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U.S. Department of State
Malaysia Country Commercial Guide
Office of the Coordinator for Business Affairs
 


                             COUNTRY COMMERCIAL GUIDE
                                    MALAYSIA


     Table of Contents

CHAPTER I.      Executive Summary
CHAPTER II.     Economic Trends and Outlook
CHAPTER III.    Political Environment
CHAPTER IV.     Marketing U.S. Products and Services
CHAPTER V.      Lending Sectors for U.S. Exports and Investment
CHAPTER VI.     Trade Regulations and Standards
CHAPTER VII.    Investment Climate
CHAPTER VIII.   Trade and Project Financing
CHAPTER IX.     Business Travel
CHAPTER X.      APPENDICES:
  A.  Country Data
  B.  Domestic Economy
  C.  Trade
  D.  Investment Statistics
  E.  U.S. and Country Contacts
  F.  Market Research
  G.  Trade Event Schedule




                     COUNTRY COMMERCIAL GUIDE:  MALAYSIA


This Country Commercial Guide (CCG) presents a comprehensive look at 
Malaysia's commercial environment through economic, political and market 
analyses.  

The CCGs were established by recommendation of the Trade Promotion 
Coordinating Committee (TPCC), a multi-agency task force, to consolidate 
various reporting documents prepared for the U.S. business community.  
Country Commercial Guides are prepared annualy at U.S. Embassies through 
the combined efforts of several U.S. government agencies.


Chapter I.  Executive Summary


The U.S. is Malaysia's second largest trading partner, accounting for 
18.9% of its total trade.  U.S. exports to Malaysia were estimated at $7 
billion in 1994.  Total two-way trade grew 14% in 1994, to $20.9 
billion.  The U.S. was the largest foreign investor in Malaysia for the 
years 1991-93; and the third largest in 1994.  The cumulative value of 
U.S. private investment in Malaysia is over $8 billion.  Sixty-five 
percent of that is in the oil and gas sector, with the rest in 
manufacturing, especially semiconductors and other electronic products.  

The Malaysian economy grew 8.7% in 1994; it has grown over 8% for the 
past 7 years, and is forecast to expand by 8.9% in 1995.  Economic 
growth has averaged almost 7% per annum over the last three decades.  
Traditionally sound monetary and fiscal policy has ensured low 
inflation.  In the process, Malaysia has been transformed from a low 
income producer of commodities like tin, rubber, and palm oil into a 
middle income exporter of manufactured products.  It is now, for 
example, the world's third largest producer, and the largest exporter, 
of semiconductors.  It is also the world's largest exporter of room air 
conditioners, color TV tubes, and VCR's.  Malaysian per capita income 
has risen to $3,406 in 1994 in terms of international exchange rates.  
In terms of purchasing power parity it is well over $8,000.  

Although the population of Malaysia is only 19.5 million, it is a more 
important market for US exports than many countries of much larger size.  
This market is, moreover, continuing to grow rapidly in line with the 
on-going expansion and transformation of the economy.  There are no 
significant barriers to U.S. manufacturing, business or investment in 
Malaysia, but there are certain barriers to new investment in services 
industries.  Most sectors of the economy are very open to international 
trade, and U.S. products have been successful in practically all of 
them.  The U.S. is Malaysia's second largest supplier.  In 1994 the U.S. 
supplied 16.7% of Malaysian imports.  Japan was first with 26.7%.  
Singapore was third, with 14.1%.  Taiwan was fourth, with 5.1%.  
Malaysia's agricultural import market is worth US $3.2  billion; of 
that, the U.S. share is 8.4%.

Principal opportunities for U.S. manufactured exports include electronic 
components, production and test equipment; oil and gas production 
equipment; telecommunications equipment; aircraft and parts; chemicals; 
industrial process controls; electric power generation and distribution 
equipment; pollution control equipment and other environmental products 
and services; scientific and medical instruments; and computer software.  
In the agricultural sector, principal opportunities include corn, 
soybeans, tobacco, fresh fruit, temperate hardwood lumber and frozen 
french fries.   

Country Commercial Guides are available on the National Trade Data Bank 
on CD-ROM or through the Internet.  Please contact STAT-USA at 1-800-
Stat-USA for more information.  To locate the Country Commercial Guide 
via the internet, please use the following worldwide web address:  
WWW.STAT-USA.gov.  CCGs can also be ordered in hard copy or on diskette 
from the National Technical Service (NTIS) at 1-800-553-NTIS.


CHAPTER II.  Economic Trends and Outlook

Malaysia reported glowing figures on economic performance in 1994:  real 
growth of 8.7%; rising per capita income (US$3,406); low inflation; a 
stable currency; technical full employment; and rising exports.  Over 
twenty years, Malaysia has reduced the economy's reliance on rubber and 
tin through the development of oil-based commodities and the expansion 
of manufacturing (mostly electronics), which now accounts for 78% of 
export earnings.  Malaysia is the world's third largest producer of 
semiconductors after the U.S. and Japan, and the world's largest 
exporter.  Two-way merchandise trade reached US$108 billion (156% of 
GDP) in 1994 and Malaysia enjoyed a US$2.2 billion surplus.  

The manufacturing, construction, and services sectors are expected to be 
key components of robust growth again in 1995.  The manufacturing sector 
contributed about 32% to GDP in 1994, with strong increases in both 
domestic and export markets.  Domestic activities rose rapidly in the 
construction and industrial sectors, boosting demand for fabricated 
metal products, chemicals and in the non-metallic mineral industries.  
Strong external demand produced significant growth on the export side 
for products from the electronic, electrical, non-electrical machinary, 
textiles, wood and rubber industries.  

The services sector, contributing 45% to overall GDP, grew 9% in 1994 
and likely will grow by at least the same amount in 1995.  The major 
areas of growth are retail trade, tourism, financial services, and 
utilities sub-sectors.  Agricultural growth has slowed down to a half a 
percent in 1994, but is expected to grow 2.8% in 1995 and contribute 
about 15% to GDP.  Mining, consisting mostly of oil and gas, provides 
less than 8% of GDP and is likely to grow a modest 2% in both 1994 and 
1995.

Malaysia has diversified its energy resources, but oil remains an 
important source of energy and will continue to supply about half of 
primary energy needs through the year 2000.  Malaysia's position as a 
net exporter of oil however, will likely be reversed in the near term.  
The substitution of other energy sources for oil and the diversification 
of energy supply based on available indigenous resources (namely gas) 
are the central objectives of Malaysia's energy supply policy and 
strategy.  Increased gas production will help meet the country's need 
for increased power generation.  Tenaga Nasional Berhad (TNB) announced 
in December 1991 that it would permit independent power producers (IPP) 
in Malaysia, including foreign-led consortia, to operate plants on a 
build-own-operate basis.  Since the first license to operate an IPP was 
announced in February 1992, six consortia have been awarded licenses.

There are potential trouble spots which merit attention.  Increasing 
worldwide competition will require improved productivity from export 
firms.  A subset of this issue will be chronic labor shortages for both 
skilled and unskilled workers.  Rising demand for imports has strained 
the balance of payments and highlighted a continued reliance on imported 
components for the production of principal exports.  Inflation, as 
always, remains a concern for monetary managers.

The 1995 budget projects the third consecutive balanced budget with 
US$18.6 billion in spending, of which US$5.5 billion is allocated for 
developmental purposes.  The four main objectives are to sustain strong 
growth, reduce inflation, develop skilled manpower and build a 
progressive and balanced society. Defense allocations for development 
purposes in 1995 are US$ 1 billion.  There was some relaxation of 
foreign-exchange controls which could benefit U.S. firms with local 
operations.  The budget cut or eliminated import duties on 2,600 items, 
mostly for raw materials currently attracting modest duties.  It also 
reduced corporate and maximum personal income tax rates two percentage 
points to 30% and 32%, respectively.  The government is counting on 
strong growth to fund the reductions in tax and tariff rates.  In 1994, 
when tariffs were reduced on 600 items, government revenue increased by 
17%.

While the government plays a diminishing role as a producer of goods and 
services, it continues to hold equity stakes (generally minority shares) 
in a wide range of domestic companies.  These entities are rarely 
monopolies; instead, they are one (generally the largest) player among 
several competitors in a given sector.  However, government-owned 
entities are major players in some sectors, particularly plantations and 
financial institutions.  Since 1986, the government has begun 
privatizing many entities, including telecommunications, the national 
electricity company, the national airline and the government shipping 
firm.  The government sold off its remaining shares in Malaysia Airlines 
(MAS) in August 1994 and this reorganization of MAS has already improved 
profitability.  Seaports, some hospitals and pharmaceutical supply 
centers are in various stages of privatization.

The balance of payments was negative in 1994, the first time since 1988, 
primarily due to outflows of $5-6 billion in private short-term capital, 
due to restrictions by the central bank aimed at curbing foreign 
speculation.  There is a growing current account deficit and continuing 
large services outflows.  These outflows in the services account helped 
push the deficit in the current account to US$ 4.4 billion in 1994, up 
84% from the 1993 figure.  The principal components of the outflows are 
payments for freight and insurance and repatriation of profits and 
dividends by foreign investors.  The 1995 budget modestly addresses this 
issue by doubling tax deductions to premiums paid to local insurance 
companies and allowing foreign reinsurance brokerages to operate in 
Malaysia.  However, the official projection for 1995 is that the current 
account deficit will rise 19% to US$ 5.6 billion and the services 
deficit is projected to be $8.5 billion in 1995.  The overall balance 
for 1994 was negative, US$ 3.2 billion, a sharp change from a positive 
balance of $11.5 billion in 1993.  Malaysia has been enjoying 
substantial net inflows of long-term private capital (US$ 5.3 billion in 
1994), which have helped support the balance of payments.

CHAPTER III.  Political Environment

The Malaysian political environment is strongly favorable to 
international and domestic business development.  U.S. - Malaysian 
bilateral relations are close and productive across the board.   

Malaysia is a constitutional monarchy with a parliamentary system of 
government.  In practice, power is strongly concentrated in the Prime 
Minister.  He has traditionally been head of UMNO (the United Malays 
National Organization), the principal party in the governing coalition 
which has ruled Malaysia continuously since independence from the UK in 
1957.  The ruling coalition scored an impressive victory in the general 
elections held in April 1995.  The position of monarch, the Yang di 
Pertuan Agong, is rotated among the rulers of nine of the thirteen 
states of Malaysia.  The role has over time become almost entirely 
ceremonial and symbolic. 

The government has taken a strong pro-active role in the development and 
industrialization of the Malaysian economy.  This has included 
significant state sector investment, a close alliance between government 
and the private business community, and a variety of policies and 
programs to bolster the economic status of the Malay and indigenous 
communities, commonly referred to as "bumiputras".  Malaysia is a multi-
ethnic society, with Malay, Chinese, and Indian communities.  Tensions 
between these groups were serious in the past.  However, with rapid 
economic growth over the past several decades, in which all groups in 
the country have shared, these tensions have become much less salient 
than previously.  

Malaysia enjoys friendly relations with the United States and has worked 
with the U.S. on many issues, including for example the U.N. 
peacekeeping operations in Somalia.  Malaysia has also contributed 
forces to U.N. operations in Cambodia and Bosnia.  Malaysia is a member 
of ASEAN (Association of South East Asian States), founded in 1967 with 
Indonesia, the Philippines, Singapore, Thailand and Brunei.  The U.S. 
has strongly supported ASEAN, and participates in an annual dialogue 
with ASEAN members at the level of Foreign Ministers.  ASEAN is working 
to create AFTA (ASEAN Free Trade Area), which if successful would create 
a single market of over 330 million people.  Vietnam is expected to join 
ASEAN in 1995.  If, as expected, Laos, Cambodia, and Burma also join 
ASEAN in the future, the group would include over 400 million people.  
Malaysia is also a member APEC (Asia-Pacific Economic Cooperation), 
which includes the U.S., China, Japan and most of the other countries of 
the Pacific Rim.


