Challenges of Doing Business in Malaysia
Malaysia attracts investors because of its strong economy, modern infrastructure, and location in Southeast Asia. But running a business there isn’t all smooth sailing.
This article explores the specific challenges businesses face in Malaysia, covering everything from starting up to understanding the local culture.
1. Starting a Business in Malaysia
Starting a business venture in Malaysia is a strategic move, but it necessitates meticulous planning. The process involves nine procedures, spanning approximately two weeks.
Initiating with an application to the Companies Commission of Malaysia (CCM) ensures the availability of the proposed company’s name.
Subsequently, the Company Secretary undertakes the preparation of company incorporation documents, leading to registration with the CCM’s one-stop shop.
This streamlined process sets the stage for opening a bank account and subsequent registrations for goods and services tax, income tax, PAYE, Employee Provident Fund, and Social Security.
2. Taxation Challenges and Incentives
Malaysia’s tax landscape presents complexities that demand a thorough understanding. Beyond corporate income rates, businesses struggle with taxes on interest, real estate, and vehicles. However, the government offers tax incentives tailored to stimulate investment.
These incentives include policies favouring specific industries and fostering a business-friendly environment.
3. Trading Across Borders
Malaysia’s advantage as a manufacturing centre in Asia is highlighted by its cost-effective trading environment. However, businesses must brace for the time-intensive import and export processes.
With over 38 hours required for export and 43 hours for import, meticulous preparation and adherence to documentation procedures become imperative.
4. Cultural Considerations in Business
Malaysia’s rich culture, shaped by Malays, Chinese, and Indians, presents both opportunities and challenges for business engagement. Effectively communicating and building relationships necessitate an understanding of cultural nuances.
Frequent visits, engagements and understanding provide a firsthand experience of Malaysia’s multicultural acceptance.
5. Business Licence Requirements
Acquiring various licences is important for businesses to operate legally. General licences cover fundamental aspects like company registration, income tax registration, and social security organisation enrollment.
Industry/sector-specific licences cater to specific sectors, while activity-specific licences regulate particular business activities. Engaging professional services, including Japan Desk and China Desk, streamlines the licensing process for foreign businesses, ensuring they meet all legal requirements.
6. Entry Permits, Banking Challenges, and Accounting Services
Foreign investors encounter challenges in securing entry permits and opening corporate bank accounts. Engaging accounting services in Malaysia becomes important for compliance with local regulations.
The establishment of Japan Desk and China Desk further facilitates seamless interactions for businesses from these regions, ensuring comprehensive support and enhancing cross-cultural collaboration.
7. Halal Certification for Businesses
For businesses dealing with food or goods, adhering to halal standards is imperative in Malaysia, a predominantly Muslim country. Obtaining halal certification from the Department of Islamic Development Malaysia (JAKIM) is mandatory.
Strict conditions, including business licences and compliance with halal standards, must be met. Non-compliance with halal regulations could result in penalties, emphasising the importance of understanding and adhering to cultural and religious considerations.
8. Dealing with Construction Permits
The good news for businesses dealing with construction permits, is that Malaysia has streamlined the process of obtaining construction permits, catalysing growth in the construction sector. The involved 11 procedures take an average of 54 days, reflecting the government’s commitment to facilitating infrastructure development.
In Summary
Successfully overcoming the challenges of doing business in Malaysia requires a blend of local knowledge, strategic planning, and a proactive approach. While challenges exist, Malaysia’s economic potential and business-friendly environment continue to attract investors globally.
By engaging the services of professionals, such as accounting services in Malaysia, businesses can not only overcome challenges but also thrive in this vibrant and promising market.
As Malaysia evolves, so do the opportunities for those willing to explore its unique business environment.
