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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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