investment and business oppoetunities in malaysia

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Introduction

The purpose of this paper is to analyze the investment and business opportunities in Malaysia. We will do this by analyzing Malaysia’s economic factors and indicators. As a country inherited elements of democracy from its previous colonizers and its experience of gaining independence, Malaysia could be seen as one of the few Islamic majority democracies, and one of the few highly successful Islamic states. Currently around 4000 foreign companies are operating in Malaysia. Many of these companies have expanded and diversified their operations over the years, reflecting their continued confidence in Malaysia.

Summary

After analyzing the economic conditions and investing opportunities in Malaysia we came to the conclusion that, Malaysia’s with its favorable investment environment which includes such factors as political and social stability, supportive government policies, available and qualified labor, competitive cost structures, excellent infrastructure, quality of life, and a generally good standard of living, has been successful in attracting direct foreign investment and will continue to do so.




History

Malaysia was first mentioned in Chinese and Sanskrit records of the 7th and 8th centuries. In subsequent centuries the area was under the influence and loose control of various Thai and Indonesian empires, including the great Sumatra-based civilization of Sri Vijaya.

The city of Malacca, founded by a Sumatran prince at the beginning of the 15th century, became the center of an Islamic empire and was to remain the primary trading post between India and China for more than 00 years.

In 1511, the control of Malacca went to the spice-trading Portuguese. In 1641, the Dutch defeated the Portuguese and ruled for 154 years. They used imported Dutch stone to construct distinctive pink buildings, many of which still stand.

The British established a thriving port in Penang in 1786 and took over Malacca in 175. The British, discovered tin, and moved inland. Kuala Lumpur, was founded at the confluence of the Klang and Gombak rivers in 1864. The British began building colonial-style structures and made it the capital of the Protected Malay States.

Malay nationalism and desire for self-rule was felt around the 10s. A call for independence was made but the move was halted by the Second World War. Later, the movement resumed and independence was declared on the 1st of August 157.

http//www.planetgypsy.com/destinations/malaysia/generalinfo.html

In 16, Malaysia was formed, bringing together the states of Malaya, Singapore, Sabah and Sarawak. Singapore, however, left the federation in 165.

Today, Malaysia is a strong participant of the six-member Association of South-East Asian Nations -ASEAN-. This association, comprising Brunei Darussalam, Indonesia, Malaysia, Thailand, the Philippines and Singapore, was formed to promote regional growth and cooperation among member nations. Malaysia has since been prosperous and generally peaceful from 165. (www.planetgypsy.com)

Geography

Rightly known as a tropical paradise, Malaysia is situated 7 degrees north of the Equator in the heart of Southeast Asia. Malaysia covers an area of about 0,071 sq.km., occupying the Malay Peninsular and the states of Sabah and Sarawak in the north-western coastal area of Borneo island. The two regions are separated by about 51.1 km of the South China Sea. Peninsular Malaysia, covering 11,587.67 sq.km, has its frontiers with Thailand while East Malaysia, which consists Sabah and Sarawak, about 18,847.4 sq.km, border the territory of Indonesias Kalimantan. (www.planetgypsy.com)

Climate

Malaysia is the classic example of a wet tropical zone- hot and humid all through the year, with the temperature ranging between 1º C and ºC, and the humidity usually touching around 0%. As in all of South East Asia, the monsoons are an important feature of the climate- Malaysia has two monsoons, one in August-September and the other between November and February. The time to see turtles on the east coast is between May and September. (www.planetgypsy.com)

Religion

The different types of religion in Malaysia reflect the variety of races living there. Islam is the official religion but Buddhism, Hinduism, Christianity and other religions are practiced freely. Islam is practiced predominantly by the Malays. Most of the Chinese believe in Buddhism and Taoism but others are Christians. Hinduism is mostly practiced by the regions Indian population. Many indigenous people have converted to Christianity but others still practiced animism. (www.planetgypsy.com)

Language

The national language in Malaysia is Bahasa Malaysia. English, Tamil, Chinese (in its different dialects- Mandarin, Cantonese, Hokkien, Hakka, Hainan and Foochow), Telugu, Malayalam and Punjabi are the other languages spoken by different ethnic groups. In addition, in East Malaysia several indigenous languages are spoken, the main ones being Iban and Kadazan. English is widely spoken by the business community. Mandarin and Tamil are taught concurrently with Bahasa Malaysia and English in schools. (www.planetgypsy.com)

http//www.planetgypsy.com/destinations/malaysia/generalinfo.html

Political Structure

Malaysia is a federal constitutional monarchy with a bicameral federal legislature and unicameral state legislatures. Nine of the 1 states have hereditary rulers (eight Sultans and one Rajah) who share the position of King (Agong) on a five-year rotating basis. The Kings functions are purely ceremonial since constitutional amendments in 1 and 14.

