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ENVIRONMENTAL SCANNING
MALAYSIA
By Brian Leemoon and Tim
Letcher
Investment Scanning Scoring Methodology
The PESTLE framework format was
used. A scoring system was utilised
(0,1,3, or 9.)...
POLITICAL
RISKS
OPERATIONAL
RISKS
COMPETITIVE
RISKS
ECONOMIC
RISKS
SHAREHOLDER EXPOSURE
• Asset destruction (war, terroris...
CAGE (Distance Framework) Analysis
• CAGE analysis: + similar - Different
• Cultural distance. +(Common British Influence,...
Government Support of Economic Growth
• Mixed Economy with an emphasis on Economic Diversity
• 1970’s - Producer of raw ma...
100% 100%
70%
49%
70%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Healthcare
Retail
Education
Professional
Evironmental
Co...
Gross Domestic Product Growth
(Annual %)
-10
-5
0
5
10
15
20
20142013201220112010200920082007200620052004
US Mexico China ...
Access to Labor
Pros
• High Literacy (95%)
• Workforce Experienced in:
• Agriculture (11%)
• Industry (36%)
• Services (53...
Political Stability
1 1 1 1 1 1
2
1 1 1
17
1
4
1
0
2
4
6
8
10
12
14
16
18
1967 1969 1977 1986 1991 2001 2007 2010 2011 201...
Social Topics
[CELLRAN
GE], 63%
20%
9%
7%
1%
Muslim Buddhist Christian Hindu Other
Religion
• Issues of Concern
• Human Tr...
0
2
4
6
8
10
12
14
0-14 15-24 25-54 55-64 65 and above
Population in Millions
Combined Men Women
Social Topics (cont.)
Economic factors
• Malaysia has a relatively low inflation rate (0-3.5% Annually last 5 years)
• Local product purchasing ...
Legal Overview
• The Malaysian Legal system is based on the British legal system and its common law, with two
types of tri...
Employment Law (Unique Aspects)
• An employer cannot require employees to work more than a ten hours spread over the
cours...
Environmental Review
NATURAL DISASTER RISK (Low)
• Floods are the primary hazard affecting Malaysia, ranking in the top de...
ICT
• Malaysia at #32 (out of 148) in the world ranks highly for its Information Communication
technology (ICT WEF 2015).
...
Malaysia Interesting Facts & Recommendation
Interesting Facts
• Worlds tallest twin tower building (PETRONAS Towers) forme...
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Malaysia Presentation-Public

  1. 1. ENVIRONMENTAL SCANNING MALAYSIA By Brian Leemoon and Tim Letcher
  2. 2. Investment Scanning Scoring Methodology The PESTLE framework format was used. A scoring system was utilised (0,1,3, or 9.) for ranking & comparison . A Leading indicator Country Risk Analysis matrix was reviewed and elements incorporated into the Investment Scanning Matrix. CAGE analysis done. (High level) Why? -Making Differences more visible -Liability of being foreign -Take distance into account 3 Key Methodologies used. Points system allows for country to county/ industry comparison. Over 30 sources of information were used. Score of 4.36
  3. 3. POLITICAL RISKS OPERATIONAL RISKS COMPETITIVE RISKS ECONOMIC RISKS SHAREHOLDER EXPOSURE • Asset destruction (war, terrorism etc..)  Asset seizure (Nationalization) OPERATIONAL EXPOSURE • Market disruption  Labor unrest  Supply shortages EMPLOYEE EXPOSURE • Crime  Expatriate Risk ECONOMIC EXPOSURE  Growth Variability  Inflation  Exchange rates BUSINESS EXPOSURE : • Corruption  Cartels  Monopolies INFRASTRUCTURE - Utilities Telecommunication, Transportation REGULATIONS -Local Regulations - local capital, content, employment. Taxes Country Risk Analysis incorporated into the Rating matrix COUNTRY RISK ANALYSIS
  4. 4. CAGE (Distance Framework) Analysis • CAGE analysis: + similar - Different • Cultural distance. +(Common British Influence, Common Law, Language muti- cultural), - Religion • Administrative distance. +( Ease of doing business, Law, Treaties,) – (Weak institutions, Home bias, currency) • Geographical Distance. -( Distance, Time zone, Trade zones, Weak transportation links) • Economic distance. +( Natural resources, Financial Resources, Per Capita Income,) – (Economic size, Human Resources) For US Investors, Direct Investments in Malaysia , less affected by Geographical Distance could be more favorable
  5. 5. Government Support of Economic Growth • Mixed Economy with an emphasis on Economic Diversity • 1970’s - Producer of raw materials (Tin and Rubber) • 1980’s - Began to change focus to diversify economy • 2015 - Classified as an upper-middle economy • 2020 - Goal to become high income economy • Encourages Trade and Foreign Direct Investment • Free Industrial Zones and Free Commercial Zones • Raw materials, products and equipment imported duty free • Minimal customs formalities • Requires minimum 80% of output to be exported. • Goods sold into Malaysian Economy must pay import duties.
