There are four primary investment types from which an investor in Malaysia may select. An investor ought to select the type of investment to be made by analyzing the characteristics, risks, and benefits associated with each type, then selecting an investment type which best suits the current circumstances. The types of investment from which one may choose are cash investments, growth investments, fixed assets, and defensive investments.
Cash investments include ordinary bank accounts, high-interest savings accounts, and term deposits. They often provide investors with relatively low returns; however, they also expose investors to lower levels of risk when compared to other investment types. Growth investments such as shares are primarily used by long–term investors who are willing and able to work within changes in the condition of a given market. They are known as growth investments because they increase the value of the original investment over the medium to long term. Properties are also growth investments because the prices of properties can increase substantially over a medium– to long–term period. Defensive investments tend to consistently generate income rather than growth and are low-risk but low-return investments. Fixed assets are necessary when governments or companies borrow money from investors and pay them at an interest rate.
How to Start 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.
Incidentally, we at Paul Hype Page & Co can assist you if you have any issues with matters related to licensing, taxation, or investment plans in Malaysia. Our experts will work with you in order to help you overcome these issues in any such area. Through our services, you and your Malaysia-based company will certainly be able to arrive at a favorable outcome.
The corporate tax rate of Malaysia is 24%. Malaysia imposes a form of value added tax known asSales and Services Tax (SST) on all taxable products and services. 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. Anyone who plans to invest in a Malaysian company should consider the company’s capabilities regarding factory or office space, availability of skilled labor, budget, advertising methods, and level of competition. All these factors must be considered when creating an investment plan in Malaysia.
Pros and Cons of Investing in Malaysia
Malaysia’s economy is open to international contributions because it is reliant on the diversification of exports. Malaysia strives to make its economy attractive to foreign investors by implementing open and transparent investment policies by emphasizing its high level of economic competitiveness, incentives for investors, and developed infrastructure. The country is also located in the fast-growing Asia-Pacific region, is home to many critical natural resources, and has a high level of domestic consumption driven by high per capita income and low unemployment. For these reasons, Malaysia has one of the best-performing economies in the region of Southeast Asia. Other benefits for those who invest in Malaysia include direct foreign ownership, the ability to own freehold properties without paying any inheritance tax, a low level of real property gain tax, the ability to sell at any time in the open market, and a low entry point for entering the market itself.
Investing in Malaysia, however, has some disadvantages of which a foreign investor must be aware. Bureaucratic and regulatory burdens, a rise in labor costs which have somewhat eroded the country’s price competitiveness, the country’s increasing reliance on the economic might of China which its leading trading partner, and the prices of natural resources such as gas and oil all pose risks to the country’s economic stability. 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. Biotechnology, electronics, cosmetics, and transport, meanwhile, are sectors with much potential for growth in Malaysia. 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.
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 organizations 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.