Malaysia

Main Industry Sectors

Agriculture employs around 15% of Malaysians and contributes to 10% of the GDP. Malaysia is ranked amongst the world’s main producers of palm oil, cocoa, and rubber. The country is also one of the main exporters of tropical wood. Malaysia has successfully developed its economy based on raw materials (the export of rubber and tin, significant reserves of oil and gas, copper and bauxite).

Industry contributes to around 40% of the GDP. Malaysia is one of the world’s largest exporters of semi-conductor devices, electrical goods and appliances, and the government has ambitious plans to make of Malaysia the main producer and developer of high-tech products, including software. Malaysia is a major outsourcing destination for components manufacturing after China and India. The country has attracted significant foreign investments which have played a major role in the transformation of Malaysia’s economy.

The tertiary sector accounts for nearly half of the GDP, which is due mainly to the tourism sector. Malaysia has become one of South-East Asia’s major tourist destinations.

Economic Overview

The growth rate of GDP remained high until the first half of 2008 (6% in average), after that, it suffered the effects of the global crisis and was strongly reduced in 2009 (-1.7%). The effects of the crisis were softened by a important budgetary stimulus plan. The growth, estimated at 6.7% of the GDP, bounced back in 2010, with the support of the dynamic private consumption and the recovery of domestic investment.

The budgetary deficit has a tendency to increase, mainly due to the need of compensating the weakness of private investment and also because the public debt has highly increased. To face this problem, the government has launched a program to perform a progressive revision of subventions in order to reduce its expenditures. The objective is to bring the budget deficit to 3% of GDP by 2015. In addition, the “New Economic Model” (NEM) intended to promote innovation and to increase production profits, was launched together with the tenth five-year plan (2011-2015).

Malaysia has one of the highest living standards in South-East Asia and a very low unemployment rate. However, the objective of NEM is to double the income per capita from now until 2020. Despite the government’s long-term efforts to improve the economic situation of native Malays, the population of Chinese origin continues to maintain its traditional dominance.

FDI in Figures

Global FDI inflows into Malaysia increased a lot in the 1990′s, but the net flows of FDI have been negative since 2006, this is a reflect of the policies encouraging the internationalization of companies and the mistrust of investors regarding the profit repatriation earned by foreign enterprises. It seems that the re-investment of profits from the existing multinationals, which are already installed in Malaysia, constitutes the essential components of the FDI income. The authorities want to make of Malaysia a foothold access to the ASEAN market and in order to promote this, the country offers various incentives to foreign companies, notably the status of pioneer company and tax reductions associated to the investment. The country benefits from a high-skilled and English speaking workforce. However, the government maintains a large discretionary power for authorizing investment projects and uses it to obtain the maximum profit from foreign participation and demands agreements that are advantageous in matters of transferring technologies or creating joint ventures.

FDI Government Measures

The Malaysian government encourages FDI by a number of incentive measures particularly towards industries exporting “high-tech” products and back office operations services. In 2003, the government launched a program to boost the economy, which extended the total number of years of tax exemption from 10 to 15 for “pioneer” companies and from 5 to 10 years for priority companies. Firms which benefit from the “Multimedia Super Corridor” (MSC) program have easy taxes and regulations terms.

In order to face the crisis, the government adopted different measures: supporting company balance-sheets, maintaining the redistribution of the oil annuities (subsidies for basic products and the education and hospital systems, and major construction policies), strengthening of the financial system and economic liberalization. At the same time, in order to favour the transfer of technology and facilitate the influx, into the country, of qualified staff, Malaysia is looking to liberalize the expatriate employment regime in the  manufacturing sector.

Country Strong Points

The main factors that make FDI attractive are:
- A liberal and transparent investment policy;
- Competitive costs;
- Rationalization of public services;
- Attractive investment incentives;
- Developed infrastructures;
- A strategic location linked to the proximity of the main Asian markets;
- Significant resources;
- Growing spending power.

Foreign Trade Overview

Malaysia is well known for its openness to international trade. Foreign trade represents more than double of the country’s GDP.

The trade balance is structurally positive. The global economic crisis, even if it caused a reduction in exports, it did not affect the trade balance since imports also dropped on a larger proportion than exports.

The country mainly exports electric and electronic equipment, machinery, mineral fuels and hydrocarbons, animal and vegetable oils and fats, wood and charcoal. The country mainly imports electric and electronic equipment, machinery, fuels and oils, plastic products, iron and steel. Its main trade partners are the United States, Singapore and Japan, followed by China and the European Union.

Source www.globaltrade.net