CHAPTER IV.  Marketing U.S. Products and Services

U.S. firms active in the Malaysian market range from large 
multinationals such as Boeing, General Electric and Bechtel to numerous 
small and mediums sized firms who have discovered the opportunities that 
exist in this growing market.  U.S. exports to Malaysia move in a wide 
variety of sales channels depending on the product or service.  For 
example, U.S. electronic components are purchased directly by major U.S. 
and other multinational companies, with manufacturing facilities in 
Malaysia.  Much of that business is intra-firm.  Similarly, oil and gas 
production equipment is purchased directly from suppliers by a 
relatively few major U.S. and third-country companies and the Malaysian 
national company, Petronas.  

Major U.S. exporters of computer software are present in Malaysia with 
offices and joint ventures.  Software is also handled by a large number 
of retail outlets and local and international consulting companies.  
Capital equipment is almost always handled by in-country representation, 
either through locally hired firms or by the placing of a corporate 
representative in Malaysia.  Food and other consumer goods are typically 
sold by U.S. export wholesalers to Malaysian general import houses, 
which handle distribution to supermarkets and other outlets.  U.S. fast 
food franchises (Kentucky Fried Chicken, McDonald's, Kenny Rogers, Carl 
Jr's, Chili's, Swenson's, etc.) involving local partners have 
proliferated very rapidly in recent years, reflecting life-style changes 
as Malaysia's per capita income rises and urbanization accelerates.  
U.S. firms in the retail sector include Toys R Us, Hallmark and Levi's, 
among others.  

Sales to the government require a local agent.  Moreover, for contracts 
of significant size, direct involvement and visits by the U.S. company, 
including its senior leadership, are also typically required.  In 1993 
the U.S., for example, successfully sold 8 McDonnell-Douglas F/A-18-D 
military aircraft worth more than $700 million, in an extensive joint 
effort by the corporation and the U.S. government.  Significantly, the 
final deal involved offset arrangements by McDonnell-Douglas with local 
partners in the aero-space sector, which will result in long-term 
business and technology transfer relationships in addition to the F/A-
18-D deal itself. 
 
Major equipment sales to corporations in both the private and public 
sector also require local agents and the active engagement of senior 
corporate leadership.  This has paid off in the past year, for example, 
in the sale by G.E. of gas turbines for one of the first independent 
power plants in Malaysia, and the sale by Otis elevator of more than $80 
million worth of elevators and escalators for the twin 88-story towers 
of the Kuala Lumpur City Center (KLCC) now under construction. 

Many exporters designate an existing Malaysian-based trading company as 
their local sales agent, responsible for handling customs clearance of 
imported goods, dealing with established wholesalers and/or retailers, 
marketing the product directly to major corporations or the government, 
and handling after-sales service.  

In other cases, some exporters have found it advantageous to establish 
their own subsidiary company in Malaysia to directly handle sales, 
distribution, and service.  While this provides more direct control, it 
requires a commitment of capital and the identification of suitable 
local joint venture partners to establish such a company in Malaysia.  
The Government of Malaysia, for its part, is working to attract 
companies to establish offices in Malaysia, both to deal with the local 
market and the regional market.  Because of this, there appears to be a 
government preference for companies with a local presence when 
considering bids on major items.  Companies which are only represented 
from offices outside Malaysia are often at a disadvantage in such major 
competitions, or in establishing long-term markets with major private 
sector firms.   

A number of Malaysian and international advertising, accounting and 
consulting firms are present in Kuala Lumpur and can provide market 
survey services and advice on potential agents or partners for an 
interested exporter.  

Any firm intending to establish a local office should secure the 
services of a local attorney.  As a former British colony, Malaysia's 
legal system is based on British common law, making it more familiar to 
U.S. firms than legal systems based on European continental models.  The 
Malaysian legal system is, moreover, relatively transparent.  Good 
lawyers are available, and the country is not particularly litigious.  

U.S. food and other consumer goods are primarily marketed to the rapidly 
growing urban middle class, and as such tend to occupy the upper end of 
the local retail price spectrum.  Prices on major government projects 
and sales tend to be negotiated, often after a bidding process has 
narrowed the range of potential candidate suppliers.   

Malaysia has a strong intellectual property (IPR) regime.  In 1986 the 
government passed a strong patent law, and in 1987 it enacted a 
copyright law that explicitly protects computer software.  The 
enforcement of IPR regulations in general, and combatting of software 
piracy in particular, has been good.  The Business Software Alliance 
gave Malaysia its award for vigilance in 1992.  Following amendments to 
the 1987 copyright law, Malaysia acceded to the Berne Convention in 
1990.  Trademark infringement has not been a major problem for US 
companies, and patent protection is good. 

Advertising approaches differ depending on market sectors.  Consumer 
goods advertising techniques include the full range of television, 
press, and outdoor and other approaches.  However, due to 
health/religious concerns, there are prohibitions on most types of 
advertising for tobacco and alcoholic beverages.  Sales of equipment and 
materials to particular industries, e.g. electronics, depend heavily on 
specialized trade fairs, publications, and visits by company 
representatives.  Sales to the government involving major equipment or 
projects involve extensive high level contact by local representatives 
and visiting company representatives.  Major companies with investments 
in Malaysia or interest in significant export sales often also engage in 
continuing programs of company image building through articles and 
advertising in local business journals, sponsorship of conferences and 
other events, and participation in public-private sector consultative 
bodies.  
Malaysia currently has four TV channels, two government and two private.  
It has a number of English language papers, the largest being the New 
Straits Times and the Star.  The primary business-oriented paper is the 
Business Times, published by the New Straits Times group.  There is an 
extensive press in Bahasa Malaysia and Chinese.  There are a number of 
business-oriented magazines, including Malaysian Business, Malaysian 
Industry and the Malaysian Investor.  

CHAPTER V.   Leading Sectors for U.S. Exports and Investment

1  -  Electronic Components (ELC)

Narrative:  
Malaysia is the world's third largest producer of semiconductor devices 
after the U.S. and Japan, and the world's largest exporter.  Production 
of the semiconductor and other electronic components sector expanded 
markedly, by 21.2 percent in 1994.  Most of this increase resulted from 
soaring demand for elctronic chips from the U.S., Japan and some Asia-
Pacific countries.  In particular, there was stronger-than-expected 
worldwide demand for semiconductors following the recovery of the 
computer market in the U.S.  The upsurge in the production of electronic 
components in Malaysia in recent years also reflects the rising demand 
for the production of audio-visual products in Malaysia.  The rapid 
expansion of telecommunication facilities also led to higher demand for 
electronic chips for the production of transmission systems for the 
local telecommunications network.  

The import market of electronic components in Malaysia is estimated to 
grow 15 percent per year on average over the next three years.  The 
exports of U.S. electronic components to Malaysia should continue to 
perform well.  Currently, U.S. companies supply more than 30 percent (by 
value) of Malaysia's total yearly electronic components imports.  The 
most promising subsectors, along with estimated 1996 total market size 
of each subsector, are as follows:  (i) diodes, transistors, and similar 
semi-conductor devices--US$2,350 million; (ii) electronic integrated 
circuits and micro-assemblies--US$7,000 million.


                                      1994     1995   1996
                                         (US $ millions)
a.  Total Market Size                10,783  12,800  14,700
b.   Total Local Production          11,861  14,080  16,200
c.   Total Exports                    9,366  10,770  12,000
d.   Total Imports                   10,783  12,800  14,700
e.  Total Imports from U.S.           3,474   3,995   4,470
f.  Exchange rate                      2.62    2.45    2.40

 
2  -  Aircraft and Parts (AIR)

Narrative:  
Malaysia Airlines (MAS) currently operates a large fleet of aircraft 
(more than 90) serving 57 international destinations in six continents 
and 35 domestic destinations.  It has a large fleet of U.S. aircraft as 
follows:  eleven B747-400s, one B747-300, two B747-200s, six Dc10s 
(including five leased), and fifty-two B737s (including twelve leased).  
MAS's fleet modernization plan was carried out in 1993/94.  Twenty seven 
new generation fuel-efficient aircraft were added to the company's 
existing fleet.  With the delivery of twenty new B737-400/500s and MAS's 
sale of its last B737-200, the re-equipment of the B737 fleet is 
virtually complete.  Six new B747-400 aircraft were added during 
1993/94, and another two B747-400 aircraft are to be delevered by 
December 1997.  Ten A330s are to be delivered in 1995/96.  One B737-300 
freighter aircraft was delivered in 1993/94.  Malaysia Airlines 
currently operates three B737 freighters on regional routes.  Its 
international air cargo division will start operating a fleet of six 
full freighters by August 1995, up from one currently.  Its freighter 
fleet will be comprised of four MD-11s, all leased from World Airways, 
and two B747-200 passenger aircraft, which are being converted into all-
cargo planes.

Malaysia Airlines is now the sole national carrier.  Pelangi Air, 
Berjaya Air and Mofaz Air are relatively small airline operators 
servicing local destinations.

In 1993  Malaysia purchased 8 F/A-18 fighter attack aircraft worth $700 
million (delivery of aircraft will begin in 1996) and 18 MIG-29 fighter 
aircraft (delivery of aircraft started in April 1995).  The Malaysian 
Armed Forces currently plan to purchase helicopters within the next 12 
to 24 months.
As part of its modernization program, Malaysia is interested in attack, 
lift, utility, and scout helicopters.  It is estimated that the 
Malaysian government will spend $700 million or more for these 
helicopters.  Although opportunity exists for U.S. defense companies to 
make sales in this market, stiff foreign competitiion should be 
anticipated.

The U.S. is doing well in the Malaysian aircraft market, based both on 
the high quality of U.S. equipment and friendly relations between our 
two countries.  The most promising subsectors within the sector, along 
with 1996 total market size of each subsector, are as follows: (i) 
commmercial airplane--$500 million; (ii) military aircraft--$350 
million.  


                                1994  1995  1996
                                 (US $ millions)
a.  Total Market Size           2,070  2,490  2,730
b.   Total Local Production        25     40     60
c.   Total Exports              1,553  1,600  1.650
d.   Total Imports              2,058  2,470  2,700
e.  Total Imports from U.S.     1,942  2,250  2,450
f.  Exchange rate                2.62   2.45   2.40

(Note to table: figures on Malaysian exports include reexports;  figures 
on imports include military aircraft.)


3  -  Computer Software  (CSF)      

Narrative:  
The current economic uptrend in the country has caused more business 
sectors to upgrade their current computer systems.  The change is also 
influenced by a strong move towards open systems, the decreasing cost of 
hardware and software and the ease of connecting computers in networks.

The U.S. is considered the market leader for computer software and is 
highly regarded by Malaysian consumers.  Favorable opportunities exist 
for software for commercial, service, industrial/manufacturing as well 
as for the home, small office and education sectors.  Commercial 
application software and networking and connectivity software have a 
high potential for growth.  Growth has been fueled by the government's 
active role in promoting a technologically advanced economy.

Malaysian laws protect the intellectual property rights of computer-
related products through the Copyright Act 1987 and the Trade 
Description Act 1972.  Malaysia is a member of the Berne Convention for 
copyrights.

The Malaysian government has taken a pro-active role in curbing software 
piracy in the country.  As a result of its efforts, the piracy rate in 
the country has decreased significantly.   

                                1994  1995  1996
                                  (US $ millions)
a.  Total Market Size            312  420  541       
b.   Total Production             19   24   30      
c.   Total Exports               3.8  4.8  6.0
d.   Total Imports               297  401  541          
e.  Total Imports from U.S.      253  329  428      
f.  Exchange Rate (per US$)     2.62  2.45  2.40


4  -  Computers and Peripherals (CPT)

Narrative:  
The computers and peripherals industry is expected to grow at an annual 
rate of more than 20 per cent for the next three years.  Many businesses 
and organizations including government agencies have yet to be 
computerized, therefore giving rise to vast opportunities in the market. 

With the greater level of technology and sophistication of products in 
the market, the current purchasing trends no longer focus exclusively on 
price, but on value and support service.  Personal computing is emerging 
as a preferred environment for less technical computation tasks.  The 
market segment for home and small office users has also experienced a 
massive growth in recent years. 

The major PC vendors in the market are ACER, Compaq, Wearnes, and NEC.  
Best prospects in the market include pentium based PCs and PowerPCs, 
multimedia-equipped PCs, personal computers equipped with CD-ROM drives, 
audio and video capabilities, and peripherals such as laser printers, 
CD-ROM drives, and magnetic tape back-ups.

