Manufacturing
The Malaysian Investment Development Authority (MIDA) screens all proposals for
manufacturing and related projects in
the extent to which they contribute to the government’s goals and objectives. These
goals are outlined in the Third Industrial Master Plan (2006-2020), the various regional
initiatives (Iskandar Development Region and the Northern, Eastern,
Sarawak Economic Regions) as well as the ETP and the 10MP.
Project approval depends on many other factors as well. MIDA may consider the size of
an investment, the export-orientation of production, the type of financing required (both
local and offshore), capital/labor ratio, the potential for technological diffusion into the
local economy, the ability of existing and planned infrastructure to support the effort, and
the existence of a local or foreign market for the output. If both local and foreign firms
propose similar projects, the local firm will be given preference. All requests are handled
on a case-by-case basis. MIDA now has the authority to issue or renew licenses for all
manufacturing companies, eliminating a second layer of approval from its parent
ministry, the Ministry of International Trade and Industry (MITI). MIDA established an
on-site immigration unit in 2007 which has helped expedite the processing of expatriate
work visas. Applications for investment in sectors other than manufacturing are handled
by the relevant ministries and sometimes require multiple approvals.
Investment regulations are specified in the Promotion of Investments Act of 1986 (PIA)
and the Industrial Coordination Act of 1975. The government pledged in 2004 to replace
the PIA with a more concise law covering investments in both manufacturing and
services, but has yet to do so. The PIA does not address services investment. Private
entities, both foreign and domestic, may acquire, merge with, and take over business
enterprises. However, the acquisition or disposal of 5% or more of interests in any local
financial institution requires the prior approval of the Minister of Finance and Bank
Negara
implements and enforces the provisions of the Competition Act 2010, issue guidelines in
relation to the implementation and enforcement of the competition laws, act as advocate
for competition matters; carry out general studies in relation to issues connected with
competition in the Malaysian economy or particular sectors of the Malaysian economy; inform and educate the public regarding the ways in which competition may benefit
consumers in, and the economy of,
Distribution Services, including Direct Selling and Retail Trade
Local companies that seek multi-level direct selling licenses require paid-in capital of RM
1.5 million ($423,700), while companies with foreign shareholders must have paid-in
capital of RM 5 million ($1.4 million).
operation of direct selling companies to have 30% Bumiputra equity.
The Ministry of Domestic Trade’s "Guidelines on Foreign Participation in the Distributive
Trade Services" (www.kpdnkk.gov.my/kpdnkk-theme/images/pdf/WRT_Guideline.pdf)
that came into effect in December 2004 and were amended in 2010 prohibit foreign
involvement in supermarkets, mini-markets and convenience stores, general vendor
shops, news agents. Foreign investment in hypermarkets, department stores and
superstores is allowed, subject to restrictions. For example, the Guidelines require that
hypermarkets provide at least 30% equity for Bumiputra. Hypermarkets, department
stores, and superstores must allocate at least 30% of total stock keeping units (SKUs)
displayed on the shelf space in their premises for goods and products manufactured by
Bumiputra-owned small and medium sized industries. The Guidelines also impose
restrictions on the number and location of hypermarkets.
two of the 27 service sectors from which the government removed 30% Bumiputra
ownership requirements in 2009.
Professional Services
operations that support foreign business activities).
Legal Services
Liberalization in the legal services sector is expected to begin pending amendments to
relevant legislation. It is expected that the changes will allow for the establishment of
joint ventures for permitted areas of practice. The liberalization initiative, however, is
only applicable to Peninsular Malaysia, not the states of Sarawak and
foreign lawyers may not practice Malaysian law, nor may they affiliate with local firms or
use the name of an international firm. Foreign law firms may not operate in
except as minority partners with local law firms and their stake in any partnership is
limited to 30%. The Attorney General has authority to grant limited exceptions on a
case-by-case basis under the law restricting the practice of Malaysian law to Malaysian
citizens or permanent residents who have apprenticed with a Malaysian lawyer, are
competent in Bahasa
are accredited British Barristers at Law, provided the applicant has seven years of legal
experience. Malaysian law does not allow for foreign legal consultancy except on a
limited basis in the
“Financial Services” below).Architectural Services
The Malaysian government has announced that architectural services will be fully
liberalized, subject to amending existing legislation, to allow for 100% foreign ownership
in architectural firms in
Board of Architects. Foreign architects may not be licensed in
to be managers, shareholders, or employees of Malaysian firms.
Engineering Services
The Malaysian government has announced that engineering services will be liberalized
once pending amendments to relevant Acts have been passed by the Malaysian
Parliament. At present, foreign engineers may be licensed by the Board of Engineers
only for specific projects and must be sponsored by the Malaysian company carrying out
the project. In general, a foreign engineer must be registered as a professional engineer
in his or her home country, have a minimum of 10 years experience, and have a physical
presence in
licensing for a foreign engineer, a Malaysian company often must demonstrate to the
Board that they cannot find a Malaysian engineer for the job. Foreign engineers are not
allowed to operate independently of Malaysian partners or serve as directors or
shareholders of an engineering consulting company. A foreign engineering firm may
establish a non-temporary commercial presence if all directors and shareholders are
Malaysian. Foreign engineering companies may collaborate with a Malaysian firm but
only the Malaysian company may submit the plans for domestic approval.
Accounting and Taxation Services
The government announced in 2011 that by January 2012 foreign accountants and
auditors will be allowed to wholly-own a practice in
yet to be issued. All accountants seeking to provide auditing and taxation services in
may apply for a license from the Ministry of Finance. Citizenship or permanent
residency is required for registration with the MIA.
