Malaysia - Using an Agent to Sell US Products and ServicesMalaysia - Using an Agent

Most exporters find that using a local distributor or agent is the best first step for entering the Malaysian market. A local distributor is typically responsible for handling customs clearance, dealing with established wholesalers/retailers, marketing the product directly to major corporations or the government, and handling after-sales service. Exporters of services generally also benefit from use of a partner.

Sales to the government, Government Linked Companies (GLC), or priority sectors require a local agent and/or a joint venture partner, usually a Bumiputra owned firm.  The Malaysian government makes use of offsets and other measures to encourage technology transfer, particularly in defense procurements.

For companies that sell services, we generally recommend use of an agent or partner. Looking at specific sectors, however, there may be other considerations. Under the World Trade Organization (WTO) General Agreement on Trade in Services (GATS), Malaysia scheduled a certain number of commitments on the foreign provision of services, but retained a large degree of freedom to restrict services trade pursuant to development goals. For instance, it made no commitments to grant foreigners licenses in banking, insurance, or telecommunications or to permit foreigners to provide education, environmental, or distribution services through commercial presence (though it has in fact granted licenses to foreign entities in these sectors). Under the New Economic Policy (NEP) formulated in the 1970s to eradicate poverty and to correct racial economic imbalance, capital ownership structure was proportionated in the following ratios:

Sendirian Berhad (private limited company/LLC)

• Malaysian companies require a minimum of 2 shareholders, 2 directors and a company secretary; the directors and company secretary must be resident in Malaysia. The company secretary must also be professionally qualified or licensed in the country.

• Bumiputera companies are established through the same process as the Sdn. Bhd., but are characterized by
  • 100 percent equity ownership by ethnic Malays
  • 51 percent or more of the board seats filled by ethnic Malays and
  • 51 percent of the workforce being ethnically Malaysian.

• In order to register a branch of a foreign company in Malaysia, only a registered office and authorized agent are required;
• This removes the requirement for two shareholders, which means that overseas companies may receive the entire benefit of their Malaysian sales without the use of a nominee;
• The need for only one authorized agent also simplifies the LLC’s requirement for two resident directors;
• Like with most branches, the tradeoff for these benefits is that responsibility for the branch’s liabilities lies with the parent company.

• There is no minimum requirement since this business entity is only used for support services and is not profitable.

• A foreign entity can access the Malaysian market through several options.
  • Incorporate a company with 100 percent foreign ownership
    • This is limiting as they will be excluded from direct participating in priority sectors tenders/activities
  • A joint venture with a Malaysian partner, in which case the local company will have at least 50 percent ownership over the respective company.
    • In this particular case, the company should have a paid up capital of at least RM 350,000,
    • while the minimum authorized capital should be RM 500,000.  

The 30-40-30 ration is applicable to public listed companies only. So far there is no stipulation from the government to change the ratio.