Economic Data
(1999 projections)
Total GDP (in U.S.$): $67 billion (1998)
GDP Growth: -6.7% (1998), positive 8% in the decade before the Asian financial crisis.
Per Capita GDP (in U.S.$): $3,272 (1998), $4,703 (1996)
Inflation: 5.3% (1998), 3.5% (1996)
Unemployment Rate: 3.4% (1998), 2.5% (1996)
Trade Balance: $17.7 billion (1998)
Trade with RI: Malaysia is Rhode Island’s 10th largest trading partner, with $27 million in exports in 1998.
Exports (U.S.$): $71.9 billion: electronic equipment, petroleum products, palm oil, wood and wood products, rubber, textiles. Export trading partners: U.S. (21%), Singapore (20%), Japan (12%), Hong Kong (5%), UK (4%), Thailand (4%), and Germany (3%).
Imports (U.S.$): $58 billion: machinery and equipment, chemicals, manufactured goods, foods. Imports trading partners: Japan (27%), U.S. (16%), Singapore (12%), Taiwan (5%). Germany (4%), and South Korea (4%).
Best Prospects for Export: Computer software, franchising, industrial process controls for the petrochemical industry, pollution control, medical equipment and information technology, financial management consulting services, education/distance learning.
Key Trading Partners: United States, Singapore, Japan.
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Ask Erik Hansen, president of SOA, Inc., about exporting to Malaysia, and he’ll tell you be wary, because it’s quite possible the company with which you are doing business won’t be able to pay its bills.
Hansen describes Malaysia as a country still mired in economic problems that have resulted in devaluation of its currency, companies failing to live up to their obligations, and banks defaulting on promises.
“We stopped it (exporting to Malaysia) because we didn’t get paid,” said Hansen, whose Pawtucket based company is extremely active exporting printing related machinery worldwide. “The country’s problems of a couple of years ago — the economy went down the drain. They didn’t stand up to their promises, even with a letter of credit.
“We have threatened if something goes wrong with the equipment we sold them, we won’t even service it until they pay their bills. We still have a fight with it.”
Hansen said he dealt with a private company that is still manufacturing but because of “devaluation they could not afford to pay the prices they had signed up for, and the banks defaulted also. We’re just hoping we can establish some kind of payoff they can slowly pay back to us.”
The machines Hansen and his wife, Gabrielle, co-owner of the business, export and sell domestically are Corona Treating Systems, an electronic surface treatment for machines used for printing, coating or lamination.
Sometimes, Hansen said, the equipment is sold to other manufacturers who incorporate the product into their printing machinery.
Hansen and his wife bought the company about 15 years ago from a German firm which had been manufacturing the same machinery that the Hansens are manufacturing today. The German company had operated the business for about 25 years.
SOA now employs about 20 persons, with gross sales between $1.5 million and $2 million annually, Hansen said.
The company relies heavily on exports, Hansen said, with an even split of 50-50 between exports and domestic sales. Export sales, he said, are either done directly or through sales to Original Equipment Manufacturers (OEMs).
Hansen said he has found problems dealing with Indonesia similar to those he encountered with Malaysia, but has found the once struggling Indian and Korean economies to be coming back.
Malaysia
Location: Southeastern Asia, peninsula and northern one-third of the island of Borneo, bordering Indonesia and the South China Sea, south of Vietnam.
Geographic Area: 329,750 sq. kilometers, slightly larger than New Mexico.
Climate: Tropical, monsoons from April to February.
Main Cities: Kuala Lumpur (capital), Penang, Ipoh, Malacca, Johor Baru, Kuching, Kota Kinabalu.
Population: 22 million (1998)
Languages: Bahasa Malaysian is the national language, but English is widely understood and is used in business. Chinese and Indian languages are used within their respective ethnic communities.
Time Zone: Thirteen hours ahead of U.S. Eastern Standard Time.
Workweek: Monday-Thursday, 8:00 a.m. to 12:45 p.m., 2:00-4:15 p.m., Friday, 8:00 a.m. – 12:15, 2:45-4:15 p.m., Saturday, 8:00 a.m. to 12:45 p.m.
Type of Government: Constitutional monarchy with parliamentary structure. Executive power rests with the Prime Minister. The Yang di-Pertuan Agong (paramount ruler, referred to as king) is elected for a five-year term among the nine hereditary sultans of the peninsular Malaysian states.
Head of State: Prime Minister Dr. Mahathir bin Mohamad.
Currency: 1 Malaysian ringgit (M$)=100 sen.
Exchange Rate: US$1 = 4.4 ringgits (January 1998), 2.5 ringgits (1996).
Economic and Political Conditions: A stable political system, well-developed financial regulations, and strong fiscal management have allowed Malaysia to withstand the worst effects of the Asian financial crisis. Political violence has been virtually unknown in the past three decades. In recent months, political protests over the jailing of Deputy Prime Minister Anwar Ibrahim ( on sodomy charges) and a Canadian journalist have received international attention. Ibrahim’s trial had been postponed when he was hospitalized, claiming he was the victim of arsenic poisoning. Malaysia strongly supports international and domestic business development. Bilateral relations with the U.S. have been close since Malaysian independence in 1957.
