Malaysia and Business - Key points;

      Multi-ethnic, but politically and socially very stable – essentially same government since independence 50 years ago. And safe (radicalism not allowed to take root).

      Robust economy (6% growth), driven by export-orientated manufacturing, especially E & E. But services (nearly 60% of GDP) increasingly important, including tourism. Strong too in oil & gas and commodities (largest palm oil exporter in the world).

      Nominal GDP some USD5,000 per capita, but real purchasing power (PPP) much higher – nearly USD12,000. And higher still in main urban areas like Kuala Lumpur. So solid domestic market of 26 million people.

      Very open economy, especially in goods. 18^th largest trading nation in the world, with exports and imports each more than GDP. Services sector less open, but gradually opening up as Malaysian government recognise need, so growing opportunities.

      Some wrinkles on rules and procedures for government- linked contracts (due to Bumiputra policy). But experienced operators can and do find ways successfully around or through these.

      Government pump-priming under the 9^th Malaysia plan (2006-10) will stimulate growth and demand further, and create opportunities notably in construction and infrastructure.

      Keen to be regional base/hub. Has advantage of native-speaking Chinese and Indian populations, as well as Malay (like Indonesia) and English. Some successes, e.g. in oil & gas and also SSO. A T Kearney report ranked Malaysia third most attractive country for outsourcing in the world (after India and China).

UK/ Malaysia

      Education, along with the English language, a major linking factor. Large numbers of influential Malaysians have studied or are studying in the UK. Even more take UK qualifications in Malaysia (a growing area of business opportunity).

      Also broadly similar systems of government and the law (very many lawyers are UK-trained). And don’t forget football!

      Very strong UK presence and significant investment in Malaysia: notably in financial services (HSBC, Standard Chartered, Prudential…), oil & gas (Shell, BP…), retail (Tesco et al) and education & training (Nottingham University Campus, very many ‘twinning’ and similar arrangements, huge uptake of UK professional and vocational qualifications).

      Bilateral trade around £3 billion, plus £700 million + on services.

UK-Malaysia trade and investment brief

Background

Malaysia remains an attractive target for British trade and investment. Close historical and educational ties (very many Malaysians study in and know the UK), a familiar commercial/ legal framework and the widespread use of English have all facilitated this process. An increasing number of British companies are beginning to see Malaysia as a natural hub for their regional business interests – something the Malaysian authorities are anxious to promote (in competition with Singapore).

Malaysia is politically stable, and is one of South- East Asia’s more successful economies. A decade or more of growth of around 8% until 1996 raised per capita income close to US$4,000 (more like US$9,000 in PPP terms), transforming a commodities-based economy into one based on manufacturing. The Asian financial crisis set this back. But the Malaysian Government’s subsequent unorthodox recovery package – combining exchange controls and a dollar-pegged currency with financial restructuring and fiscal stimuli, high world prices for oil and other commodities such as palm oil and timber in which Malaysia is a significant exporter, and latterly the global recovery in demand for electronics products (which make up the lion’s share of Malaysia’s exports) have led to a strong recover. The economy grew by 5.2% in 2003, 7.1% in 2004, 5.3% in 2005 and 5.9% in 2006. Since the 1997 Asian financial crisis, Malaysia has made good progress in reforming its banking and financial system. Local banks have been consolidated and there is phased liberalisation to allow greater competition. Malaysia is one of the world’s key Islamic Financial players.

UK-Malaysia Trade (£millions)

Malaysia is a very open economy, with both imports and exports exceeding GDP – making it the 18^th or so largest trading nation in the world. It is the second largest South East Asian export market for the UK after Singapore, and was the UK’s 34^th largest export market globally in 2004. In 2003 they rose by 18% to top the £1billion mark and, despite a slight fall in 2004 (perhaps reflecting the strength of the pound against the Malaysian ringgit), were again topped the £1 billion mark in 2005.

Bilateral two-way trade is around £3 billion annually; with Malaysian goods exports to the UK roughly double our exports in the other direction. However, there are UK exports to Malaysia via Singapore which do not show up in the bilateral trade figures, but which may amount to as much as £100 million. The UK also runs a surplus on visible trade with Malaysia – of some £240 million in 2003. Education for example represents a significant but difficult to track source of income, with about 11,000 Malaysians studying in the UK, while in Malaysia over 40,000 students are studying for British degrees or other UK qualifications. Overall, the bilateral current account in 2003 was more or less in balance.

Malaysian Government concern about falling standards in English has led them to re-introduce English as the medium of instruction for Maths and Science. This decision has opened up major new opportunities for British suppliers, which the British Council and UK companies are pursuing. The British Council has offices and English teaching centres in Kuala Lumpur and Penang, and education promotion centres in Sabah and Sarawak.

UK Trade & Investment has identified the following priority sectors in Malaysia:

      Aerospace (civil)

      Agriculture, Horticulture & Fisheries

      Construction

      Education and Training

      Environment

      Financial & Legal Services

      Healthcare & Medical

      Oil & Gas

      Power

UK investment in Malaysia

Traditionally, Britain has been a leading investor in Malaysia, with estimated cumulative investments of well over £3billion over the last 15 years. Malaysia’s rapid development, strategic location and political and social stability have continued to make it an attractive place for British investment. So has the development of high-tech projects such as the Multimedia Super Corridor (MSC), with its related incentives for investors, and of strategic industries such as oil and gas. The continuing development – and, we hope, gradual liberalisation – of the local services sector and of Malaysia’s position as a regional base should help bolster this trend.