The governing Barisan Nasional (National Front) coalition comprises the United Malays National Organisation (UMNO), the Malaysian Chinese Association (MCA), Gerakan - a Chinese-based party, and the Malaysian Indian Congress (MIC), plus a number of other parties including some based in Sabah and Sarawak. This coalition, in which UMNO is the dominant voice, has been in power in one form or another since the first elected government in 155. At the November 1 general election, the governing coalition was returned to power with its two thirds majority intact. The four national opposition parties formed a loose coalition, Barisan Alternatif (Alternative Front), and increased the number of opposition seats in federal parliament. The next federal election is due to be held by 004. (www.dfat.gov)

Economy

General

Malaysia is an export-oriented economy. In the past 5 years, it has developed rapidly from an agriculture-based economy to one dominated by intermediate manufacturing. Manufactures now account for about 8 per cent of exports, of which about 70 per cent are electrical and electronic products. Chemical and wood products make up the bulk of the remaining manufactured exports. Malaysia is also the worlds leading exporter of palm oil.

Malaysias strong economic performance in the 180s and most of the 10s was built on careful economic planning and management. The government has sought to divest itself of direct ownership in industry, and in the early 10s undertook an ambitious privatisation program. As a result of these reforms, Malaysia enjoyed strong inflows of foreign direct investment in the decade before the Asian economic crisis, further enhancing its industrialisation process. The government � directly, and indirectly through its agencies � still has significant interests in the top 10 listed companies on the Kuala Lumpur stock exchange. The Asian financial crisis impacted greatly on the Malaysian economy. Growth fell sharply and unemployment rose significantly. The government adopted a range of policy responses, including capital controls and the pegging of the ringgit at RM.80 to the US dollar. Non-performing loans worth nearly RM50 billion have been restructured since 18, and the government has injected new funds into the ailing banking industry. The Corporate Debt Restructuring Committee has overseen the successful restructuring of a further RM44 billion in non-performing loans. (www.dfat.gov)

http//www.planetgypsy.com/destinations/malaysia/generalinfo.html

http//www.dfat.gov.au/geo/malaysia/malaysia_brief.html#pol

Recent Economic Performance

The Asian financial crisis followed a decade of high growth in Malaysia. Between 1 and 17, Malaysia sustained growth of around per cent per annum, with per capita income rising to among the highest in the region. In 18, the economy contracted by 7.4 per cent. From 1, capital control measures - introduced at the height of the economic crisis - were progressively eased in recognition of the need to restore foreign investor confidence. The RM/USD peg remains in place, but other capital control measures have now been abolished.

Malaysias economy recovered strongly in 1, achieving growth of 5.6 per cent. The turnaround was propelled largely by burgeoning exports and public sector spending. The economy grew by over 8 percent in 000 but slowed to 0.4 per cent growth in 001, reflecting weaker global economic conditions and decreased demand for exports in Malaysias key america and asian export markets. (www.dfat.gov)

The governments upward revision in September 00 of its 00 growth estimate (from .5 per cent to between four and five percent) proved accurate, with Malaysia recording a 4. per cent expansion on the back of growth in private consumption and positive export performance. Private consumption overtook manufacturing production as the main contributor to growth, expanding by 4.5% in 00. Analysts suggest that the upward trend in the Malaysian economy is based upon a number of favourable factors, including relatively low interest rates, rising incomes in the public and private sectors, greater access to credit and the governments expansionary fiscal policy.



Source Consensus Economics (March 00)

In 00, exports expanded by about 6%, while imports grew at 8.% in line with stronger domestic demand. The trade account maintained a sizeable surplus of RM50. billion in 00, slightly down from RM54.1 billion in 001.

http//www.dfat.gov.au/geo/malaysia/malaysia_brief.html#pol

The 00 budget (released in September 00) forecast growth of 6 to 6.5 per cent for 00, assuming export growth of 10.5 per cent. Recent forecasts are less optimistic, owing to the current slowdown in electronic shipments to the US. Consensus Economics forecasts growth of 4.8 per cent for 00. The 00 budget continues the inclination towards fiscal deficits since the 17 economic crisis. Government consumption and increased spending - particularly in the construction sector - have been crucial to ensuring positive growth in recent years. The government is targeting a fiscal deficit of . per cent of GDP for 00 and aims to achieve a balanced budget by 005. This target may prove difficult to realise in light of the softening US economy and the knock-on effects of military conflict in the Gulf. (www.dfat.gov)

Economic Policy

Since the early 10s, Prime Minister Mahathirs 00 Vision has underpinned Malaysias aspirations for economic development. The 00 Vision strives for an eightfold increase in GDP and achievement of “industrialised country” status by the year 00. The policy sets privatisation as a cornerstone of national development, whilst retaining an emphasis on foreign investment to sustain industrialisation.

