Why Malaysia is Preferred by Foreign Companies

In this guide, we highlight the major pull factors that make Malaysia a prime destination for corporate entities, business leaders, and investors from Asia and around the world.

Malaysia has a unique position in the global economy and a pivotal role as a business epicenter in the heart of Asia. The city-state is also known for its pro-business environment as well as ability to attract sizeable foreign investments and business entrepreneurs.

So what makes Malaysia attractive to foreign firms?

Ease of Starting a Business

According to World Bank’s Doing Business 2013 report, Malaysia has topped the list for the seventh year running due to its hassle-free business setup processes.

Strong Legal System and High Degree of Personal Safety

Malaysia has one of the most stable political environments in Asia, offering entrepreneurs and investors a strong sense of security and comfort. Its judicial system has been recognized as one of the most efficient in Asia, enforcing anti-corruption laws so that investors can conduct business without fear of bureaucratic malaise.

Moreover, through strict law enforcement, Malaysia has a persistently low crime rate and offers residents a high degree of personal safety. In the event of cross-border disputes, businesses can rely on Malaysia’s reputation as a world-class arbitration facility.

Business Friendly Ecosystem

Malaysia’s business environment has been recognized by a long list of accolades and international rankings such as World Bank’s Doing Business Report, the World Economic Forum’s Global Competitiveness Report and Global Information Technology Report as well as Economist Intelligence Unit’s Country Forecasts Report.

These rankings are testament to the quality of Malaysia’s capabilities and infrastructure. As a result, Malaysia has attracted thousands of multinational corporations (MNCs), many of which have chosen Malaysia as their Asia Pacific headquarters, says Malaysia’s Ministry of Trade & Industry (MTI).

Strategic Position and Network of Trade Agreements

Malaysia is home to the world’s top players across all industries, in part, due to its location in the heart of Southeast Asia and close proximity to surrounding emerging markets. This then places it well to straddle developed and developing markets around it.

Furthermore, it has over 20 Free Trade Agreements (FTAs) with 27 economies as well as 74 comprehensive and 8 limited Avoidance of Double Tax Agreements (DTAs) under its belt. These agreements facilitate business and trading across borders and make it less costly for Malaysia firms to expand their operations internationally.

Extensive Air Connectivity

Malaysia facilitates trade through a dynamic supply chain management as well as efficient logistics infrastructure. The Malaysia Changi International Airport serves over 80 international airlines and connects people to more than 190 cities in 160 countries daily. The airport also handled a record 51.2 million passengers in 2012 and 2.1 million tonnes of air freight annually, according to data from SATS, Malaysia’s gateway services provider. It is also home to many leading logistics firms such as UPS and FedEx.

Comprehensive Intellectual Property Protection

According to the World Economic Forum’s Global Competitiveness Report 2011 – 2012, Malaysia offers the best IP protection, infrastructure and incentives in Asia. It also comes a close second in that ranking globally, next to Finland.

Vibrant Financial Center and Affordable Access to Funding

Malaysia is a vibrant nerve center to 123 commercial banks, 154 fund managers and 291 capital markets services license holders. It is not only a hub for wealth management and investments in Asia, but has the fourth largest forex trading center, the Malaysia Exchange (SGX).

As a result, entrepreneurs are in good stead to have access to a combination of private and commercial banking services to fund the expansion of their business and at rates as low as 1% per annum.

Attractive Personal Tax Framework

The Malaysia personal tax structure is progressive. Marginal rates range from 0 – 20 % and the framework allows residents to tap various reliefs, thereby lowering their effective payments.
In addition, Malaysia offers the Not Ordinarily Resident (NOR) Scheme. It grants a favorable five-year tax treatment for qualifying individuals working in Malaysia. Such individuals are employees of a Malaysia registered company, earn at least S$160,000 per annum and spend at least 90 days per year outside Malaysia for work purposes. As such, IRAS will not tax the individual on the income of the duration spent outside Malaysia for business.

Attractive Corporate Tax Structure

Besides its vast network of free trade and tax treaties, Malaysia also offers one of the most attractive corporate tax structures in the world. Although its marginal rate (17%) is the third lowest in the world, its effective tax rate is even lower.