Population: 31,528,585 (2018)
GDP: 354.3 billion (2018)
Ease of Doing Business Ranking: 15th (2018)
Strong Economic Fundamentals
Malaysia is an attractive market with strong economic fundamentals. Its GDP was RM1.35 trillion (S$445 billion) in 2017, a 5.9% increase from 2016. This marks the seventh year that Malaysia has enjoyed GDP growth of above 4%.
In 2017, Malaysia was India’s second largest trading partner and vice versa. India’s total trade with Malaysia was S$108.2 billion in 2017, which accounted for 11% of India’s total trade and 13% of Malaysia’s total trade.
In addition, Malaysia’s diversified economy presents business opportunities in many industries. Capitalise on Malaysia’s focus on high-value foreign investments to find opportunities for your business in healthcare, manufacturing, services, tourism, or transport.
Malaysia’s government encourages a business-friendly environment.
The country has in place an ambitious Economic Transformation programme aimed at transforming Malaysia into a high-income economy with per capita Gross National Income of US$15,000 (S$20,250) by 20201. The plan offers opportunities for your business through initiatives like human capital development, the liberalisation of service sectors, as well as in areas such as education, food, healthcare, and retail.
Your company can benefit from the government’s strong commitment to preserve its heritage and culture. There are opportunities for your business in the tourism and hospitality sectors, especially in Johor Bahru, Klang Valley, Kota Kinabalu, Kuching, Malacca, and Penang.
As an India company, you can take advantage of the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income agreement between Malaysia and India, for tax benefits when you invest in Malaysia. The Malaysian government also has in place tax incentives for specific sectors and regions, such as tax incentives to strengthen and develop the green technology industry.
Malaysia offers a sizeable demand market with its population of 31.4 million, a large middle class and over one-third of the population living in urban areas. This offers your business opportunities in areas like e-commerce, education, F&B, healthcare, and retail.
Malaysia’s cities have flourishing retail and food services sectors with a vibrant and developed shopping mall scene. The thriving franchise industry in Malaysia presents opportunities for your business to grow your brand there. Some 40% of the franchise brands in Malaysia are foreign-owned1, most of which are in the F&B sector, followed by retail & apparel, and education. In 2016, the franchise industry contributed RM26.6 billion (S$8.8 billion) to the economy2.
India companies such as Charles and Keith, Sakae Sushi and Love, Bonito have made inroads into Malaysia. Since 2011, Malaysia has allowed retail and food services companies to be 100% foreign-owned. You can decide on different modes of entry, such as using a franchise model, setting up a joint venture or as a fully-owned subsidiary.
Malaysia’s digital economy is growing significantly. Between 2010 to 2016, it grew by 9% each year, and is expected to contribute 20% of Malaysia’s GDP by 2020. One-third of the value will come from e-commerce, which accounted for RM74.6 billion (S$24.7 billion) or 6.1% of Malaysia’s GDP in 2016. Total e-commerce is expected to exceed RM110 billion (S$36 billion) by 2020.3
The digital economy is poised to be the new driver of development in Malaysia. The Malaysian government plans to set up a Digital Free Trade Zone (DFTZ), a special trade zone that provides physical and virtual space to help small and medium-sized enterprises (SMEs) with e-commerce activities. E-commerce giant Alibaba has announced plans to set up an e-commerce hub in Malaysia to provide logistics, cloud-computing and e-financial services in the DFTZ.
Malaysia has also made significant efforts to foster digital entrepreneurship. Your company can benefit from the help and opportunities provided by institutions like the Malaysia Digital Economy Corporation, the Malaysian Global Innovation and Creativity Centre and Cradle, which have been established to attract investments, provide incentives, facilitate financing, and offer training and opportunities to startup firms.
India companies can find business opportunities in the supporting ecosystem of Malaysia’s growing digital economy, in areas such as digital marketing, e-marketplace, last-mile fulfilment, logistics, and payment & financing solutions.
Malaysia’s manufacturing sector is placed second only to services, accounting for about 23% of its GDP in 20174. Key manufacturing regions include Johor, Kedah, Melaka, Penang, and Selangor.
