an individual residing in Malaysia
for more than 182 days in a year has tax resident status. Effective from the year of assessment
2004, income remitted to Malaysia by a resident individual is exempted from income tax. A
resident individual is taxed on his chargeable income at a graduated rate from 0% to 28% after
deducting tax reliefs. A non-resident individual is not eligible for any personal tax relief and is
subject to 28% tax on the chargeable income accruing in or derived from Malaysia unless there
are double tax treaties. Other sources of income received by a non-resident individual are
subject to withholding tax as discussed below. Non-resident public entertainers are taxed at
15% of the gross income. The basic taxation system in Malaysia is territorial in nature. All
income of companies and individuals accrued in, derived from or received in Malaysia from
outside Malaysia, are liable to income tax. However, foreign sourced income received in
Malaysia from outside Malaysia by resident companies (except those involved in the banking,
insurance, air and sea transportation business), non-resident companies and non-resident
individuals are exempted from income tax in Malaysia. The Malaysian taxation system
comprises of direct and indirect imposition of taxes. The forms of direct taxes are income tax,
real property gains tax and petroleum income tax. Indirect taxes come in the form of excise
duty, customs duties, sales tax, service tax, stamp duty and quit rent and assessments on realty.
There is no capital gains tax in Malaysia apart from real property gains tax.
Tax incentives are offered for foreign investments into the following industries:
• Manufacturing;
• Tourism;
• Agriculture;
• Environment protection;
• Training;
• Research and development;
• Transport and communication.
Non‐resident individuals are subject to a final withholding tax on the following sources of
income:
• 10% on special classes of income such as use of movable property, technical advice,
assistance or services; installation services on the supply of plant, machinery, etc; personal
services associated with the use of intangible property;
• 10% on royalties;
• 15% on bank interest;
• 15% on services of a public entertainer;
• 10% on gains or profits taxable under Section 4(f) of the Income Tax Act 1967 such as
commissions guarantee fees and introducer’s fees.

Due to the volatile conditions of the Asian economies in 1997 and 1998, the Malaysian
government imposed on 1 September 1998 a levy on repatriation out of Malaysia of foreign
funds (except for foreign direct investments). Foreign direct investments, being an investment
made by non-resident in a company, where the nonresident is entitled to exercise or control
the exercise of not more than 10% of the votes attached to the voting shares of the company,
or where the directors of the company are under an obligation to act in accordance or with the
wishes of the non-resident, were allowed to repatriate their investments, including capital,
profits, dividends and interest without being subject to any levy even after 1 September 1998.
Likewise, dividends, interest and rental earned were not subject to the said levy. However, the
government over the course of time gradually relaxed the levy and with effect from 2 May
2001, the remaining exit levy, being the 10% exit levy imposed on profits of portfolio
investments repatriated within 12 months from the month profits are realized, was abolished.

Currency
The local currency is Ringgit Malaysia (RM). Major hotels and larger establishments readily
accept foreign currency. Foreign currencies can also be readily exchanged at banks or licensed
money changers.
The Economy
The economic policies and strategies of the country are set out in the National Development
policy. These are implemented through the outline Perspective Plan. The current action plan is
the Ninth Malaysia Plan (2006‐2010). The Ninth Malaysia Plan is the first of three five‐year
blueprints for the National Mission, encapsulating policy directions and programs, which are
aimed at delivering the Mission’s philosophy and thrusts. The National Mission will drive the
design and prioritization of programs, plans and budgets from the year 2006 onwards. With
consistent and determined effort in the implementation and delivery of the National Mission,
the nation will be well placed to achieve its aspirations and join the ranks of developed nations
by the year 2020.