                              1994  1995  1996
                                (US $ millions)        
a.  Total Market Size         1,312  1,544  1,892           
b.   Total Local Production   3,419  3,706  4,088      
c.   Total Exports            3,325  3,624  3,950          
d.   Total Imports            1,218  1,462  1,754          
e.  Total Imports from U.S.     264    312    374      
f.  Exchange Rate (per US$)    2.62   2.45   2.40      


5  -  Electronics Industry Production/Test Equipment (EIP)

Narrative:  
The electronics industry in Malaysia has grown to become the largest 
industry in the manufacturing sector.  Malaysia is one of the largest 
producers and exporters of semiconductors in the world.  Malaysia's 
industrial policy encourages the industry to undertake greater 
technological upgrading and to move into the area of micro-electronics 
and automated manufacturing.

The import of electronics industry production equipment (in particular 
semiconductor production equipment), is expected to expand significantly 
over the next three years.  Growth in equipment imports will be driven 
by the need to increase worker productivity, a shift towards production 
of higher-end products and an anticipated movement by industries 
upstream into wafer fabrication. Currently, the Malaysian semiconductor 
industry is focused on assembly activities.  

There is no local production of EIP equipment.  Although most assembly 
equipment are imported from Japanese and European manufacturers, U.S. 
manufacturers are predominant in test equipment.  The anticipated 
opening of upstream wafer fabrication in Malaysia should give U.S. 
companies the opportunity to strengthen their position in the industry.

The most promising sectors in the industry are: i) high technology 
assembly equipment; ii) high quality and high volume automatic test 
equipment; iii) wafer fabrication production equipment; and iv) 
automated manufacturing equipment.

U.S. firms account for over half of Malaysia's semiconductor production, 
with the rest being produced by Japanese and European companies.  The 
American electronics industry has contributed estimated sales of over 
US$4 billion in 1994, and provided employment to more than 45,000 
Malaysians.  In order to remain competitive in the industry, the 
American Electronics industry invested about US$311 million and US$300 
million in 1993 and 1994 respectively.


                               1994  1995  1996
                                (US $ millions)        
a.  Total Market Size           206  236    270        
b.   Total Local Production      -  -  -      
c.   Total Exports               -  -  -          
d.   Total Imports              206  236    270          
e.  Total Imports from U.S.      86  103    124    
f.  Exchange Rate (per US$)    2.62  2.45  2.40      


6  -  Telecommunications Equipment  (TEL)

Narrative:  
The Malaysian telecommunications network has experienced accelerated 
growth and transformation over the last decade as a result of the 
country's strong sustained economic growth.  Malaysia is expected to 
invest a total of US$6.5 billion in telecommunication infrastructure in 
the next five years.  

An advanced nationwide telecommunications infrastructure utilizing 
technologies like optic fiber, satellites, wireless transmission and 
digitalization will be developed to provide efficient, reliable and 
diverse services at competitive prices.  The nation will have its own 
satellite services with the expected launching of the Malaysia East Asia 
Satellite (MEASAT) in December 1995.

The telecommunications industry has high growth potential.  The tele 
density in Malaysia is currently at 14 lines per 100; the goal of the 
country is to have a penetration rate of 45 lines per 100 by the year 
2005.  In view of this, numerous opportunities exist in sectors such as: 
i) switches for local, long distance, and international 
telecommunications network; ii) cellular networks;  iii) satellite 
networks; iv) telecommunications software and management systems; v) 
digital terminal equipment; and vi) infrastructure supplies and related 
equipment

                                 1994  1995  1996
                                   (US$ millions)
a.  Total Market Size           3,547  4,161  4,882
b.  Total Local Production      3,483  3,831  4,214
c.  Total Exports               3,167  3,483  3,831
d.  Total Imports               3,231  3,813  4,499  
e.  Total Imports from the U.S.   318    350   385
f.  Exchange Rate (per US$)      2.62   2.45  2.40





7  -  Franchising  (FRA)

Narrative:
Realizing the importance of the franchise business concept worldwide, 
and with the aim of helping Bumiputra (ethnic Malay and other indigenous 
group) entrepreneurs, the government has set up a Franchise Development 
Unit (FDU).  The FDU is to assist Bumiputra entrepreneurs in the 
franchise business by identifying prospective franchisees with 
established franchisors from overseas and also by developing the local 
franchise network.  In addition to this, the Malaysian Franchise 
Association was formed last year to promote the development of 
franchising in Malaysia.  Although not yet adopted, the draft of the 
standard Malaysian franchise business agreement has been modified to 
conform to the requirements set forth in the Franchise International 
Association.  Presently, the bulk of franchise business in Malaysia is 
in the food category followed by retailing.  It is reported that there 
are about 102 franchise businesses operating in the country; of which 80 
are foreign franchisor companies.  The most promising subsectors are (i) 
automotive servicing;  (ii)  information technology business support;  
(iii) travel related business; and (iv) education . 


                                     1994  1995  1996
                                       (US $ millions)
a.  Total Market Size                 400  520  676
b.   Total Local Production            20  26  34
c.   Total Exports                     -   -    -  
d.   Total Imports                    380  494  642
e.  Total Imports from U.S.           300  390  507
f.  Exchange Rate (per US$)          2.62 2.45 2.40


8  -  Industrial Chemicals (ICH)

Narrative:
The Malaysian market for industrial chemicals is expanding at a rate of 
about 20% per annum, in step with the rapid growth of the manufacturing 
sector.  Imports accounted for 69% of the inorganic chemicals market in 
1994.  Specialized chemicals are more heavily imported, and are expected 
to remain so in the long-term.  US chemicals currently have 21% of the 
import market, topped only by Japan.  Major foreign competition also 
includes Germany and Singapore (as a middle-man exporter) for the higher 
end products, while China, Taiwan and Thailand are main suppliers to the 
low end market.  Local production of industrial inorganic chemicals have 
been expanding in recent years but are not expected to affect the 
imports due to increase in demand from the manufacturing sector.  The 
Malaysian market is heavily influenced by pricing.  US chemicals have a 
reputation for high quality and are particularly in demand where quality 
control and technological support is important. 

                               1994      1995      1996
                                        (US $ millions)
a.  Total Market Size         1,560     1,875     2,265
b.  Total Local Production      910     1,005     1,162
c.  Total Exports               492       544       605
d.  Total Imports             1,127     1,399     1,678
e.  Total Imports from the U.S. 240       285       345
f.  Exchange Rate (per US$)    2.62      2.45      2.40



9  -  Pollution Control Equipment  (POL)

Narrative:
The Malaysian environmental market is expected to grow to approximately 
US$ 2.3 billion over the next 10 years.  Rapid industrialization and 
urbanization has caused extensive damage to Malaysia's natural 
environment.  The regulatory framework for environmental protection is 
set forth in the Environmental Quality Act (EQA) of 1974 and is enforced 
by the Department of Environment (DOE).  Several amendments to the EQA 
are currently being proposed to empower DOE's enforcement activities.  
These include increasing prison terms and fines, and higher emission 
standards.  The larger environmental projects in Malaysia are those 
which involve the privatization of environmentalal services.  These 
include sewage treatment, hazardous waste treatment and disposal, and 
air pollution monitoring.   

U.S. environmental firms and equipment have a strong reputation for 
their experience and advanced technologies, both of which are lacking in 
Malaysia.  The Malaysian market is generally very receptive to U.S. 
equipment, especially if it conforms to Malaysian concerns such as cost 
effectiveness and technological support.

Best potential markets for US technologies are in the following 
subsectors: 1) industrial and municipal wastewater treatment; 2) 
industrial and hazardous waste minimization and recycling; 3) air 
pollution control; and 4) solid waste.  Primary competition for U.S. 
companies will include German, Japanese, Canadian, Danish, French and 
U.K. firms.

                                    1994    1995    1996
                                       (US $ millions)      
a.    Total Market Size             188     230      259
b.    Total Local Production         11      13       17
c.    Total Exports                  34      42       53
d.    Total Imports                 211     259      287
e.    Total Imports from the U.S.    38      42       48
f.    Exchange Rate (per US$)      2.62    2.45     2.40


10  -   Oil and Gas Field Machinery and Services (OGM)

Narrative:  
Prospects for Malaysia's oil and gas industry are still bright; it is 
expected to see healthy growth rates despite a downturn in international 
crude oil prices.  It is estimated that US$12 billion will be invested 
in upstream activities between 1994 and 1998 by Petronas (the national 
oil corporation) and other oil and gas companies.  

Exploration activities in Malaysia reached their peak in 1993.  As the 
sedimentary basins of Malaysia become more and more explored, there is 
an increasing tendency for the remaining prospects to become smaller and 
relatively more difficult to access.  Efforts to search for oil and gas 
recently extended to some of the more unconventional areas such as the 
deepwater acreages where, in the past, very limited exploration 
activities were carried out due to technological constraints and high 
investment costs.  Malaysia, in a bid to coax oil and gas companies to 
explore deeper waters, has recently developed a new set of Production 
Sharing Contract (PSC) terms which cater to deepwater ventures.  The 
deepwater exploration and exploitation activities will require advanced 
technology equipment that will favor the state-of-the-art technology 
enjoyed by U.S. products.  

Occidental Petroleum Company has had a series of major gas and 
condensates discoveries in East Malaysia since 1992.  Because of the 
discoveries, a third liquefied natural gas facility is being planned for 
Bintulu in East Malaysia.  

Malaysia uses primarily American-made drilling and boring equipment and 
tools, with approximately 75 percent of imports coming from the U.S. in 
1994.  There is no single supplier of rigs to Malaysia.  Whenever a rig 
is required, a worldwide search is conducted for the most suitable rig 
at the most suitable leasing price.  Platforms, modules and jackets are 
supplied/fabricated by local engineering firms.  All PSC contractors are 
required to purchase their oil and gas equipment and supplies through 
local agents licensed with Petronas.

The most promising subsectors, along with estimated 1996 total market 
size of each subsector, are as follows:  (i) drilling & boring machinery 
& tools--$95 million; (ii) pipeline systems and equipment--$200 million.  

                               1994  1995  1996
                                 (US $ millions)        

a.  Total Market Size         1,600  1,680  1,764
b.   Total Local Production     400    408    417
c.   Total Exports               10     12     15
d.   Total Imports            1,210  1,260  1,332
e.  Total Imports from U.S.     520    542    573
f.  Exchange rate              2.62   2.45   2.40


11 -  Medical Equipment (MED)

Narrative:
The Government's commitment towards increasing the level of health care 
is reflected in the allocation for health expenditures in the 1995 
budget of RM2.39 billion (US$0.96 billion), a 167 percent increase over 
RM885 million allocated in 1980.  The increasing number of new private 
hospitals combined with the extended hospital facilities of the existing 
private and public hospitals has created increased demand for medical 
equipment and supplies.  Presently, Malaysia imports all of its high 
technology medical equipment from countries such as Japan, the U.S, 
Germany and the U.K.  Local production consists mainly of low technology 
equipment such as surgical gloves, catheters, syringes and others.  
Malaysia is one of the biggest producers of catheters with exports in 
1994 worth US$108 million.  The U.S. medical equipment enjoys a good 
reputation in Malaysia due to its high quality.  The declining dollar 
and the relatively strong yen will contribute to the growth of demand of 
U.S medical equipment.  The  most promising subsectors within the sector 
are as follows: (i) hospital supplies and appliances; (ii) surgical 
appliances; and (iii) diagnostic equipment. 
 

                                  1994  1995  1996
                                   (US $ millions)
a.    Total Market Size            122  127  146
b.    Total Local Production       260  273  300
c.    Total Exports                238  261  287
d.    Total Imports                100  115  133
e.    Imports from the U.S.         27   33   40
f.  Exchange rate (per US$)       2.62  2.45  2.40


12 -  Laboratory Scientific Instruments 

Narrative:
In general, much greater emphasis has been placed on local research and 
development in various industries.  The Malaysian government has 
increased the funding for research and development to strengthen 
development of industry-oriented technology.  Of the total estimated 
expenditure of RM 319 million (US$128 million) for direct R&D from 1991 
to 1995, about 30 percent was for industrial research.  Research 
capabilities in industrial application of new and emerging technologies 
are still inadequate.  It is estimated that the demand for laboratory 
scientific equipment will increase in the region of 12 to 18 percent per 
annum for the next three years.  Countries competing with the U.S. in 
this area are Japan, Germany and the U.K.  The most promising subsectors 
are: (i) instruments/apparatus for measuring or checking the flow, 
level, pressure or other variables of liquids or gases; (ii) 
chromatographic and spectroscopic equipment; and (iii) microscopes.  