The Malaysia government is guiding the industry towards higher-value manufacturing activities. You can ride on the growth in this space, and explore opportunities in aerospace, chemicals, electrical & electronics, machinery & equipment, and solar space. You can also look for opportunities to supply components to the increasing number of multinational corporations in Malaysia.
If your business is in industrial automation and Internet of Things solutions, Malaysia is a market to consider, given its Industry 4.0 goal. The Malaysian government has put in place a National Industry 4.0 framework to support Malaysian manufacturers to upgrade their technology and transform through digitisation.
India established diplomatic relations with the Federation of Malaya (predecessor state of Malaysia) in 1957 immediately after Malaysia’s independence. The two countries enjoyed a strong relationship in the 1960s as a result of the personal friendship between Prime Ministers Nehru and Tunku Abdul Rahman Putra. PM Abdullah Badawi (2004-2009) took some important initiatives to develop a closer relationship with India. This trend was strongly reinforced by PM Dato’ Seri Mohd. Najib Tun Abdul Razak. Presently, India and Malaysia have developed close political, economic and socio-cultural relations. There is a considerable goodwill for India in Malaysia at people to people level, which hosts the third largest PIO community in the world. India and Malaysia are witnessing growing engagements in all aspects of bilateral relationship, including political, economic and trade, defence and security, tourism and education, health, human resources, public administration, etc.
Economic & commercial relations:
Economic and commercial relations are the mainstay of our bilateral partnership. A bilateral Comprehensive Economic Cooperation Agreement (CECA) covering goods, services and investment has come into effect from 1 July 2011. India and ASEAN have also signed an FTA covering goods, services and investment.
In 2018-19, the bilateral trade was US$ 17.24 billion, with India’s exports being US$ 6.43 billion and imports being US$ 10.81 billion. Page 4 of 10 Thus, with strengthening bilateral economic and commercial relations, Malaysia has emerged as 13th largest trading partner for India while India figures among the ten largest trading partners for Malaysia.
Mineral fuels, aluminium articles, organic chemicals, meat, machinery, iron & steel, cotton, tea and coffee.
|Product Code||Product Label||India’s imports from Malaysia in 2018 (Value in US$ million)|
|’27||Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral …||2380.8|
|’76||Aluminium and articles thereof||835.7|
|’02||Meat and edible meat offal||365.1|
|’84||Machinery, mechanical appliances, nuclear reactors, boilers; parts thereof||285.5|
|’72||Iron and steel||241.1|
|’85||Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television …||168.4|
|’09||Coffee, tea, maté and spices||94.2|
|’07||Edible vegetables and certain roots and tubers||93.9|
According to the ITC Trade Map, India has an untapped trade potential of US$ 5.6 billion. The products with greatest export potential from India to Malaysia are Copper cathodes, Bovine cuts boneless, frozen, and Aluminium, not alloyed, unwrought. Copper cathodes shows the largest absolute difference between potential and actual exports in value terms, leaving room to realize additional exports worth $617.3 mn.
|Product code||Description||Export potential|
|740311||Copper cathodes||US$ 617.3 million|
|760110||Aluminium, not alloyed, unwrought||US$ 31.6 million|
|100630||Semi-milled or wholly milled rice||US$ 190.2 million|
|8708XX||Parts & accessories of motor vehicles, nes||US$ 149 million|
|0306Xb||Shrimps & prawns, frozen||US$ 137.1 million|
Minerals, animal oils, electrical machinery, copper articles, organic chemicals, chemical products, etc.
|Product Code||Product Label||India’s imports from Malaysia in 2018 (Value in US$ million)|
|’27||Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral …||2822.5|
|’15||Animal or vegetable fats and oils and their cleavage products; prepared edible fats; animal …||1385.6|
|’85||Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television …||1088.3|
|’84||Machinery, mechanical appliances, nuclear reactors, boilers; parts thereof||753.3|
|’74||Copper and articles thereof||599.4|
|’76||Aluminium and articles thereof||486.4|
|’72||Iron and steel||336.1|
|’44||Wood and articles of wood; wood charcoal||328|
|’38||Miscellaneous chemical products||309.8|