The advanced economies experienced a gradual pick-up in growth benefiting from the policy
support, while the regional economies recorded a stronger recovery supported by favorable
domestic demand and an increase in intra-regional trade. The recovery in the global economy
had improved further in the fourth quarter of 2009. This positive trend is expected to continue
in 2010, although the pace of the global recovery is expected to be gradual and uneven. The
prospect for sustained global growth will depend importantly on the recovery in private sector
demand, particularly when the effects of policy measures begin to diminish. The Malaysian
economy has recovered from the global crisis and turned around to record a positive growth in
the fourth quarter of 2009. Going forward, the improvement experienced in the second half of
2009 is expected to strengthen in 2010. Higher domestic demand, particularly private
consumption spending, is expected given the stable labor market conditions, improved
consumer and business confidence, and continued access to financing. Further improvements
in external demand, following the gradual recovery in the global economy, is also expected to
provide further impetus to the domestic economy.
Malaysia, a middle-income country, has transformed itself since the 1970s from a producer of
raw materials into an emerging multi-sector economy. After coming to office in 2003, former
Prime Minister ABDULLAH tried to move the economy farther up the value-added production
chain by attracting investments in high technology industries, medical technology, and
pharmaceuticals, an effort that continues under current Prime Minister Najib Razak. The NAJIB
administration also is continuing efforts to boost domestic demand and to wean the economy
off of its dependence on exports. Nevertheless, exports - particularly of electronics - remain a
significant driver of the economy. As an oil and gas exporter, Malaysia has profited from higher
world energy prices, although the rising cost of domestic gasoline and diesel fuel, combined
with strained government finances, has forced Kuala Lumpur to reduce government subsidies.
The government is also trying to lessen its dependence on state oil producer PETRONAS, which
supplies 40% of government revenue. The central bank maintains healthy foreign exchange
reserves and its well-developed regulatory regime have limited Malaysia's exposure to riskier
financial instruments and the global financial crisis. Nevertheless, decreasing worldwide
demand for consumer goods hurt Malaysia's exports and economic growth in 2009, although
both began showing signs of recovery late in the year. In June 2010 NAJIB will introduce the
Tenth Malaysia Plan, outlining new reforms. NAJIB already has introduced several reforms in
the services sector in a bid to attract direct foreign investment, which has stagnated in recent
years. (CIA World Factbook)

Malaysia has continued to receive positive reports on its corporate governance framework,
particularly for its investor protection regime. According to the World Bank’s Doing Business
2010 Report, Malaysia retains its 4th position for investor protection for the fourth consecutive
year.

Out of 183 countries assessed, Malaysia was ranked after New Zealand, Singapore and Hong
Kong. The dimensions of investor protection covered are the transparency of transactions, the
extent of directors’ liability for self-dealing and ease of shareholders’ suits.

Language
Bahasa is the official language. However, English is widely used for business and in the tourism
industry. Apart from English, Mandarin and Tamil are also common languages taught at school
concurrently with Bahasa and English.
Forms of Business Organizations
In Malaysia any business enterprise must take one of the following three forms:-
 A sole proprietorship;
 A partnership;
 A locally incorporated company, or branch of a foreign company.

A) Sole Proprietorship and Partnership

A sole proprietor, as well as a partner of a business, is personally liable for the debts of a
business. Partners of a business may draw up partnership agreements or be governed by the
Partnership Act 1961. All sole proprietorships and partnerships must be registered with the
Companies Commission of Malaysia (“CCM”) under the Registration of Businesses Act 1956.
Prior to the establishment of the CCM in April 2002, the functions relating to registration of
businesses was undertaken by the Registrar of Businesses. No foreign individuals or companies
(whether locally incorporated or foreign) can be registered as a sole proprietor with the CCM.
The CCM as a matter of practice, does not permit companies (whether locally incorporated or
foreign) or foreign individuals to be registered as partners in a partnership. The present laws of
Malaysia do not permit partnerships with limited liability to be established, except for offshore
limited partnerships in Labuan, under the Labuan Offshore Limited Partnerships Act 1997.

B) Incorporated Company
Any two or more persons may incorporate a company. Although there are three types of
companies that may be formed, the most popular is a company limited by shares where the
personal liability of members is limited to the amount if any, unpaid on their shares. A company
may be either a private or a public company.

A private company is one whose articles of association restrict the right of its members to
transfer their shares, restrict membership to 50 and prohibits any invitation to the public to
subscribe for its shares or debentures or to deposit money with it. A public company however,
is generally one that desires to raise capital from the public. Such companies typically go on to
seek listing of their shares on the Bursa Malaysia Securities Berhad (“BMSB”), the Malaysian
stock exchange.

C) Branch of a Foreign Company

Instead of forming a local company, a foreign company may choose to operate a branch in
Malaysia. The Malaysian Guidelines on Foreign Participation in Wholesale and Retail Trade
provides that with effect from 1 November 1995, a foreign company is not allowed to establish
a branch to carry on business in wholesale and retail trade in Malaysia. Instead, all foreign
involvement is required to be through a company incorporated in Malaysia under the
Companies Act 1965.

D) Typical Foreign Business Ventures

In practical terms, foreigners desiring to carry on a business in Malaysia have the following
options:-
(a) Register a branch office if the investor is a foreign company;
(b) Incorporate a separate Malaysian company as its subsidiary;
(c) Acquire all or a majority of the shares of an existing Malaysian company; or
(d) Enter into joint venture with a Malaysian company or individual typically through holding
shares in a newly-incorporated joint venture company.