Trade Rules and Tarriffs
Tariffs are the most frequently used method of regulating imports, but import licenses are applied as well. Trade-weighted tariffs average less than 10 percent, but are higher when the product is manufactured locally. Import licenses are required for 51 products to protect health and safety standards or Malaysian industries. Some products, such as color copiers, “indecent or obscene” articles, and certain poisonous chemicals, are prohibited. Because of the economic crisis, the government has increased the list of products that require import licenses. The new regulations, not yet enacted, stipulate higher local content in imported products. Higher rates are levied on luxury goods, tobacco products, and alcoholic beverages.
E-Commerce: No special restrictions are applied to products or services traded through the Internet. Products ordered on the Internet and imported are subject to import duties that apply to the product category.
Taxation: A 10 percent sales tax is levied on most imported goods, although it does not apply to raw materials and machinery used in export production. Malaysia and the U.S. are negotiating a treaty to avoid double taxation.
Foreign Investment: The United States is the leading source of investment in Malaysia, with $853 million (U.S.) in 1997, followed by Japan and Germany. The Malaysia Industrial Development Authority (MIDA) acts as a one-stop clearinghouse for investment regulatory information and project approval. The Malaysian government encourages investment through a series of incentives, and protects very few industries. Malaysia is actively encouraging investment in the Multimedia Super Corridor, the proposed multimedia and information technology corridor that will contain two “Smart Cities.” (www.mdc.com.my/msc/index.html)
Free Trade Zones: Malaysia’s 11 free trade zones allow duty-free import, with minimal customs formalities, of raw materials, products and equipment used in export-oriented manufacturing. Companies that export no less than 80 percent of their output and depend on imported goods, raw materials and components may locate in the Free Zones. If goods are sold eventually into the Malaysian market, import duties are levied. Malaysia allows licensed manufacturing warehouses, with privileges parallel to FTZs, to locate elsewhere in the country. Malaysia has two free ports, Labuan Island and Langkawi. Port Klang has been designated as a free port in order to divert transshipment trade from neighboring ports.
Trade Finance: Exports are financed through letters of credit issued to the importer by banks operating in Malaysia, including BankAmerica, Citibank and Chase Manhattan. U.S. Ex-Im Bank provides direct loans, loan guarantees and insurance policies that enable an exporter to eliminate political and commercial risk of repayment by foreign purchasers. The U.S. Small Business Administration (SBA) offers loans, revolving lines of credit, joint guarantees with Ex-Im Bank, long-term asset financing and international trade loans.
Marketing and Selling Factors: U.S. products move into Malaysia through a variety of distribution channels. Many electronic components, and petroleum products, are purchased directly by major multinational companies with manufacturing facilities in Malaysia. Computer software exporters have offices and joint ventures, and sell through retail outlets. Capital equipment is most commonly sold through Malaysian trade representatives. Consumer goods are typically sold through U.S. export wholesalers to Malaysia import houses. Many exporters work though a Malaysian trading company that acts as their local sales agent. These agents can handle customs clearance, transact with Malaysian wholesalers and retailers, market the product, and handle after sales services.
Patents/Trademarks/Copyrights: Malaysia belongs to the World Intellectual Property Organization (WIPO) and most multilateral IPR agreements. Patents can take up to three years to obtain, and are valid for 15 years. Stringent penalties exist for patent law violations. Trademarks are valid for up to seven years, with renewals permitted. Trademark and patent violations have not been serious problems for U.S. companies selling to Malaysia. Government regulations give copyright protection to all works, including software, for 50 years. Malaysian officials have worked with industry representatives to suppress end-user software piracy, reducing piracy by 10 percent between 1996 and 1997. In March 1998, the Malaysian government opened an intellectual property training center to educate government officials, agencies, attorneys and the judiciary.
Key Contacts – Australia
Rhode Island Export Assistance Center (RIEAC) and World Trade Center, Bryant College
Raymond W. Fogarty, Director; Edward Barr, World Trade Center Manager
Telephone: (401) 232-6407 or (401) 232-6408
Fax: (401) 232-6416 E-Mail: postoffice@itdn.net Website: http://www.rieac.org
Rhode Island Economic Development Corporation (RIEDC)
Maureen Mezei, International Trade Director
Telephone: 222-2601, ext. 123 E-Mail: mmezei@riedc.com
U.S. Export Assistance Center, Department of Commerce
Keith M. Yatsushashi, International Trade Specialist
Telephone: (401) 528-5104 E-Mail: kyatsuha@mail.doc.gov
U. S. Small Business Administration
Marilyn Bogue, International Trade Officer
Telephone: 528-4585 E-Mail: marilyn.bogue@sba.gov
Embassy of Malaysia
2401 Massachusetts Ave NW
Washington, DC 20008
Telephone: (202) 328-2700 Fax: (202) 483-7661
U.S. Embassy in Malaysia, Commercial Office
376 Jalan Tun Razak 50400 Kuala Lumpur
Mike Hand, Commercial Counselor: mhand@doc.gov
Steve Alley, Commercial Attache: salley@doc.gov
English Language Publications
New Straits Times: http://www.nstpi.com.my
The Star: http://thestar_malaysia.com
Country Profile
Compiled by Providence Business News,
in collaboration with Bryant College Export Assistance Center.
