Malaysia Market Entry

Malaysia Market Entry

Subchapters:

  • Market entry
  • Forms and conditions of operation on the market
  • Marketing and Communications
  • Issues of intellectual property protection
  • Public procurement market
  • Payment terms, payment ethics and resolution of commercial disputes
  • Visas, fees, specific conditions of travel to the territory
  • Employment of citizens from the Czech Republic
  • Fairs and events

Market entry

Due to the cultural differences and geographical distance between Malaysia and the Czech Republic, penetrating the local market is highly difficult without a local representative or establishing your own branch/representative office. The three main ethnicities represented in Malaysia (Malays, Chinese and Indians) form to some extent specific groups of consumers that differ from each other and, in the case of a certain type of goods, can represent three distinct market segments characterized by different preferences, but also, for example, different levels of income. Check smber for agriculture and fishing facts of Malaysia.

If an exporter wants to succeed in offering a certain type of luxury goods, for example, he should not voluntarily disqualify himself by entering into an exclusive agency agreement with a company that does not have good business ties to the affluent Chinese community. In any case, the representative should be based in Malaysia, as the form of non-resident representatives (eg from Singapore or Thailand) is not effective. The local business community and the population, on the other hand, respond favorably to the presence of an authorized service for goods or any other visibility of their own presence. The presence of representation adds credibility.

Increasingly, obtaining “halal” certification is a significant factor. By law, the obligation of this certification applies only to certain food products (meat, dairy products, etc.), but often local distributors require the presentation of halal certification even for products where it is not mandatory, purely for the reason of potentially higher sales (Muslims make up 65 %-70% of the population, which is systematically encouraged to consumer prudence, and the preference for halal certified products). In recent years, there have also been tendencies to apply halal certification to entire supply-customer chains.

Obtaining halal certification from the Malaysian authority JAKIM (Department of Islamic Development Malaysia) is quite difficult. Among the main conditions is that the production company is completely dedicated to halal production. An alternative to the demanding and expensive process of certification by the JAKIM authority is to obtain a certificate from one of the European authorities appearing on the list of certifications recognized by the JAKIM authority.

Forms and conditions of operation on the market

Penetration into the Malaysian market requires a considerable amount of patience and a willingness to adapt to the local mentality during the establishment of new business contacts and during the negotiations themselves. We recommend hiring a local representative or establishing a representative office or branch in the territory.

There are two options for foreign companies to operate in Malaysia, namely: 1/ establishing a local company and 2/ establishing a representative office. The Companies Act 2016 greatly simplified the process of setting up companies, especially in terms of administrative burden. The vast majority of steps can be done remotely through the MycoID portal. This portal also allows you to make remote payments for fees for individual actions. User registration to the portal still needs to be verified in person at the nearest SSM (Malaysian Commercial Register) counter, so it is not a completely convenient option for users abroad. In practice, many companies are still founded personally. Practical steps to start a company can be found in the MycoID manual.

A private or public company can be incorporated in Malaysia. A company can be established as a joint-stock company, a limited liability company or a company with unlimited liability. A limited liability company can only be established as a public company. In the case of a private company, it is sufficient to document one Malaysian director and one partner during registration. In the case of a public company, it is necessary to document at least two Malaysian directors.

For the simplest establishment of a company with limited liability, it is necessary to document only one managing director with permanent residence in Malaysia, in many cases it is not necessary to document a partnership agreement when establishing a company. However, it is necessary to document the agreement of the executive/executives with the appointment to the position. After the establishment of the company, it is also necessary to appoint a company secretary. This obligation can be covered by a contract with a specialized company. The registration of a company is largely dependent on its form and, subsequently, on the amount of accompanying documentation. In the case of a sole proprietor of a company with limited liability, this is a process that is handled “on hold” in the case of personal filing and in a matter of days in the case of remote filing (verification of documents sent online through the MycoID portal).

A representative office is an office of a foreign company in the service or manufacturing industry, which performs certain but non-commercial functions for the head office and represents the head office. An application for the registration of a representative office must be submitted to the Malaysian Investment Promotion Agency, MIDA.

Marketing and communication

The requirements for promotion, marketing and advertising are similar to those in all economically developed countries of the world. It is possible to use the local press (in English, Malay, Chinese or Tamil), television and radio broadcasts, the Internet, direct mailing, etc.

