1. Introduction

• 1.1 Why Malaysia?
• 1.2 Malaysia at a glance
• 1.3 Malaysia and Australia: the bilateral relationship

1.1 WHY MALAYSIA? OPPORTUNITIES FOR AUSTRALIAN BUSINESSES

Malaysia is one of Asia's fastest-growing economies and, according to the World Bank, it is among the best 20 countries in the world in which to do business. With its newly industrialised economy, relatively high GDP growth rate, and a well-educated population, Malaysia is Australia's ninth-largest two-way trading partner and second-largest within ASEAN. In 2012, the two nations signed the Malaysia-Australia Free Trade Agreement (MAFTA. Some factors that make Malaysia a good prospect for Australian businesses:

• Malaysia was the world's 35th biggest economy in 2015, with GDP just under USD300 billion.
• Malaysia is the third-most prosperous nation in Southeast Asia after Singapore and Brunei.
• Although GDP growth slowed in late 2015, the rate still stood at an impressive five per cent.
• Malaysia expects its middle class to be 45 per cent of the population by 2020.
• Average household incomes increased by 52 per cent between 2009 and 2014, to a value of MYR 6,141 ($2,103).

Doing business in Malaysia is not without challenges. Cultural barriers aside, red tape and the diversity of the Malaysian market appear likely impediments, compounded by a complex regulatory framework across the 13 states and three federal territories. But businesses willing to research opportunities and prepare for potential obstacles could reap considerable rewards in:

• Aged care
• Agriculture
• Business services
• Food and beverages
• Health and medical services
• Information communications technology
• Infrastructure, building and construction
• Oil and gas services

For more information, access the full Malaysia Country Starter Pack

1.2 MALAYSIA AT A GLANCE

Geography

Malaysia occupies more than 329,000 square kilometres in two distinct halves, namely Peninsular Malaysia to the west and East Malaysia. The former is south of Thailand, just north of Singapore and east of Sumatra. East Malaysia comprises most of northern Borneo, bordering Brunei Darussalam and Indonesia.

Its climate is mostly tropical, although its mountain regions can be significantly cooler. In the capital, Kuala Lumpur, temperatures generally stay within 23 degrees and 33 degrees throughout the year. It has monsoonal rainfall between October and March.

History

Malaysia was initially dominated by Hindu and Buddhist influences as the Sumatran empire stretched across Southeast Asia. Islam established itself in Malaysia in the 14th century, giving rise to various sultanates. The first Europeans to colonise parts of Malaysia were the Portuguese in 1511. The Dutch arrived in 1641, but it

was the British over the 19th century who consolidated and ruled much of the region now known as Malaysia. The colonial economy saw the arrival of many Chinese and Indian migrants.

During World War II, the Japanese occupied Malaysia from 1942 to 1945. The Malayan Communist Party fought the British for the right to self-governance. The region, then Malaya, was granted independence in 1957. Later, after merging with North Borneo and Singapore, it became Malaysia. Singapore went its own way in 1965.

Culture

Malaysia is multicultural, home to ethnic Malays, Chinese and Indians for many generations. Malays form the largest ethnic group (50 per cent) and are predominantly Muslim. The national language is Malay, or Bahasa Malaysia, similar to Bahasa Indonesia. Chinese Malaysians form the next biggest ethnic group (25 per cent) of the population. Indians account for 10 per cent. Several other indigenous Malay groups occupy different parts of Peninsular Malaysia.

Malaysians observe strict hierarchies, rules and etiquette in personal and business settings. The family is an important unit of society and respect for elders is very important. Traditionally, children care for elderly parents. Similarly, respect and reverence of more senior colleagues is important.

Religion

The 1971 National Culture Policy defined Islam as a central part of Malaysian culture and this remains true today. The majority of Malaysians are Muslims, of Malay heritage, with smaller populations of Buddhists, Christians and Hindus. Although Islam is the official national religion, the constitution explicitly states that this is merely symbolic and that government should be secular. A vocal movement calls for the supremacy of Islamic law and courts, but as yet there has been no official adoption of this.

Politics and government

Malaysia is a constitutional monarchy and parliamentary democracy with the King (the Yang di-Pertuan Agong) as Head of State and the Prime Minister leading the government. The position of king is rotated among the hereditary rulers of nine of Malaysia's 13 states (eight Sultans and one Rajah), and is mostly ceremonial.

The national parliament is bicameral, comprising a House of Representatives (Dewan Rakyat) and a Senate (Dewan Negara. States have single-chamber parliaments.

Economy

Since independence, Malaysia's economy has been transformed from one that was commodity-based and focused on rubber and tin, to one of the world's leading producers of electronic and electrical goods. Exports of goods and services account for around 85 per cent of Malaysia's GDP. It is the world's second-largest exporter of palm oil and one of the region's major oil and gas exporters. The export-oriented economy underpins the country's relatively high per capita GDP of $US11,120 and high standard of living and wellbeing. Malaysia's so-called Vision 2020 blueprint aims to eradicate poverty and improve the fortunes of Bumiputeras (sons of the soil — mainly Malays, but also other indigenous groups).

Its commitment to free trade is underscored by the series of bilateral FTAs with Australia, Japan, Pakistan, New Zealand, Chile and India. Malaysia and Australia are parties to the Trans-Pacific Partnership (TPP) as well as the Regional Comprehensive Economic Partnership (RCEP).

Legal system

The Malaysian legal system is built on a combination of common law inherited from the British, as well as limited jurisdiction for Islamic law. The constitution guarantees equal rights for its citizens and prohibits discrimination on a multitude of grounds. A parallel system of Shariah Courts has limited jurisdiction in matters of Islamic law.