The National Vision Policy (NVP), implemented in 001, replaces the New Economic Policy (NEP) (introduced in 16), and its successor, the National Development Policy (NDP). The 16 NEP was designed to eradicate poverty and advance the economic position of Bumiputras (sons of the soil, mainly Malays but also other indigenous groups). The NDP, implemented in 11 after the expiry of the NEP, incorporated most of the elements of the NEP, but placed greater emphasis on developing Bumiputra entrepreneurial skills. The NVP largely incorporates and updates these objectives. While the Governments target of 0 per cent Bumiputra ownership of capital has not been achieved, there has been a very significant shift in the balance of ownership, coinciding with the emergence of an influential new class of Bumiputra entrepreneurs. (www.dfat.gov)

Foreign Trade and Investment

Trade Policy regime

Malaysia has been a strong exponent of trade liberalisation and a supporter of the multilateral trading system. Malaysia participates actively in regional economic arrangements, including the ASEAN Free Trade Area (AFTA) and APEC. Malaysia is also an active member of the World Trade Organisation (WTO).

In the AFTA context, Malaysia places a high priority on the early implementation of the common effective preferential tariff (CEPT) scheme which provides for concessional tariffs on intra-ASEAN trade. However, Malaysia continues to offer significant protection for its national automotive industry. In 000, Malaysia won a concession from other AFTA members for the non-application of AFTA to its automotive industry until 005. Malaysian market access for foreign service providers remains limited in the financial and professional services sectors. (www.dfat.gov)

http//www.dfat.gov.au/geo/malaysia/malaysia_brief.html#pol

Foreign Investment

Foreign Direct Investment (FDI) has played a large part in Malaysias development. FDI grew significantly throughout the 180s, averaging about 5 per cent of GDP. At its peak in 1 and 1, FDI accounted for 8.7 per cent of GDP. The bulk of FDI during the early to mid 10s flowed into the manufacturing sector (65 per cent), oil and gas (18 per cent), services (10 per cent) and property (7 per cent). However, FDI inflows have since slowed, falling to RM14.4 billion (4. per cent of GDP) in 000.

In recent years, strong competition from the labour-rich emerging markets of India and china and labour supply constraints have led to escalating pressure on wages in Malaysia. The government has sought to channel investment into high technology, capital-intensive manufacturing operations. The ultimate goal is to sustain increasing wage costs by managing the transition of the Malaysian manufacturing base from labour to capital-intensive that generates a higher level of value-added per employee. (www.dfat.gov)

Supportive Government Policies

Government policies that maintain a business environment with opportunities for growth and profits have made Malaysia an attractive manufacturing and export base in the region. The private sector in Malaysia is encouraged to become partners with the public sector in achieving the nations’s development objectives.

A major factor that has attracted investors to Malaysia is the government’s commitment to maintain a business envirnoment that provides companies with the opportunities for growth and profits. This commitment is seen in the government’s constant efforts to obtain feedback from the business community through channels of consultation such as regular government-private sector dialogues. These allow the various business communities to air their view and to contribute towards the formulation of government policies, which concern them.. (www.combinet.net)

Liberal Equity Policy

Generally, foreign investors in Malaysia’s manufacturing sector can hold 100% equity in projects, which exports atleast 80% of their production. However , currently, for projects applications received until 1 december 00, foreign investors can hold 100% equity irrespective of their level of exports, with the exception of certain products/activities where Malaysian SMIs have the capabilities. (www.combinet.net)

Employment of Expatriates

Foreign companies are allowed to employ expatriates in cases where certain skills are still lacking in Malaysia. A company with foreign paid-up capital of US$ million or more will be allowed five expatriate posts, including key posts, that is, posts that are permanently filled by foreigners. (www.combinet.net)

http//www.dfat.gov.au/geo/malaysia/malaysia_brief.html#pol http//www.combinet.net/wldecnmy/Nov/recent.html

Attractive Tax Incentives

Malaysia’s company tax rate is attractive at 8% and is applicable to both resident and non-resident companies. Malaysia also offers a wide range of tax incentives for manufacturing projects under the Promotion of Investment Act 186 and the Income Tax Act 167. the main incentives are the Pioneer Status, Investment Tax Allowance, Reinvestment Allowance, Incentives for High Technology Industries and Incentives for Strategic Projects. (www.combinet.net)

