Malaysia as a foreign investment destination.
View point of Bernhard Schutte, foreign investor.
South East Asia is unquestionably the future of the planet Earth for the next decade. I think any business man with a little business savvy recognizes this. The past empires are dyeing a long slow death, history repeating itself. No empire stayed forever.
Suggestions to the Malaysian government:
I am sure the Malaysian government does not need any advice from me. I have seen and experienced working very close together with various government departments and have seen in several occasions that they recognize and learn from their mistakes. They are a little slow but are doing fantastic compared to their competitors in the south East Asian region.
The one thing I would highly recommend to the Malaysian government is to rather focus on the middle size to smaller investor that the mega investor. This is my reason:
- Large corporations or Mega investors have no loyalty what so ever to any countries, politics, management, and staff but only to themselves and their shareholders. Mega investors don’t care about anything but mega profit. Mega investors usually think short term, five to ten years. They use and abuse every country, person and situation and then move on, often leaving behind disappointment and misery.
Mega investors will make governments bow to them like they are doing everyone this massive favor, demanding unrealistic incentives, tax breaks and subsidies. Unfortunately, they almost always succeed because they usually have the best negotiators money can buy. Mega investors will convince governments they are the next best thing to sliced bread, and have lawyers that make contracts that are only good for themselves. Mega investors usually have decades of experience and the politicians making decisions are often inexperienced, often leaving the parties behind like rape victims without any recourse.
Just look at so many of the Mega investors that come to South East Asia, look what they have left behind in the USA or Europe. They are the reasons for much misery there. Thousands of jobless, abandoned factories, bankrupted communities and and and. Do you think they are going to treat your country any different when they don’t want you anymore?
Malaysia has had some of these experiences already and I believe they have learnt. Under the new PM Najib, things are changing for the better. UMNO has been in power for a long time and the advantage of this is that administrators have gathered experience from the past. I cannot overemphasize to the Malaysian government to be very careful of these Mega investors.
- Small and Medium size investors are much more loyal. Why? Because they usually have a completely different corporate structure. The business owner usually is the decision maker and wants to move his/her family to the investment destination for life. Not like most Mega investors who usually have their headquarters in some offshore base where no one can touch them and employ a management team to do their dirty work.
The good thing about the small and medium size companies is:
- They often grow to become a large and are thankful and more faithful to the country and its employers.
- They usually don’t even ask for incentives.
- They look at it as a privilege to live in the country they are investing in.
- They pay more taxes.
- Why do governments push for Mega investors?
Unfortunately it is easier to convince Mega Investors to come to invest. Most governments gear up with all the tools and incentives to get the Mega Investors to come. The fruit is the lowest on the tree here. Politicians can show how well they have done on the short term, often not realizing what they have gotten themselves or the country into.
To get the Small and Medium size Investors is a lot of work for government departments, and the return on investment is often not seen for many years. This makes the government recruiting departments look like they have little results. The reason for this is; all reports are usually short term. My recommendation would be for government policy to be changed to also push more for medium size and small investors.
Investors should also do their homework before they decide to come to South East Asia.
There are so many destinations in SE Asia. Every country has its advantages and disadvantages. So the investor has to understand and study every aspect of their business and the countries that could be a candidate to invest in. You have to look at everything. It took me at least two years of studding the region before I made a decision.
A few pointers about what Malaysia is NOT:
- Malaysia is not a cheap labor country. If you looking for a country for cheep labor, don’t waste your time in Malaysia. All the neighboring countries have cheaper labor except for Singapore.
- Malaysia does not have an abundance of labor. Malaysia has a massive shortage of labor, and the majority of cheap labor is imported for other Asian countries. The government has heavily cracked down on labor permits for cheap labor. I to a certain extent even agree with this policy. The government under the new Prime Minister Najib is looking more at high income jobs. The government is encouraging and training the workforce to get into the next level of growth with better more profitable cleaner businesses rather than being cheap labor country. This is where the incentives are now.
- Malaysia is not full of corruption and business can be done without bribery. One thing I have learned: When you do business in Malaysia, learn the rules, it will make it easy for you and stick to the rules. Sure there is corruption in Malaysia like there is in every country on the planet, but Malaysia has less corruption than almost all of its neighbors and you can avoid the corruption if you obey the rules.
If you learn the rules and follow the rules by the book, you can do almost anything and get licenses for almost anything. If you get into a corruption situation, it is probably your own fault. It is usually because you either trying to avoid the rule, or you trying to do it the easy way. If you get into a situation where someone is trying to extort money out of you, be it government or private a person, report it. The government is very hard working to kill corruption.
- Malaysia does not force their religion on any one if you not a Muslim, even though over 50% of the population in Muslim. I found Malaysia to be very moderate when it comes to religion. No one has ever bothered me or anyone I know about their religion. Surprisingly there are many Malaysians that are Christians, Buddhist, Hindu and many of the natives still practice their own natural bush religions, especially in East Malaysia.