Infrastructure

Since 1966, more government funding has been allocated to infrastructure than any other type of development. More advanced telecommunications infrastructure is expected to drive economic growth in the next five to 10 years. Malaysia has an efficient network of highways, rail corridors and seaports, and 62 airports, 38 of which accommodate commercial passenger flights, eight international.

Most of the electricity in Peninsular Malaysia is supplied by state-owned enterprise Tenaga Nasional. A push towards privatisation has seen the establishment of a private consortium, the Independent Power Providers, to build new power-generating plants. The government is focused on improving telecommunications, particularly networked and broadband services.

For more information, access the full Malaysia Country Starter Pack

1.3 MALAYSIA AND AUSTRALIA: THE BILATERAL RELATIONSHIP

Australia and Malaysia have long worked together, with 2015 marking 60 years since Australia established a diplomatic presence in its northern neighbour. Australia played a small but vital role in helping the establishment of the Federation of Malaya in 1957, sponsoring the just-formed nation's application for membership of the United Nations. Five Commonwealth jurists, including former Australian Governor-General Sir William McKell, helped draft Malaysia's constitution.

Defence and security interests have been at the forefront of growing bilateral ties, with Australian and Malaysian troops fighting together during the Malayan Campaign of World War II, the Malayan Emergency (1950-60) and the period of Confrontation (1963-66). The co-operation is enshrined in the Malaysia-Australia Joint Defence Program of 1992.

Sectors that figure prominently in Malaysian-Australian relations are education, migration and tourism, work and holiday arrangements. Malaysia ranks third as a source of international students at Australian universities, and sixth overall across all education sectors.

Australia-Malaysia trade

Annual two-way trade of goods and services between has topped $20 billion. Malaysia is Australia's second-biggest trading partner within ASEAN and ranks ninth among all nations. Australia's key exports to Malaysia include, copper, nickel, coal and wheat while its services trade is dominated by education. Malaysian exports to Australia include crude and refined petroleum, monitors, projectors, televisions and computers.

The Australia Malaysia Business Council and the Malaysia Australia Business Council are important co-ordinating bodies for developing commercial ties. MAFTA came into force on 1 January 2013 and builds on commitments by both countries under the ASEAN-Australia-New Zealand Free Trade Agreement. Ministerial meetings of the Australia-Malaysia Joint Trade Committee (JTC) provide a regular forum on bilateral, regional and international trade and investment issues.

For more information, access the full Malaysia Country Starter Pack

2. Getting Started in Malaysia

• 2.1 What you need to consider
• 2.2 Researching Malaysia
• 2.3 Possible business structures
• 2.4 Manufacturing in Malaysia

2.1 WHAT YOU NEED TO CONSIDER

Location

Malaysia offers several distinct markets with unique tastes and preferences, stemming from its multicultural population and its broad socio-economic groups. Understanding your target market can help you identify the right location. Additionally, there may be more attractive government incentives that apply in particular locations. Unless your product or service is specifically targeting more regional communities, it can be advantageous to set up in an urbanised area. This could mean higher operating costs and more expensive labour. However, rural locations may reveal hidden costs associated with unreliable or poor infrastructure.

Development regions

Malaysia has set up special economic zones (SEZs) and development regions that provide a business-friendly environment for both local and foreign businesses, including a number of tax, financial and other incentives. Industries best suited to these regions include oil, gas and petrochemicals, high-value manufacturing, tourism and agribusiness, as well as human capital projects such as start-up accelerators or training institutes.

Using interpreters and translators

Malaysia's official national language is Bahasa Malaysia or Malay. However, the language of international business is English and an interpreter will not always be necessary. An interpreter is more likely needed for doing business in remote or rural regions. Even so, interpreters can be helpful in more complex negotiations, especially if there are a number of people involved in the conversation. Interpreters are for oral interpreting and translators are for written translation. Decide which type of help you need.

Financing your venture

Adequate funding will be critical to success, and a detailed financial plan is crucial. You may be eligible for financing from a variety of sources in Australia. However, your existing bank manager may be your best first port of call.

* Venture capital may be an attractive alternative financing vehicle if you are comfortable with a third party taking an equity stake — and a share of the profits.

* Angel investment is an alternative to venture capital, although you are likely to raise a smaller amount of capital than you would through venture capitalists. Visit the Australian Association of Angel Investors at www.aaai.net.au and/or the Malaysian Business Angel Network at www.mban.com.my.

* Government assistance, federal and state, is available to Australian businesses wanting to expand overseas, especially exporters, through grants, loan facilities and reimbursement schemes.

Risks

Your research should include a careful risk assessment and thorough due diligence. Malaysia's sovereign risk is low, with an A- credit rating from Standard & Poor's. It ranks 18th on the World Bank's Doing Business report (eighth in the Asia Pacific region) and is categorised as a country in which it is relatively easy to do business.

Corruption poses a low to moderate risk in some parts of Malaysia. Malaysia ranked 54th out of 168 countries on Transparency International's 2015 Corruption Perception Index, with a score of 50 out of a possible 100. It is worth noting that on the 2015 Corruption Perception Index, Malaysia's ranking was ninth out of 28 Asia Pacific countries, better than India, Thailand, China, Indonesia and Vietnam.

Malaysia is not exposed to major foreign geopolitical risks. Internally, however, there is tension between the major ruling party and the leading opposition party, though this poses little threat to Malaysia's business landscape. Malaysia is a stable and democratic society, and protests and strikes are rare.

