Malaysia, a middle-income country, has transformed itself since the 1970s from a producer of raw materials into an emerging multi-sector economy. As an oil and gas exporter, Malaysia has profited from higher world energy prices, although the rising cost of domestic gasoline and diesel fuel, combined with strained government finances, has forced Kuala Lumpur to reduce government subsidies.
Malaysia's on-going reform measures have enhanced the overall entrepreneurial environment. The economy scores above the world average in eight of the 10 economic freedoms. The labour sector is relatively flexible, with simple employment procedures and no mandated minimum wage. The top income and corporate tax rates are moderate and have been reduced, and the overall tax burden is low as a percentage of GDP.
The financial sector has weathered the global financial crisis relatively well. Limits on foreign ownership in financial sub-sectors were eased, improving financial freedom, and numerous domestic equity requirements that restricted foreign investment were eliminated. Corruption and a judicial system that remains vulnerable to political influence remain significant challenges to economic freedom in Malaysia.
Supportive Government Policies:
A major factor that has attracted investors to Malaysia is the government's commitment to maintain a business environment that provides companies with the opportunities for growth and profits.Â
Generally, foreign investors in Malaysia's manufacturing sector can hold 100% equity in projects which export at least 80% of their production. However, effective from 17 June 2003, 100% foreign equity holding is allowed for all investments in new projects, as well as investments in expansion/diversification projects by existing companies irrespective of their level of exports. Effective from the year of assessment 2009, the corporate tax rate is reduced to 25% and the maximum individual tax rate is revised from 28% to 27%. Malaysia also offers a wide range of tax incentives for manufacturing projects.
The workforce
Malaysia offers investors a young, educated and productive workforce at costs competitive with other countries in Asia. Backed by the government's continued support of human resource development in all sectors, the quality of Malaysia's workforce is one of the best in the region. Literacy levels are high and school leavers entering the job market have at least 11 years of basic education. Education and training are accorded high priority in national development under Malaysia's five-year development plans.
Judicial
Separate from the civil courts of Malaysia are Sharia courts, which decide on cases which involve Malaysian Muslims. The sharia courts are run parallel to the normal court system, and are undergoing reforms that include the first ever appointment of female judges. Debate exists in Malaysia over whether the country should be secular or Islamic, some states have passed Islamic laws, but they have not gone into effect due to opposition from the federal government.
State Powers
Due to Internal Security Act, the Interior Minister is able to arrest any Malaysian without trial. The government has effective control of all media, with media outlets only able to operate if licensed by the government
Employment Act 1955
The definition of "employees" The following types of employees are included: (a) Any employee as long as his month wages is less than RM1500.00 and (b) Any employee employed in manual work including artisan, apprentice, transport operator, supervisors or overseers of manual workers, persons employed on vessels and even domestic servants are classified as employees even if their wages is more than RM1500.00 per month.
Annual Leave
60E. (1) An employee shall be entitled to paid annual leave of : (a) eight days for every twelve months of continuous service with the same employer if he has been employed by that employer for a period of less than two years;
Sick Leave
An employee shall, after examination at the expense of the employer: (a) by a registered medical practitioner duly appointed by the employer;
Contract of Service
Under the Employment Act 1955 "Contract of service" is defined as: "contract of service" means any agreement, whether oral or in writing and whether express or implied, whereby one person agrees to employ another as an employee and that the other agrees to serve his employer as his employee and includes an apprenticeship contract;
Ease of Doing Business
The Ease of doing business index (1=most business-friendly regulations) in Malaysia was reported at 21.00 in 2008, according to the World Bank. In 2009, the Malaysia Ease of doing business index (1=most business-friendly regulations) was 23.00. Ease of doing business index ranks economies from 1 to 181, with first place being the best. A high ranking means that the regulatory environment is conducive to business operation. The index ranks the simple average of the country's percentile rankings on 10 topics covered in Doing Business 2007: How to reform. The ranking on each topic is the simple average of the percentile rankings on its component indicators.
Malaysia is a rapidly developing economy in Asia. Malaysia, a middle-income country, has transformed itself since the 1970s from a producer of raw materials into an emerging multi-sector economy. The Government of Malaysia is continuing efforts to boost domestic demand to wean the economy off of its dependence on exports. Nevertheless, exports - particularly of electronics - remain a significant driver of the economy.
Source: (Trading Economics 2010)