Malaysia - Country Commercial Guide
Distribution and Sales Channels

Discusses distribution network from how products enter to final destination, including reliability of distribution systems, distribution centers, ports, etc.

Last published date: 2021-11-06

U.S. exports to Malaysia move through a wide variety of sales channels, depending on the product or service. U.S. export wholesalers typically sell food and other consumer goods to Malaysian general import houses, which then handle distribution to supermarkets and other outlets. Significant equipment sales to corporations in both the public and private sectors require local presence and local agents, as well as active engagement of corporate leadership. It should be noted that Bumiputra firms are given preference in securing government priority sector contracts and privatization projects. 

Capital equipment is almost always handled by in-country representation, either through locally hired firms or a corporate representative in Malaysia. Electronic components are purchased directly from the United States by the major U.S. and other multinational companies with manufacturing facilities in Malaysia. Much of that business is intra-firm. Many retail outlets and local and international consulting companies handle computer software. Many software companies have offices and joint ventures in Malaysia. 

Using an Agent or Distributor

Most exporters find that using a local distributor or agent is the best first step for entering the Malaysian market. A local distributor is typically responsible for handling customs clearance, dealing with established wholesalers/retailers, marketing the product directly to major corporations or the government, and handling after-sales service. Exporters of services generally also benefit from the use of a partner. Sales to the government, GLC, or priority sectors require a local agent and/or a joint venture partner, usually a Bumiputra owned firm.

Establishing an Office

The primary concerns for those considering setting up an office or factory in Malaysia are registration, taxes, labor, wages, rental/construction prices, utilities, and insurance.  

Several international accounting and consulting firms located in Kuala Lumpur can assist with the procedures and requirements for setting up a business in Malaysia. The American-Malaysian Chamber of Commerce (AMCHAM) can be a useful resource for U.S. firms interested in setting up an office or plant. MIDA, a Malaysian government entity, works to attract and support foreign direct investment in Malaysia. It is also advisable to seek more specific information from qualified legal and consulting services. 

Franchising

The Malaysian franchise industry was expected to contribute $8.3 billion to the country’s GDP in 2020 and continues to achieve healthy growth. The growth rate for the industry is 7.6 percent as of October 2019. The franchise industry contributed RM30.03 billion/$8.07 billion to the country’s GDP in 2018 (latest available data). The initial 2020 forecast for the franchise sector is RM35 billion/$8.3 billion, but this industry estimate will decrease significantly in the wake of the COVID-19 pandemic. As of October 2019, 906 current domestic and international franchise brands are registered with the Malaysian authority.

Approximately 30 percent of the total franchise concepts in Malaysia are foreign-owned. Foreign franchise concepts market share for the first three quarters of 2019 is 36 percent. In the same period, four percent of franchise companies exited the market, and investors are increasingly more selective on franchise. Niche concepts with unique value propositions would be of interest to the Malaysian franchisee. On the food and beverage front, authentic Asian food and beverage concepts are in high demand. Demand for Western food concepts (burgers, Western-styled sandwiches, pizzas, pasta dishes, etc.) is declining, except for prominent brands. Chinese Hot Pot concepts – such as the successful Haidilao chain – are growing in demand. Mainland Chinese and South Korean popular culture, TV, and music have spurred increased interest in its national cuisines, though South Korean food concepts have reduced in popularity recently.

Perbadanan Nasional Berhad (PNS) is a corporatized government entity tasked as the lead agency in developing the Franchise Development Program. It is under the purview of the Ministry of Domestic Trade and Consumer Affairs. The agency’s function is to identify, acquire, launch, facilitate, and encourage both local and international franchise brands. Even though PNS mainly focuses on encouraging home-grown franchise concepts, they are open to exploring collaboration with foreign franchises. PNS is leaning towards lower-cost service sectors as the next prime mover for entrepreneurs.