For more information, access the full Malaysia Country Starter Pack

2.2 RESEARCHING MALAYSIA

Getting help

Research organisations in Malaysia, including big international professional and accounting firms, can be a major source of information. Austrade has an office in Kuala Lumpur and provides a range of research services, including Information and advice on market entry and business expansion, selecting a location, and access to local contacts. The Victorian and New South Wales governments also have offices in Malaysia. The Australian Government's Export Market Development Grant (EMDG) scheme can help with costs, and state and territory governments may provide grants. Useful data sources on the Malaysian market include the Department of Statistics www.statistics.gov.my and the Ministry of International Trade and Industry www.miti.gov.my.

Market visits

You will need to visit Malaysia to develop a deeper understanding of potential markets and establish relationships. Business visits to Malaysia require patience, understanding and commitment. Visit before entering into any agreements with prospective agents, distributors or other business partners. Arrange in-country assistance to set up of your program. This will help you see the right agents and customers who will be briefed and screened for interest and suitability. A good website can be very useful; make sure your contact details are clear and accurate. Trade shows and exhibitions in Malaysia provide an excellent opportunity to meet potential customers.

Building relationships and making connections

Don't waste valuable time in Malaysia doing what you can do in Australia. Training courses and seminars to expand your knowledge about Malaysia and doing business in a different culture are offered by various organisations in Australia, including Asialink Business, Austrade, and state and territory governments.

Pre-arrange as many of your meetings as possible, and make sure you have information on the people you are meeting. Business cards are essential. Follow up meetings with an email thanking your contact and noting any agreed actions.

Joining a business association is a good way to learn more about the local business community and to meet potential colleagues and partners. Country-specific business associations like the Australia Malaysia Business Council are a good place to start.

For more information, access the full Malaysia Country Starter Pack

2.3 POSSIBLE BUSINESS STRUCTURES

After deciding to set up a business in Malaysia, there are many next steps to consider. What type of business structure will you use? Will you open a branch office, or incorporate locally? What legal and administrative processes must you go through to get established? There is no single business structure that holds the key to unlocking the Malaysian market.

There are multiple channels of entry open to foreign businesses in Malaysia:

Company

Most companies in Malaysia are limited liability companies and members and directors are limited either by shares or by guarantee. Businesses seeking to incorporate in Malaysia must have a minimum of two resident directors and a registered company secretary.

Limited Liability Partnership

Combines characteristics of a company and a partnership, giving partners limited liability. The LLP has unlimited capacity to conduct business and hold property, subject to foreign ownership rules, and requires two or more partners.

Joint ventures

Joint ventures are structured either as partnerships or incorporated companies. They are usually the most common approach to setting up a business in a foreign market to leverage a local partner's existing networks and infrastructure.

Partnership or sole proprietorship

Unincorporated but must be registered with the Registrar of Businesses and the Companies Commission of Malaysia (Surhanjaya Syarikat Malaysia). Sole proprietors and partners are personally liable for losses.

Branch office

Foreign branch offices are generally permitted by SSM except for businesses in wholesale and retail trade. They offer the advantage of being easier to shut down than the process of liquidating a registered company or partnership. It requires a physical presence in Malaysia and the managing agent must be a Malaysian resident.

Representative office

Representative and regional offices are not permitted to carry out business or any commercial activities, but are a good way to collect useful information.

Foreign enterprise entity

Foreign companies involved in a construction or infrastructure development project sometimes form an unincorporated joint venture with a local company subcontracting or delivering part of the project. Such a business structure may provide tax benefits in the home country of the foreign company.

For more information, access the full Malaysia Country Starter Pack

2.4 MANUFACTURING IN MALAYSIA

While China, India, Vietnam and other manufacturing hubs have emerged in Asia over the last decade, Malaysia still holds significant market share in high-end electronics and some food and agriculture products. Multinational companies that have chosen to continue — or begin — manufacturing in Malaysia instead of other Asian hubs, gain confidence from the strength of Malaysia's intellectual property rights.

Quality control is important wherever you are manufacturing. If you fail to maintain strict oversight of every aspect of your process, including staff training, you risk producing goods that may not comply with the minimum standards of the countries to which you wish to export.

For more information, access the full Malaysia Country Starter Pack

3. Sales and marketing in Malaysia

• 3.1 Agents and Distributors
• 3.2 Online Sales
• 3.3 Direct Selling
• 3.4 Franchising
• 3.5 Marketing and Advertising
• 3.6 Labelling Requirements

3.1 AGENTS AND DISTRIBUTORS

An agent is a representative of the supplier, but does not take ownership of the goods. They are generally paid a commission based on an agreed percentage of sales value generated. A distributor takes ownership of the goods by buying them and reselling them, either to local retailers or consumers directly. In some cases, the distributor may sell to other wholesalers who on-sell.

When choosing an agent or distributor be sure you can establish a close working relationship. Before making a final choice, meet any potential partner in their own market to get to know them better; put detailed and well-constructed contracts in place.

For more information, access the full Malaysia Country Starter Pack

3.2 ONLINE SALES

There are more than 20 million active internet users and more than half of Malaysia's mobile phone subscribers use smartphones. But statistics show that only three in 10 Malaysians make purchases online, though 80 per cent of Malaysian shoppers use the internet for research before buying online or offline.

Online sales payment

More than 16 per cent of the population have access to a credit card with nearly 40 per cent of e-commerce in Malaysia being paid for this way. However, around half of all online purchases are paid for via electronic bank transfer. PayPal and local telco Celcom's AirCash payment services are gaining popularity.

How Malaysia is different

The potential for Malaysia's online sales market is very promising. However, some barriers to growth still remain, stemming from underdeveloped digital infrastructure. More than one-in-three shoppers are wary of sharing personal and banking information online, but secure payment gateways such as Verified by Visa and MasterCard's SecureCode are lifting confidence. The biggest challenge is refining your digital business strategy and making adequate investments in people, process and technology to engage with the right customers across different channels.

