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Doing Business in Malaysia

Each year, the U.S. Commercial Service Malaysia produces a Country Commercial Guide. This guide presents a comprehensive look at Malaysia’s commercial environment, reviews economic and political conditions and trends, identifies commercial opportunities for U.S. exports and investment, and also the overall investment climate in Malaysia. CCGs are prepared annually at U.S. embassies for use by U.S. businesses and U.S. government organizations, and they represent the combined efforts of several U.S. Government agencies.

Below are summaries of select elements of our CCG-Malaysia. For a copy of the guide, or for further details on doing business in Malaysia, please email office.kualalumpur@trade.gov.

Market Overview

  • The Malaysian economy grew 5.6% in 2012, an increase from 5.1% in 2011. Forecasts for 2013 range between 3.5% and 5%.
  • Merchandise trade data for 2013 ranks Malaysia as the 25th largest export market for United States products. The U.S. is Malaysia’s fourth largest trading partner, behind China, Singapore and Japan. Total U.S.-Malaysian bilateral merchandise trade in 2013 was over $40 billion. U.S. goods exports to Malaysia for 2013 totaled $13.0 billion, while imports from Malaysia were $27.3 billion, resulting in a merchandise trade deficit of $14.3 billion.
  • With respect to trade in services, the U.S. carries nearly a $1.1 billion trade surplus with Malaysia, with U.S. service exports to the country totaling $2.5 billion and imports of $1.4 billion in 2012 (the most recent available data).
  • The stock of U.S. foreign direct investment (FDI) in Malaysia was $15 billion in 2012, up from $13.9 billion in 2011; and the stock of Malaysian FDI in the United States was $1.7 billion. The United States is Malaysia’s largest foreign investor. Factoring in investments among affiliates in the financial and oil and gas sectors would make U.S. FDI significantly higher (perhaps more than $30 billion).
  • is one of the 12 Trans-Pacific Partnership (TPP) negotiating countries. Through the TPP, Malaysia hopes to modernize its economy to reach developed nation status by 2020 and to attract more foreign FDI, as it faces tough competition from other countries in the region. Malaysia is also an active member of the Association for Southeast Asian Nations, the Asia-Pacific Economic Cooperation forum, and the World Trade Organization.

Market Challenges

  • Duty rates and systems of import permits in protected industries, such as automotive and motorcycles, combined with excessive excise taxes, continue to block open trade in these sectors.
  • Government restrictions hamper foreign involvement in several areas, including government procurement contracts; financial, business and professional services; and telecommunications. In many cases, it is imperative to have a local partner, usually an ethnic or indigenous Malay, known as a Bumiputra, in order to effectively compete in the market.

Market Opportunities

  • Malaysia has joined the United States and seven other countries in negotiations for a regional Trans Pacific Partnership (TPP) free trade agreement.
  • In 2010, the Government of Malaysia (GOM) removed Foreign Investment Committee (FIC) investment guidelines, enabling transactions for acquisitions of interests, mergers and takeovers of local companies by domestic or foreign parties without FIC approval.
  • Also in 2010, GOM initiated four economic programs to spur additional investment: the New Economic Model (NEM) economic policy reform platform, the Economic Transformation Program (ETP) intended to stimulate foreign and domestic private investment, the Government Transformation Program (GTP) to decrease corruption and improve Malaysia’s social safety net, and the Tenth Malaysia Plan (10MP) to guide public sector capital expenditures.
  • The NEM proposes reforming ethnic biases in business ownership and social safety net programs by improving the government delivery system and reducing the cost of doing business as well as divesting state enterprises. These reforms face significant domestic political opposition.
  • The ETP includes large infrastructure projects such as expansion of the existing light-rail network, and large projects in the oil, gas and petrochemical sectors. All of these projects present opportunities for U.S. companies.

Market Entry Strategy

  • Most exporters find using local distributors an easy first step for entering the Malaysian market. A local distributor is typically responsible for handling customs clearance, dealing with established wholesalers/ retailers, marketing the product directly to major corporations or the government and handling after-sales service.
  • Sales to the government require a local agent and/ or a joint venture partner, usually a Bumiputra. Additionally, direct involvement by the U.S. company and demonstrations of long-term commitment to the local market are essential for contracts of significant size. The Malaysian government makes use of offsets and other measures to encourage technology transfer, particularly in defense procurements.

For further details on Doing Business in Malaysia, U.S. companies and U.S. commercial organizations may send an email to office.kualalumpur@trade.gov to get a copy of our most recent Country Commercial Guide (CCG). Exclusively for our U.S. clients and partners, this guide presents a comprehensive look at Malaysia’s commercial environment, reviews economic and political conditions and trends, identifies commercial opportunities for U.S. exports and investment, and also the overall investment climate in Malaysia. CCGs are prepared annually at U.S. embassies and represent the combined efforts of several U.S. Government agencies.