The Malaysian Franchise Act 1998 (amended in 2013) governs franchise sales throughout Malaysia. All franchisers that are selling their franchises in Malaysia are required to register with the Registrar of Franchise.  As over 60 percent of the Malaysian population is Muslim, U.S. food and beverage related franchise companies that intend to sell to Muslim consumers should be aware of halal requirements. While halal stems from Islamic Sharia Law, Malaysian standard MS1500:2400 is used in the production, preparation, and handling of halal food. This standard prescribes the practical guidelines for the food industry on the preparation and handling of halal food. The Department of Islamic Development Malaysia (JAKIM) uses this standard to certify food as halal, though its practices, standards, and testing are often unclear, making it difficult for foreign companies to advance the certification process. As of Feb 2019, JAKIM’s latest list recognizes three U.S. based halal certification bodies are in the United States: IFANCA with a Halal Research Centers based in the Chicago, Illinois area, ISA based out of Cedar Rapids, Iowa, and AHF from Tampa, Florida. As of the writing of this report, the new Malaysian government is reviewing the operations of JAKIM.

Direct Marketing

In recent years, social media and online platforms are an increasingly essential channels for marketing and maintaining real-time connections with consumers. More recently, more companies have turned to online channels to reach consumers more broadly, Facebook Groups, Twitter, and LinkedIn Group and Email marketing have high penetration in Malaysia and are growing as the social media platforms of choice for targeted marketing.

Joint Ventures/Licensing

Some exporters find it advantageous to establish their subsidiary in Malaysia to handle sales, distribution, and service directly. While this provides more direct control, it requires a commitment of capital and the identification of suitable local joint venture partners. The selection of a joint venture partner is perhaps the most critical decision made by a potential investor in Malaysia. Licensing maybe a more comfortable option for U.S. exporters as the daily management of the business is handled by the Malaysian licensee. Although there are some licensing of services and trademarks in-country, it is not very prevalent other than in the franchising sector, and that is a relatively small market share. All partnerships must register under the Businesses Ordinance of 1956 with the Companies Commission of Malaysia. Partners are both jointly and separately liable for the debts and obligations of the partnership. Formal partnership deeds govern the rights and obligations of each partner, but this is not obligatory.

U.S. exporters interested in establishing a joint venture should contact the MIDA for more information on other government policies that may affect contract arrangements within their specific industry. The MIDA may also be able to assist with the identification of a suitable partner. Any firm intending to establish a local office should secure the services of a local attorney.

Express Delivery

Major global express delivery firms are actively doing business in Malaysia. Express delivery or “courier” companies in Malaysia need to obtain a courier license to provide related services. As of 2020, 116 courier services licenses were issued by the Malaysian Communications and Multimedia Commission (MCMC). As of October 2020, the MCMC has decided to halt issuing new licenses for express services from two years between September 2020 to 2022.

Below are some of the various express delivery firms in Malaysia:

•    City Link Express

•    DHL Worldwide Express

•    FedEx

•    GDExpress

•    Malaysian Express Worldwide

•    Nationwide Express

•    Overseas Courier Service OCS

•    Red Box Asia Pte Ltd     

•    S.O.S. Express

•    Sure Reach Worldwide Express

•    United Parcel Service

International shipping fees and delivery times differ from one company to another. Customs clearance delays may cause interruptions in the process of delivering international inbound and outbound goods, especially time-sensitive goods. Operators that comply with customs clearance procedures and requirements will be able to minimize the risk of having their assets held by enforcement authorities for too long.

Due Diligence

Several firms gather information and publish reports on Malaysian companies, including Rating Agency Malaysia (RAM), the Malaysian Rating Corporation, United Management Services, and D&B Information Services (M) Sdn. Bhd (https://www.dnb.com.my/). For significant corporate transactions, financial advisors and lawyers can perform due diligence. Publicly listed companies are required to publish audited financial results, which are checked before entering into business agreements. In smaller transactions, letters of credit are a standard requirement of potential customers, while bank references and track records are checked before appointing agents. The U.S. Foreign Commercial Service (USFCS) can assist exporters by providing an International Company Profile report, which can include a visit to the office, an updated financial statement, and, if appropriate, a recommendation by a current supplier or customer. Please contact your local U.S. Export Assistance Center for pricing and details (US Export Assistance Center Offices).