Oil and Gas
Under the terms of the Petroleum Development Act of 1974, the upstream oil and gas
industry is controlled by Petroleum Nasional Berhad (Petronas), a wholly state-owned
company and the sole entity with legal title to Malaysian crude oil and gas deposits.
Foreign investment takes the form of production sharing agreements (PSAs). Foreign
operators include ExxonMobil, ConocoPhillips, Hess, Baker Hughes, Newfield, and
Murphy Oil from the
permitted to participate in oil services either in partnership with local firms and are
restricted to a 49% equity stake if the foreign party is the principal shareholder. Terms of
upstream projects with foreign participation are determined on a case-by-case basis by
Petronas. Electricity Generation and Distribution
Tenaga Nasional Berhad (TNB) is a state-owned electricity utility company that has a
monopoly on electricity distribution in Malaysia.TNB generates its own electricity and
purchases electricity from Independent Power Producers (IPPs) with power generation
plants located in
power plant in
Telecommunications
and partially adopted the WTO reference paper on regulatory commitments. Based on
up to a 30% equity stake in existing licensed public telecommunications operators and
foreign participation is limited to facilities-based suppliers. In certain instances
has allowed greater than 30% equity participation in the telecommunications market, but
the manner in which such exceptions are administered is nontransparent and is
perceived by foreign suppliers as arbitrary. In some cases, firms permitted to invest up
to a certain equity limit are subsequently asked to divest to lower foreign equity levels.
However in April 2012, foreign companies will be allowed to have the license to be an
applications service, network facilities or network service provider.
The government also removed 30% Bumiputra ownership requirements from computer
hardware installation consultancy services (CPC 841), software implementation services
(CPC 842), data processing services (CPC 843), database services (CPC 844),
computer repair services (CPC 845), and other computer related services (CPC 849).
Broadcasting and Audio-Visual
The Malaysian government maintains broadcast content quotas on both radio and
television programming. At least 80% of television programming is required to originate
from local production companies owned by Bumiputras and 60% of radio programming
must be of local origin. Foreign investment in terrestrial broadcast networks is prohibited
and is limited to a 20% equity share in cable and satellite operations. As a condition for
obtaining a license to operate, video rental establishments are required to have 30%
local content in their inventories.
Advertising
Advertising falls under the purview of multiple ministries and agencies, complicating the
adoption of a single set of advertising regulations and enforcement procedures for all
stakeholders in this process. International firms have concerns about the lack of clear
and consistent advertising content guidelines, and how some advertisers misrepresent
their products and services through advertising. The Government of Malaysia has an
informal and vague guideline that commercials cannot “promote a foreign lifestyle.”
Foreign content in commercials in
government relaxed enforcement of regulations governing the appearance of foreign
actors in commercials shown in
described below.
Banking
In 2009, the Malaysian government announced a liberalization package for the
conventional and Islamic financial sectors, but equity limits continue to broadly apply in
many areas. Bank Negara
and local financial products. Interest rates on consumer savings accounts and fixed
deposits are mandated and significantly higher than in other Asian countries. Fees on
transactions are determined by the Association of Banks, but they are not permitted to
vary these fees without BNM approval. Credit card interest rates are capped at 18% per
annum.
Foreign equity limits are 70% for domestic Islamic banks and 30% for domestic
conventional banks. Foreign banks can own 100% of individually licensed banks that
the foreign bank opens in
additional branches throughout
designating how the branches can be set up (i.e., in market centers, semi-urban areas
and non-urban areas). The policies do not allow foreign banks to set up new branches
within
and foreign insurers are not permitted, regardless of whether the companies are locally
incorporated. Presently, foreign banks are also not allowed to open ringgit-based
Correspondent Bank Accounts with local banks due to concerns with local banks being
used as conduits for ‘branching’ by foreign banks.
To attract multinational corporations to establish their treasury management services in
exemption of 70% for 5 years; a withholding tax exemption on interest payments on
borrowings; and stamp duty exemption on loan and service agreements. The
Government has extended a concessionary tax rate of 10% on dividends of noncorporate institutional and individual investors in Real Estate Investment Trusts through
December 2016. The Government provides an income tax exemption of 100% for 10
years and stamp duty exemption on loan and service agreements for
International Financial District status companies.
Insurance
The life insurance industry remains dominated by foreign providers, including some
firms, and domestic firms control the general insurance industry. As part of
response to the 1997-1998 Asian financial crisis, all branches of foreign insurance
companies were required to incorporate locally. The 2001 Financial Sector Master Plan
set out a timeline for liberalization of the insurance industry in several phases. These
include increasing caps on foreign equity, fully opening the reinsurance industry to
foreign competition, and lifting existing restrictions on employment of expatriate
specialists. In 2009, foreign ownership limits were raised from 49% to 70% for branches
of foreign insurance companies. Reinsurance companies are required to do more than
50% of reinsurance in
Foreigners are permitted to purchase a limited number of stockbrokerage licenses and
are allowed to take a majority ownership stake in unit trust management companies.
company to set up operations in
Malaysian stock brokerage firms and unit trusts is 70%. There are no foreign equity
restrictions for fund management companies providing wholesale services and 70%
foreign equity unit trust management companies providing retail services and for stock
broking companies. Futures brokerage firms may be 100% foreign-owned. International
fund managers have to go through a local fund provider, which then establishes a
‘feeder’ arrangement.