International Relationship
Malaysia shifted its policy towards non-alignment and neutrality. Malaysia's foreign policy is
officially based on the principle of neutrality and maintaining peaceful relations with all
countries, regardless of their ideology or political system, and to further develop relations with
other countries in the region. Malaysia is a founding member of the Association of Southeast
Asian Nations (ASEAN) and the Organization of the Islamic Conference. As a former British
colony, it is also a member of the Commonwealth. Kuala Lumpur was the site of the first East
Asia Summit in 2005.
Germany and Malaysia have enjoyed close and longstanding economic ties and strong business
partnership during the era of Mahathir, which is continued until now. As for United States,
negative impact of international relations for both models is not surprising. While as for
Singapore, during the era of Mahathir, despite being the closest neighbor of Singapore, the
relationship between both countries had been stormy due to issues such as disagreement on
raw water prices and status of Pulau Batu Putih.

Malaysia is affiliated with the United Nations and many of its specialized agencies, including
UNESCO, World Bank, International Monetary Fund, International Atomic Energy Agency;
General Agreement on Tariffs and Trade. It is also a member of the Asia-Pacific Economic
Cooperation, the Developing 8 Countries, and the Non-Aligned Movement. Asian Development
Bank, Five-Power Defense Arrangement, and South Centre. Malaysia is involved in a complex
dispute with Brunei, China, Philippines, Taiwan, and Vietnam over claims to part or all of the
Spratly Islands; while the 2002 "Declaration on the Conduct of Parties in the South China Sea"
has eased tensions over the Spratly Islands, it is not the legally binding "code of conduct"
sought by some parties; Malaysia was not party to the March 2005 joint accord among the
national oil companies of China, the Philippines, and Vietnam on conducting marine seismic
activities in the Spratly Islands; disputes continue over deliveries of fresh water to Singapore,
Singapore's land reclamation, bridge construction, and maritime boundaries in the Johor and
Singapore Straits; in 2008, ICJ awards sovereignty of Pedra Branca (Pulau Batu Puteh/Horsburgh
Island) to Singapore, and Middle Rocks to Malaysia, but does not rule on maritime regimes,
boundaries, or disposition of South Ledge; ICJ awarded Ligitan and Sipadan islands, also claimed
by Indonesia and Philippines, to Malaysia but left maritime boundary and sovereignty of
Unarang rock in the hydrocarbon-rich Celebes Sea in dispute; separatist violence in Thailand's
predominantly Muslim southern provinces prompts measures to close and monitor border with
Malaysia to stem terrorist activities; Philippines retains a dormant claim to Malaysia's Sabah
State in northern Borneo; Brunei and Malaysia agreed in September 2008 to resolve their
offshore and deepwater seabed dispute, resume hydrocarbon exploration, and renounce any
territorial claims along their land boundary; piracy remains a problem in the Malacca Strait.
(CIA World Factbook)
Economy Indicator Financial Ratios
1. GDP (purchasing power parity):
$383 billion (2009 est.)
Country comparison to the world: 31

2. GDP (official exchange rate):

$193 billion (2009 est.)

3. GDP - real growth rate:

-1.7% (2009 est.)
Country comparison to the world: 146

5. GDP - per capita (PPP):

$13,800 (2009 est.)
Country comparison to the world: 82

6. GDP - composition by sector:

Agriculture: 9.4%
Industry: 40.9%
Services: 49.7% (2009 est.)

7. Labor force:
11.38 million (2009 est.)
Country comparison to the world: 44

8. Labor force - by occupation:

Agriculture: 13%
Industry: 36%
Services: 51% (2005 est.)
9. Unemployment rate:
3.7% (2009 est.)
Country comparison to the world: 33

10. Population below poverty line:

5.1% (2002 est.)

11. Household income or consumption by percentage share:

Lowest 10%: 2.6%
Highest 10%: 28.5% (2005 est.)

12. Distribution of family income - Gini index:

46.1 (2002)
Country comparison to the world: 36

13. Investment (gross fixed):

20.1% of GDP (2009 est.)
Country comparison to the world: 94

14. Budget:
Revenues: $45.01 billion
Expenditures: $58.46 billion (2009 est.)
15. Public debt:
53.3% of GDP (2009 est.)
Country comparison to the world: 42

16. Inflation rate (consumer prices):

0.6% (2009 est.)
Country comparison to the world: 39
17. Central bank discount rate:
1% (31 December 2009)
NA% (31 December 2008)

