Malaysia has emerged as a promising destination for businesses seeking to expand their operations. With its strategic location, favorable business environment, and growing economy, the country offers lucrative opportunities for entrepreneurs. However, starting a business in Malaysia is not without its challenges. Navigating the complexities of the local market, understanding regulatory requirements, and building a strong business foundation are crucial for success.
11 Challenges When Starting a Business in Malaysia
1. Navigating Malaysia’s Competitive Market
Malaysia’s business landscape is a fiercely competitive arena. With countless players vying for attention, standing out is a formidable challenge. It’s like trying to be heard in a bustling marketplace, where every vendor is shouting to attract customers.
Innovation is the key to breaking through this clutter. Simply offering a product or service is no longer sufficient. Businesses must differentiate themselves with unique selling points, whether it’s a groundbreaking feature or a captivating marketing campaign.
The digital age has intensified competition, transforming local markets into global battlegrounds. However, it also presents unparalleled opportunities for growth. By harnessing the power of social media and online platforms, businesses can expand their reach and build a strong brand presence.
The solution:
To thrive in Malaysia’s competitive market, entrepreneurs must:
- Embrace Innovation: Develop groundbreaking products or services that truly stand out.
- Master Digital Marketing: Utilize social media and online platforms to connect with a global audience.
- Implement Creative Marketing: Craft compelling campaigns that capture attention and build brand loyalty.
By combining innovation, digital prowess, and creative marketing, businesses can rise above the competition and achieve sustained success.
Key improvements on challenges in business:
- More concise and impactful language.
- Stronger emphasis on the competitive nature of the market.
- Clearer articulation of the solution.
- Enhanced readability and flow.
2. Talent Acquisition: A Competitive Edge
Attracting top talent is only half the battle in starting business in Malaysia. Retaining them requires a strategic approach. Beyond competitive compensation, fostering a positive work environment is crucial. Employees seek growth, recognition, and a sense of purpose. By investing in their development and well-being, you build loyalty and create a high-performance culture.
Key strategies for talent acquisition and retention:
- Develop a strong employer brand: Clearly communicate your company’s values, mission, and culture to attract like-minded individuals.
- Offer competitive compensation and benefits: Research industry standards and provide attractive packages to entice top talent.
- Create a thriving work environment: Prioritize employee growth, recognition, and work-life balance.
- Effective communication: Maintain open dialogue with employees to understand their needs and expectations.
By implementing these strategies, you can build a talent pool that drives your business forward.
3. Scaling Operations: From Startup to Scale-Up
Scaling a business is often likened to transforming a small boat into a cruise ship. It’s exhilarating but fraught with challenges. The key lies in strategic planning, operational efficiency, and a strong team.
Scaling requires a methodical approach. Analyze your processes, identify bottlenecks, and streamline operations. Build a high-performing team capable of handling increased responsibilities. Data is your compass; use it to inform decisions and measure progress.
Remember, scaling is a journey, not a destination. With careful planning and execution, you can navigate the complexities and achieve substantial growth.
4. Cash Flow: The Business Lifeline
Cash flow is the oxygen that keeps a business alive. It’s more than just paying the bills; it’s the fuel for growth and stability. However, maintaining a steady cash flow can be a delicate balancing act.
The cash flow challenge arises from the unpredictable nature of income and the consistent demands of expenses. Sales can fluctuate, while costs like rent and salaries remain relatively fixed. This imbalance can create cash flow gaps.
Adding to the complexity are late payments from customers, unexpected costs, and the financial strain of rapid growth. These factors can quickly deplete cash reserves, putting a business at risk.
To thrive, businesses must master the art of cash flow management. It’s about anticipating challenges, optimizing income, and controlling expenses to ensure a steady financial flow.
5. Applying For Entry Permits
When planning to starting business in Malaysia, foreign entrepreneurs must navigate several challenges in business, particularly when it comes to securing entry permits. The process is governed by the Immigration Act and Immigration Regulations of 1963, which outline four main categories for entry permits:
Categories of Entry Permits:
- Investors and Experts
- Investor: Requires a minimum of USD 2 million in a fixed deposit in a Malaysian bank, which cannot be withdrawn for five years. The applicant must have one Malaysian sponsor.
- Expert: This category is for individuals with specialized skills or expertise. A recommendation from a relevant Malaysian agency is required, along with a Good Conduct Certificate from the applicant’s home country. One Malaysian sponsor is also needed.
- Professionals
- This permit is for professionals with outstanding skills. Applicants need a recommendation from a relevant agency in Malaysia and must provide a Good Conduct Certificate from their country of origin. The applicant must have worked in a government agency or private company in Malaysia for at least three years and have one Malaysian sponsor.
- Spouses and Children of Malaysian Citizens
- Spouses: Must have been married to a Malaysian citizen and lived in Malaysia for at least five years with a Long-term Visit Pass. The Malaysian spouse must act as the sponsor.
- Children: For children under six years old, the Malaysian parent must be the sponsor.
- Point System
- This system is available for all foreign nationals except investors, experts, professionals, and spouses of Malaysian citizens. Applications are assessed based on criteria such as age, qualifications, duration of stay in Malaysia, and proficiency in Bahasa Malaysia. A minimum of 65 points is required to apply.