Work Force

Malaysia offers investors a young, educated and productive workforce at very competitive costs. Malaysia’s literacy rates are high at % and school leavers entering the job market have at least 11 years of basic education. Malaysia offers investors a young, educated and productive workforce at costs competitive with ither countries in Asia. Backed by the government’s continued support of human resource development in all sectors, the quality of Malaysia’s workforce is one of the best in the region. In addition , labor productivity has grown steadly at more than 5% per annum over the last few years. (www.capstrans.com)

High Priority on Education

Education is accorded high priority in development with about 15% of total public development expenditure allocated for this purpose under Malaysia’s five-year development plans.

There are nine public universities, six private universities, about 600 government and private colleges, and several polytechnics and industrail training institutes which offer courses leading to certificate, diploma, degree and post-degree qualifications. Total enrolment in public institutions of higher learing alone is projected to reach over 50,000 this year, with more than half in the science and technical disciplines.

The private sector has also set up educational institutions to supplement the government’s efforts to generate a larger pool of professional and semi-professionals. Among these are institutions of higher learning set up by large corporations such as Telekom Malaysia Berhad, Tenaga Nasional Berhad and Petronas, which provide degree-level courses. Various private colleges in Malaysia offer degree programs on a twinning basis with overseas institutions of higher learing, while foreign universities have set up branch campuses in the country. (www.capstrans.com)

http//www.dfat.gov.au/geo/malaysia/malaysia_brief.html#pol

http//www.combinet.net/wldecnmy/Nov/recent.html

Industrial Training

In 1, the Human Resource Development Fund (HRDF) was launched by the government to encourage training, retraining and skills upgrading in the private sector. Manufacturers who contribute to this fund will be eligible to apply for grants to defray or subsidize costs incurred in training their workers.

The National Vocational Training Council under the Ministry of Human Resources coordinates the plainning and development of a comprehensive system of vocational and industrial training programs for all public training agencies. It also develops the National Occupational Skills Standards (NOSS) on a continuous basis. To-date there are more than 450 NOSS covering basic, intermediate and advanced taining levels.

Besides the increasing number of Training institutions such as techincal schools, polytechnics, industrial training institutes and skills development centers, to meet the growing requirements of the industrail sector, collaborative efforts between the Malaysian government, enterprises and foreign governments have resulted in the establishment of several advanced skills training institutes such as the German-Malaysian institute, Malaysia France Institute, Japan Malaysia Technical Instiute and Bristish Malaysia Instiute. (www.capstrans.com)

Industrail Relations

Industrail relations in the country are harmonious with minimal trade disputes. Malaysia’s Labor laws safeguard the interests and spell out the rights and responsibilities of employers and employees, thus providing a legal framework for the orderely conduct of industrail relations in the country. (www.capstrans.com)

Infrastructure

Network of Highways

Malaysia has one of the finest road systems in Asia covering 6,445 km. The 848 km expressway links major industrial areas and urban centers of the country. The East-West Highway serves as part of the Asian Highway System linking Thailand with Malaysia. The development of road infrastructure and the Network of highways gave a boost in the income levels. In 1, there were 5.4 million motor vehicles of which 8.6% were motorcars, 54.8% motorcycles and 6.6% goods vehicles. This increased by 50.5% to reach 8.1 million motor vehicles in 17, with motorcycles accounting for 5% of the total, followed by motorcars 40% and goods vehicles 7%. The number of motor vehicles per 100 populations, which is an indicator of the quality of life of the population, increased from 7.6 in 1 to 7.6 in 17. In 1 there was a 6.5 million rail passenger traffic, which by 17 reduced to 5.4 million. How ever there was an increase in air passenger from .8 million in 1 to 0.5 million in 17. (www.northport.com)

http//www.combinet.net/wldecnmy/Nov/recent.html

http//www.capstrans.edu.au/apec_report/_Malaysia.html

Efficient Seaport

The international trade in Malaysia is a sea borne trade. 5 % of the countries trade is by the seven international ports � Penang Port, port clang, Johor port, port of tanjung pelepas, kuantanport, and kemaman port in peninsular Malaysia and Bintulu port in Sarawak.

