Malaysia Due Diligence
Malaysia has become an important destination for many foreign investors. It is one of the key economies of Southeast Asia and a can’t ignore destination both for investment and the attractiveness of its consumer market.
The Malaysian Economy
Malaysia’s economy is relatively open and state-oriented, though with perhaps too much reliance on foreign demand. The country has the third highest GDP per capita in Southeast Asia, after the city-states of Singapore and Brunei.
Malaysia competes in the very tough and serious region of East Asia. It is, according to the World Bank, the 23rd easiest place to do business in the world and the fifth easiest place in East Asia, which is impressive, considering the competition.
The Malaysian economy is highly diversified, with natural resources playing a large role in the exports of the country. Falling oil prices have hurt the Malaysian economy and highlighted the need of the government to build domestic demand for higher-value added goods and services.
Some Risk Factors in Malaysia
Bribery and Corruption
Malaysia is considered to have an average level of corruption for the region, though domestically, there is still a lackadaisical attitude toward bribery. Bribery is often considered a cost of doing business in Malaysia.
Many companies in Malaysia are linked to the government (Government Linked Companies (GLCs)) where the Malaysian government maintains an equity stake in the company. Remaining stakes may be held by local or foreign partners. Corruption can take many forms in Malaysia, and should absolutely be investigated as a normal due diligence procedure.
Intellectual Property Protection
Malaysia is a member of the World Intellectual Property Organization and a signatory to the Agreement on Trade Related Aspects of Intellectual Property Rights. Local laws regarding intellectual property are in conformance with global standards, but these standards do not always filter down to the local markets. Lax or ineffective enforcement of intellectual property laws mean actual protection on the ground can vary.
Due Diligence in Malaysia is a must.
If you are planning on doing business in Malaysia, such as investing, sourcing product or components, entering the market directly, entering the market through a local partner, or licensing your brand or technology, it is crucial to know all you can about the status, environment, and history of the parties you will be doing business with. Due diligence is not a luxury, it is a risk mitigation necessity.