Investments in Malaysia

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Investments in Malaysia Malaysia is an open economy and is trying to ease rules to attract foreign investments. In a recent survey, conducted by ASEAN – BAC survey on ASEAN Competitiveness, Singapore ranked as the most attractive for investment in 45% of survey respondents planning to invest in the country, followed by Malaysia (42%). (Competitiveness, 2013). Malaysia is also considered as the gateway to expand into not only the ASEAN region, but Asia in general. The government is striving towards achieving a developed nation status by 2020 and in order to give impetus, the government has laid out policies like Government Transformation Plan (GTP), New Economic Model (NEM), 1Malaysia and 10th Malaysia Plan (RMK10). Malaysia is also politically stable, and has good relations with all countries worldwide. Risks 1. Malaysia has an affirmative-action programme in aimed at reducing poverty among the locals. A key requirement of this programme is that atleast 30% (Euromonitor, 2014) of the ownership of service sector companies should be with Malays or indigenous groups. Malaysian government has taken steps to liberalize the economy and relax the controversial rule that required businesses to be owned partly by ethnic Malays. The ownership has gradually been decreasing from 50.0% to 30.0%. The Prime Minister of the country recently announced that the listed companies will no longer be required to have Malays to hold a stake. The Country realised that the policy was not benefiting the Malays. 2. Most businesses in Malaysia are on a personal basis and the deal can take time to kick in. There are cultural and social barriers, and most companies are family run. Malaysia is moving away from traditional funding and is warming up for PE investments. However, the country has to ensure that regulations and guidelines are effective. The Securities Commission has recently revised its equity investor’s guidelines PE investment in Malaysia The government is giving a boost to the private equity investment in Malaysia. Local companies have been dependent on state-owned companies for financing. The government now aims to reduce this dependence by encouraging funding from private equity investors, to help small businesses expand. Malaysia’s state-run pension fund is also allocating more funds to private equity investment. Most companies in Malaysia prefer to take debt since the cost of debt is as low as 3.0% maintained by the Bank Negara Malaysia (BNM), for the last 10 years, and thus have overlooked funding from private equity and IPOs.
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