                                 1994  1995  1996
                                   (US$ millions)         
a.  Total Market Size             652  729  815
b.  Total Local Production        200  236  283
c.  Total Exports                 274  342  428
d.  Total Imports                 726  835  960
e.  Total Imports from the U.S.   228  262  300
f.  Exchange Rate (per US$)      2.62 2.45 2.40


13 -  Sporting Goods & Recreational Equipment (SPT)
                    
Narrative:
The demand for sporting goods and recreational equipment is increasing 
as Malaysians become more affluent and health conscious.  The 
mushrooming of golf courses, country clubs, and health and fitness clubs 
has resulted in increased demand for golf and fitness equipment.  The 
increase in consumer purchasing power has also spurred demand in the 
amusement and entertainment games market.  U.S golf and fitness 
equipment enjoys a good reputation in Malaysia.  The U.S PGA Merchandise 
Show, which is very popular among Malaysian golfers, certainly 
influences the market here, although the U.S. faces stiff competition 
from Japan and Taiwan in this area.   

                                        1994      1995       1996
                                               (US$ millions)

a.  Total Market Size                   195           236        280
b.  Total Local Production              200           220        246
c.  Total Exports                       140           154        170
d.  Total Imports                       135           170        204
e.  Total Imports from the U.S.          20            25         31
f.  Exchange Rate (per US$)            2.62          2.45       2.40


14 -  Electrical Power Systems (ELP)

Narrative:  
Tenaga Nasional Berhad (TNB), the national energy company, was launched 
on September 1, 1990, upon the corporatization of the National 
Electricity Board.  TNB is the leading power utility in the country and 
has a monopoly over the transmission and distribution of electricity in 
Peninsular Malaysia.  TNB's total installed capacity now is about 7,700 
MW, and it will be increased to 9,400 MW by 1997.  TNB is planning for 
an introduction of a new $1.5 billion transmission network of 500 kV in 
Peninsular Malaysia.  This network will be implemented in three phases 
from 1995 to 2000.  Another project is TNB's US$800 million Port Klang 
power plant (Phase III - 2x500 MW) which is now under construction (from 
1994 - 1997).  

Six Independent Power Producers (IPP) in Peninsular Malaysia are 
spending about US$4.5 billion to construct power plants from 1993-1996, 
with a total capacity of 4,570 MW.  The government has approved another 
IPP project in Peninsular Malaysia recently:  a 650 MW gas-fuelled 
combined cycle power plant in Perlis.

In Sabah, three IPPs have been given licenses to set up power plants of 
206 MW total capacity.  The total project cost is about US$500 million, 
and the construction period is from 1994 to 1997.  The government is 
planning to have another IPP in Sabah.

In Sarawak, the US$6 billion Bakun hydroelectric power project (2,400 
MW) will be constructed from 1995 - 2002 as a privatized development.  
It will consist of a hydropower component and a power transmission 
component which will include HVDC submarine cables linking Sarawak and 
Peninsular Malaysia (670 km).

GE (U.S.) and European firms such as ABB, Siemens, Alsthom are doing 
well in Malaysia in supplying gas turbines and constructing power 
plants.  Black & Veatch is successful in providing consultancy services 
to TNB and several IPPs.  Westinghouse is also active here.  U.S. 
transmission equipment suppliers should be competitive in bidding for 
the upcoming 500 kV peninsular Malaysia transmission project (see 
above).       

                                1994  1995  1996
                                 (US $ millions)        
a.  Total Market Size          3,110  3,610  3,950
b.   Total Local Production      570    660    700
c.   Total Exports               110    125    130
d.   Total Imports             2,650  3,075  3,380
e.  Total Imports from U.S.      300    350    388



15 -  Drugs and Pharmaceuticals (DRG)

Narrative:
The Malaysian pharmaceutical industry is still considered relatively 
undeveloped.  There are about 35 companies involved in the mixing and 
blending of medical and pharmaceutical preparations.  Manufacturers 
still rely heavily on imported raw materials.  However, the Malaysian 
government is encouraging local companies to synthesize some of the 
drugs locally instead of merely relying on imported raw materials.  
Demand for drugs and pharmaceuticals is expected to increase as the 
result of rising health consciousness and increasing popularity of self-
medication which is further promoted by the introduction of more over-
the-counter (OTC) drugs.  All pharmaceuticals and drugs whether 
manufactured locally or imported are required to be registered with the 
National Pharmaceutical Control Bureau of the Ministry of Health. 
Malaysia's Drug Control Act has been described as having one of the most 
stringent requirements for drug registration.  The range of products to 
be registered prior to sale and use is very comprehensive, even 
including over-the-counter and herbal medicines, which are not covered 
in the U.S., the U.K. and Australia.  The most promising subsectors are: 
(i) antibiotics; (ii) vitamins; and (iii) over-the-counter drugs and 
medicines.

                               1994  1995  1996
                                (US $ millions)        
a.  Total Market Size           355  385  443
b.  Total Local Production      120  144  173
c.  Total Exports                71   99  138
d.  Total Imports               284  340  408
e.  Total Imports from the U.S.  31   35   39


AGRICULTURE SECTORS 

A.  Rank:  N/A
B.  Name of Sector:  Oilseeds (Soybean)
C:  ITA or PS&D Code:  2222000

                                      1994  1995  1996
                                      (1000 Metric Tons)
D.  Total market size (consumption)    472  610  600
E.  Total local production               0    0    0
F.  Total exports                       12   15   15  
G.  Total imports                      502  630  610    
H.  Total imports from U.S.            121  450  450    

Narrative:
Imports of U.S. soybeans will reach a record in 1995 and capture about 
70% of the Malaysian market.  In value terms sales will be around $100 
million.  The U.S. should be able to maintain a major share of the 
market over the next 3-5 years.  China is expected to have fewer beans 
available for export and the construction of a new port facility capable 
of handling Panamax sized vessels will also add to the competitiveness 
of U.S. soybeans. 

A.  Rank:  N/A
B.  Name of Sector:  Corn
C:  ITA or PS&D Code:  0440000

                               1994  1995  1996
                               (1000 Metric Tons)        
D.  Total market size         2,030  2,190  2,350
E.  Total local production       38     40     40
F.  Total exports                 0      0      0
G.  Total imports             1,977  2,200  2,300    
H.  Total imports from U.S.       0    600  1,200    

Narrative: 
Imports of U.S. corn will go from nothing to 600,000 MT in 1995 due 
primarily to the lack of competition from China -- the primary supplier 
in recent years.  In value terms this amounts to about $72.0 million.  
China is not expected to return as a competitor in 1996 and South Africa 
will also be out of the picture.  Thus, the U.S. will essentially share 
the market with Argentina and capture at least half of it.  In the 
longer term the U.S. could even capture further market share if current 
plans for a new port grain handling facility are realized.

A.  Rank:  N/A
B.  Name of Sector:  Tobacco (Unmfg., Flue-cured)
C:  ITA or PS&D Code:  1211100

                               1994  1995  1996
                                (1000 Metric Tons)        
D.  Total market size          12.5  14.3  15
E.  Total local production      5.6   8.6   8
F.  Total exports                 0   0.1   3
G.  Total imports               5.5   7.7  10    
H.  Total imports from U.S.     3.3   4.0   6    

Narrative: 
Imports of U.S. flue-cured tobacco should reach close to $30.0 million 
in 1995 and climb even higher in 1996 as a new tobacco processing plant 
becomes fully operational in that year.  The plant is foreign-owned by a 
U.S. tobacco company which means that at least 80% of its output must be 
exported.  The company will import most of its tobacco from the U.S. 
but, as is the case with all tobacco and cigarette manufacturers in 
Malaysia, it will also be required to utilize a minimum amount of 
domestically produced flue-cured tobacco in its production process.  
Long-term imports of U.S. tobacco will likely remain strong as the 
relatively low quality and high price of domestic flue-cured tobacco 
restricts its use.

A.  Rank:  N/A
B.  Name of Sector: Fresh Fruits (oranges/apples/grapes)
C:  ITA or PS&D Code:

                               1994  1995  1996
                                 (US$ millions)         
D.  Total market size:         61.3  67.0  72.0
E.  Total local production        0     0     0
F.  Total exports                 0     0     0
G.  Total imports              61.3  67.0  72.0
H.  Total imports from U.S.    28.3  31.0  34.0
I.  Exchange rate              2.62  2.45  2.40

Narrative:  
The market for fresh fruits has been growing at a rate of about 10 
percent annually in volume terms in the past five years.  Growth rates 
for the future are forecast at 8-10 percent per year, with rising 
affluence, expanding population growth, reduction in tariffs and 
increasing health consciousness contributing to the favorable outlook.  
There are growing opportunities for sales of U.S. "exotic" fruits 
(plums, nectarines, peaches and pears), but best prospects are for sales 
of U.S. oranges, apples and grapes. 

A.  Rank:  N/A
B.  Name of Sector:  Frozen French Fries
C:  ITA or PS&D Code:

                               1994  1995  1996
                                 (US$ millions)         
D.  Total market size:          8.6  10.0  11.0
E.  Total local production        *     *     *  
F.  Total exports                 *     *     *
G.  Total imports               8.6  10.0  11.0
H.  Total imports from U.S.     7.0   8.0   9.0
I.  Exchange rate              2.62  2.45  2.40

* insignificant

Narrative:
The U.S. is the major supplier of frozen french fries to Malaysia 
capturing more than 80 percent of the market.  Almost all major fast 
food restaurants use U.S. frozen fries.  The expanding Malaysian fast 
food industry augurs well for increased exports of U.S. frozen fries.  
However, since Malaysia has a large Muslim population, fast food 
operators will only purchase fries which have been certified "halal", 
meaning the food is acceptable for consumption by Muslims.  The fries 
have to be processed in facilities which have been inspected and 
approved by Islamic authorities for halal exports to Malaysia.  


CHAPTER VI.  Trade Regulations and Standards

The Ministry of International Trade and Industry (MITI) is primarily 
responsible, within the Government of Malaysia, for the formulation and 
implementation of trade regulations and policies.

The Government of Malaysia operates a system of import licensing.  
Import permits are required for arms and explosives; motor vehicles; 
dangerous drugs and chemicals; plants; soil; tin ore, slag or 
concentrates; and certain essential foodstuffs.  Malaysia follows the 
Harmonized Commodity Description and Coding System of classification of 
goods.  All imported beef and poultry products must originate from 
facilities which have been approved by Malaysian authorities as "halal", 
or acceptable for consumption by Muslims.

Raw materials used directly for the manufacture of goods for export are 
exempted from import duties if such materials are not produced locally 
or if the local materials are not of acceptable quality and price.  This 
provision, for example, applies to the very large Malaysian imports of 
semi-conductor components for the fabrication of completed semi-
conductors for export.  Exemptions from duties are also available for 
machinery and equipment used directly in the manufacturing process or 
not available locally.  

Import duties range from nil to 200 per cent, with the average duty rate 
being less than 10 per cent.  The higher rates apply to luxury goods, 
including knocked down and assembled automobiles.  There are high 
tariffs on leaf tobacco and for processed and high-value food products.  
In December 1993 and April 1994 protective tariffs (five year duration) 
were imposed on imports of plastics, resins, and kraftpaper.  There are 
also restrictions on imports of chicken and chicken parts dating to 
1983.  Rice can only be imported through the National Rice Authority and 
is generally negotiated on a government-to-government basis.  In 
addition to import duties, a sales tax of 10 per cent is levied on most 
imported goods.  Like import duties, however, this sales tax is not 
applied to raw materials and machinery used in export production.  
  
All imported consumer goods are required to be labeled to identify the 
importing agent.  This is typically accomplished by affixing a label 
after goods have cleared customs.  Prepacked drugs must be labeled in 
English or Bahasa Malaysia indicating the substance and its components.  
Food labels must indicate the use of additives and shelf life.    
   
