Key Factors Driving Malaysia’s Trade Success

With a 4-5 percent increase in GDP in 2024 and a reduced unemployment level, Malaysia is one of the fastest-growing economies in Southeast Asia, catching the eye of international businesses and investments. Other than that, it has many policies to encourage foreign businesses to expand their business reach in this religiously and culturally rich country.

Malaysia is a member of the ASEAN (Association of Southeast Asian Nations), which means businesses can access a large market of almost 667 million people. Malay is the official language, but most of the population can also speak English. It offers a great chance to connect with diverse customers and thrive in a collaborative region. Professional Malay translation services even make it easier for global and non-English-speaking businesses to further expand their market.

In this article, we will discuss the key factors in detail that contribute to the strength of Malaysia’s trade sector. Let’s begin:

Competitive Tax Environment 

One of the most significant problems foreign businesses face is high corporate taxes. As compared to other Asian countries, Malaysia has a lower tax rate of only 17%. The following are the requirements for a company to be eligible for this tax rate:

  • The bidding company will be eligible for this program if its capital is less than RM 2.5 million and its annual revenue is less than RM 50 million.
  • The company must not be a stakeholder in another company with a paid-up capital of more than RM 2.5 million.
  • Also, the company is not under the supervision or control of another company with a paid-up capital of more than RM 2.5 million.
  • After the company surpasses the initial threshold of RM 600,000, the tax rate will increase to 24%.

If the company doesn’t meet the outlined criteria, the CIT (Corporate Income Tax) rate holds steady at 24%. The same applies for non-resident companies.

Streamlined Business Registration 

Along with a suitable tax environment, Malaysia has an easy registration process for companies. In Malaysia, companies are registered under the Companies Act 2016, which makes registration a straightforward and cost-effective process for both local and foreign companies.

However, the following changes apply if you are seeking to form a public limited company:

  • Formation of a company with just one director or shareholder.
  • Those with no revenue, such as dormant companies, and companies that meet specified threshold criteria are exempt from audits.
  • Removal of the obligation for private corporations to hold an annual general meeting.
  • Easy approval of written resolutions for private companies.

The above-mentioned factors showcase Malaysia’s dedication to supporting businesses and making it easier for all kinds of businesses to grow.

Business-Friendly Regulations

In the category of Ease of Doing Business, Malaysia ranked 12th according to the World Bank’s 2022 report. Malaysia has been working on business models to make it easier for locals and foreigners to start businesses. To register a company in Malaysia, you just need to follow three simple steps:

  • The first step is registration preparation. It involves choosing a business partner and company name and appointing officers.
  • The second step is to register your company with the Companies Commission of Malaysia.
  • Ongoing compliance, such as submitting annual returns, filing taxes, and obtaining business permits.

Although it includes the submission of the documents, translating them into Malay proves beneficial. English is indeed spoken and understood by a huge population, but submitting documents in the official languages streamlines your process.

Global Connectivity 

The geographical location of Malaysia is another factor that helps in driving trade success. The country is located on the Asia-Pacific rim. Its connectivity with Brunei, Cambodia, Indonesia, Laos, Philippines, Myanmar, Thailand, Singapore, and Vietnam makes it the heart of the ASEAN community.

Its strategic location helps businesses connect to a huge population of 667.3 million people. The multilingual workforce helps businesses easily find educated employees with local experience. The Malay language also plays a crucial role, as it is spoken in many ASEAN countries. So, whether you are reaching Malaysia, Indonesia, Brunei, or Singapore, connecting with a professional translation company provides an edge to communicate and compete in diverse markets.

Wait, there is more. Malaysia is also best for sea route trading businesses. The country is home to multiple seaports, including Johor Port, Kuantan Port, Port Klang, Bintulu Port, Penang Port, and the Port of Tanjung Pelepas.  

Open Trade Networks 

Here comes the most exciting part. Malaysia has several bilateral and regional free trade agreements. These agreements smooth the trading experience within ASEAN countries by removing trade and non-trade barriers. The seven countries with bilateral agreements are Pakistan, Japan, New Zealand, India, Chile, Turkey, and Australia.

Lower tariffs on imports and exports, easier entry for investors, and less complicated customs procedures are a few of the many benefits of the agreement.

Investment Guarantee Agreements 

If you are thinking of investing in the Malaysian market, the Investment Guarantee Agreement is your assurance. The agreement reflects Malaysia’s commitment to offering secure investment opportunities and inviting foreign businesses to become a part of its growth journey. This legal agreement shields foreign investments from risks and protects assets and dispute resolution aspects.

Take Away

Malaysia offers exciting opportunities for businesses that want to expand their reach. Considering the above-mentioned factors will help you enter the Southeast Asian market. However, tapping into the Malaysian market requires you to understand the market dynamics and local regulations. Good luck!

Leave a Comment