The field of advertising and promotion is self-regulated by the Advertising Standards Council (ASA), which consists of the Advertisers Association, the Association of Accredited Advertising Agencies, the Association of Newspaper Publishers, the Outdoor Advertising Association and the Media Specialists Association. The association is governed by a code that emphasizes the principles of equal competition, the multi-ethnic composition of Malaysia and the fair nature of advertising. In practice, however, advertising is also affected by regulations regulating the media, where special attention is paid to content that could cause offense on religious grounds. Published texts and photographs or film footage must therefore be largely in line with Muslim morality. In Malaysia, you can use the services of small graphic and audiovisual studios that offer basic services at relatively low prices, or large advertising agencies,

Issues of intellectual property protection

With the development of business activities, the center of gravity of the issue of intellectual property is also shifting to the Indo-Pacific region. In 2020 alone, more than two-thirds of applications for the protection of intellectual property were filed on this continent, and with the advent of the coronavirus pandemic, these activities have increased even further. Malaysia has also made progress in this regard, and the business environment has recently undergone changes that will make it easier for Czech exporters to enter this market without the risks they experienced in the past or from other Asian countries. According to the Global Innovation Index 2021 issued by the World Intellectual Property Organization, Malaysia ranks 3rd among all upper-middle-income countries (35th globally).

Within the ASEAN countries, Malaysia is an important trading partner for Czech exporters, where it ranks second after re-export-oriented Singapore. Ambitions to liberalize foreign trade are evidenced by signals of renewed willingness to negotiate the Malaysia-EU Free Trade Agreement, but also the ratification of the largest FTA in the world – the Indo-Pacific RCEP.

The protection of intellectual property during the internationalization of trade is thus an increasingly popular topic, not only in connection with small and medium-sized enterprises, which should pay particular attention to this topic. The main concerns of businesses relate to aspects of intellectual property rights infringement and the lack of enforcement and prosecution of infringements of various types of copyright.

Malaysia is a member of the World Intellectual Property Organization, a signatory to the TRIPS Agreement, the Berne Convention, the Paris Convention for the Protection of Industrial Property and most recently the Protocol to the Madrid Agreement on the International Registration of Trademarks. In 2019, the Law on Trade Marks also entered into force, which aimed to harmonize the legislation with international standards. In December 2021, several other laws on the protection of patents, trademarks or geographical indications passed for further reading. So is this a change in the approach in Southeast Asia, which Czech exporters should also start to perceive? Definitely yes.

Trademarks

The trademark registration document, form (CR-1 or CR-2), can only be submitted by a Malaysian citizen or a foreigner with a permanent residence permit, regardless of whether they are the owner or author of the trademark. Protection lasts for 50 years from the death of the author and costs RM155 (approx. €35) in the basic version. Compulsory registration is not required in Malaysia, but it can be an advantage, especially for small and medium-sized enterprises. In such a case, it is a voluntary registration that is submitted to the Intellectual Property Corporation of Malaysia (MyIPO).

Patents and Innovations

One of the innovations that will fundamentally facilitate the protection of the rights of European, i.e. also Czech entrepreneurs, is the Patent Prosecution Highway (PPH) program, which is an official program that provides a means to significantly speed up the patent application, provided that the initial investigation has already been carried out and found acceptable at another office (Office of Earlier Examination – OEE), i.e. at the European Patent Office.

The establishment of the ASEAN Patent Examination Co-operation (ASPEC), which is a regional patent program sharing the work of 9 out of 10 ASEAN states, also simplifies things for Czech exporters. In the case of protection in another ASEAN state, the whole process in Malaysia will thus be shortened and simplified.

While patents are generally known to Czech exporters, the term utility innovations in Malaysia refers to inventions of “insignificant” importance, which, unlike patents, do not require testing of the invention process. Therefore, they can be registered in a faster mode than ordinary patents.

Patent protection lasts 20 years and that of utility innovations 10 years. Within 6 months from the submission of the application, it is possible to change the form from an innovation to a patent. Patent searches can be carried out in advance, or the office register can be requested to speed up the process, for several exhaustive reasons defined by law (national interest, etc.). The possibility of an electronic application (RM 1390 – approx. €300) is also a great convenience, which is related to the fact that even a foreign national can submit it.

Industrial patterns and designs

Industrial design registration is done physically or online at the Intellectual Property Corporation of Malaysia (MyIPO) at a cost of RM 500 (approx. €110). The process takes about 8 months and protects the author for 5 years, which can subsequently be extended up to 4 times after 5 years (maximum 25 years). The condition for the possibility of registration is that the industrial design is new and original. Even in this case, previous research will help.

Trademarks

Probably the biggest benefit for Czech exporters is connected with the protection of trademarks. In this regard, Malaysia has made significant progress with the entry into force of the Trademarks Act in late 2019, harmonizing local legislation with current international standards. The trademark registration system in Malaysia follows the “first use” model, which means that prior use of a trademark establishes the right to protect it. Therefore, although access to the Madrid Protocol means that one can protect one’s trademark even during its registration in the Czech Republic, trademark registration in Malaysia is generally recommended for its easier enforcement. Indeed, the certificate of registration issued by MyIPO is used as primary evidence of the trademark in the event of a dispute.