THE cargo arm of Malaysia Airlines has introduced a three-letter code for seven seaports around the country to enhance efficiency in the movement of the goods. The ports involved in the procedure are Kuching, Kuantan, Penang, the Port of Tanjung Pelepas (PTP), Bintulu, Kota Kinabalu and Pasir Gudang. The International Air Transport Association (IATA) as a point of origin recognizes the three-letter code, which displays the abbreviated port of destination on e-way bills. Currently, it is only implemented in Port Klang under the abbreviated name of XPQ. With the confirmation, the seven ports will join Port Klang as a known destination for forwarders in the air and shipping industries. “Kuantan Port is well-known for being a chemical hub in the region. If they were to be a point of destination, it will open up many possibilities for the country. Malaysia may well be the point of origin for all sea-air links in Asean,” Malaysia Airlines senior general manager (cargo) Ong Jyh Jong. (www.northport.com)

International Airports

Malaysia has five International airports, including those at Kuala Lumpur, George Town and Kota Kinabalu and Sepang along with 15 Domestic airports and STOL Ports. Recognized as leader in multisystem integration Malaysian airport Technologies focus on quality has been unwavering. (ww0.malaysiamanufacturers.com)

Projects under the 8th Malaysia Plan are as follows

Project Status Completion

New Tawau Airport, Sabah Completed 1 May 001

New Bintulu Airport, Sarawak In Progress September 00

New Limbang Airport, Sarawak In Progress May 00

Upgrading of Sibu Airport, Sarawak Planned -

Upgrading of Miri Airport, Sarawak Planned -

Upgrading of Alor Setar Airport, Kedah Planned -

Upgrading of Rural Airstrips - BaKelalan, Long Seridan, Long Lelang, Long Banga, Sarawak Completed 001

Perlis Air Strip (Microflight Aircraft) Planned -

Source http//www.mot.gov.my/english/Division.asp?div=100

High Tech Telecommunication

Malaysia has one of the most modern telecommunication systems in the Southeast Asia. Apart from the telephone service the department provides Telegraph and Telex services and facilitates communication for Broadcasting, civil Aviation, Police, Customs and fisheries. The telecommunication system is supported by microwave trunk telephone network linking all the cities. Communication between Peninsula Malaysia and Sabah and Sarawak are via satellite and the troposcatter system and by submarine cable enabling the operation of nationwide Subscriber Trunk Dialing (STD) and the expansion of television broadcasting services throughout the country.

Introduction of Industrial Parks

Industries in Malaysia are spread over 00 industrial estates or parks and 14 Free Industrial Zones (FIZs), which are developed throughout the country. These sites are fully equipped with infrastructure facilities such as roads, electricity and water supplies, and telecommunications, are continuously being developed by state governments as well as private developers to meet demand.

FIZs are export-processing zones, which have been designed to cater to the needs of export-oriented industries basically for manufacturing and trading establishments that export 80 to 100 percent of their products. Companies in FIZs are allowed duty free imports of raw materials, components, parts, machinery and equipment directly required in the manufacturing process, as well as in the export of their finished products. In areas where FIZs are not available, companies can set up Licensed Manufacturing Warehouses (LMWs), which are accorded facilities similar to those enjoyed by establishments in FIZs. (ww0.malaysiamanufacturers.com)

Introduction of Specialized parks

Malaysia has developed specialized parks to cater to the needs of specific industries. Such as the Technology Park Malaysia in Bukit Jalil, Kuala Lumpur and the Kulim Hi-Tech Park in the northern state of Kedah which cater to technology-intensive industries and R&D activities. The sprawling 1,450-hectare (,580-acre) Kulim Hi-Tech Park is the countrys first fully integrated high technology industrial park. The parks master plan emphasizes on quality of life in a self-contained environment, which incorporates industries, R&D facilities, and a new township with full amenities such as a shopping center, a hospital, educational institutions and recreational facilities. The first phase of its industrial zone covering 50 hectares (60 acres) has been fully leased, and tenants have started moving into the second phase. According to Kulim Technology Park Corporation (KTPC), the developer and manager of the park, a total investment attracted to the park has exceeded RM14 billion (US$.7 billion). (ww0.malaysiamanufacturers.com)

http//ww0.malaysiamanufacturers.com/profitcentre/infrastructure.html#Airports

Business Environment

Malaysia has a mixed economy, comprising of an active private sector of multinational and indigenous businesses and a public sector with extensive involvement in business. The private sector in Malaysia is expected to play a dominant role in the country’s economy and in assisting the country to achieve the status of an industrialized nation by the year 00.

A market oriented economy and government policies that provide business with the opportunity for growth and profits have made Malaysia a highly competitive manufacturing and export base. The biggest advantage of Malaysia is the pool on young, educated trainable workforce. The use of English in Malaysia facilitates your communication with local personnel and suppliers. The country practices the British accounting system, which is acceptable to most international companies.

