Malaysia - Country Commercial Guide
Market Challenges

Learn about barriers to market entry and local requirements, i.e., things to be aware of when entering the market for this country.

Last published date: 2021-11-06

COVID-19 Pandemic

The ongoing pandemic and movement restrictions will affect Malaysia’s economy in the near term. Malaysia is on track to achieve its vaccination targets by the end of 2021. According to a World Bank study, the trajectory and pace of growth will depend on the duration and severity of movement restrictions, the containment of the pandemic, and the pace of the vaccine rollout.

With recovering global demand, export growth is likely to gain momentum. Given the acceleration of advanced nations’ vaccination programs and the reopening of their economies, global demand is expected to continue to recover in the near term. The growth rate for Malaysia’s exports of goods and services is projected to rebound to 13.1 percent in 2021, compared with -8.9 percent in 2020, as global demand picks up. Import growth is projected to rise by 13.6 percent, compared with -8.4 percent in 2020, with the growth of intermediate and capital imports regaining some momentum due to improvements in exports and investment.

Political Developments

On the political front, the situation in Malaysia remains challenging despite the formation of a new coalition government and the appointment of a new prime minister. Muhyiddin Yassin resigned as Prime Minister on August 16, 2021, partly due to political infighting, the COVID-19 pandemic, and an economic downturn in Malaysia. Ismail Sabri Yaakob, the former Deputy Prime Minister and Minister of Defense during the previous government, was named the new prime minister. The Memorandum of Understanding on Transformation and Political Stability signed on September 15, 2021, by the Malaysian government and the main opposition bloc, the Pakatan Harapan (PH), could signal greater political stability as it will allow Ismail Sabri Yakob to serve as Prime Minister at least until August 2022 and promises to enact political reforms.

Structural Policies

The Government of Malaysia’s structural policies hamper foreign involvement in several areas, including government procurement contracts, financial, business, and certain professional services (military, defense, security, and oil and gas), and telecommunications.  In many cases, it is imperative to have a local partner, such as a Malay-owned Bumiputra company, to compete effectively for government procurements.  In the assessment of procurement applications, the lack of know-how on life-cycle costing presents challenges to foreign companies offering quality products at higher price points compared to competitors’ lower-cost alternatives.