18. Commercial bank prime lending rate:

5.08% (31 December 2009 est.)
Country comparison to the world: 137

19. Industrial production growth rate:

-7% (2009 est.)
Country comparison to the world: 124

20. Current account balance:

$34.08 billion (2009 est.)
Country comparison to the world: 10

21. Exports:
$157.5 billion (2009 est.)
Country comparison to the world: 23
22. Imports:
$117.3 billion (2009 est.)
Country comparison to the world: 29

23. Reserves of foreign exchange and gold:

$96.71 billion (31 December 2009 est.)
Country comparison to the world: 20
24. Debt - external:
$58.79 billion (31 December 2009 est.)
Country comparison to the world: 49

25. Stock of direct foreign investment - at home:

$74.64 billion (31 December 2009 est.)
Country comparison to the world: 40

26. Stock of direct foreign investment - abroad:

$75.62 billion (31 December 2009 est.)
Country comparison to the world: 26

27. Exchange rates:

Ringgits (MYR) per US dollar - 3.55 (2009), 3.33 (2008), 3.46 (2007), 3.6683 (2006), 3.8 (2005)
(CIA World Factbook)

Why Malaysia?
The Ministry of International Trade and Industry (MITI) aims to promote and safeguard
Malaysian interest in the international trade arena, to spur the development of industrial
activities and to further enhance Malaysia’s economic growth. The Malaysian Industrial
Development Authority (MIDA), as an agency under MITI, is the government’s principal agency
in charge of promotion and co-ordination of industrial development in Malaysia including
foreign investments especially in the manufacturing sectors. MIDA is the first point of contact
for investors who intend to set up projects in manufacturing and its related support service
sectors in Malaysia. Malaysia has a prime up-and-coming property market generating a lot of
foreign interest. The most popular regions for international investors tend to be major cities
such as Kuala Lumpur which have growing financial, cultural and tourist industries. Unlike its
neighbor Singapore, the country of Malaysia is often overlooked by investors. The economy of
Malaysia is commodity-based with palm oil, crude oil and rubber being the major exports.
Among the Asian emerging markets, Malaysia has some unique comparative advantages. Some
of the top reasons for investing in Malaysia are listed below:
1. The Malaysian banks was virtually unaffected by the global credit crisis last year that
decimated many banks especially in the western world. The Top Banks such as May
Bank, Public Bank, CIMB and Malayan banking (MLYBY.PK) were not involved heavily in
derivatives and weathered the crisis easily.
2. After the Asian crisis, Malaysia enacted many regulations which prevented the reckless
flow of capital into and out of the country. These regulations require that capital
invested in Malaysia stay invested for some years before they can be taken out.
3. As the world’s largest producer of palm oil, Malaysia has a leadership position in
providing cheap edible oil to many developing countries. Palm oil is a cheaper substitute
for vegetable or sunflower oil which are used in cooking. There are many huge palm oil
plantations in Malaysia which benefited nicely last year when palm oil prices soared.
Kuala Lumpur Kepong which trades in the OTC market with ticker KLKSY.PK is engaged in
palm oil and rubber production among other products.
4. In 2008, Foreign Direct Investment (FDI) into Malaysia increased by 38% (RM 46.1
Billion) from the previous year. Australia was the largest investor followed by US, Japan
and Germany. However this year, FDI plunged to just $13 B from January thru May. But
in the future FDI may increase substantially as the government has announced many
liberalization measures and the country holds potential in sectors such as renewable
energy, manufacturing, etc.
5. Since Islam is the largest and official religion in Malaysia, the financial sectors follows
the principles of Islamic finance and take very low risks compared to banks in other
countries.
6. Since Independence from the British, the country has been a Parliamentary democracy
with a stable government in most years. Hence political risk is low.
7. Corruption is lower in Malaysia relative other ASEAN countries such as Indonesia,
Thailand and others.
8. In addition to palm oil and rubber, Malaysia is blessed with an abundance of forestry,
fertile agricultural land minerals like copper, iron-ore, etc.
9. Crude oil and Natural gas were discovered offshore in the 1970s and today Malaysia
subsidizes gasoline for domestic consumers and is a net exporter of crude oil. The
famous Petronas Tower is owned by the national state-owned oil giant Petronas.
10. While Malaysia has failed to succeed in innovation based industries like IT,
biotechnology, semiconductors, etc. it has been able to excel in the agricultural and
commodity sector and more recently is heavily encouraging the growth of tourism,
healthcare and education sectors. Genting Berhad (GMALY.PK) is a major entertainment
company that operates the famous Genting Highland Resorts outside of Kuala Lumpur,
Sentosa Island in Singapore and others.
11. The Malaysian government recently scrapped capital gains tax on property and relaxed
its laws on foreign ownership.
12. Demand has also been promoted by a flourishing tourist industry.
13. Annual property growth is between15% to 30%.
14. Malaysia has a low cost of living compared to other countries.
15. The country currently has a high rental demand due to a growing tourist industry.
16. With 32% of Malaysia’s population under 15 years of age, 58% of people under 30, and
just 8% over 60, the country boasts attractive demographics and a very strong
foundation for future growth. By contrast, just 15% of Japan’s population is under the
age of 15.
17. Although palm oil, tin, petroleum, copper, iron ore and other commodities are an
important part of the Malaysian story, its economy is well diversified. A full 50% of GDP
comes from the services sector, with 40% coming from industry and 10% from
agriculture.
18. With U.S. interest rates at record lows and more money consequently pouring into fast-
growing Asian markets, currencies are gaining strength. The Malaysian ringgit is one of
them, having recently climbed to a 13-year high.
Our main target is to invest in the property sector. The Malaysian Government has opened up
the route for foreign investors to purchase real estate in Malaysia. The program promoted by
the Malaysian government has removed many of the obstacles preventing foreign investors
from purchasing property in Malaysia and offers several substantial incentives for foreign
nationals purchasing property in Malaysia.