Framework of the Industry

The industry falls into three broad categories.

1. Indigenous small business, which are once largely concentrated in light industry as well as in wholesale and retail distribution and trading, have successfully moved towards small and medium scale industries (SMIs) through the governments umbrella strategy.

. Large Malaysian corporations, many of which are listed on Kuala Lumpur Stock Exchange. The shareholders in these companies are largely institutional, with significant proportions held by government trust agencies.

. Local operations of multinationals, most of which are majority owned by their foreign parent corporation.

Chamber of commerce and industry

Newcomers to Malaysia’s business environment will feel at home with presence of various chambers of commerce and trade associations made up of investors from different countries. These organizations are invaluable sources for general business information, advice assistance, and compliment the role of government agencies. The major ones are

1. The Malaysian international chamber of commerce and Industry. (MICCI)

. Federation of Malaysian manufacturers (FMM)

. The Japanese chamber of trade and industry (JACTIM)

4. American � Malaysian chamber of commerce (AMCHAM)

Besides several trade associations such as the Malaysian � American electronics industry (MAEI) Group.

Banking and Finance

A well-developed financial and banking sector has enhanced Malaysia’s position as a dynamic export base in Asia. Sophisticated financial facilities are available through domestic and foreign commercial Banks. There are 7 licensed commercial banks in operation. Other financial institutions include merchant banks, retail finance and leasing companies, discount houses, development finance houses and the agricultural bank. The country’s law restricts ownership of banks and financial institutions.

Islamic Banking

As an alternative system, Malaysia offers Islamic banking, which is based on the concept of profit sharing as opposed to the use of interest in the conventional banking system. commercial banks, 18 finance companies and merchant banks were given approval for interest free banking in the year 14.

The central bank has embarked on a plan to develop Malaysia as a regional Islamic financial center. It has formed a consultative committee on Islamic banking in January 16 to serve as a think-tank group to develop strategies and proposals to map out the future directions on Islamic banking.

Specialized Financial Institutions

Malaysia has 40 finance companies, operating through 860 offices, which accepts retail deposits and provide financing for installments (Hire � Purchase) and leasing transactions and housing loans. 156 registered leasing companies serving mainly the industrial sector supplement the services of finance companies.

Source Doing Business In Malaysia � The price water house in Malaysia 16

Joint Ventures Partnerships and sole proprietorships



In addition to business activities conducted by companies, business may be carried on in Malaysia by a partnership or sole proprietorship. A partnership may consist of individuals or companies or a combination of both, but no more than 0 partners if it carries on a business for gain. An exception is made for partnerships in certain professions that have been specifically proclaimed to be excluded from the rule of membership limit. Partnership or sole proprietorship may be registered under the business registration act. Foreign investments do not commonly take for of sole proprietorships.

There is no specific statute that regulates joint ventures or defines the rights and obligations of the parties to the venture. A joint venture can take the form of a partnership, or it may be incorporated.

Restrictions On Foreign Investment

Malaysia recognizes its lack of experience and know-how in many fields of industrial endeavor and the valuable contribution that can be made in economic and industrial development by foreign industrialists. How ever the need for foreign technology and capital must be balanced against the ownership targets of the national development plan. In 11 the NDP replaced the New Economic Policy (NEP), sets out the guidelines and objectives of the governments policies on t he distribution of ownership and participation in the commercial and industrial sectors. The industrial act 175 requires all manufacturing companies to apply to the Malaysian industrial Development Authority (MIDA), an agency of Ministry Of International Trade and Industry, for permission to commerce or expand operations.

This act sets provides for the issue of manufacturing licenses, sets out conditions for BUMIPUTRA and other Malaysian participants.

Some of the conditions are

1. No equity will be imposed on companies that will export 80 percent or more of their production.

. For projects exporting between 51 and 7 percent of their production, foreign equity ownership of 7 percent may be allowed.

. For projects exporting between 0 and 50 percent of their production, foreign equity ownership between 0 to 50 percent will be allowed.

4. Projects less than 0 percent of their production, foreign equity of ownership 0 percent will be allowed.

Quality of life in Malaysia

Malaysia is one of the most friendly and hospitable countries in the world to live in and do business or work. Foreigners coming to this country to do business will not only have hospitable conditions for business, but also can enjoy the modern day facilities like very good living conditions, state of art healthcare and medical conditions, world class educational institutions, and also un surpassing recreational and sports facilities. The cost of such facilities in country like Malaysia is far less than in any of the western country or developed countries. The country is generally warm throughout the year with temperatures ranging from 1° to ° Celsius in the lowlands. This can however be as low as 16° Celsius in the highlands. (geographia.com/Malaysia)

Malaysia reflects different cultural traditions, including those of China, India, the Middle East, Europe, and the entire Malay Archipelago. Early Malay empires absorbed Indian influences, such as Hindu epics and the Sanskrit language. The kingdom of Malacca, centered in the present-day state of Melaka, developed as an Islamic state, or sultanate, in the 1400s. Later, new cultural influences from Europe and China mixed with Hindu and Islamic traditions.