Some advantages Malaysia has to other countries in the South East Asia region.
- Pro Business. The laws in Malaysia are very pro business. For foreigners it is practically open to do business and you can even buy property on your own name, with is not possible in most South East Asian countries.
Some businesses you need a local Malaysia as a partner to get certain licenses. I do not see that as an obstacle, but as an advantage. As a foreigner in any country, you need local knowledge, without this you will fail anyway.
The biggest mistake you can make is to look for a puppet partner that just signs documents and you run the business in their name. This will become a time bomb anywhere in the world and is a massive risk. There are so many knowable Malaysians who will joint venture with you and they will even invest money with you. Make it a win win situation for you and your partner.
- Locals will invest with you. The illusion that people in South East Asia are poor is totally wrong. There are so many well to do Malaysians who are waiting for a fair opportunity to invest in and are prepared to be a full working partner.
- Strategic position on the map. Malaysia is slap bang in the middle of South East Asia. You get to 60% of the world’s population within a five hour radius, this is amazing. If you compare it to New York, you only get to 5% of the world’s population within a five hour radius.
- Cheap flights and many flights. Malaysia has cheap flights to every major destination in South East Asia on a daily basis to many destinations, a few times a day. I don’t like to use the word cheap, because cheap usually means bad quality, but this is not the case here. Companies like Air Asia have the newest and latest airplanes in their fleets.
- Multi culture and multi language. Because of the very diverse culture in Malaysia, this is an enormous advantage for the business world.
Most Malays speak Bahasa Malay and English. Bahasa Malay is related to Bahasa Indonesia and is almost the same language. The language in the Philippines is also related and the two cultures can communicate fairly well with each other.
Most Chinese Malaysians speak many languages; it is not unusual for the local Chinese to speak up to six languages. Almost all of them speak at least Mandarin, Cantonese, English and Malay Bahasa.
Then you have the Malaysian Indians. They almost all speak Tamil, English and Bahasa Mala. Many of the Indians speak Hindi and other Indian dialects too.
So the big advantage to the businessman coming to Malaysia is that you have this immense knowledge of language that is a major key of doing business in the South East Asia region. Almost no country can offer this at a reasonable cost. The only other country in the region that has this is advantage is Singapore, but it comes at a massive escalation of cost.
- Education. Malaysians are well educated compared to most of the surrounding countries. Malaysia has a lot of international university that produces educated graduates that have little or no working experience. This means it is a tremendous opportunity for the entrepreneur businessman looking for young people who are ready to be molded and trained in his business. Malaysian people believe in Education and the government has heavily supported this financially and legislatively.
- Reasonable priced real estate. If you do your homework, and compare the cost of real estate in Malaysia to the region, you will come to the conclusion that Malaysia still has the best value for many and best rental yields.
- Government support. After considering coming to Malaysia, I was very impressed with the government assistance MIDA has to offer. MIDA give you many of the answers to your research for free. MIDA also does have a one stop shop to assist you with setting up your company in Malaysia.
Once your company is set up, there is another government department called MATRADE who can assist you in marketing your products and services worldwide. Both MATRADE and MIDA are very efficient and helpful.
- One Malaysia. This is something new and fantastic that the new Prime Minister has done. Finally uniting all Malaysians. Driving away racism and discrimination. I believe this program will make Malaysia strong if embraced by all of its citizens.
- 0) So much to do and see. Malaysia is a very big country. You can go to a different place every day. The diversity in culture and food is hard to ignore. The hardest part is keeping of the weight because of the good food.
- 1) Government Incentives. There so are many Government Incentives, on the State and Federal level. It is important for the business man to do his homework.
I see Malaysia as the diamond in the rough. There are so many opportunities in Malaysia. The people are so friendly; it was difficult to understand that in the beginning. The first world can really learn from Malaysians when it comes to friendliness. Malaysians are humble and have more wealth than they are willing to tell you.
The people are in three groups:
Malays, or Bumiputra who run the government and they do a very good job at it. Sure they have the power struggles and bickering going on just like any nation on this planet. When I hear the locals complaining about their government, I tell them; go look what is going on in Thailand, the Philippines, Indonesia or any other place in Asia. The grass always seems to be greener on the other side till you get there.
Malaysia also has very good relationships with all countries worldwide. Malaysia has no wars or bad situations with any of its neighbors. This is very unusual and is due to the good diplomacy of the Malaysian government.
Chinese. They run most of the business. The Chinese do a very good job at it too.
The Indians, they dabble in all of the above, and make my favorite food.
In general, I chose to settle and do business in Malaysia because is it is a bubbling, bustling melting pot of races and religions where Malays, Indians, Chinese and many others ethnic groups live together in peace and harmony. In addition the government and Politics function very well, the business climate is good and Malaysia is a safe place that has a low crime rate.
I have invested mostly in the service industry and am very pleased on the outcome and future potential, especially with the new Prime Minister Najib who is very active and pro business.