Business area kuala-lumpur

Ease of doing business in Malaysia

Malaysia made it in the top 10 world’s tourist destinations last year thanks to its diversified cultures; crystal clear waters; eco-tourism attractions; first-class infrastructure.

More importantly, though, Malaysia ranks 6 in the World Bank’s Ease of Doing Business Report 2014. The country has been experiencing a steady economic growth of approximately 6% in the last decade and is on its way to become a high-income country by 2020.

Business in Malaysia

Table 1 Source: The World Bank

For a relatively small country of 30 million people, being open to trade and attracting foreign direct investment is a matter of life or death. Malaysia has not only been able to develop of the best infrastructure system of the whole region and attract FDI in different sectors, but it has reached such a level of economic sophistication that is now transitioning from being a cheap-labor destination to a knowledge-based society.

The ASEAN region is one of the fastest growing in the world. With European economies struggling to get out of recession, many MNCs are looking for value-for-money destinations where to re-locate their business. One of the key variables to make sure to become the location of choice is the ease of doing business. As you can see, one of the indicators in the table above is “Paying Taxes.” So let’s take tax incentives and regulations for instance, as I’ve had the opportunity to interview the CEO of the Malaysian Inland Revenue Board, Tan Sri Shukor.

In Malaysia it is possible to file taxes online, through an e-filing system. The e-filing system not only guarantees efficiency for the government and companies in terms of cost and time savings but it also ensures fair treatment to the public (for instance you can get tax returns within 30 days).

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The Petronas Towers, the heart of the business district in Kuala Lumpur

Moreover, in line with the government strategy to develop strategic economic activities (e.g. biotechnology industries, operational headquarters, international procurement centers, regional distribution centers, real estate investment trusts, treasury management centers, 4 and 5 Star Hotels in Peninsular Malaysia, private and international schools, provider of industrial design services in Malaysia, child care centers and pre-school education), international investors allocating resources in specific geographical areas or sectors enjoy tax holidays and don’t have to pay income tax for a certain number of years. Dividends are tax-free and companies willing to re-invest in R&D in Malaysia may be eligible to double-deduction.

Companies that are recognized with the Pioneer Status are eligible to a tax exemption ranging from 70 to 100%. In alternative, another tax incentive is the Investment Tax Allowance (ITA) for projects that imply long-term large capital investments.

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Malaysia is now transitioning from being a cheap-labor destination to a knowledge-based society

Malaysia has put in place a comprehensive approach to drive the economy forward. From my experience in the country I can tell that both the political and business elite work hand in hand towards a common goal. The government has created a conductive ecosystem for business to thrive and the private sector aligns profit-making with innovation and socio-economic development. All the ingredients are there to make Malaysia an economic case study of excellence.

 

About Fabrizio Fitzgerald Farina

Fabrizio Fitzgerald Farina is an individual interested in everything and its opposite. He believes in a new humanism based on sustainability and the overcoming of socially constructed communicative barriers.

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