Quantitative import restrictions are seldom imposed except on a limited 
range of products for protection of local industries or for reasons of 
security.  Recently, for example, a system of quantitative licenses has 
been instituted for the import of certain plastic resins, for the 
purpose of protecting a domestic petrochemical operation.  

Malaysia also has a system of export licensing.  In some cases, such as 
textiles, the system of export licenses is used to ensure compliance 
with bilateral export restraint agreements.  In some other cases, such 
as rubber exports, special permission from government agencies is 
required.  Export duties are imposed on the principal commodities:  
petroleum, rubber, pepper, palm oil, and tin.  In the case of petroleum 
this is a flat rate of 25 per cent.  In the case of other commodities, 
it is calculated on the basis of a threshold price, and no duty is 
charged if the price falls below the given threshold.

Malaysia has ten free trade zones in which export-oriented manufacturing 
facilities may be established.  These FTZs are located in the states of 
Johor, Melaka, Penang, Perak, and Selangor.  Raw material and equipment 
may be imported duty free into these zones with minimum customs 
formalities.  Companies which export not less than 80 per cent of their 
output and depend on imported raw materials and components may be 
located in these FTZs.  Goods sold into the Malaysian economy by 
companies within the FTZs must pay import duties.  In addition to the 
FTZs, Malaysia permits the establishment of licensed manufacturing 
warehouses, which give companies greater freedom of location while 
enjoying privileges similar to operating in a FTZ.  Malaysia is also 
expanding arrangements for temporary entry of goods in customs areas at 
the principal seaport, Port Klang.    

Malaysia is a member of the ASEAN Free Trade Area (AFTA), which aims to 
reduce trade barriers between the member countries (Malaysia, Indonesia, 
Singapore, Thailand, the Philippines and Brunei) over a fifteen year 
period.  Progress to date, has been relatively slow, though the target 
date for completing AFTA has been advanced to 2003.   


CHAPTER VII.  Investment Climate

A.1   Openness to Foreign Investment

The Malaysian Government welcomes manufacturing investment, especially 
in high-tech areas.  The shortage of labor has, in the past year, led to 
official statements that Malaysia will no longer allow investment in 
labor-intensive industries.  It is not yet clear what this will mean in 
terms of investment projects.  Proposals for a manufacturing license are 
screened by the Malaysian Industrial Development Authority (MIDA) to 
determine whether or not they are consistent with the Industrial Master 
Plan (IMP) and government social policy.  Investment regulations are 
specified in the Promotion of Investment Act of 1986 and the Industrial 
Coordination Act of 1974.  Approval depends on the size of the 
investment, whether or not it includes local equity participation, the 
type of financing (both local and offshore) required, the ability of 
existing and planned infrastructure to support the effort, and the 
existence of a local or foreign market for the output.  The criteria are 
applied in a non-discriminatory manner, except in the rare instance when 
a local and a foreign firm propose identical projects.  

Domestic services industries are tightly protected, with foreign firms 
generally limited to 30% equity shares in new ventures.  Existing firms 
have been allowed to retain equity positions, but are under pressure to 
"Malaysianize" their operations and divest.  In June 1995, the 
government shifted policy in allowing foreign fund managers to hold 70% 
equity in firms sourcing capital from Malaysia or 100% equity for firms 
managing non-Malaysian capital.

One-hundred per cent foreign ownership in manufacturing is permitted 
only in certain instances.  The general policy for manufacturing 
investment is as follows (it should be noted, however, that the 
government is very flexible in administering these guidelines):  

-  No equity conditions are imposed on projects which export at least 80 
percent of their output.  Under these provisions, for example, U.S. 
electronics firms in Malaysia have 100% U.S. equity, and operate in 
special export-oriented Foreign Trade Zones. 

-  For projects that export between 50 and 80 percent of output, 100 per 
cent foreign ownership is allowed if (a) the investment is worth at 
least RM 50 million (US $20.8 million) in fixed assets (excluding land) 
or has at least 50 percent value added; and (b) the product does not 
compete domestically with a locally made product. 

-  For projects exporting from 51 to 70 percent of output, majority 
foreign ownership (51 percent) is permitted.  This can be raised to 79 
percent ownership under certain circumstances. 

-  For projects exporting less than 20 percent, the maximum foreign 
ownership is 30 percent.  

The Government of Malaysia also regulates the distribution of Malaysian 
equity, in pursuit of its social goals.  When foreign equity is less 
than 100 per cent, local equity will be distributed as follows:

-  For foreign projects without a local partner, if 70 percent or more 
of the equity is foreign held, the balance is reserved for Bumiputras 
(the Malay and other indigenous people).  If less than 70 percent is 
foreign-held, 30 percent is reserved for Bumiputras, and the rest for 
other Malaysians.  If the equity reserved for Bumiputras is not taken 
up, the Ministry of International Trade and Industry (MITI) will 
allocate the balance to other Malaysians.

-  For foreign joint ventures with Bumiputras, all local equity will be 
held by the Bumiputra partner.  If the partner is unable to do so, MITI 
will allocate any unclaimed local equity to other Malaysians. 

-  For foreign joint ventures with non-Bumiputras, the local partner 
will take at most 30 percent of the equity.  Any other local equity will 
be held by a Bumiputra. 

The Government of Malaysia also offers a number of fiscal incentives to 
foreign manufacturing investors.  The principal incentives for the 
manufacturing sector are contained in the Promotion of Investments Act 
of 1986 and the Income Tax Act of 1967.  These incentives apply to 
companies subject to Malaysia's (30) percent corporate income tax.  
These incentives include: 

-  Pioneer status:  A partial tax exemption for payment of income tax; 
Companies located in Sabah, Sarawak, and the designated 'Eastern 
Corridor' of Peninsular Malaysia will only have to pay tax on 15% of 
their statutory income for five years.  Dividends paid out of tax-exempt 
income to shareholders will also be exempted from tax.

-  Investment tax allowance (ITA).  A write-off of up to 60 percent of 
capital expenditures incurred during the first five years of project 
approval to offset up to 70 percent of income.  Any unused balance can 
be carried forward.  Not available to firms with Pioneer status.

-  Reinvestment Allowance: An allowance of 40 percent of capital 
expenditures to expand, modernize or diversify an existing facility 
before 1996.

-  Export Credit Refinancing (ECR).  This provides qualified exporters 
with below-market, short-term commercial credit.

-  Export Allowance.  Five percent of the FOB value of export sales can 
be deducted from the pre-tax income of trading companies exporting 
Malaysian manufactures.

-  Double Deduction of Export Credit Insurance.  This is provided if the 
insurance company is approved by the Ministry of Finance. 

-  Double Deduction for Export Promotion.  This is granted for certain 
qualifying expenditures (e.g. overseas advertising and export market 
research).  

-  Industrial Building Allowance (IBA).  The IBA is an initial allowance 
of ten percent, followed by an annual two percent allowance, of the cost 
of warehouses and bulk storage facilities for exports.

-  Incentives for Research and Development.  These include a five-year 
tax holiday and permission to carry tax-relief period losses forward to 
the taxable period. 

-  Incentives for Training.  These consist of an IBA for buildings used 
for training and a double deduction for approvable training expenses. 

-  Customs Exemption for Raw Materials, Machinery.  This is granted for 
export-oriented manufacturers which use raw materials or components that 
are not made locally of acceptable quality.  It also applies to 
machinery directly used in production.  Under certain circumstances it 
may be granted for firms producing for the domestic market.

The Malaysian Government does not discriminate against foreign investors 
after the initial investment has been made.  The Securities Commission 
and the Foreign Investment Committee implement the regulations specified 
in the Malaysian Code on Take-overs and Mergers.  Foreign portfolio 
investors are permitted to trade freely in both equity and debt on the 
local exchanges, and to purchase stock in newly privatized firms during 
an initial public offering. 

A.2  Conversion and Transfer Policies

Malaysia has an open foreign exchange regime.  Payments, including 
repatriation of capital and remittance of profits, are freely permitted 
and are transacted on a timely basis.  Payments to other countries 
outside Malaysia may be made in any foreign currency other than the 
currency of Israel.  Payments within Malaysia must be made in Malaysian 
Ringgit.  

The Government places no other restrictions on payments in a foreign 
currency of less than RM 10,000 (US$ 4,000).  Larger transactions 
require an exchange control license.  For transactions up to RM 10 
million (US$ 4 million), the license consists of a simple reporting form 
obtained from any commercial bank.  The single exception is on payments 
made abroad on loans from non-residents.   Here, the loan must have been 
made with the approval of the Controller of Foreign Exchange (an office 
of Bank Negara, the central bank), and the payments must be consistent 
with terms of the approved loan.  Transactions exceeding RM 10 million 
require the approval of the Controller, who generally grants it.  

Over the past decade, the Malaysian Ringgit (RM) has fluctuated within a 
rather narrow band -- from 2.44 to 2.75 ringgit per dollar.  The Central 
Bank manages the exchange rate in a controlled float using a basket of 
currencies weighted heavily in the U.S. dollar.  However, the recent 
decline of the dollar against the yen and other major currencies has 
seen the dollar fall below 2.4 ringgit.    


A.3  Expropriation and Compensation

The Embassy is unaware of any cases of uncompensated expropriation of 
foreign-held assets by the Malaysian Government.  The Government's 
stated policy is that all investors, both foreign and domestic, are 
entitled to fair compensation in the event that their private property 
is required for public purposes.  Should the investor and the Government 
disagree on the amount of compensation, the issue would be referred to 
the Malaysian judicial system, which has proved capable of enforcing 
property and contractual rights. 

A.4  Dispute Settlement

The Embassy is unaware of any important investment disputes involving 
foreign investors or contractors in the past several years.  Malaysia is 
signatory to the UN-sponsored Convention on the Settlement of Investment 
Disputes.  The domestic legal system is open, accessible on a non-
discriminatory basis and transparent.  Should local administrative and 
judicial facilities fail to satisfy claimants, a dispute would be 
submitted to the International Center for Settlement of Disputes (ICSID) 
under the aegis of the United Nations.  

A.5  Performance Requirements and Incentives

Apart from the equity guidelines described in section A.1 above, the 
Malaysian Government does not generally impose performance requirements 
on foreign investors.  Quite often, however, performance requirements 
are written into the manufacturing license of both local and foreign 
investors who are granted fiscal incentives.  Most often these take the 
form of export targets -- for example the license may specify that at 
least 40 percent of the output must be exported.   There have also been 
cases where the transfer of specific technology has been made a 
condition for obtaining investment tax incentives.  If a firm (foreign 
or domestic) fails to meet the terms of its license, it risks losing any 
tax benefits it may have been awarded.  In extreme cases the firm could 
lose its manufacturing license.  The Government has stated that over the 
long term it intends to eliminate gradually most of the fiscal 
incentives now offered to foreign and domestic manufacturing investors, 
as described on section A.1 above. 

A.6  Right to Ownership and Establishment

Conditions under which a foreign investor or a domestic entrepreneur may 
establish a manufacturing enterprise and engage in remunerative 
activities in Malaysia are liberal.  Certain sectors of the economy 
remain, however, essentially closed to foreigners.  Foreign service 
firms, for instance, are generally restricted to a minority interest (30 
percent).  The government severely restricts establishment in the 
financial service industry with the notable exception of fund management 
firms.  No new banking or insurance licenses are being awarded.  
Ownership of agricultural land is restricted to Malaysian citizens.  
Under the terms of the Petroleum Development Act of 1974, the upstream 
oil and gas industry is the province of the parastatal Petroleum 
Nasional Berhad (Petronas), which is the sole entity with legal title to 
Malaysian crude oil and gas deposits.  

A.7  Protection of Property Rights

Malaysia has an effective legal system and adequate legislation to 
protect private property.  It has a strong regime for protecting 
Intellectual Property Rights (IPR).  They are covered by the Trade 
Description Act of 1976, the Patent Act of 1983 and the Copyright Act of 
1987, as amended in 1990.  In addition, Malaysia has acceded to the 
Berne Convention and the Paris Convention, and is a member of the World 
Intellectual Property Organization (WIPO).