For more information, access the full Malaysia Country Starter Pack

3.3 DIRECT SELLING

Making direct contact with buyers and end users is another option although its growth in Malaysia's is slowing. The direct seller may sometimes have input on the development of products, pricing and marketing. Selling directly to retailers who will market and sell your product generally reduces commissions you will pay, reduces your travel burden and ensures your product will reach its target market.

For more information, access the full Malaysia Country Starter Pack

3.4 FRANCHISING

Malaysia wants the franchise industry to account for almost 10 per cent of GDP by 2020 to make Malaysia the leading franchise hub in Southeast Asia. For Australian brands, franchising is a useful and proven expansion method. The Franchise Act 1998 regulates franchises and it is advisable to seek professional legal advice.

For more information, access the full Malaysia Country Starter Pack

3.5 MARKETING AND ADVERTISING

Malaysia is one of the biggest consumer markets in the world with an expanding middle class. Tailor your marketing strategies and even your products to local preferences and consider the diversity of cultural backgrounds, varying levels of wealth and sophistication.

The best way to deal with the complexities of a foreign market for marketing and advertising is to invest in local knowledge. A comprehensive marketing plan that considers core elements such as your brand, stakeholder management, public relations, media (including digital and social media), and your product/brand value proposition is critical.

For more information, access the full Malaysia Country Starter Pack

3.6 LABELLING REQUIREMENTS

There are strict rules for product labelling, particularly when dealing with halal and non-halal indicators, as well as food safety. Malaysia uses the GS1/EAN numbering and barcode system. For more information and helpful advice on your product's labelling requirements, visit www.gs1au.org.

For more information, access the full Malaysia Country Starter Pack

4. Conducting Business in Malaysia

• 4.1 Malaysian Culture and Business Etiquette
• 4.2 Building Relationships with Malaysia
• 4.3 Meetings and Negotiations
• 4.4 Due Diligence and Avoiding Scams

4.1 MALAYSIAN CULTURE AND BUSINESS ETIQUETTE

Malaysians are strongly guided by their religions and shared understanding. Respect for elders and hierarchy are core values, and Malaysians place huge importance on family and community. Saving face — avoiding blame or any type of shameful situation — can influence decision making. It is a relatively conservative society, and it is important to respect norms and traditional values that underpin customs and business practices.

Greetings: Greetings can vary depending on ethnicity. Conservative Muslims may view physical touch by opposite sexes as inappropriate. Wait for the other party to extend their hand. If someone does not, the best way of greeting is to put your right hand over your heart and bow slightly.

Titles: Malaysians tend to be very formal. Most will address foreigners as Mister or Ms. Using local honorifics conveys respect. Malays are generally addressed by their first name, Indians and Chinese by their surnames.

Communication: The Malaysian style of communication is somewhat indirect and you may feel that someone is explaining a point in a roundabout way. Be patient. Communicate clearly and speak at a slightly slower pace.

Body language: Respect personal space. Showing the soles of your feet or your shoes, or pointing your feet towards anyone, is considered highly disrespectful and insulting. Before entering someone's home, remove your shoes. It is rude to touch someone's head. Pointing with fingers is also disrespectful; if you must point, use the thumb of your right hand, with your other fingers folded under.

Business cards: Make sure your card includes your name, company name, position and email address, all in English. A website address is also necessary. Cards should be given and received with two hands, text facing the receiver. Never place business cards in your pants or skirt pockets in front of your hosts.

Corporate culture: Make sure the person with whom you are negotiating is senior enough to commit to business and partnership decisions. Do not begin by getting straight to the negotiation. Take a short time to ask personal questions about your contact's family and background. Do not expect negotiations to be completed at the first meeting. Be patient.

Dress code: Conservative, professional attire is expected in the business setting, although this can be in the form of either traditional ethnic outfits or modern ones. Men should generally wear a suit and tie. Women may wear pants or skirts, avoiding short ones. Malaysians sometimes cite "long sleeve batik" for men. This refers to a silk shirt in a batik print and is equivalent to a lounge suit dress code.

For more information, access the full Malaysia Country Starter Pack

4.2 BUILDING RELATIONSHIPS WITH MALAYSIANS

'Local' obstacles can be overcome by spending time in Malaysia and by investing real effort into building relationships and trust with business and government contacts. And remember, the people you are dealing with are likely evaluating you and your business as well. Be open about what you can or cannot do for them.

General knowledge: Relationships can be enhanced through demonstrating some general knowledge of Malaysia and its culture. Ignorance of basic facts will not impress.

Formal introduction: Malaysians tend to prefer to do business with people they know. It can help to be introduced through a respected and senior intermediary.

Conscious effort: Relationships in Malaysia, as in many parts of Asia, are based on trust and are personal. Develop and maintain relationships.

Gifts: Not common to avoid any perception of bribery. If you are given a gift, accept it with both hands and find an opportunity to reciprocate.

Dining and entertainment: Most Malays are Muslims and follow a Halal diet that excludes pork and alcohol. Many Indian Hindus and Chinese Buddhists do not eat beef. Alcohol is not usually served at official functions. The host usually pays the bill. Many Malay and Indian Malaysians use their hands to eat. If you attempt to follow suit, use only your right hand.

Local government and authorities

The main government agencies and their areas of licensing authority are:

Malaysia Investment Development Authority: Promotes foreign and local investment in manufacturing and services sectors, confirms exemptions on import and sales duties.

Malaysia External Trade Development Corporation: Promotes, assists and develops Malaysia's external trade with emphasis on the export of manufactured and semi-manufactured goods.