  6. 6. 100% 100% 70% 49% 70% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Healthcare Retail Education Professional Evironmental Courier Services Telecommunications Insurance Companies Oil and Gas ApplicationServiceProvider Foreign Direct Investment (Ownership) NetworkService Provider
  7. 7. Gross Domestic Product Growth (Annual %) -10 -5 0 5 10 15 20 20142013201220112010200920082007200620052004 US Mexico China Malaysia
  8. 8. Access to Labor Pros • High Literacy (95%) • Workforce Experienced in: • Agriculture (11%) • Industry (36%) • Services (53%) • Government Discourages Strikes • Low Unemployment rate (2.7%) • No Welfare System Cons • Shortage of Skilled Labor • Acute Shorages in: • Academics • Professionals • Scientists • High Cost of Termination • (75 weeks of Salary)
  9. 9. Political Stability 1 1 1 1 1 1 2 1 1 1 17 1 4 1 0 2 4 6 8 10 12 14 16 18 1967 1969 1977 1986 1991 2001 2007 2010 2011 2012 2013 2014 2015 2016 Events of Civil Unrest
  10. 10. Social Topics [CELLRAN GE], 63% 20% 9% 7% 1% Muslim Buddhist Christian Hindu Other Religion • Issues of Concern • Human Trafficking • Forced Labor • Child Labor • Piracy
  11. 11. 0 2 4 6 8 10 12 14 0-14 15-24 25-54 55-64 65 and above Population in Millions Combined Men Women Social Topics (cont.)
  12. 12. Economic factors • Malaysia has a relatively low inflation rate (0-3.5% Annually last 5 years) • Local product purchasing is encouraged by government policies, national pride, pricing & adjacent Singapore market (Exports $37B,Imports $25B). • Cost of Labor- Very competitive, Minimum wage of approx $1US per hour (Similar to Philippines & Indonesia v Cambodia & Vietnam $0.60 per hour) Stable, well managed economy. Competitive, highly skilled & experienced workforce.
  13. 13. Legal Overview • The Malaysian Legal system is based on the British legal system and its common law, with two types of trial, civil and criminal. • At the state level some level of limited Shariah (Islamic law) is practiced. CONSUMER LAW • Consumers who have problems with goods or services have recourse to the Tribunal for Consumer Claims or the Small Claims Court; those with banking or insurance problems can resort to the Financial Mediation Bureau (FMB). EMPLOYMENT LAW • Main law derives from Malaysia's Employment Act (As Amended 2012) • Personal liability on individual directors and officers of corporate entities for offenses and violations of the Employment Act Malaysia has modern Consumer & Employment laws, that also recognize the protection of infant industries
  14. 14. Employment Law (Unique Aspects) • An employer cannot require employees to work more than a ten hours spread over the course of a single day; and to work more than 48 hours a week. (Certain emergency exceptions). • Long probationary periods are the norm due to ease of workers filing dismissal complaints • No onerous expatriate worker provisions. (Except non replacement of local workers by foreign workers). INTELLECTUAL PROPERTY • Malaysia’s IP laws are in conformity with Global standards (member WIPO etc..) and fully protect foreign and local inventors. COMMERCIAL LAW • Malaysia has 71 Bilateral Investment Agreements in place (Inc USA). By comparison Singapore has 41. These protect foreign investments from nationalization & facilitate repatriation of funds. HEALTH & SAFETY FRAMEWORK • Malaysia has had a modern Act in place since 1994. (Fatality rate 4.2/1000 v 3.3/1000 USA).
  15. 15. Environmental Review NATURAL DISASTER RISK (Low) • Floods are the primary hazard affecting Malaysia, ranking in the top deciles for most of the western half of the country (Center for Hazard & Risk Columbia University). Rainy season is Oct-Feb and the main risk is flash flooding/ landslides. NATURAL RESOURCES (High) • Malaysia has significant natural resources including Petroleum (Almost self sufficient, daily production 570K v 623K Barrels consumption), Palm Oil, Rubber and tin, timber, natural gas. • Oil palms produce 38% of the world's vegetable-oil output on 5% of the world’s vegetable-oil farmland (10 Times more oil than Soya per acre), Worlds #2 producer. Industry employs 500K • #1 supplier of specialized latex products in the world (50% of global demand) • Exports Semi conductors $32 Billion (B), Refined Petroleum $31B Nat Gas $20B ENVIRONMENTAL & POLLUTION • Malaysia suffers from deforestation, some level of pollution in its rivers (up to 25%), high carbon footprint (Rapidly decreasing) and at times below average air quality in major cities. Well managed natural resources. Environmental pollution being actively addressed & in National 2020 plan
  16. 16. ICT • Malaysia at #32 (out of 148) in the world ranks highly for its Information Communication technology (ICT WEF 2015). • Several High tech IT freezones exist in Malaysia including semiconductor fabrication factories. • Internet costs are similar to developed countries (High for Asia). • Communication costs (Cell & International ) are significantly lower due to intense competition. (Celcom (Vodaphone) , Maxis (Saudi Telcom) , Digi (Telenor) etc..) 98% National cell coverage. >40 Million users. 1.3 cell phones per person. Low weekday & free weekend rates & 2GB monthly Data included for $10US. Market is predominately prepaid. Modern communication coverage, very low cost telecommunication. Well developed ICT infrastructure
  17. 17. Malaysia Interesting Facts & Recommendation Interesting Facts • Worlds tallest twin tower building (PETRONAS Towers) former tallest building 1998-2004 • Ranked 4 times consecutively in the Top 20 most competitive economy (14th-18th place IMD, WEF). In Goods market efficiency [Ease of doing business] (6th, US 16th) and Financial market development [Access to finance , VC, legal rights] (9th US 5th) • Malaysia is the fifth largest recipient of Foreign Direct Investment inflows in the world (2014). • Transparency International Corruption perception index 2015 #54 Malaysia (Italy #61, India #73, China #83). • 20th Largest economy in the world. Positive trade Balances with Singapore , USA , China Recommendation/Conclusion • Malaysia is a world class foreign direct investment opportunitiy especially in selected industries that are be supported by the Malaysian Government. For investors located in the Middle East and South East in particular it will be one of the top choices to consider.

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