Patents registered in Malaysia generally have a 15-year duration, but 
this can be extended under certain circumstances.  Although the 
processing time for trademark registration may be as long as 18 months, 
infringement has not been a problem for American firms.  Copyright 
protection extends to computer software, and lasts for life plus 50 
years.  The Copyright Act includes enforcement provisions allowing 
Government officials to enter and search premises suspected of 
infringement and to seize infringing copies and reproduction equipment.  
Malaysia has expanded Government IPR enforcement personnel and has 
brought action against both software and video pirates. 

A.8  Regulatory System, Law and Procedures

Malaysia has a transparent system of Government economic and business 
regulation.  For tax purposes, local and foreign enterprises are treated 
on essentially the same footing.  The corporate tax rate is 30 percent, 
except in petroleum production where it is 40 percent.  There is an 
additional one percent development tax imposed, but it will be phased 
out by 1995.  

The Malaysian Government places restrictions on the number of expatriate 
personnel employed by foreign and domestic firms.  Applications for 
expatriate posts are submitted to MIDA at the same time as the 
manufacturing license application.  The following are the Government 
guidelines on the employment and retention of expatriate personnel in 
Malaysia: 

-  A company with a paid-up capital of at least US $2 million is 
automatically allowed five expatriate positions.  More can be requested. 

-  For a company with paid-up capital of less than US $2 million, 
expatriate positions may be permitted if the paid-up capital is in the 
neighborhood of RM 500,000 (US $200,000).   If allowed, expatriate 
executive posts may be retained for at most 10 years if a Malaysian 
citizen is being trained for the post.  Non-executive expatriate posts 
can be retained for at most five years, again providing a Malaysian is 
being trained.  The Malaysian Government may relax these conditions for 
certain high priority industries.  
-  In general, intra-company transfers among expatriates already given a 
work permit are permitted without the need for a new work permit. 

-  Work permits are valid for at most 10 years, although one year 
permits are more common. 

-  Work permit holders are granted multiple-entry visas valid for the 
same duration of the work permit. 

-  Companies desiring additional expatriate posts as a result of 
expansion or product diversification or to renew existing posts must 
apply to the Standing Committee on Malaysianization of the Department of 
Immigration.   

In addition, the Government of Malaysia monitors hiring practices to 
ensure that all employers strive to meet guidelines designed to ensure a 
racial balance in employment. 

A.9  Efficient Capital Markets and Portfolio Investment

Malaysia imposes no restrictions on foreign portfolio investment.  The 
Malaysian Government has in place an adequate regulatory system to 
facilitate portfolio investment.  It 1992 it established a Securities 
Commission to centralize regulation and encourage further expansion of 
the domestic capital market.  In the same year, the Government licensed 
a private company (Rating Agency of Malaysia) which rates all bonds 
before issuance.

Deepening the domestic capital market is a major Malaysian Government 
priority.  To foster development, monetary authorities grant local and 
foreign private sector liberal access to a variety of credit 
instruments.  Credit is, in general, allocated on market terms.  One 
exception is a requirement that local and foreign banks loan a small 
portion of their funds at a specified rate of interest (currently nine 
percent) to Malaysian citizens purchasing low-cost housing.  Foreign 
investors have access to credit on the local capital market, but are 
required to source at least 60 percent of local borrowings with 
domestically-incorporated banks.  As of 1994, all banks operating in the 
country are domestically incorporated, nevertheless, foreign-controlled 
banks will continue to be restricted in making loans to foreign 
investors.  No prior permission is required for borrowing less than RM 
10 million (US $4 million). 

In December 1994, Bank Negara announced a two-tiered banking system and, 
based primarily on local net worth, placed seven of the country's 34 
commercial banks in the top tier.  Describing it as a tool to motivate 
banks to become bigger and more efficient, Bank Negara allowed Tier-1 
banks to offer foreign-currency accounts to customers.  No U.S. banks 
were in the original group of seven, but Citibank became the first bank 
to cross the threshold from Tier-2 to Tier-1 in June 1995.  There is 
some concern that Tier-1 banks will continue to be allowed to offer 
extra services which could competitively disadvantage banks in Tier-2.

Foreign investors may borrow locally in foreign currency to finance 
their business activities (e.g. pay for imports) or to purchase 
Malaysian Ringgit (RM) on the local market, but may not hold local 
borrowings of foreign currency for investment abroad without permission 
of the Controller of the Currency.  

The domestic banking system is sound.  As of the end of 1994, the 34 
commercial banks held assets worth US $91 billion.  To retain tight 
control over the domestic money supply, Bank Negara Malaysia (the 
Central Bank) instituted a series of measures in 1993 which penalized 
speculators holding Ringgit offshore and placed limits on the volume of 
currency swaps.  These measures were gradually eliminated in late 1994 
and early 1995.

To date the incidence of foreign firms interested in a hostile takeover 
of a Malaysian company has been extremely small.  As noted above, take-
overs and mergers are regulated by the Malaysian Code.  

A.10  Political Violence

Although Malaysia suffered violent conflicts in the past, there is 
currently no political violence.  The country has been peaceful for over 
a generation, since the racial clashes of 1969 and the earlier communist 
insurgency.     

B.  Bilateral Investment Agreements

Malaysia has bilateral investment guarantee agreements with 29 countries 
and country groupings:  USA (1959), Germany (1960), Canada (1971), 
Netherlands (1972), France (1975), Switzerland (1978), Sweden (1979), 
Belgium and Luxembourg (1979), United Kingdom (1981), Sri Lanka (1982), 
Romania (1982), Norway (1984), Austria (1985), Finland (1985), 
Organization of Islamic Conference (1987), Kuwait (1987), ASEAN (1987), 
Italy (1988), South Korea (1988), People's Republic of China (1988), 
United Arab Emirates (1991), Denmark 91992), Vietnam (1992), Papua New 
Guinea (1992), Chile (1992), Laos (1992), Taiwan 91993), Hungary (1993) 
and Poland (1993).   

Malaysia has a limited Investment Guarantee Agreement with the United 
States under the U.S. Overseas Private Investment Corporation (OPIC) 
program.  Efforts to negotiate a more comprehensive Bilateral Investment 
Treaty still require resolution of several issues, the most important of 
which is differing interpretations of national treatment.  

Malaysia has a limited taxation treaty with the U.S., which provides for 
reciprocal exemptions for taxes on income by shipping and air transport 
enterprises.  It also has tax treaties with 39 other countries:  
Singapore (1968, 1973), Japan (1970), Sweden (1970), Denmark (1970), 
Norway (1970), Sri Lanka (1972), United Kingdom (1973), Belgium (1973), 
Switzerland (1974), France (1975 and 1991), New Zealand (1776), Canada 
(1976), India (1976), Germany (1977), Poland (1977), Australia (11980), 
Thailand (1982), South Korea (1982), Philippines (1982), Pakistan 
(1982), Romania 91982), Bangladesh (1983), Italy (1984), Finland (1984), 
People's Republic of China (1985), Commonwealth of Independent States 
(1988), Netherlands (1988), USA (1989), Hungary (1899), Austria (1989), 
Yugoslavia (1989), Indonesia (1991), Mauritius (1992), Iran (1992), 
Papua New Guinea (1993), Saudi Arabia (1993), Sudan (1993), Albania 
(1994), and Zimbabwe (1994).  

With the United States, Malaysia has a tax agreement limited to air and 
sea transportation.  Negotiation of a comprehensive agreement was re-
opened in 1992.

C.  OPIC and Malaysia

Since 1959 Malaysia has qualified for the U.S. Overseas Private 
Investment Corporation (OPIC) insurance programs.  However, given 
Malaysia's political stability, positive attitude towards foreign 
investors and available dispute settlement mechanism, few investors have 
sought OPIC insurance in Malaysia.

D.  Labor

The Malaysian economy is at or near full employment.  The official 
unemployment rate for 1994 was 2.9 percent (down from 3.0 percent in 
1993).  Unlike the US employment statistic, the Malaysian figure 
includes workers no longer actively seeking employment.  Excluding these 
workers, unemployment is well below 3.0 percent.  Local and foreign 
firms report difficulty in obtaining workers at all skill levels. 

Labor relations in Malaysia are generally good, and Malaysian labor 
unions, who account for less then 10 percent of the workforce, act 
responsibly.  The Government discourages strikes through a system which 
promotes settlement through negotiation or arbitration by the Industrial 
Court.  Once a case is referred to the Industrial Court, both management 
and labor are barred from further industrial action until resolution has 
been reached.  The Malaysian Government prohibits the formation of a 
national union in the electronics industry, but allows in-house unions.  

E.  Foreign Trade Zones/Free Ports

Foreign and domestic investors have equal access to Malaysia's ten Free 
Industrial Zones (FIZ's), located in the states of Penang, Melaka, 
Selangor, Johor and Perak.  To be eligible, a firm must export all 
production (although the Malaysian Government will also consider 
applications from companies that export at least 80 percent of output).  
Raw materials and components imported for use in export production in 
the FIZ and exported abroad are not subject to duty.  No restrictions 
are placed on a company's choice of suppliers.  

Investors may apply to sell a portion of their FIZ production on the 
domestic Malaysian market, subject to domestic duties but eligible for 
duty drawbacks and available exemptions.  For manufacturers located 
outside FIZ's, sales to companies with facilities within a Malaysian FIZ 
were formerly considered exports, a potentially key fact for a foreign 
firm with an export requirement written into its license.  

In addition to the FIZ's, Malaysia offers firms wishing to locate in 
other parts of the country the opportunity to establish themselves as 
Licensed Manufacturing Warehouses (LMW's), which operate on the same 
principles as an FIZ.  This means an investor can essentially set up a 
"mini-FIZ".  

Malaysia has two Free Ports:  Labuan Island (offshore of Sabah) and 
Langkawi Island (offshore of the northwestern peninsular state of 
Kedah).  Labuan is also the site of Malaysia's infant International 
Offshore Financial Center (IOFC). It was set up in 1990 and is designed 
to promote development of offshore banking and insurance.  Langkawi is 
primarily devoted to the tourist trade.  

F.  Capital Outflow Policy

Malaysia is relatively free of foreign exchange restrictions. Malaysians 
are currently not permitted, however, to borrow funds on the domestic 
capital market for investment abroad. 

As the country industrializes, it is becoming a foreign investor itself.  
In 1992, the Malaysian Government announced plans to implement 
incentives for outward investment for certain industries in which 
Malaysia has a comparative advantage, such as rubber estate management 
and palm oil processing.  The Prime Minister and other cabinet officials 
have led trade missions to other developing countries to encourage 
Malaysian outward investment.  A special cabinet committee has been 
formed to propose measures.  The latest available Bank Negara (central 
bank) estimate put Malaysian direct investment abroad at RM 554 million 
(US $200 million) in 1990, over a third (35 per cent) in Hong Kong.  

G.  Foreign Direct Investment Statistics

See tables in Appendix A, Section 4. The data on approved applications 
for manufacturing investment were supplied by the Malaysian Industrial 
Development Authority (MIDA).  They do not include foreign investment in 
the upstream oil and gas industry (exploration, production and 
development), which the national petroleum company, Petronas, puts at RM 
8.5 billion (US $3.4 billion) annually.   In addition, the data record 
only project approvals, not actual disbursements or reinvestment by 
existing foreign manufacturers.  A 1992 Bank Negara (central bank) 
survey of manufacturers revealed that 17 percent of total project cost 
is disbursed in the first year following approval, 53 percent in the 
second year and the balance by the end of the third year. 

H.  Major Foreign Investors

On a manufacturing project approval basis, the US has been one of the 
top foreign investors in Malaysia for the last several years.  In 1994 
the approved proposed investment from the US was US $ 501 million, 
behind Japan and Taiwan.  The three countries made up approximately 75 
percent of the total foreign investment in Malaysia.  Other major 
foreign investors are from Hong Kong (US $ 349 million) and Singapore 
(US $ 426 million).  

US firms with a significant investment in Malaysia include:  Exxon, all 
major semi-conductor manufacturers (e.g. Motorola, Texas Instruments, 
Intel, National Semiconductor, Harris), a number of computer component 
makers (e.g. Seagate, Komag), the toy maker Mattel and the medical 
products manufacturer Baxter International.  Virtually all the major 
Japanese consumer electronics firms (e.g. Sony, Panasonic) have 
facilities in Malaysia.
 