Examples of significant British investment include:-

      Shell has very substantial operations and ongoing investments in Malaysia, including exploration and production; LNG and middle distillates production; refineries; and a retail business of over 800 petrol stations (the largest in Malaysia). It has also established several global operations in Malaysia, including a centre for the group’s information technology requirements in the Multimedia Super Corridor.

      BP made Britain’s largest single investment in Malaysia through three joint ventures in the petrochemical industry. While BP announced in early 2004 the sale (to a local company) of its chain of petrol stations, and will also dispose of part of its petrochemical operations due to global consolidation, its presence and investment in Malaysia remains very substantial.

      Tesco established in 2001 a joint venture with a local company to develop hypermarkets in Malaysia. It now has seven large stores, with more on the way. Tesco’s total planned investment £200 million.

      HSBC and Standard Chartered, two of the biggest and long established foreign banks in Malaysia, have opened major ‘back-office’ processing centres in the Multi Media Super Corridor involving substantial investment and new jobs. So have Prudential, a major player on the life insurance market.

      Dyson now manufacture/ assemble all their vacuum cleaners and washing machines at a plant in Johor, established in 2001.

      Hanson plc is the largest quarrier and provider of asphalt in Malaysia.

      GlaxoSmithKline is the No 1 pharmaceutical company in Malaysia.

      Nottingham University have established a full-fledged campus in Kuala Lumpur and are developing a brand new site for this- an investment of £12 million.

      BPB – the largest quality gypsum (plasterboard) manufacturer in the world – are building a manufacturing plant near Kuala Lumpur, to be opened at end 2005, and investment of over £17 million.

      The British Adminex Group opened a ceramics factory in Perak in 2004 – an investment of around £12million.

Malaysian investment in the UK

Malaysian investment in the UK is difficult to track, but is significant compared to Malaysia’s size. 44 Malaysian companies are recorded from various sectors in London alone (the second highest figure from ASEAN after Singapore). Recorded Malaysian investments include: manufacturing, sports cars, toiletries, textiles and a range of property investments. Some of the most notable include; Proton the national car maker, own Lotus; the acquisition by Malaysian company YTL of Wessex Water for around £1.2 Billion – the largest Malaysian outward investment to date; MUI’s ownership of Laura Ashley and the Corus hotel chain; Usaha Tegas’s ownership of EXCEL Exhibition Centre in London’s Docklands; and most recently, Malaysian national oil company Petronas’s decision to take a 30% share in a large LNG terminal in Wales.

Further information…

For further information on Malaysia and trade and investment between the UK and Malaysia is available on the following websites;

www.britishhighcommission.gov.uk – Website of the British High Commission, Kuala Lumpur.

www.malaysianinformation.com – Website providing information on trade, investment, travel and tourism in Malaysia as well as Malaysia-related activities in the UK.

UK top 10 exports to Malaysia, January – December 2006 (SITC Description)

01)  Electrical machinery, apparatus and appliances, nes and electrical parts thereof -£203Million (% Share of Total: 23.0%)

02)  Professional, scientific and control instruments (and apparatus nes) - £73Million (% Share of Total: 8.3%)

03)  Other transport equipment - £66 Million (% Share of Total: 7.5%)

04)  Metalliferous ores and metal scrap - £56 Million (% Share of Total: 6.3%)

05)  Road Vehicles -£48 Million (% share of Total: 5.5%)

06)  General industrial machinery and equipment, nes and machine parts nes - £41 Million (% Share of Total: 4.7%)

07)  Power generating machinery and equipment -£38 Million (% Share of Total: 4.1%)

08)  Office machines and ADP equipment - £36 Million (% Share of Total: 4.1%)

09)  Specialised industrial machinery - £29Million (% Share of Total 3.3%)

10)  Medicinal and pharmaceutical products – £29 Million (% Share of Total: 3.3%)

UK top 10 imports from Malaysia, January- December 2006 (SITC Description)

01)  Office machines & ADP equipment - £460 Million (% Share of Total: 23.8%)

02)  Telecommunications and sound recording and reproducing apparatus - £305 Million (% Share of Total: 15.7%)

03)  Electrical machinery, apparatus and appliances, nes and electrical parts thereof - £239 Million (% Share of Total: 12.3%)

04)  Articles of apparel and clothing accessories - £114 Million (% Share of Total: 5.9%)

05)  Furniture and parts thereof, bedding, mattresses, supports, cushions, and similar stuffed furnishings - £110 Million (% Share of Total: 5.7%)

06)  Cork and Wood manufacturers (excl. furniture) - £75 Million (% Share of Total: 3.9%)

07)  Fixed vegetable fats and oils; crude, refined, or fractionated - £43 Million (% Share of Total 2.2%)

08)  Other transport equipment - £42 Million (% Share of Total: 2.2%)

09)  Power generating machinery and equipment – (£41 Million (% Share of Total: 2.1%)

10)  Road Vehicles - £36 Million (% Share of Total: 1.9%)