The Malaysian economy is bolstered by modest oil and natural gas reserves and at current
production rates will be able to produce oil for up to 18 years and gas for 35 years.

Malaysia is one of the fastest growing economies in the region and last year the property
market enjoyed capital growth figures of between 15 and 30%. The demand for investment in
Malaysia is due to rocket over the coming years. Prices in Malaysia are still very reasonable;
one of the most exciting projects to come to the tourist sector is the Palm in Sepang, only 20
minutes from the Formula 1 circuit. The Development is in the first phase of a 10 year scheme
partnered by the Government, boasting 22 Km of coastline being transformed into potentially
the world’s finest Resort. The quality and beauty of the property currently on offer in Malaysia
is high and therefore it is high in rental demand. A growing tourist industry is boosting rental
investments and allowing high yields of around 7.4 to 8.7% in the city and the same in the
popular tourist resorts, such as Port Dickson and Sepang. In addition, quality property is high in
demand from affluent expatriates. Chinese investors are already very active in the market and
this trend is expected to grow.

Malaysia is catching the eye of many discerning property purchasers worldwide. Below is a
comprehensive list explaining why Malaysia is such a popular investment arena today.

There are many economic and political reasons why Malaysia offers so much promise as a
strong emerging market today. Successful investment in property in Malaysia relies chiefly on
the ever increasing tourism figures, as well as commercial and residential options within the
capital city of Kuala Lumpur. Some of the reasons why Malaysia affords a great investment
climate for foreigner property purchasers today:
 One of the fastest growing economies in the region
 British legal system, property laws and environment
 Freehold property ownership and security of title
 Active government incentives encouraging foreign homebuyers to the country through
offering 10 year entry permits
 Attractive, well-priced properties with strong rental demand
 Low buying costs at between 3.4 to 6.75% of the property value, including 2.75% agent’s
commission
 Strong capital growth of between 15 and 30%
 Effective Land Registry and transparency in property transactions
 Tax advantages: remittances of income from overseas are TAX FREE
 Car import duties and other taxes are waived for foreign residents
 No capital gains tax on unearned income inside the country
 No requirement, as in neighboring countries, for a company or local “partners” to buy
property
 Capital gains on real property are less than 5% after 5 years
 Strong demand for resale properties from locals moving to the cities
 Also a high demand for quality new real estate is high from an affluent expatriate
market.
 Among the top three countries for the greatest number of tourist arrivals among the 53
Commonwealth countries, according to the World Tourism Organization.
 Tourist arrivals in Malaysia rose by more than 160% between 2000 and 2005
 Chinese investors already active in the market and this is expected to grow
 Good, modern communications and infrastructure country-wide
 Through its Ninth Plan, the government of Malaysia aims to further improve the
infrastructure and general economic development of the country. Analysts believe this
will have a positive impact on the Malaysian real estate market.
 The value of the local currency, the ringgit, is far below the euro, dollar and pound
sterling, allowing foreign investors to buy a lot more for their money in Malaysia.
 Easy and cheap to reach. 25 flights a week from UK starting at £285
 Low cost of living
 Low cost of regional flights on Air Asia to major S.E. Asian cities
 High quality development properties in prime areas are now available
 English language widely spoken and all property sale agreements in English
 Wonderful climate and food. Superb golf and other sports facilities.
 Extensive white sandy beaches continue to draw holidaymakers.
 Warm, friendly people and peaceful pro-British environment