Ministry of International Trade and Industry: Plans, legislates and implements Malaysia's international trade and industrial policies.

Suruhanjaya Syarikat Malaysia (Companies Commission of Malaysia): Manages registration of businesses and companies and enforces the Companies Act.

Royal Customs and Excise Department of Malaysia: Regulates imports, and any certification relevant to FTA benefits.

Malaysian Franchise Association: Advice and support for franchisees.

Multimedia Super Corridor of Malaysia: Key Special Economic Zone, close to Kuala Lumpur International Airport, to attract innovative technology and services companies.

For more information, access the full Malaysia Country Starter Pack

4.3 MEETINGS AND NEGOTIATIONS

Check the local calendar to avoid public holidays. Be prepared well in advance and have a detailed proposition. Know the language capabilities of your hosts. If using interpreter, brief them on the objectives.

Seating arrangements: The most senior person from each delegation usually sits in the middle seat on either side of the table.

Structure of the meeting: It is helpful to share an agenda. Do not rush into the business discussion. Always be patient. Interrupting is considered rude. Do not put anyone on the spot by asking for information they seem unwilling to give, or by challenging someone directly.

Ending a meeting: Make an explicit request for further information before the meeting ends, if you need it. It is helpful to send your contact an email after the meeting to express appreciation and ask for any further information needed.

Bargaining: Malaysians are very experienced at negotiating and bargaining, but will push less than some of

their regional neighbours. Deceptive techniques may be used in negotiations, particularly in smaller businesses. Verify information you receive from your Malaysian counterpart. Applying time pressure may send a negative signal, being too direct is usually counterproductive. Loss of face should always be avoided, even when faced with blocking tactics.

Decision making: Although Malaysian companies are very hierarchical, decision making is a process of group discussion aimed at reaching consensus. That said, the key influencers of a group decision usually are the most senior leaders of the company.

Contracts: Your Malaysian partner is likely to insist on the contract being based on Malaysian law so it may be necessary to engage a local lawyer. Contracts are much less detailed than in Australia; it is important to find a compromise on detail to be included.

For more information, access the full Malaysia Country Starter Pack

4.4 DUE DILIGENCE AND AVOIDING SCAMS

Malaysia's laws are well established and robust. Its judiciary, however, is less efficient and reliable so you will want to do as much due diligence as you can to avoid having to go to court later and to protect your own reputation and business. Fraud, scams and corruption are ongoing challenges for Australian businesses wanting to operate in Malaysia.

Malaysia's legal system comprises a multitude of national laws and local regulations, supplemented by court interpretations, departmental notices and, importantly, local practice. The Australian Government recommends that you obtain specific legal advice. Austrade can provide referral lists of proven local law firms.

Dispute resolution: A number of international arbitration commissions facilitate the resolution of commercial disputes. The Australian Government supports the use of arbitration but does not endorse one arbitration body over another — whether in Australia or overseas. Negotiation is fundamental to dispute resolution in Malaysia.

Scams

Find out more about possible scams on www.scamwatch.gov.au. If you suspect a scammer has contacted you, ignore and delete their emails immediately.

For more information, access the full Malaysia Country Starter Pack

5. Business practicalities in Malaysia

• 5.1 Laws and Regulations
• 5.2 Import duties, tariffs and regulations
• 5.3 Taxation
• 5.4 Audit and accountancy
• 5.5 Employing workers
• 5.6 Banking in Malaysia
• 5.7 Repatriating profits and Getting Paid

5.1 LAWS AND REGULATIONS

Investment rules

The push towards achieving developed and high-income nation status is allowing greater foreign investment in many industries. Malaysia's investment policies are liberal and transparent, and the costs of doing business compare favourably with Singapore. A rule requiring that 30 per cent of equity must be Bumiputera-held was ditched in 2009.

Incentives

You may be eligible for direct Malaysian fiscal incentives such as a reduction in tax on profits for a specified period and indirect incentives in the form of exemptions from customs and excise duties, and goods and services tax (GST). Particular incentives exist for FDI in manufacturing designed for export and in technology-based industries such as electrical equipment and electronics, biotechnology, multimedia and more. Other benefits are offered through Malaysia's Special Economic Zones, including its 13 Free Industrial Zones and 12 Free Commercial Zones.

Land and property rights

Malaysia offers liberal foreign land and property ownership. Foreigners can buy most types of property — commercial and residential, freehold or leasehold — as long as it is valued above MYR 1 million. Foreigners may not buy agricultural land or land allocated to Bumiputera for a planned development.

Intellectual property (IP)

Counterfeiting and scams are commonplace across the region, although Malaysia is improving its IP protections to boost investor confidence. You should register your IP as early as possible. In Malaysia, you are able to protect patents, trademarks, copyrights, geographical indications and layout designs of integrated circuits by registering them with the Intellectual Property Corporation of Malaysia (MyIPO).

Trademarks

A first-to-use rule applies to trademark rights, giving the first person to use the trademark in Malaysia superior rights to any other person or organisation. It is essential to conduct a trademark search prior to registration. This can be done online through the Patents and Trademark Administration System (PANTAS) or in the Public Search Room at the MyIPO office.

5.2 IMPORT DUTIES, TARIFFS AND REGULATIONS

Australian businesses exporting goods to Malaysia should be aware of import duties and taxes, including tariffs, and other import regulations with which they must comply. Prospective importers should refer to DFAT's MAFTA Tariff Finder (maftatariffs.austrade.gov.au/) for up-to-date information. You might also seek professional advice or contact Austrade in KL for clarification.