The registration process takes about 12 months, it can be submitted both physically and online at MyIPO through a local agent, in case the company or its representative is not based in Malaysia. The fee starts at RM 950 (approx. €200) and protects the brand for 10 years. In addition to the mandatory search on MyIPO, it is possible to search for possible identical or similar brands for free on the website of the IPR platform of the ASEAN countries or in the Trademark Database of the World Intellectual Property Organization.

More information about this area is processed on the website of the Embassy of the Czech Republic in Kuala Lumpur.

Public procurement market

The Malaysian government, its authorities and public agencies are authorized to directly purchase goods and services up to RM50,000. In the case of works (e.g. construction, reconstruction, repair), they can directly assign an order above 20,000 to a registered contractor. Above this amount and up to RM500,000, these entities are required to request at least five bids from companies/contractors registered with the government and government agencies. The obligation to announce a tender occurs for contracts with a value higher than RM500,000. Supervision over the awarding of public contracts is entrusted to individual ministries, which establish a technical commission for the specifications. Offers are assessed by evaluation committees, respectively. by two separate commissions (technical and financial), are processed and forwarded to the committee of the relevant department for decision (Ministry/Departments Board).

Domestic and foreign applicants must register with the Ministry of Finance. In the case of deliveries to large state-owned companies (e.g. power company Tenaga Nasional, or oil company Petroliam Nasional – Petronas), it is also necessary to be registered directly with them. In the case of the construction industry, registration with the Construction Industry Development Board – CIDB is required. In specific cases where local entities lack expertise and capacity, a public business competition is open to the participation of joint ventures of a local firm with a foreign supplier, in order to support technology transfer. International tenders are issued only in situations where the given product/service cannot be obtained on the local market and when the aforementioned joint ventures are not possible. In some cases, the share of foreign companies in deliveries may be limited by a certain percentage limit (e.g. 30% of the contract value). Some tenders are reserved only for companies owned by ethnic Malays and neither foreign companies nor Malaysian companies owned by local Chinese or Indians have access to them. Although some tenders are at least partially accessible to participants from abroad, they are mostly participants already properly registered in Malaysia and usually in a joint venture with a local entity. Potential participants in a public business competition often have a very short time to arrive at the place of delivery (assembly) and, on the basis of the tender documentation, prepare and submit a competitive offer in time. Information on tenders issued can be obtained on the government website, on the eperolehan portal,

Payment terms, payment ethics and resolution of commercial disputes

In Malaysia, offers of goods are normally submitted in English, usually on a CIF basis. Payments are made in freely convertible currencies (USD, EUR). However, FOB delivery parity is not an exception, when the importer uses the services of Malaysian carriers and insurance companies. At the beginning, when establishing business cooperation, documentary payments are used, especially an irrevocable and confirmed documentary letter of credit (L/C). Later, even less secure payment instruments, such as documentary direct debit (D/P), can be accepted for verified and provably solvent importers. Ignorance of local market conditions is conducive to fraud, but this is almost exclusively due to insufficiently vetted contacts from international business portals, and these contacts may not ultimately come from Malaysia at all.

Payment morality in the country is standard. However, it cannot be ruled out that the exporter will come into confrontation with Asian cultural specifics during collection. When making deliveries of machinery and equipment, it is customary to require an advance payment. When importing to the Czech Republic, it is recommended to provide advance payments only after consultation with the bank. Malaysia still belongs to countries with a low credit risk and a high rating, however, it is generally recommended to choose good security of receivables and payments with suitable payment instruments. In the event of a problem, as in most developed countries of the world, commercial disputes can be resolved through courts or arbitration. Before entering into business contracts, it is a good idea to define the jurisdiction of the courts in case of disputes, if this is possible and it does not contradict the nature of the contractual relationship, from which the jurisdiction of the legal system would otherwise result.

Visas, fees, specific conditions for traveling to the territory

A valid visa-free agreement allows citizens of the Czech Republic to stay in Malaysia without a visa for a period not exceeding 3 months (i.e. 90 days). When entering Malaysia, local immigration authorities require a passport valid for at least 6 months beyond the period of authorized stay. There is no registration requirement in Malaysia. In terms of residence and travel, Malaysia is a developed and basically safe country in the Southeast Asian region. Travelers are advised to observe basic safety rules and also to observe basic hygiene rules: drink only bottled drinking water, wash fruits and vegetables with running water before eating and especially wash your hands often.

Malaysia is a developed country with a functioning infrastructure, car rental, hotel reservations and other services can be carried out without any problems, cashless transactions are preferred, basic cash in the local currency (Malaysian ringgit) is recommended to be withdrawn via a payment card of any Czech or foreign bank or use one of the numerous exchange office.

