Discusses distribution network from how products enter to final destination, including reliability of distribution systems, distribution centers, ports, etc.
U.S. exports to Malaysia move through various 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. Bumiputra firms, businesses owned by ethnic Malays, 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 often are purchased directly from the United States by multinational companies with manufacturing facilities in Malaysia. Much of that business is intra-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 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 valuable resource for U.S. firms interested in setting up an office or plant. The Malaysian Investment Development Authority (MIDA) 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.
To learn more, access Malaysia’s ICS, at the U.S. Department of State Investment Climate Statement website.
The Malaysian economy supports a wide variety of franchise concepts. Foreign franchises are well accepted, and the United States is Malaysia’s largest source of foreign franchises. At the same time, investors are increasingly more selective in choosing franchise opportunities. Niche concepts with unique value propositions would interest the Malaysian franchisee. Authentic Asian food and beverage concepts are in high demand on the food and beverage front. Demand for Western food concepts (such as burgers, Western-styled sandwiches, pizzas, and pasta dishes) 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 an increased interest in its national cuisines.
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 promotes 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 halal food production, preparation, and handling. This standard prescribes practical guidelines for the food industry on preparing and handling halal food.
The Department of Islamic Development Malaysia (JAKIM) uses this standard to certify food as halal. However, its practices, standards, and testing are often unclear, making it difficult for foreign companies to advance the certification process. The Recognized Foreign Halal Certification Bodies and Authorities List acknowledges three U.S.-based halal certification bodies in the United States:
· IFANCA (Halal Research Centers), Chicago, Illinois
· ISA, Cedar Rapids, Iowa
· AHF, Tampa, Florida
In recent years, social media and online platforms are 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 using such platforms as Facebook Groups, Twitter, and LinkedIn Groups.
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. Selecting a joint venture partner is perhaps the most critical decision a potential investor makes in Malaysia.
Licensing may be a more straightforward option for U.S. exporters as the Malaysian licensee handles the daily business management. Although some services and trademarks are licensed 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 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 Malaysian Investment Development Authority (MIDA) for more information on other government policies that may affect contract arrangements within their specific industry. 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.
Major global express delivery firms are actively doing business in Malaysia. Below are some of the various express delivery firms in Malaysia:
· City Link Express
· DHL Worldwide Express
· 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 delivering inbound and outbound goods internationally, 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.
Several firms gather information and publish reports on Malaysian companies, including:
· D&B Information Services (M) Sdn. Bhd.
· Malaysian Rating Corporation
· Rating Agency Malaysia (RAM)
· United Management Services
For significant corporate transactions, financial advisors and lawyers can perform due diligence. Publicly listed companies must 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 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 current supplier or customer recommendation. Please contact your local U.S. Export Assistance Center for pricing and details.