malaysia presentation-public
TRANSCRIPT
ENVIRONMENTAL SCANNING
MALAYSIABy 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.) 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
POLITICALRISKS
OPERATIONALRISKS
COMPETITIVERISKS
ECONOMICRISKS
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
COUNTRYRISK ANALYSIS
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
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.
HealthcareRetail
EducationProfessional
EvironmentalCourier Services
Telecommunications Insurance Companies Oil and Gas 0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%100% 100%
70%
49%
70%
Appl
icati
on S
ervi
ce P
rovi
der
Foreign Direct Investment(Ownership)
Net
wor
k Se
rvic
e Pr
ovid
er
Gross Domestic Product Growth(Annual %)
20142013201220112010200920082007200620052004-10
-5
0
5
10
15
20
US Mexico China Malaysia
Access to LaborPros
• 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)
Political Stability
1967 1969 1977 1986 1991 2001 2007 2010 2011 2012 2013 2014 2015 20160
2
4
6
8
10
12
14
16
18
1 1 1 1 1 12
1 1 1
17
1
4
1
Events of Civil Unrest
Social Topics
Religion, 63%20%
9%
6%
1%
Muslim Buddhist Christian Hindu Other
Religion
• Issues of Concern• Human Trafficking• Forced Labor• Child Labor• Piracy
0-14 15-24 25-54 55-64 65 and above0
2
4
6
8
10
12
14
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 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.
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
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).
Environmental ReviewNATURAL 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 $20BENVIRONMENTAL & 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
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
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 (14 th-18th place IMD,
WEF). In Goods market efficiency [Ease of doing business] (6 th, 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 , ChinaRecommendation/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.