VIII.  Trade and Project Financing

Malaysia has a dynamic and sound banking sector.  It comprises the Bank 
Negara (central bank), 24 locally-incorporated commercial banks, sixteen 
foreign-incorporated commercial banks (all foreign-incorporated banks 
were required to incorporate locally by September, 1994), twelve 
merchant banks, seven discount houses, and forty-one finance companies.  
In March 1995, commercial banks held assets of US$ 101,627 million, of 
which domestic banks held 75%.  The top five commercial banks hold about 
three-quarters of total assets.  Three U.S. banks have operations in 
Malaysia:  The Bank of America, Citibank and Chase Manhattan Bank have 
branches in Kuala Lumpur; Citibank also has a branch in Penang.  Most 
Malaysian banks have correspondent relationships with banks in the 
United States.  A list of Malaysian commercial banks are included in 
Appendix C. 

Exports to Malaysia may be financed through letters of credit issued to 
importers by banks in Malaysia.  Finance is readily available on the 
domestic market to Malaysian importers.  There are no foreign exchange 
controls which would impede trade.  The Malaysian Ringgit is freely 
convertible.  All payments to non-residents for any purpose are freely 
permitted, subject only to the completion of a simple form for 
remittances of more than RM 10,000 (US$4000).  No permission is required 
from the Controller of the Currency for a company to maintain inter-
company accounts with associate companies, branches, or other companies 
outside Malaysia.

In addition to the Malaysian banking sector, exports to Malaysia can be 
supported by the U.S. Export-Import Bank (EXIMBANK), which can provide 
direct or intermediary loans, loan guarantees to enable a foreign buyer 
to secure private credit, loan guarantees to a private creditor to 
provide working capital to an exporter, and insurance policies for 
exporters to eliminate both political and commercial risk of repayment 
by foreign purchasers.  Most recently, for example, EXIM has been 
involved in financing the sale of Boeing aircraft to the Malaysian 
national airline, MAS.  

Export financing is also available through the U.S. Small Business 
Administration, which provides regular business loans, a revolving 
export line of credit, joint guarantees with the EXIMBANK, investment 
company financing, long-term asset financing, and international trade 
loans to compete, export, and develop export markets.  For exporters of 
agricultural products, the U.S. Department of Agriculture Market 
Promotion Program has been used to promote export market development 
efforts in Malaysia.

Major infrastructure projects have been funded by a variety of means, 
including Malaysian government funds, the domestic capital markets, 
international consortia, loans from the Asian Development Bank (ADB), 
and supplier credits.  In the case of the new Kuala Lumpur International 
Airport (KLIA), for example, the Japanese Government has indicated an 
intention to make available a long term soft loan of $600 million 
through the Overseas Economic Cooperation Fund.  This will, however, 
only cover a portion of the costs, the bulk of which will have to be 
raised on the capital markets.    


CHAPTER IX.  Business Travel

U.S. business visitors to Malaysia do not require visas unless they are 
coming for the purpose of employment in the country.  Business visitors 
may be issued passes at the point of entry for the purpose of attending 
business meetings and conducting business negotiations in Malaysia.  
However, anyone who is to be employed in Malaysia, or to engage in work 
in Malaysia such as the overseeing of the installation of equipment on a 
project, must apply for a business or professional pass prior to arrival 
in Malaysia.     
English is widely spoken in Malaysia and is commonly used in business.  

Malaysia is well served by a number of international airlines through 
Kuala Lumpur.  Further international connections are less than an hour 
away in Singapore, with which there is a joint Malaysian 
Airlines/Singapore Airlines air shuttle service.  Within the country, 
Malaysian Airlines provides frequent service to all major cities.  The 
most recent innovation in transportation in the country is the 
completion in February, 1994, of the North-South Highway.  Stretching 
the length of the peninsula, it has reduced driving time from Singapore 
to the Thai border to 7 hours.  This is already having an impact on 
industry location decisions as well as on business travellers between 
Kuala Lumpur, Singapore, and Penang, where much of the electronics 
industry is located.    

Kuala Lumpur and other major cities in Malaysia have world class hotel 
accommodations catering to both business visitors and international 
tourism.  For longer stays in the country the market for rental housing 
and apartments in the Kuala Lumpur area is large and not overly 
expensive by regional standards.  Food in Malaysia includes the three 
local cultures -- Malay, Chinese, and Indian -- as well as restaurants 
specializing in U.S., Japanese, Korean, and European cuisine.  Kuala 
Lumpur has a state-of-the-art U.S.- operated medical facility.  
International telephone service from Malaysia is only adequate, and more 
investment is being undertaken to keep up with the very rapid growth in 
demand.  In recent years there have been occasional power outages 
affecting industry, including a national blackout in 1993 and a blackout 
in Penang in June/July 1995 which cut power to the factories for more 
than a week, but this problem should be eliminated in the next two years 
as several new private power generating plants come on line.   

The following are commercial holidays for 1996: 
(NB: * indicates subject to change)

January 1           New Year's Day (Monday)
February 1          Kuala Lumpur City Day (Thursday)
February 19 & 20    Chinese New Year (Monday/Tuesday)
February 21 & 22*   Hari Raya Puasa (Wednesday/Thursday)
April 28*           Hari Raya Haji
May (day unknown)*  Wesak Day
May 1               Labor Day (Wednesday)
May 19*             Awal Muharam
June 1              Agong's Birthday (Saturday)
July 28*            Prophet Mohamad's Birthday
August 31           National Day (Saturday)
October/November 
(day unknown)*     Deepavali
December 25        Christmas (Wednesday)




CHAPTER X:  APPENDICES

A.  COUNTRY DATA


Population:    19.50 million (1994); 19.96 million (1995)  (World Bank 
projection)

Population 
Growth Rate:  2.41% per annum (Malaysian Ministry of Finance-Economic 
Report 1994/95)

Religion:     Islam (the official religion and that of most of the Malay 
population, about 60% of the national total); Buddhist, Confucian, 
Taoist (much of the Chinese population, about 30% of the national 
total); Hindu (much of the Indian population, about 10% of the national 
total); Christian (about 3%). 

Government
System:     Constitutional monarchy with a parliamentary structure, with 
executive power vested in a Prime Minister.  UMNO, the United Malays 
National Organization, has held dominant power since independence in 
1957, in coalition with smaller Chinese and Indian parties. 

Languages:     Bahasa Malaysia is the national language.  However, 
English is widely understood and used in business.  Chinese and Indian 
languages are used within their respective communities. 

Work Week:    Government and most businesses:
        Monday - Thursday:  8:00 a.m. - 12:45 p.m. 
                  2:00 p.m. -  4:15 p.m. 
            Friday:  8:00 a.m. - 12:15 p.m.
                  2:45 p.m. -  4:15 p.m. 
            Saturday:  8:00 a.m. - 12:45 p.m.

        In Kelantan, Terengganu, Johor, Perlis and Kedah States:
        Saturday - Wednesday:  8:00 a.m. - 12:45 p.m. 
                      2:00 p.m. -  4:15 p.m. 
              Thursday:    8:00 a.m. - 12:45 p.m. 

        U.S. Embassy: 
          Monday - Friday:    7:45 a.m. - 4:30 p.m.


B.  DOMESTIC  ECONOMY
                                1994    1995    1996

Real GDP: (US$millions)        41,855  48,749  56,549
Real GDP Growth Rate (%)          8.7     8.9      8.8      
GDP per capita:(US$)            3,627   4,282    5,053
Govt. spending as % of GDP         41      39       37
Inflation (%)                     3.7      4       4
Unemployment (%)                  2.9     2.8      2.7
Foreign Exchange Reserves      26,020     --       --
  (US$millions)      
Avg. Exchange Rate for 1 USD     2.62    2.45     2.40    
Debt Service Ratio (%)            4.9     --       --
US economic/military
  assistance (International
  Military and Education
  Training)                       0.3     0.5     0.6


C.  TRADE

OVERALL:  (US $ millions)
                               1994    1995    1996
Total Malaysian Exports      58,660  67,459  77,577
Total Malaysian Imports      59,511  66,652  75,316
U.S. Exports to Malaysia      9,930  11,221  12,792  
U.S. Imports from Malaysia   12,413  14,399  16,127
U.S. Share of Malaysian       16.7%   16.8%   17.0%
  Imports (%)

(Sources:  Malaysian Official Statistics; U.S. Embassy Estimates)


IMPORTS OF MANUFACTURED GOODS:  (US $ millions)

                               1994    1995    1996

Total Malaysian Imports      52,110  58,363  65,367
  of Manuftd Goods 
Imports of Manuftd            8,999  10,259  11,695
  Goods from U.S.
U.S. Share (%)                 17.3%  17.6%  17.9%
Manuftd Goods Trade            2,442  2,500  2,550
  Balance with U.S.
Proj. Avg. Growth Rate           12%    12%    12%
  from World Through 1996(%)
Proj. Avg. Growth Rate           13%    14%    14%
  from U.S. Through 1996(%)             
      
(Sources:  Malaysian Official Statistics; U.S. Embassy Estimates)


IMPORTS OF AGRICULTURAL GOODS:  (US $ millions)
 
                                 1994   1995   1996          
Total Imports of 
  Agricultural Goods            3,556  3,980  4,400        
Imports of Agricultural 
  Goods from U.S.                 271    420    460
U.S. Share (%)                    7.6   10.6   10.5
Agricultural Goods Trade
  Balance with U.S.               253    230    220



MALAYSIAN TRADE BALANCE WITH THREE LEADING PARTNERS IN 1994  (US $ 
millions)

1.  Japan -  -8,884
2.  Singapore -   3,771
3.  US -   2,484  

(Sources:  Malaysian Official Statistics)


PRINCIPAL U.S. EXPORTS TO MALAYSIA, 1994

1.  Group 776, Thermionic valves and tubes, integrated circuits and 
parts, valued at US $3,474 million.

2.  Group 792, Aircraft and associated equipment, spacecraft and parts 
thereof, valued at $1,934 million.

3.  Group 641, Paper and paperboard, valued at US $167 million. 

4.  Group 764, Telecommunications equipment, parts and accessories, 
valued at US $127 million.

5.  Group 752, Automatic data processing machines and units thereof, 
valued at US $116 million.
 
(Sources:  Malaysian Official Statistics)

PRINCIPAL U.S. IMPORTS FROM MALAYSIA, 1994

1.  Group 776, Thermionic valves and tubes, integrated circuits and 
parts, valued at US $3,369 million.

2.  Group 759, Parts and accessories for office machines, valued at US 
$1,156 million. 

3.  Group 762, Radio broadcast receivers, valued at US $998 million.

4.  Group 763, Sound recorders or reproducers, valued at US $926 
million.

5.  Group 752, Automatic data processing machines and units thereof, 
valued at US $772 million.  

(Sources:  Malaysian Official Statistics)

D.  INVESTMENT STATISTICS

  Table One: Sources of Investment in Malaysia:
  (US $ millions; shares in percent)

COUNTRY           1991   1992  1993  1994

U.S.               719  1,320  703    501
Japan            1,482  1,074  664    706
Taiwan           1,443    600  358  1,150
Singapore          446    177  209    426
Hong Kong          240      -   38    349
Korea              728      -    -    164
Indonesia          497    192   98      -
Germany              -      -    -    262
Australia          164    850    -     70
United Kingdom     218    522   18     38  
Italy                -      -    -     21

TOTAL            5,937  4,735  2,088  3,687

US Share        12.11%  27.88%  33.67%  13.59%
Foreign          5,937  4,735    2,088   3,687          
Domestic         4,470  3,922    2,688     -
Foreign Share   57.05%  54.70%  43.72%


Source:  Malaysian Industrial Development Authority (MIDA)
  
  Table Two: Foreign Investment by Sector:
  (US $ Million)

SECTOR                 1991  1992  1993  1994

Food Mfg.               134    85  154  N/A
Textile                 145   454  152  
Paper, Print             59    13   45  
Chemicals               720   518  653  
Petroleum               942 3,924    0  
Rubber Products          56   159   27  
Non-Metal               680   131   30  
Basic Metal           1,232   304  277  
Mfg'd Metal             614    38   30
Electronics             749   375  663
Transport                75    31  118
Other                   491   398   77
TOTAL                 5,859 6,969 2,226