Relevant Agencies for Recommendations
Depending on the field of expertise, recommendations for permanent residency can be obtained from various Malaysian agencies, such as:
- Ministry of Health (Health and Medical)
- Ministry of International Trade and Industries (MITI) / Malaysian Industrial Development Authority (MIDA) (Industrial, Services, and Manufacturing)
- Central Bank (Banking and Finance)
- Security Commission (Investment and Capital)
Penalties for Non-compliance
According to Section 6(3) of the Immigration Act 1959/63, entering Malaysia without a valid entry permit can lead to a fine of up to RM 10,000, imprisonment for up to five years, or both.
6. Obtaining Business Licenses in Malaysia
Before you can legally start business in Malaysia, securing the appropriate business licenses is essential. Depending on the nature of your business, you may need to obtain general licenses, industry/sector-specific licenses, or activity-specific licenses.
To ensure a smooth and error-free process in acquiring the necessary licenses, we recommend utilizing Acclime’s professional services.
| License Type | Details | Examples |
| General Licenses | Essential licenses required for establishing any business in Malaysia. | – Company Registration
– Employee Income Tax Registration – Employees Provident Fund (EPF) Registration – Social Security Organization (PERKESO) Registration – Human Resources Development Fund (HRDF) Registration – Business Premise Licenses – Signboard Licenses |
| Industry/Sector-Specific Licenses | Licenses needed for businesses in specific industries as determined by the Malaysian government. | – Manufacturing
– Wholesale and Retail Trade – Telecommunications – Broadcasting – Oil Exploration – Construction – Banking – Public Houses |
| Activity-Specific Licenses | Licenses regulating specific activities that may apply to multiple industries or sectors. | – Certificate of Fitness for Certified Machinery
– Approval of Expatriate Posts – Approval to Install, Resite, or Alter Air Pollution Control Equipment – Building Plan Approval – Sales Tax License – Fire Brigade Approval |
7. Obtaining Halal Certification in Malaysia
Halal certification is mandatory for businesses handling food or goods in Malaysia. Due to the country’s predominantly Muslim population, ensuring products adhere to Islamic dietary laws is crucial.
Eligibility Criteria
To obtain halal certification, businesses must:
- Be registered with the Malaysian government (SSM, Co-operative Societies Commission, or other relevant agencies).
- Hold a valid business license from local authorities.
- Be fully operational.
- Exclusively produce or handle halal products.
- Utilize halal ingredients and suppliers.
Ineligible Products and Businesses
- Non-halal products
- Businesses handling both halal and non-halal products
- Products or premises associated with non-Islamic activities (e.g., entertainment, alcohol, pork)
- Fertilizers, animal feed, crockery, and paper
- Hotels offering pork-based menus
Importance of Halal Certification
Misrepresenting a product as halal is a serious offense in Malaysia. Businesses must obtain halal certification before selling their products to avoid penalties.
By adhering to halal standards and obtaining the necessary certifications, businesses can gain trust and access the significant halal market in Malaysia.
8. Opening a Corporate Bank Account in Malaysia
Opening a corporate bank account in Malaysia as a foreigner is possible, but it might present some challenges. While some banks are more accommodating to foreign businesses, others may have stricter requirements.
Physical presence in Malaysia is generally preferred when opening a corporate bank account. However, with careful preparation and documentation, it might be possible to open an account remotely.
Required Documents
The specific documents needed to open a corporate bank account can vary between banks. While there’s no standardized list, common requirements include:
- Company registration documents: Certificate of incorporation, Memorandum and Articles of Association.
- Identification documents: Passports and visas for directors and shareholders.
- Proof of business address: Lease agreement or utility bill.
- Business registration documents: Business license or other relevant permits.
- Bank introduction letter (optional): A letter of introduction from an existing customer of the bank can be beneficial.
Popular Banking Options
Some of Malaysia’s major banks include:
- CIMB
- Maybank
- Public Bank
- RHB Bank
It’s essential to contact the bank directly to inquire about their specific requirements and procedures for foreigner to start business in Malaysia.
9. Malaysia’s Construction Permit Process: A Double-Edged Sword
While Malaysia has made significant strides in streamlining its construction permit process, challenges in Malaysia still persist. The government’s efforts to reduce bureaucracy and expedite approvals have undoubtedly boosted the construction sector. However, the reality on the ground is often more complex.
On paper, the process is efficient. With 11 clear steps and an average processing time of 54 days, Malaysia seems to have a competitive edge. However, this efficiency is often undermined by:
- Inconsistencies: Variations in implementation across different states and districts create confusion and delays.
- Human intervention: Reliance on human discretion can lead to corruption, subjectivity, and inefficiency.
- Hidden costs: Beyond official fees, unexpected expenses can erode profit margins.
- EIA bottlenecks: The environmental impact assessment process can be lengthy and complex.
While the government’s commitment to infrastructure development is commendable, addressing these underlying issues is crucial to fully unlock the potential of the construction sector.
To truly create a business-friendly environment, Malaysia must transition from a process-oriented approach to an outcome-focused one. This involves not only streamlining procedures but also ensuring transparency, accountability, and predictability to attract foreigners to start business in Malaysia.
Conclusion
Malaysia offers a compelling proposition for entrepreneurs seeking to start a business. Its strategic geographic location, supportive government policies, and growing economy create a conducive environment for business growth. However, like any venture, starting a business in Malaysia comes with its own set of challenges. Navigating bureaucratic processes, securing financing, and competing in a dynamic market require resilience and adaptability. By understanding these challenges and leveraging the country’s strengths, entrepreneurs can increase their chances of success.
