Malaysia - Market ChallengesMalaysia - Market Challenges

The Malaysia marketplace has become more cautionary due to recent global events such as the rising trade relations tension between U.S.-China, the disruption in global financial markets, and weaker commodity prices and production. As a result, Malaysia’s GDP projection has been lowered for 2019 to between 4.3-4.8 percent. In 2018, Malaysia’s GDP was at 4.7 percent, while its 2017 figure was around 5.9 percent.

The US$4.5 billion 1 Malaysia Development Berhad (IMDB) scandal from the previous government, The U.S. Department of Justice’s biggest kleptocracy case, revealed the extent of corruption and misappropriation of public funds in Malaysia. For 2019, the Federal Government's official debt as a percentage of GDP reached 51.8 percent, while total liabilities are expected to be at 73.5 percent. Theh new government’s goal is to reduce the deficit to 3.4 percent in 2019, 3 percent in 2020, and 2.8 percent in 2021.  For the next several years, Malaysia will face challenges and fiscal belt -tightening. Consequently, public sector expenditure is forecast to drop 1.8 percent in 2019.

Bank Negara, the country’s central bank’s primary economy support is prudent financial market measures and policies. A flexible exchange rate will increase the country’s economic resilience when facing external shocks. The exchange rate of Malaysain Ringgit to United States dollar (USD) for the first four months of 2019 averaged about 4.1 ringgit to the dollar. For the first five months of 2018, the exchange rate was around US$1 = RM3.92. The 2018 annual average for RM against USD was in the 4.05 range.

Import Permits
To import or export goods which require a license, traders first must register with the Companies Commission of Malaysia. Once registered, a company must then apply for an import license from the Ministry of International Trade and Industry (MITI). Malaysia uses a privatized single digital window for all import and export regulations called Dagang Net.

When bringing goods into or out of Malaysia, traders must provide the following documents to customs officials:

Guidelines to apply for Import License for Controlled Commercial Products Under Customs Order are as per below:
INTRODUCTION

1. The purpose of these guidelines is to explain the conditionsand procedures that need to be complied with, by companies that wish to apply for Import Permit License (AP) of commercial products controlled under the Customs Orders 1998 (Prohibition of Import), Customs Act 1967.

2. Among the products listed under the Customs Orders are heavy machineries, iron steel, chemical and cable.

CONDITIONS AND PROCEDURES FOR APPLICATION

1. Companies need to be registered with the Companies Commission of Malaysia.

2. How to apply

Companies need to submit the Application Form together with:

1. 1. Customs Form JK69.

   2. Memorandum and Article of Association (M & A).

   3. Form 24 : Information of Shareholders.

   4. Form 49 : Information of directors, managers and secretary of company

M&A, Forms 24 and 49 are required for first time applications.

3. Supporting Documents

Other documents that need to be enclosed with the Application Form are:
 

1. 1. Heavy Machineries.

      • Certificate of Origin from exporting country (heavy machineries must not exceed 5 years old).

      • Catalogues and photographs.

      • Record of importation.

      • Purchase Invoice.

   2. Prime Mover

      • Certificate of Origin from exporting country. (Prime Mover must not exceed 5 years old).

      • approval letter from Commercial Vehicles Licensing. Board (LPKP).

      • Purchase Invoice.

   3. Iron Steel (Flat Products, Pipes-Tubes and Long Products)

      • Manufacturing License or Warehouse Manufacturing License

      • Application Form.

      • Purchase Invoice/Sales Contract/Purchase Order.

      • Purchase Order from clients for Service Centres and Traders/Stockists.

   4. Chemical Items

      • Approval letter from the national Authority of Chemical Weapon Convention (NACWC).

      • Purchase Invoice.

   5. Cable

      • letter from Malaysia Manufacturer of Cable and Wire Association (MECWA).

      • Purchase Invoice.

4. Customs Form JK69 is available at:

Syarikat Percetakan Nasional (M) Bhd. 
Jalan Chan Sow Lin 
50554 Kuala Lumpur
Tel. : 03-92212022 
Fax. : 03-92220690

5. Submission of Application:
   Completed application must be submitted to:

Ministry of International Trade and Industry
Level 2, Menara MITI, 
No. 7, Jalan Sultan Haji Ahmad Shah,
50480 Kuala Lumpur, Malaysia.
Tel : 03 6208 4970 
Fax : 03 6206 2823
Email: ap@miti.gov.my

APPROVING AUTHORITY
Secretary General of MITI.

CLIENTS’ CHARTER
Application will be processed within 7 working days (manual application) and 5 working days (online application) upon receipt of completed application.

The Customs Department is streamlining its processes with a single gateway for trade.  The National Single Window end-to-end solution enables cost savings, automation of manual processes, ease of obtaining and sharing of information, and remote access.  The new initiave will work hand-in-hand with the Digital Free Trade Zone initiative (DFTZ) (see Information, Communication, Technology (ICT) section). The DFTZ has been implemented in Port Klang and will be rolled out to other ports.

Restrictions on Foreign Involvement
Government restrictions 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, in government-procurement cases a Malay-owned “Bumiputra” company, to effectively compete in the market. 

With the new government in place, several policies are being reviewed, but changes have not yet been announced.  Bumiputra interest groups, namely Bumiputera Retailers Organization (BRO), Persatuan Bumiputera Malaysia, Malay Chamber of Commerce Malaysia, and the Bumiputra Contractors Association, among others, are calling on government to continue the status of quo and/or increase of Bumiputra privileges.  The Malaysian Bumiputra Contractors Association requested the government to provide a special quota of at least 20 percent of the local civil work portion of the East Road Rail Link project to Bumiputra contractors.  Another recent proposal by the Ministry of Education Minister is to increase the number of places for Bumiputra in public universities.  Public universities support  retaining the 90 percent Bumiputra intake quota in the education ministry’s matriculation program.  The ministry will increase student intake into the pre-university programme to 40,000 from the present 25,000.  Seats for non-Bumiputra will increase proportionally to 4,000.