Import duties

These are calculated on either a quantity base (by applying an amount of duty per unit) or on an ad valorem (by value) basis (by applying an applicable set rate based on value). The import procedures and duty rates are specified according to Customs Act 1967 and Customs Duties Order 2012. Import duty rates can be divided

into two categories: general and preferential. Alcohol incurs a tariff regardless of the value of the imports. Preferential rates apply to products that receive a MAFTA benefit. Some goods, including laptop computers and some other electronic products, are not subject to any duties.

Food labelling and Halal certifications

A comprehensive list of regulations pertaining to food products being exported to Malaysia is available in the country's Food Act 1983. Specific labelling regulations are available in the Labelling and Food Declaration Guide issued by the Ministry of Health. Halal and health certificates are compulsory for all meat-based products and are issued by JAKIM (part of the Department of Islamic Development Malaysia). Such certification should be obtained before the goods enter Malaysia.

For more information, access the full Malaysia Country Starter Pack

5.3 TAXATION

Malaysia's tax system includes a wide range of imposts on businesses and individuals, including income taxes (corporate income tax and individual income tax), transaction taxes (customs and excise duties, sales and services taxes, stamp duty and contract levies) and real property gains tax.

Corporate income tax

The corporate tax rate applicable to resident and non-resident companies in Malaysia is a flat rate of 24 per cent, with some variations for the former. Other earnings of a non-resident company that are not derived from business being conducted by that company in Malaysia can be taxed, subject to double taxation relief. Other than real property gains tax, no other capital gains taxes apply.

Deductions

Deductible expenses under Malaysian tax legislation are reasonably similar to those in other markets. Expenses that cannot be deducted include capital expenses, income tax, preliminary and start-up costs incurred before the company is registered or incorporated, capital that is withdrawn and capital expenditure on improvements to the business infrastructure.

Tax incentives

Pioneer status (PS) and Investment Tax Allowance (ITA): Companies with pioneer status can enjoy a tax exemption on 70 per cent of their income (adjusted after deducting depreciation allowances) for up to five years.

Islamic financial services: The government is keen to establish Malaysia as a leading international hub for Islamic financial services and is offering a range of incentives to businesses in this area.

Regional operations: Companies establishing principal regional hub activities can take advantage of income tax relief.

Pre-packaged incentives: To attract quality investments, the government is offering pre-packaged incentives to resident companies engaged in an approved business.

Tax year and tax returns: Companies can set their own financial year-end and this forms the basis period for their corporate tax filing.

For more information, access the full Malaysia Country Starter Pack

5.4 AUDIT AND ACCOUNTANCY

Self-Assessment System: Malaysia operates a Self-Assessment System in which responsibility for correctly assessing a person's tax liability lies with the taxpayer.

Payment of tax: Generally, a company tax return must be submitted to the Inland Revenue Board within seven months from its financial year-end. Companies are required to provide an estimate of the tax payable for each year of assessment no later than 30 days before the financial year begins.

Tax audit process: Generally, an audit covers one year of assessment, but it may be up to five years. The time limit is not applicable to fraud and tax evasion, intentional or unintentional.

For more information, access the full Malaysia Country Starter Pack

5.5 EMPLOYING WORKERS

Labour market

Malaysia's labour market is reasonably sophisticated but can vary from cities to regional or rural areas. Increasing access to education and skills training is allowing Malaysia to offer more specialist and skilled labour, enhancing its reputation as a hub for high-value and high-tech manufacturing and accelerating its push towards a knowledge and services-based economy. The labour force participation rate in Malaysia is 67.8 per cent, while the unemployment rate is low. Malaysia's labour laws, policies and regulations are geared to attracting foreign companies and investments with increasing efforts to attract overseas workers, both for skilled work and to meet blue-collar labour shortages.

Human resources and employment law

Various pieces of legislation oversee employment and employee relations. Get local legal advice on employment contracts and other related legal issues.

Visas: If you are not a Malaysian citizen or permanent resident, consult the Malaysian High Commission's website www.malaysia.org.au to determine what visa you need.

Wages, salaries and other employee rights: There are overlapping laws, some of which may appear inconsistent when it comes to employees' rights and remuneration. Labour costs are among the highest of ASEAN's main manufacturing nations and certainly higher than those in China or India. The Malaysian Investment Development Authority website contains a useful guide to the cost of doing business in Malaysia.

Working hours: Working hours in Malaysia are reasonably standard, normally 9am to 5pm. As in Australia, working beyond salaried hours is quite common, often without an expectation of compensation. Labour and shift workers in professions that are unionised follow stricter schedules, with an expectation of overtime payments.

Leave: Employees are entitled to eight days' paid annual leave a year if they have been with a company for less than two years, 12 days for between two and five years, and 16 days, for more than five years' service.

Unions: Only industry-specific unions are permitted in Malaysia. Trade unions must be registered with the Registrar of Trade Unions. Seek legal advice to understand your obligations.

Termination of employment: Employers are liable to pay termination or lay-off benefits to any employees employed under a continuous contract of service for 12 months or longer.

Expatriates: Approvals must be sought for expatriate posts in manufacturing and related services, hotel and tourism, and research and development. The government permits a foreign company investing in Malaysia to bring in technical expertise or other critical executives, but requires a succession plan for Malaysian personnel.

Managing a Malaysian team

Communication: Preserving face is important to workplace harmony. Pay attention to facial expressions and body language. Consider the importance of socialising in building team rapport.

The role of a manager: Cross-cultural communication will be more effective if managers keep in mind that each person has a very distinct role within the organisation. The need to save face may also prevent someone from asking for help. Frequently checking in with team members can be helpful and head off potential difficulties.

Approach to time and priorities: Deadlines and timescales can be fluid in Malaysia if you are not dealing with senior managers and executives. Patience is crucial.

