A strong economy, a welcoming administration, a well-educated workforce, and well-developed infrastructure have quietly converted Malaysia into a desirable investment destination for international investors. Many have invested in Malaysia through setting up companies in the country.
Reasons for your entrance into the Malaysian markets
There are several reasons why a foreign investor might choose to invest in Malaysia through incorporation of a company.
- In Malaysia, a foreign investor would benefit from a Skilled Workforce; most of those in the workforce are also able to speak English.
- According to the latest statistics compiled by the World Bank, Malaysia is ranked 12th in the world regarding ease of doing business.
- The foreign investment and foreign exchange legislation of Malaysia is relatively lenient because it allows for foreign direct investment in most industries. Furthermore, there is no limits to foreign ownership of the share capital of Malaysian companies.
- Malaysia is one of the primary recipients of Foreign Direct Investment (FDI) in the region. In 2019, the majority of the foreign direct investment in Malaysia originated from China, Singapore, Japan, and the United States.
The government of Malaysia has sought to position Malaysia as a gateway to the Association of Southeast Asian Nations (ASEAN) market by offering various incentives and tax reductions to foreign investors.
The government of Malaysia has also put in place an economic program that aims to create millions of jobs in Malaysia which in turn will attract foreign investment especially in strategic sectors such as Agriculture, Tourism, biotechnology, information and communications technology, and multimedia.
As such, with a Strategic Location, Great Investment Infrastructure and a Supportive Government, Malaysia makes a great destination for Foreign Investors.
Four Primary Investment Types for You
There are four primary investment types from which an investor in Malaysia may choose from. An investor ought to select the type of investment to be made by analysing the characteristics, risks, and benefits associated with each type, then selecting an investment type which best suits the current circumstances. The types of investments which one may choose are:
- Cash Investments,
- Growth Investments,
- Defensive Investments, and
Fixed Assets.
How to get started in Investing in Malaysia
Any foreign investor in Malaysia must have a well-crafted plan for the investments to be made. The investor must plan how much is to be spent, in what areas the money is to be invested, and the risks which would be involved. Taxation, Legal Matters, Licensing, Investment Sectors, and Investment Plans are among the most important points to be considered by any foreign investor.
Set your personal financial goals. Consider the following questions:
- Are you a risk taker or a risk adverse individual?
- Is your current capital sufficient to meet your goals?
- What is the planned duration of your investment?
- Open a brokerage Account
- Choose your investment type (shown above)
Some factors to take into account:
- The corporate tax rate of Malaysia is 24%. Malaysia imposes a form of value added tax known as Sales and Services Tax(SST) on all taxable products and services. This is similar to Singapore’s Goods and Services Tax (GST).
- All companies or individuals intending to make any investment in Malaysia must register with the Companies Commission of Malaysia (SSM) which oversees every company which has been established in Malaysia.
An objective view: Cons of Investing in Malaysia
So far, we have talked about the upsides of investing with Malaysia. We will now take an objective view regarding the cons of Investing in Malaysia, weighing certain drawbacks that you may face in your investment journey.
Bureaucratic and regulatory burdens
Steady rise in labor costs – there is a motion passed in February 2020 which saw a rise in minimum wage of Malaysia, from a monthly 1,100 ringgits to 1,200 ringgits.
the country’s increasing reliance on the economic might of China, Malaysia’s leading trade partner
Furthermore, the country’s regional, racial, and religious disparities as well as political and electoral issues have also put the country’s fiscal stability at risk.
Thus, both sociopolitical and monetary policy risks are associated with investing in Malaysia.
Suitable Investment Areas in Malaysia
One of the areas in which a foreign investor may choose to invest in Malaysia is the stock market. Most foreigners in Malaysia do so through the use of exchange-traded funds (ETFs). ETFs provide diversification because it is easy to buy and sell them on international stock exchanges.
Real estate is also a very lucrative investment area in Malaysia. The real estate market in Malaysia has been going through a period of much growth. This has in turn made real estate investment a common form of investment for foreign investors. However, foreign investors in this area must be wary of several risks. The Malaysian government’s attempts to reduce the cost of housing in Malaysia has sometimes led to a property glut. There are also relatively few publicly-traded real estate trusts from which investors may select.
Malaysia’s abundant natural resources such as wood, natural gas, palm oil, and rubber have also created opportunities for investment. This is with regards to having close to 60% of Malaysia’s land being covered by forest.
However, some areas have fewer opportunities for foreigners who plan to invest because the government restricts investment in branches of production which it considers to be necessary for national development, such as the automobile industry. Foreigners also have limited access to investment in industries such as professional services and financial services.
As an investor yourself, do take into account the above considerations before making your move.
Protection of Foreign Investment in Malaysia
There are several methods by which foreign investment in Malaysia is protected. Among these are the 71 bilateral investment conventions signed by Malaysia, the assistance of the International Center for Settlement of Investment Disputes (ICSID), Malaysia’s membership of the Multilateral Investment Guarantee Agency, and the services provided by the Kuala Lumpur Regional Centre for Arbitration (KLRCA). These organisations and entities do much to ensure that all foreign investment in Malaysia is conducted in a legal manner while also being adequately protected by the law.
Thinking of setting up a company or would like to work in Malaysia? Reach out to us for a free consultation to see how we can support your journey!
FAQs
Main countries for FDI flows were Singapore, Thailand and China. The FDI position as at end of 2020 was RM698. 8 billion, whereby Services sector was the largest contributor precisely in financial and wholesale & retail trade activities.
Non-residents are free to invest in any form of ringgit assets in Malaysia. They are also free to remit out divestment proceeds, profits, dividends or any income arising from these investments in Malaysia.
High cost-competitiveness. Attractive investment incentives. Developed infrastructure. A strategic position linked to the country’s proximity to the main Asian markets.
Malaysia has a very robust economy and a pro-business government that has made it an increasingly attractive investment destination for international investors. Malaysia’s political struggles and deficits in 2008 have made some international investors tread a bit more cautiously than before.
hi we are forming a local company to buy oil palm plantation and to be converted to conservation area. We has an interested foreign NGO will loan us the money to purchase the plantation . we will manage the oil palm plantation for several year to pay back the loan without interest and at the same time doing conservation work.
our question are;
foreign investment fund like that is ok with malaysia governmen or any restriction or any guide line.
If we do repayment to foreign investment any Malaysia tax requirement.
Hi Teo,
Your question has been answered under our forum.
https://www.paulhypepage.my/php-forums/malaysia/palm-plantation-conservation-work/
Feel free to interact with us in the forum if you need further clarification. We will be happy to assist.
Best Regards,
Paul