Malaysia is the 9th most complex country for multinationals to do business in globally, and the 3rd most complex in Asia, according to a new report by professional services firm TMF Group.
The Global Business Complexity Index analyses key areas of business administration and compliance across 77 jurisdictions – from the time it takes to incorporate, to changes in tax legislation, to policies around wages and benefits, through to the challenges of opening a bank account. In all, over 250 different criteria are factored into this year’s rankings.
It found that in Asia, only Indonesia (1st) and China (6th) represented a larger challenge for multinational firms looking to establish and operate local subsidiaries; on the opposite end of the scale, Hong Kong (66th) and Singapore (60th) are the continent’s simplest jurisdictions for business.
One of the drivers of Malaysia’s high complexity is the incorporation process for foreign businesses, which can take up to a month. Incorporation in Malaysia involves obtaining licences for all business premises. Licences are also required for operating in some industry sectors which will affect the required share capital. The official business language in Malaysia is Malay, with English as the second language.
Sharon Yam, TMF Group’s Managing Director for Malaysia, said: “Malaysia offers a wealth of opportunities for international businesses, and there is clearly an appetite to attract more investment into the country. However, investors in Malaysia must be able to navigate its changing social, political and economic landscape. The country’s legislation has a large impact on day-to-day business operations as well.
“In recent years, as part of a drive to make Malaysia a more attractive place to do business, the government has launched a digital submission platform for audits and financial statements. While its use is not compulsory, the government is encouraging the companies to use it by giving an annual rebate of RM5,000 per year. This is part of the Malaysian government’s strategy of simplifying processes to attract foreign direct investment which has helped move the country forward. We can expect to see the country’s business complexity to start reducing as a result.”
Malaysia’s business environment had a number of positives which helps in their global positioning. As a former British colony, Malaysia’s legal system is based on UK law, making the legal environment readily understandable to many multinational firms. Its accounting practices are internationally aligned, including adherence to the International Financial Reporting Standards (IFRS), a common set of rules and regulations for financial statements that are understandable to businesses operating globally.
The incorporation process is relatively simple, with businesses only needing to work with two bodies to do so, as opposed to three in Japan, Korea and Singapore, and more than seven in Indonesia.
Beyond Malaysia’s borders, six of the ten most complex jurisdictions are in South America, with Brazil, Argentina and Bolivia ranked 2nd, 3rd and 4th. Greece, which occupied top spot last year, has made some improvements, and is now ranked 5th most complex this year.
On the other end of the scale, the ten least complex jurisdictions to set up or operate in are those found in the Western hemisphere, with Curacao leading the way, followed by the United States of America, Jamaica, Denmark and the British Virgin Islands.
To download a complimentary copy of the GBCI 2020 report, please click here.