Decision making: In Malaysia, unlike other hierarchical societies, decisions are made through consensus. However, hierarchy must be respected as well. Ensure that younger managers and less senior staff feel engaged.

Boss or team player? It is important that a manager maintains their role as 'boss' and engenders the necessary respect from within the team. Should an individual make unhelpful contributions, the manager will need to address this sensitively.

For more information, access the full Malaysia Country Starter Pack

5.6 BANKING IN MALAYSIA

Banking Environment

The central bank or Bank Negara Malaysia as well as the Ministry of Finance govern Malaysia's banking system. Maybank is Malaysia's biggest bank with some foreign players, notably OCBC Bank and United Overseas Bank (UOB), both Singaporean, and Hong Kong's HSBC Bank, among the country's top 10. The commercial banking sector is highly competitive with 19 foreign banks.

A large number of other banks have representative or branch offices. Malaysia also offers Islamic banking services. Australian companies looking to maximise opportunities in Malaysia will likely be better served by a local bank.

Bank accounts

Different types of accounts (both in MYR and foreign currency) are permissible for foreign citizens or entities. Basic documents required
to open a bank account include passport, work visa, a certified memorandum or articles of association, a certificate of incorporation or registration of the business. Most banks also require an 'introducer' who is known to the bank and can act as a referee.

For more information, access the full Malaysia Country Starter Pack

5.7 REPATRIATING PROFITS AND GETTING PAID

Most foreign capital invested in Malaysia can be repatriated after taxes have been paid. Dividends, interest, rental charges, fees, commissions and other profits may also be repatriated as long as dividend distribution tax has been paid.

How a business is to be paid by its customers will differ depending on the type of business structure adopted. When invoicing, customers almost universally prefer Malaysian rupees since foreign currency accounts are rare. The popularity of electronic payments in the business-to-consumer (B2C) space is a major benefit to this aspect of doing business in Malaysia.

Buyer's Credit (Forfaiting): Short-term credit available to an importer to purchase goods from an overseas seller.

Documents Against Acceptance, or Documents Against Payment: Used in ongoing business relationships, and provide some protection — but also some risk — for both parties. They are easier to use and less costly than Buyer's Credit.

Cash in advance: Only used once a Malaysian buyer has developed a trusted working relationship with the foreign seller.

Open account: Arguably the least desirable option, this far-from-secure method involves the buyer agreeing to pay for the goods within a certain period after shipment. However, this is a very common method in a long-term trusted relationship.

Reducing risk of non-payment and slow payers:

When dealing with a new customer, it is best to insist on Letters of Comfort from a buyer to ensure payment, while carrying out due diligence and making sure an enforceable contract is in place.

It is important to deal with a slow payer as soon as the payment becomes overdue.

For more information, access the full Malaysia Country Starter Pack

6. Visiting Malaysia

• 6.1 Visas
• 6.2 Currency
• 6.3 Arrival in Malaysia
• 6.4 Getting around Malaysia
• 6.5 Hotels and Dining
• 6.6 Health and Welfare
• 6.7 Useful Phrases & Public Holidays

6.1 VISAS

Malaysia and Australia enjoy reciprocal visa rights. Australian citizens do not need a visa to visit Malaysia provided they have a passport valid for at least six months after arrival, stay no more than three months, and have a confirmed return or onward international ticket. Employees and their families travelling to Malaysia are allowed to enter the country on social visit passes and to obtain work permits afterwards. Malaysia imposes stringent laws for illegal workers, so it is highly recommended not to start working before a permit is issued. Dependants of a holder of a work permit must apply for their own permit.

For more information, access the full Malaysia Country Starter Pack

6.2 CURRENCY

Malaysia's currency, the Ringgit, carries no specific symbol but is written locally as RM. Major foreign currencies can be exchanged in big cities as Malaysia is reasonably credit-card friendly. Some food stalls and small restaurants may insist on cash. You can also use a foreign cash or credit card at Malaysian ATMs provided both the card and ATM are compatible with Cirrus or Visa.

For more information, access the full Malaysia Country Starter Pack

6.3 ARRIVING IN MALAYSIA

Kuala Lumpur International Airport is the largest and busiest airport in Malaysia, and is best reached by train or taxi. For incoming travellers, taxis and limousines can be accessed at the Airport Limo service desks. A number of train services are available.

Kota Kinabalu International Airport is the second-busiest airport in Malaysia and is located about eight kilometres outside of the centre of Kota Kinabalu, the state capital of Sabah. The airport is the main gateway to Sabah and Borneo. Taxis with fixed one-way tariffs are the best option.

Penang International Airport is Malaysia's third-busiest airport and is located 16km south of George Town. The most cost-effective airport connection is by very affordable bus, though taxis are more convenient and efficient.

For more information, access the full Malaysia Country Starter Pack

6.4 GETTING AROUND

Taxis

There are two types of taxis in Malaysia: local and long-distance. Local taxis are usually red and white or yellow and blue. They are metered and can be hailed in the city. Long-distance taxis in Kuala Lumpur can be found at Puduraya bus station but require a minimum of four passengers travelling to the same destination. You can wait to find fellow travellers or charter the entire taxi.

Driving in Malaysia

Malaysians, like Australians, drive on the left side of the road. Those with foreign licences may drive in Malaysia for up to 90 days. Drivers from some countries, including Australia, may apply to convert their licences for a Class D Malaysian car licence if they intend to stay longer. Traffic can be congested but, generally, it is reasonably easy to drive in Malaysia as most road signs are in English and Malay. Avoid driving a car with foreign plates.