Source:  Malaysian Industrial Development Authority (MIDA)


E.  U.S. AND COUNTRY CONTACTS


1.  U.S. Embassy Trade Personnel

Foreign Commercial Service
B. Paul Scogna, Commercial Counselor
Stephen Alley, Commercial Attache
Joseph J. Koo, Assistant Commercial Attache
U.S. Embassy, Kuala Lumpur, Malaysia
376 Jalan Tun Razak, Kuala Lumpur

APO Postal Address from the US:
Commercial Section
American Embassy
APO AP 96535-8152

Tel: (60)(3) 248-9011
Fax: (60)(3) 242-1866

Foreign Agricultural Service 
Kent Sisson, Agricultural Attache
U.S. Embassy, Kuala Lumpur, Malaysia
376 Jalan Tun Razak, Kuala Lumpur

APO Postal Address from the US: 
Agricultural Attache
American Embassy
APO AP 96535-8152

Tel: (60)(3) 248-9011
Fax: (60)(3) 242-1866

Economic Section
Deborah Linde, Economic Counselor
Dan Moore, Economic Officer     
Daniel Martinez, Economic Officer
Robert Winchester, Economic Officer
U.S. Embassy, Kuala Lumpur, Malaysia
376 Jalan Tun Razak, Kuala Lumpur

APO Postal Address from the US
Economic Counselor
American Embassy
APO AP 96535-5000

Tel: (60)(3) 248-9011
Fax: (60)(3) 242-2207

U.S. - Asia Environmental Partnership Program (US-AEP)
Cathy Fuselier, Director
Suite 20-02, Menara Tan & Tan
207 Jalan Tun Razak, Kuala Lumpur

2.  Malaysian Government Agencies:

Ministry of International Trade and Industry (MITI)
YB Dato' Seri Rafidah Aziz, Minister
YB En. Kerk Choo Ting, Deputy Minister) 
Blk. 10, Government Offices Complex
Jalan Duta
50622 Kuala Lumpur
Tel: (60)(3) 254-0033
Fax: (60)(3) 255-0827

Ministry of Energy, Telecommunications and Posts
YB Datuk Leo Moggie Anak Irok, Minister
1st Floor, Wisma Damansara
Jalan Semantan
59668 Kuala Lumpur
Tel: (60)(3) 256-2222
Fax: (60)(3) 255-7901

Ministry of Science, Technology & Environment
YB Datuk Law Hieng Ding, Minister
14th Floor, Wisma Sime Darby
Jalan Raja Laut, Kuala Lumpur
Tel: (60)(3) 293-8955
Fax: (60)(3) 392-6006


Ministry of Works
YB Datuk Seri S. Samy Vellu, Minister
Jalan Sultan Salahuddin
50580 Kuala Lumpur
Tel: (60)(3) 291-9011
Fax: (60)(3) 292-1202

Malaysian Industrial Development Agency (MIDA)
YBhg Tan Sri Datuk Zainal Abidin Sulong, Chairman
YBhg Dato' Zainun Aishah bt Dato' Ahmad, Director General
Wisma Damansara, Jalan Semantan
P.O. Box 10618 50720 Kuala Lumpur
Tel: (60)(3) 255-3633
Fax: (60)(3) 255-7970


3.  Country Trade Associations/Chambers of Commerce

American - Malaysian Chamber of Commerce (AMCHAM)
John H. Hawes, Executive Director
11.03 AMODA, 22, Jalan Imbi
Kuala Lumpur 55100, Malaysia
Tel: (60)(3) 248-2540
Fax: (60)(3) 242-8540  

Federation of Malaysian Manufacturers (FMM)
Mr. Tan Keok Yin
Chief Executive Officer
17th Floor, Wisma Sime Darby
Jalan Raja Laut, 50359 Kuala Lumpur
Tel: (60)(3) 293-1244
Fax: (60)(3) 293-5105

Malaysian International Chamber of Commerce & Industry
Peter J. L. Jenkins, Executive Director
Wisma Damansara
P.O. Box 10192
50706 Kuala Lumpur
Tel: (60)(3) 254-2205
Fax: (60)(3) 255-4946

PITO Malaysia (Private Investment and Trade Opportunities)
Goon Veiven, Director
Yee Seng Building, 7th floor
15 Jalan Raja Chulan
50200 Kuala Lumpur
Tel: (60)(3) 238-9491
Fax: (60)(3) 238-9493


4.  Malaysian Market Research Firms (partial list)
 
J. Walter Thompson Sdn. Bhd.
Jennifer Chan, Managing Director
21st Floor, Wisma Sime Darby
Jalan Raja Laut
50350 Kuala Lumpur
Tel: (60)(3) 291-7788
Fax: (60)(3) 293-9363

Burson-Marsteller (M) Sdn. Bhd.
Monica Voon, Managing Director
11th Floor, Bangunan Getah Asli
148 Jalan Ampang
50450 Kuala Lumpur
Tel: (60)(3) 261-7900
Fax: (60)(3) 261-3828

Leo Burnett Advertising Sdn. Bhd. 
Philip J. Fiebig, Managing Director
10th Floor, MCB Plaza
6 Changkat Raja Chulan
50200 Kuala Lumpur
Tel: (60)(3) 201-0998
Fax: (60)(3) 201-0972

Lintas Worldwide (M) Sdn. Bhd.
Jim Bell, Managing Director
Wisma Perdana, Jalan Dungun
Damansara Heights
50490 Kuala Lumpur
Tel: (60)(3) 254-5122
Fax: (60)(3) 255-9985

Bozell Sdn. Bhd.
Robert A. Seymour, Chief Executive Officer
18A Jalan SS 22/25
47400 Petaling Jaya
Tel: (60)(3) 719-2332
Fax: (60)(3) 717-1841

Ogilvy & Mather (M) Sdn. Bhd.
John R. Hoyle, Group Managing Director
8th Floor, Wisma MCIS
Jalan Barat
46200 Petaling Jaya
Tel: (60)(3) 756-9066
Fax: (60)(3) 755-4572

McCann Erickson (M) Sdn. Bhd. 
Ray A. Dempsey, Managing Director
18th Floor, Menara Aik Hua
Cangkat Raja Chulan
50200 Kuala Lumpur
Tel: (60)(3) 230-5677
Fax: (60)(3) 230-5598 


5.  Malaysian Commercial Banks (partial list)

Citibank
Citibank Building
28 Medan Pasar
P.O. Box 10112, 50904 Kuala Lumpur
Tel: (60)(3) 232-8585
Fax: (60)(3) 232-8763

Bank of America
P.O. Box 10950 
50730 Kuala Lumpur
Tel: (60)(3) 242-2755
Fax: (60)(3) 248-0301

Chase Manhattan Bank
Bangunan Pernas International
Kuala Lumpur
Tel: (60)(3) 262-0011

Bank Bumiputra Malaysia Berhad
Menara Bumiputra, Jalan Melaka, 50100 Kuala Lumpur
Tel: (60)(3) 298-8011
New York Office:  BBMB, 900 Third Avenue
        11th Floor, New York, N.Y. 10022
                  Tel: (212) 644-1280

Bank of Commerce
6 Jalan Tun Perak, 50050 Kuala Lumpur
Tel: (60)(3) 292-1722
Fax: (60)(3) 298-6628

Malayan Banking Berhad (Maybank)
Menara Maybank, Kuala Lumpur
Tel: (60)(3) 230-8833

United Malayan Banking Corporation Berhad
Bangunan UMBC, Jalan Sultan Ismail, Kuala Lumpur
Tel: (60)(3) 230-5833
Fax: (60)(3) 232-2627

MBF Finance Berhad
Plaza MBF, Kuala Lumpur
P.O. Box 10027, 50901 Kuala Lumpur
Tel: (60)(3) 261-1177
Fax: (60)(3) 261-8124

Public Bank Berhad
Bangunan Public Bank, 6 Jalan Sultan Sulaiman
50000 Kuala Lumpur
Tel: (60)(3) 274-1788
Fax: (60)(3) 274-2179


6.  Washington-based US Government Contacts for Malaysia

U.S. Department of Commerce, IEP 
Raphael Cung
Room 2308
14th & Constitution Ave., NW
Washington, D.C. 20230
Fax: (202) 482-4453

U.S. Department of Commerce
Herbert Cochran, Regional Director
Amy Benson, Associate Director
Room 1229
14th and Constitution Ave., NW
Washington, D.C. 20230
Fax: (202) 482-5179

EXIMBANK
Frank Wilson, Loan Officer for Asia
811 Vermont Ave., NW
Washington, D.C. 20571
Tel: (202) 566-8877
Fax: (202) 566-7524

Overseas Private Investment Corporation (OPIC)
Maurice Johnson, Insurance Officer
Tel: (202) 457-7044
Victoria Peters, Finance Officer
Tel: (202) 457-7182

Trade Development Agency (TDA)
Frederick Eberhart, Regional Director Asia
Tel: (703) 875-4357
Talaat Rahman, Country Manager, Malaysia    
Tel: (703) 875-4357

Trade Promotion Coordinating Committee
Trade Information Center
Tel: (800)-USA-TRADE

U.S. Department of Agriculture
Foreign Agricultural Service
Trade Assistance and Promotion Office
Tel: (202) 720-7420


7.  U.S.-Based Multipliers Relevant for Malaysia

U.S. - ASEAN Council for Business and Technology
Robert Driscoll, President
1400 L. St., NW, Suite 375
Washington, D.C. 20005-3509
Tel: (202) 289-1911
Fax: (202) 289-0519

Pacific Basin Economic Council (PBEC)
Ann R. Wise, Director General
PBEC U.S. Member Committee
1100 Connecticut Avenue, NW, Suite 1300
Washington, D.C. 20036
Tel: (202) 728-0993
Fax: (202) 728-0998


F.  MARKET RESEARCH 

Available and Forthcoming USDOC/Foreign Commercial Service (FCS) 
Industry Sector Analysis (ISA's)

Available ISAs from 1995:

Computers & Peripherals (2/95)
Drilling & Boring Machinery & Tools (3/95)
Environmental Impact Assessments (3/95)
Surgical Appliance/Supplies (1/95)


Forthcoming ISA's for Fiscal Year 1996:

Pollution Control Equipment
Telecommunications Equipment
Franchising
Computer Software
Electrical Power System
Drugs/Pharmaceuticals
Major Projects in Malaysia (non-ISA)


Available and Forthcoming USDA/Foreign Agricultural Service Commodity 
Reports and Market Briefs:

Cocoa report
Grain and Feed report
Oilseeds and Products report
Sugar report
Tobacco report
Forest products report
General agriculture situation report
Swine and Pork Products Report
Poultry Report
Overview of the Malaysian Market for Foodstuffs
Malaysian Market for Snacks
Malaysian Market for Cookies and Crackers
Expansion of the Malaysian Food Service/Hotel Industry
New Import Duties on Food and Agricultural Products

F.  TRADE EVENT SCHEDULE

U.S. Department of Commerce, Commercial Service:

Event:  COMDEX/Fall '95 (International Buyer Program)
Date:   November 13-17, 1995
Location:  Las Vegas
* USFCS Kuala Lumpur is recruiting and leading a delegation of 150 
Malaysian buyers to this event.


Event:  Langkawi International Maritume & Aerospace Exhibition LIMA '95
      (Certified Trade Mission) 
Date:   December 5 - 10, 1995
Location:  Langkawi, Malaysia


Event:  Electric Power Generation/Transmission (Matchmaker Trade 
Mission)
Date:   April 1996
Location:  Kuala Lumpur


Event:  Computer Software Trade Mission
Date:   August 1996
Location:  Kuala Lumpur

U.S. Department of Agriculture, Foreign Agricultural Service:

Event:  Food and Hotel Asia 
Date:   September 24-27, 1995
Location:  Kuala Lumpur

Note:  Because trade event schedules may change, firms should consult 
the Export Promotion Calendar on the NTDB or contact the U.S. Embassy 
Kuala Lumpur for the latest information.
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