Intellectual Property Rights (IPR)
Malaysia continues to express a commitment to protecting and enforcing intellectual property rights (IPR), and has made important progress in the past few years.  Malaysia  was  removed from the USTR Special 301 watch list in 2012; however, in 2018, USTR announced an Out-of-Cycle Review of Malaysia due to IP concerns.  USTR will review the extent to which Malaysia is providing adequate and effective IP protection and enforcement, including with respect to patents, prior to the next annual 301 report. 

While challenges remain, Malaysian officials have augmented their resources to combat online piracy and have sustained their efforts to deny access to piracy websites, taking down infringing content on domestic sites, and conducting raids and arrests of Malaysians either operating or posting links to sites with pirated content. The Special Internet Forensics Unit in the Ministry of Domestic Trade and Consumer Affairs is a catalyst for enforcement. Malaysia established IP Courts in 2007 to enforce IP rights.  The Ministry of Domestic Trade, Cooperatives and Consumerism (MDTCC), responsible for IPR enforcement, remained largely dependent upon complaints from companies before taking action. Royal Malaysian Customs continued to express willingness to expand cooperation with the U.S. government to combat transshipments of pirated goods.

In contrast to generally favorable views of Malaysia’s record of IPR enforcement, the U.S. pharmaceutical industry has expressed concerns that weaknesses in the system for protecting drug-related data stands as a disincentive to the development of innovative medicines and could undermine public health objectives to improve patient outcomes.  As a result, the National Pharmaceutical Regulatory Agency (NPRA) implemented the pharmaceutical data exclusivity clause. Pharmaceutical data exclusivity is calculated based on the date the product is first registered, or granted marketing authorization and granted data exclusivity in the country of origin or in any country recognized, and deemed appropriate by the NPRA director. 

Compulsory licensing is not new to Malaysia. In 2003, Malaysia became the first country to issue a compulsory licence on an HIV drug, following the adoption of the Doha Declaration on TRIPS and Public Health by the 2001 Ministerial Conference of the World Trade Organization (WTO). In 2017, Malaysia issued another compulsory license. This time it is for Hepatitis C sofosbuvir vaccine. The U.S. pharmaceutical industry expressed concern over Malaysia’s latest usage of compulsory license. Again, it is the first country to issue a government-use compulsory license for Hepatitis C Vaccine (HCV) treatment.

Halal Certification
Malaysia intends to build a global halal community and establish itself as a leading authority on halal certification, audit standards, and halal research and training.  In 2006, it established the Halal Industry Development Corporation (HDC) to coordinate the overall development of halal products and services.  The vision is for Malaysia to become the global halal hub and to create value for businesses participating in halal industries to grow the Malaysian economy.  The HDC provides assistance to manufacturers, distributors, retailers, entrepreneurs, researchers and investors to penetrate the global halal market and JAKIM (the Department of Islamic Development Malaysia) is Malaysia’s halal certifying body. Department of Islamic Development Malaysia (JAKIM) is the agency responsible for the Islamic affairs including halal certification in Malaysia.  Therefore, JAKIM plays an important role to protect Muslim consumers in Malaysia and to make sure these consumers seek halal products as urged by Shariah guidelines.  For the purpose of halal certification, JAKIM has to ascertain the halal status of the product at every stage of productionby carrying out an official site inspection on the plants purposely to examine how the halal status of the raw material is maintained and monitored at all times.  For these reasons, JAKIM requires reputable and credible foreign halal certification bodies to monitor andverity the halal status of  raw materials and products.  The validilty of the appointment is for two (2) years.  The appointed FHCB (Foreign Halal Certification Bodies) shall be listed on JAKIM’s website as the Recognised Foreign Halal Certification Bodies.  The FHCB shall submit an annual report to JAKIM.

Malaysia has created a global halal support center and has created application, processiong and advisory services – including Mobile Halal Apps, iKiosk, and B2B Portals (live halal registry).

Malaysian has developed a standard MS1500:2009 requirement for the production, preparation and handling of Halal food. This standard provides practical guidelines for the food industry on the preparation and handling of Halal food and serves as a basic requirement for food product and food trade or business in Malaysia. It is used by JAKIM as the basis for certification.  In practice, standards and testing remain unclear and, in some instances, foreign companies have had difficulties with the certification process.
Malaysia has moved beyond halal standards for just food, it has developed 15 halal standards, which include a standand on pharmaceuticals and a draft standard for medical devices. 

In 2012, Malaysia enacted MS2424:  Halal Pharmaceuticals – General Guidelines.  This voluntary standard provides general guidelines and serves as a basic requirement in the manufacturing and handling of halal pharmaceuticals.  Products included in this standard are pharmaceutical products in finished dosage forms, and includes both prescription and non-prescription medicinal products (examples include:  biopharmaceuticals, traditional medicines and investigational medicinal products) for human use that are registered with the
Drug Control Authority, Ministry of Health Malaysia. 

In 2017, Malaysia introduced draft standards on halal medical devices.  This draft standard has gone through two public comment periods and is currently undergoing review government review.  This voluntary standard was developed to meet the challenges of the growing demand for halal products and services and to complement the halal ecosystem within Malaysia.  However, industry is concerned that the draft standard is overly broad in scope. The standards includes requirements for the management and control systems of all aspects of manufacturing and production, strategy and planning, raw material sourcing and delivery of the final product. 
The requirements include compliance to specific halal product safety, performace and hygienic aspects in manufacturing and handling of halal products.