A collective but distinctively Malay cultural pattern has emerged out of all these influences, with artistic expressions in literature, music, dance, and art forms. With such a mix of cultures, most Malaysians can speak two to three languages. Their mother tongue, Malay being the national language is spoken by almost everyone, and English (Mapzones.com).

http//www.geographia.com/malaysia/

Housing

There are several options for living in Malaysia - bungalows or freestanding homes, condominiums (apartments with extra facilities) and apartments (usually with limited facilities). Recently built condominiums in good areas include most of the following - pool, gym, lifts, 4-hour security service, adequate parking, convenience store and landscape gardens. Kuala Lumpur is no different from any other city in the world; location and facilities are all important. There are few natural attractions that make certain areas better for living - being inland, for example, there are no beach-side locations near to the city. The dress circle areas therefore tend to be based upon location with proximity to the CBD, all-important. Other popular upmarket suburbs have long been established and are very well equipped with plenty of amenities. Some indication of monthly rents in Kuala Lumpur. Modern, three-bedroom condominium, ,100 sq. feet in Bangsar - RM7, 500 and a two-bedroom condominium, 1,00 sq. feet in Bangsar - RM, 000. Semi-detached house in central area, RM4,000 to RM6,000 and detached house, central location and pool - RM,000 to RM15,000. By international standards, Malaysian housing is cheap. (expatkl.com)

Education

Education is free and compulsory for children between the ages of 6 and 16, and an additional two years of free education are optional. In 17, 101 percent of Malaysian children attended primary school. Parents may choose between Bahasa Malaysia, Chinese, or Tamil as the language of instruction for their primary-school children. Bahasa Malaysia is the primary language of instruction in all secondary schools, although continued learning in Chinese and Tamil is available and English is a compulsory second language. Enrollment in secondary education was 64 percent in 17. Malaysia has a number of institutions of higher education, including nine universities.

Universities include the National University, in Bangi; the University of Technology, in Johor Baharu; and the University of Malaya, in Kuala Lumpur. Local school curricula are taught in Bahasa Malaysia (national language), Chinese, English or Tamil. There are international schools that use British, Japanese, Indonesian, American, Australian and French curricula. International schools come with a cost but the standards and facilities are high. The International schools are located in Bukit Kiara, Kuala Lumpur, Ampang, and labuana. (Mapzones.com, expatkl.com)

http//www.mapzones.com/world/asia/malaysia/cultureindex.php

http//www.mapzones.com/world/asia/malaysia/educationindex.php

http//www.expatkl.com/housing1.php

http//www.expatkl.com/education.php

Shopping

Malaysia is a shopper’s paradise. There is a wide range of shopping establishments and modern air-conditioned shopping malls, department stores, handicraft centers, bazaars and night markets. Night markets or pasar malam begin their trading activities in the late afternoon. These open-air markets feature hawker stalls that sell a variety of local produce, foodstuff, clothing, traditional medicine vendors and cakes. Bargaining is a common practice. Bukit Bintang area is the oldest shopping center. This place has local and international goods such as clothes, fashion accessories, footwear, sports goods, electrical equipment, pharmaceutical products, computers and furniture.

Exploring Malaysias outdoor markets is pure adventure (and of course one can take home whatever they hunt - or bargain - down). The variety of bargain items that can be found in the major markets is endless, ranging from quality electronics to blowguns to traditional arts and crafts. Currently, the dollar goes a long way in Malaysia. (planetgypsy.com, geographia.com)

Lifestyle

Life in Malaysia is adventure. It offers an exceptional lifestyle especially for the people who love the outdoors. You can spend many exciting weekends at some of the beautiful places in Malaysia. There are clubs for almost any interest i.e. yachting and martial arts; and most daily newspapers often list the clubs and contact numbers for their activities. Most large national groups of expats have associations. Membership for expats are also offered by exclusive where they are assured of basic amenities like swimming pool, tennis / squash / badminton courts, pool tables, and some have their own golf courses or are at least affiliated to one. Because of its myriad cultural influences, Malaysia is renown for its creative, complex, and lovingly prepared original cuisine. Food is taken very seriously here, from the five-star restaurants right down to the hawkers booths. Sauces tend to be highly developed, often incorporating local fruits and spices, and the seafood dishes are what youd expect from a country almost entirely surrounded by ocean. (geographia.com, planetgypsy.com)

http//www.planetgypsy.com/destinations/malaysia/shopping.html

http//www.geographia.com/malaysia/cuisine.html

Risk Factors

Short-term risk event

The growing influences of conservative Islam in Malaysia risks undermining the country’s image abroad as a progressive Islamic state as well as constraining domestic economic development. (home.aigonline.com)

