FDI Regime in Malaysia

Acquiring shares of a Malaysian company requires obtaining a license. The sectors where getting a license is mandatory are:

• FSI;
• Islamic insurance;
• banking;
• insurance;
• oil;
• mass media;
• trade;
• education;
• logistics;
• energy.

Concluding an M&A deal in the Federation of Malaysia requires obtaining permission from the CNB (the country’s National Bank). There’s also a requirement for foreign companies to allocate a minimum amount of shares to Malaysian citizens. Companies engaged in distribution trade must establish a company in the Federation of Malaysia.

The exact regulations for different businesses may vary but they all have one thing in common - they can significantly influence the structure of an investment. To tackle the COVID-19 challenge, the government has taken a number of steps which are expected to make a positive impact on the activities of foreign investors.

In early June, the country’s PM announced PENJANA, an economic recovery program meant to get the country’s economy back on track.

Its main emphasis will be on facilitating FDI; however, it will also have implications for company registration in Malaysia by foreigners. Given that Malaysia’s National Bank pursues a monetary policy that creates certain difficulties for foreign companies, it has been amended as well.

Changes in Malaysia's FDI Regime

The three key areas targeted by PENJANA are:

• creating jobs;
• attracting foreign investment & supporting various sectors;
• supporting digitalization & incentivizing consumption.

The third initiative is meant to attract non-resident firms & re-domicile a foreign company to the Federation of Malaysia. Businessmen wishing to re-domicile foreign companies to Malaysia can now take advantage of preferential tax treatment that will be in effect from 2020 to 2021. Obtaining a manufacturing license in the Federation of Malaysia will now take less time than usual as well.

The IDA & InvestKL, the two government agencies responsible for the facilitation of FDI in the Federation of Malaysia, are now developing competitive business rules, raising awareness of new tax incentives & expediting procedures for obtaining licenses. The government of Malaysia has identified several key industries with a potential for growth:

• electronics;
• electrical & mechanical engineering;
• manufacture of pharmaceuticals;
• aerospace industry;
• renewable energy sources;
• consumer technology.

Obtaining a Financial License in the Federation of Malaysia: Changes in BNM's Monetary Policy

Under the amended currency regulations put in place by the National Bank, certain restrictions on foreign investment in the Federation of Malaysia will be lifted. The NBM also streamlined the foreign exchange process, consolidated requirements for approval & improved some of its foreign exchange policies. All of this will make it possible for Malaysian companies to use foreign capital more flexibly.