Public transport in Kuala Lumpur

If staying in Kuala Lumpur for an extended period, consider purchasing a MyRapid card. It is valid on Rapid KL buses, the monorail and the Ampang and Kelana Jaya LRT lines. Tickets cost MYR 10 and include a credit of MYR 8. There are also Touch 'n Go cards that can be used on all public transport in the Klang Valley, at toll booths on highways and at some carparks.

For more information, access the full Malaysia Country Starter Pack

6.5 HOTELS AND DINING

Kuala Lumpur's central business district is concentrated around the Kuala Lumpur Convention Centre. Its public transport network services most major areas of KL, and getting to other neighbourhoods or suburbs is reasonably easy. Bukit Bintang, KL Sentral and Bangsar/Mid Valley are other areas you may need to visit. To avoid delays, book a hotel close to the majority of your meetings.

Business, dining and entertaining

There are restaurants, cafes and hawker stalls to suit all price ranges. Bukit Bintang, Petaling Jaya and KLCC are some of the more popular areas for dining and entertaining. Being invited to lunch or dinner is a positive signal for any business relationship, and it is important to observe etiquette. If you are the host, respect your guests' dietary requirements. If it is Ramadan, remember not to invite Muslim clients or business partners to meals during the day, only after sunset.

Gifts

Gifts are not generally expected in the context of doing business in Malaysia, though a token exchange may take place at the signing of a contract.

Tipping

Malaysians do not generally tip and do not expect it. The exception is bellhops and room service waiters at hotels. Some hotels prefer an overall tip to ensure back-of-house staff are not disadvantaged.

Mobile Phones and Electricity

Australian mobile phones can be used in Malaysia but international roaming charges, especially for data use, can be very expensive. It may prove much cheaper to buy either a pre-paid or post-paid Malaysian SIM card from a local provider, such as Maxis, Celcom or UMobile. Malaysia's power sockets supply 240V at 50Hz. Remember to carry a socket adaptor.

For more information, access the full Malaysia Country Starter Pack

6.6 HEALTH AND WELFARE

Most of the following is from Australia's Department of Foreign Affairs and Trade as general advice. Consult smarttraveller.gov.au for up-to-date information.

Health

Check whether vaccinations are recommended. At least eight weeks before you depart, see your doctor or travel clinic for a basic check-up, and to discuss your travel plans and any implications for your health. It is advisable to take out comprehensive travel insurance while in Malaysia.

Medical facilities

Comprehensive medical services are available in Malaysia's major cities, but services can be limited in rural areas. Foreigners must pay for services in government hospitals. Private hospitals with international standard facilities can be found in major cities. Most require a cash deposit or a confirmation of insurance prior to admission and expect immediate payment.

Travel health concerns

Malaria is a risk in rural locations, and Dengue fever is prevalent with serious outbreaks from time to time. DFAT recommends malaria prophylaxis where appropriate and precautions against mosquitoes. Japanese encephalitis has increased in recent years. A vaccine is registered for use and is available in Australia.

Stings from jellyfish and other marine animals can be fatal. Seek advice on seasonal bathing conditions and other dangers. Tap water is generally safe but bottled water is widely available.

The Malaysian High Commission in Canberra malaysia.org.au/travel3 provides information on regulations for importing prescription and non-prescription medication.

Natural disasters, severe weather and climate

Smoke haze: Often occurs across parts of Malaysia, usually from June to October. Regular air quality reports are available from the website of the Malaysian Department of the Environment apims.doe.gov.my/v2/index.php.

Earthquakes: A 6.0 magnitude earthquake was recorded in Sabah in 2015, causing death and injury to climbers on Mount Kinabalu. Follow local information updates.

Severe weather: Flooding and landslides are common during the wet season (October to February).

Tsunamis: The Pacific Tsunami Warning Centre website ptwc.weather.gov has information on seismic activity and the potential for tsunamis.

Personal safety

While the rule of law in Malaysia is strong, travellers should exercise normal safety precautions. The Australian Government advises that Australians avoid the coastal resorts of eastern Sabah, including dive sites and tourist facilities, as there is a continuing high threat of kidnapping on the water and waterfront after nightfall. The threat is highest between the towns of Sandakan and Tawau due to proximity to the Sulu archipelago in the southern Philippines.

Penalties for drug possession and other crimes

Foreigners are subject to local laws and penalties. Penalties for drug offences are severe, with the death penalty mandatory for trafficking. Some penalties include corporal punishment. Homosexual acts are illegal in Malaysia.

Local customs

Malaysia is a multicultural — but predominantly Islamic — country. You should respect local traditions, customs and laws at all times and be conscious of your actions and speech to ensure they do not offend. There are conservative standards of dress and behaviour that Malaysians expect of foreign visitors.

During the Islamic holy month of Ramadan, respect religious and cultural sensitivities, rules and customs. See smartraveller.gov.au/bulletins/ramadan.

For more information, access the full Malaysia Country Starter Pack

Useful Phrases & Public Holidays

For more information, access the full Malaysia Country Starter Pack

7. Engage with us

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RESOURCES AND CONTACTS

Helpful Links

Australian High Commission, Malaysia

High Commission of Malaysia, Australia

Malaysia-Australia Free Trade Agreement

Inland Revenue Board of Malaysia

Malaysian Investment Development Authority

Malaysia External Trade Development Corporation

Ministry of International Trade and Industry

Useful websites

Asian Development Bank

Malaysia Australia Business Council

Australia Malaysia Business Council

Austrade

Australian Industry Group

Department of Statistics, Malaysia

Digital Business

Export Council of Australia

Export Finance and Insurance Corporation

IBIS World

Nielsen

Ozforex

World Bank Doing Business Report

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