The customs inspection is usually thorough, but fair. It is strictly forbidden to store, import and export any drugs and other intoxicants. Violation of these regulations results in very severe penalties, including the death penalty. In addition, Malaysian laws strictly prohibit the import and export of the following types of goods: pornographic materials and magazines with this theme; items with Jewish symbolism; products originating in Israel; items with a reproduction of the Koran; firearms and cutting weapons; goods resembling syringes; marine corals; turtle eggs, etc. Import and export of local and foreign currency (including traveller’s checks) is possible without restrictions. If it is an amount that exceeds the equivalent of USD 10,000, it is necessary to declare this in customs form No. 22.

Healthcare in Malaysia is of a good standard, especially when it comes to private healthcare facilities. All fees must be paid immediately after the treatment or procedure. The Embassy recommends that all travelers to Malaysia take out standard travel health insurance. Good experiences are, for example, with Gleneagles, Prince Court or Pantai Hospital in Kuala Lumpur. For longer stays, vaccination against jaundice (hepatitis) type A and B, typhoid and Japanese encephalitis is recommended. Antimalarial equipment is recommended for stays in tropical rainforests, after prior consultation with a specialist doctor. For short-term stays, only a valid tetanus vaccination/revaccination and the use of repellents are practically recommended (also due to the risk of dengue fever).

The coronavirus pandemic hit Malaysia in a comparable way to the Czech Republic, with the difference that Malaysia has about 3x more inhabitants. The main difference is greater vigilance and a system of anti-epidemiological protection, which is implemented in Malaysia on a much larger scale and more thoroughly. Even after the restrictions and prohibitions by the state have passed, many restrictions remain, which are either required by individual entities (e.g. proof of status in the MySejahtera application required by shopping centers) or accepted by the population on their own initiative (voluntary wearing of masks in public). Even with a positive development, specific conditions can therefore be expected in this respect, especially compared to European travel standards.

Employment of citizens from the Czech Republic

When obtaining a work permit, citizens of our country are subject to similar conditions as other foreign workers. The main point of contact for the issuance of a foreign worker permit is the Expatriates Services Division (ESD), under the Immigration Department Malaysia. Applications are submitted online at esd.imi.gov.my. A Malaysian company applies for the worker. The applicant company must meet the following requirements: it must meet the condition of minimum paid-up capital, document the recommendation of the institution monitoring the given work activity, register work activities with the monitoring institution and, last but not least, also register with the ESD.

An application for a worker’s employment permit must include: a passport photo, a complete copy of the travel document, a cover letter from the company where he describes his activity on the company’s letterhead, a worker’s CV + a copy of education documents, a copy of the employment contract (with the stamp of the Malaysia Inland Revenue Board), a statement from the register of companies (SSM), a letter of recommendation from the monitoring institution to which the activity belongs. In the case of renewing a work permit, selected tax documents, payslips and other documents are also required as requested by the ESD. The minimum wage in the case of qualified jobs for foreign workers is tied to 2 basic types of residence titles (Employment Pass) – in the case of an EP category I employment permit (highest qualification), the requirement to obtain this permit is a minimum wage of 10,000 MYR (approx. 55,000 CZK), in the case of EP category II, the foreigner’s salary must be guaranteed in the range of 5,000-9,999 MYR (approx. 27,500-55,000 CZK). From May 1, 2022, after two years at MYR 1,200 (approx. CZK 6,600), the minimum wage paid to Malaysian citizens was set at MYR 1,500 (CZK 8,250).

Unlike citizens and permanent residents of Malaysia, foreign workers are not subject to social security contributions (SOCSO) and thus cannot benefit from it. On the other hand, employers must pay compulsory health insurance (SKHPPA) for foreign workers, from which, if necessary, treatment in state hospitals is paid. Foreign workers can also voluntarily contribute to the pension fund (EPF), from which, under the conditions specified by law, in addition to a pension, they can also draw funds for medical treatment or the purchase of real estate.

Fairs and events

After a two-year hiatus caused by the coronavirus pandemic, Malaysia is also opening up to support international trade through the organization of trade fairs. The Embassy of the Czech Republic in Kuala Lumpur regularly informs about specific events on its website in the Trade and Economy section. Highlights in the upcoming period include IGEM Green Technology Fair (October 2022), regionally important maritime and air defense technology fair LIMA 2023 (Q1 2023), Future Build South East Asia construction trade fair, which follows Eco Build (October 2022) or Semicon South East Asia semiconductor fair (June 2022).

The MetalTech engineering fair will take place in May 2022, and the large conference and fair in the cyber security and defense sector CYDES will take place in June 2022. However, due to the frequently changing conditions, the Embassy of the Czech Republic in Kuala Lumpur recommends paying increased attention to epidemiological conditions, current measures, a.s. with fair organizers to clarify the cancellation conditions before obligations arise. The current list of fairs and events with details and contacts can be found on the website of the government agency MATRADE or on the website of Eventseye.

Malaysia Market Entry