Political risk

The delayed departure of the Prime Minister, Mahathir Mohamad, from politics is proving destabilizing. Although Abdullah Badawi, the deputy president, has been appointed as his successor, uncertainty about policy continuity and speculation about the changing locus of political power will persist. (home.aigonline.com)

Economic outlook

The economy in 00-04 will expand more rapidly than in 00, when growth was an estimated .8%. A fiscal stimulus package is expected to help offset soft domestic and external demand in the early part of the year. The current account will remain in healthy surplus; foreign-exchange reserves will continue to rise. The currency is expected to remain pegged to the US dollar, although the Economist Intelligence Unit expects a shift away from the peg in late-004 as the US currency strengthens. (home.aigonline.com)

Debt outlook

The government will accumulate more foreign debt to finance its fiscal stimulus package, but debt servicing will remain manageable. (home.aigonline.com)

Policy Issues

Following the Asian economic and financial crisis in mid-17, the government abandoned its tight monetary and fiscal policies and adopted an expansionary strategy to revive the economy. On September 1st 18 the government introduced wide-ranging capital controls to gain greater flexibility in lowering interest rates, and pegged the ringgit at M$.80US$1. Since February 1 the government has eased most of these controls. The stimulative fiscal and monetary stance has remained basically unchanged since the 17-8 crisis. The government remains committed to the fixed exchange rate, and the weakness of the US currency has eased pressure for an adjustment of the peg. (home.aigonline.com)

http//home.aigonline.com/country_view/0,4605,157,00.html

Conclusion

Malaysia’s success in attracting the foreign investment in capital-intensive, technology, and knowledge-based projects is the result of many factors. Malaysia with excellent Infrastructure, educated and efficient work force and retaining long-term policies and incentives that provide the confidence to businessmen that their millions of ringgit worth of investments would not be wasted due to change of policies after a change in government.

Malaysia’s location also makes it a logical choice for foreign corporations seeking to establish operational headquarters in the ASIAN region.

Appendix

Key Economic Indicators

1 000 001

Population .7 million . million 4.4 million

GDP RM1.8billion RM0.billion RM10 billion

GDP growth rate 5.8% 8.5% 0.%

Per capita income US$,8 US$,516 US$,000

Inflation rate .8% 1.6% 1.5%

Labor force . million .6 million . million

Unemployment rate .4% .1% .7%

Total exports f.o.b US$ 8.billion 8.1billion 4.4billion

Total imports f.o.b US$ 61.billion 77.billion 76.billion

Major Export’s electronic equipment, petroleum and liquefied natural gas, wood and wood products, palm oil, rubber, textiles, chemicals

Major Import’s electronics, machinery, petroleum products, plastics, vehicles, iron and steel and iron and steel products, chemicals

Source cia.gov/cia/publications/factbook, Bank Negara Malaysia Annual report 000.

References

WWW.planegypsy.com

http//www.planetgypsy.com/destinations/malaysia/history.html

http//www.planetgypsy.com/destinations/malaysia/generalinfo.html

http//www.planetgypsy.com/destinations/malaysia/shopping.html

WWW.dfat.gov

http//www.dfat.gov.au/geo/malaysia/malaysia_brief.html#pol

WWW.combinet.net

http//www.combinet.net/wldecnmy/Nov/recent.html

WWW.capstrans.edu

http//www.capstrans.edu.au/apec_report/_Malaysia.html

WWW.cia.gov

http//www.cia.gov/cia/publications/factbook/geos/my.htm

WWW.georaphia.com

http//www.geographia.com/malaysia/

http//www.geographia.com/malaysia/cuisine.html

WWW.mapzones.com

http//www.mapzones.com/world/asia/malaysia/cultureindex.php

http//www.mapzones.com/world/asia/malaysia/educationindex.php

WWW.expatkl.com

http//www.expatkl.com/children.php

http//www.expatkl.com/housing1.php

http//www.expatkl.com/education.php

WWW.home.aigonline.com

http//home.aigonline.com/country_view/0,4605,157,00.html



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