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Malaysia

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Political Structure 1Malaysia follows a federated constitutional monarchy. The country is led by a King whoappoints a Prime Minister and on his advice the cabinet is chosen. There are stategovernments in each of the 13 states, in nine of which the head of state is an hereditaryruler. Each state has its own constitution, a council of state or cabinet with executiveauthority, and a legislature that deals with matters not reserved for the federal parliament.There are also three federal territories: Kuala Lumpur, Labuan and Putrajaya. Investorclimate varies depending on the policies of the State government, in addition to those ofthe federal government.

Business and Investment ClimateForeign Direct Investment (FDI): FDI inflows into Malaysia grew from 2.2 percent in 2003to 4.5 percent in 2007 1.

GDP growth: Real GDP growth in Malaysia was 6.3 percent in 2007. The EIU has revised theforecast for real GDP growth to 3.1 percent in 2009 from the previous 4.6 percent 1.

Inflation: Consumer price inflation is likely to be an average 5.4 percent during 2008, upfrom 2 percent in 2007 1 . The EIU expects consumer price inflation to average 2.4 percent in2009 (down from 3.5 percent predicted previously).

IT-BPO Scenario in the countryMalaysia clocked revenues of USD 4.7 billion 2 through expor ts in 2007, employing close to365,000 professionals 3 . There are around 1400 IT-BPO service providers 4 .

Through the Multimedia Super Corridor (MSC) project, the Malaysian government isfocusing on the IT-BPO industry to a large extent. The vision of this project is to convertMalaysia into a knowledge economy by year 2020 5 .

The Malaysian government is projecting the country as a destination for high-end services,which are relatively less scale dependent.

Kuala Lumpur, Cyberjaya, Menara MSC, Cyberport, Johor, KLCC, Kulim High Tech Park,Melaka International Trade centre (MITC), and Penang are the IT-BPO destinations inMalaysia.

Government incentivesThe Malaysian government provides a variety of incentives to the IT-BPO industry,permitting 100 percent foreign equity participation in companies. Some of the incentivesinclude:

Investment tax allowance up to 100 percent 2

Corporate tax rate to be cut to 25 percent by 2009 from current level of 27 percent 2

Customs duty exemption for import of multimedia equipment.

Over the years the Malaysian government has introduced laws to protect intellectualproperty of IT-BPO companies. Also, Cyber Security, Malaysia an agency under Ministry ofScience, Technology & Innovation acts as a one stop coordination center for nominal cybersecurity initiatives.

Malaysia

Size of the country 330,113 sq. kms.

Population 27.2 million (2007)

Capital Kuala Lumpur

Currency Malaysian Ringgit (MYR)

1 USD = MYR (Average) 3.33 (2008)

Main macroeconomic indicators1:

GDP in PPP: USD 359.3 billion (2007)

GDP per capita in PPP: USD 13,210 (2007 est.)

CPI: 2.0 percent (2007)

Unemployment rate:3.2 percent (2007 est.)

FDI stock per capita: USD 3171 (2007 est.)

2008 (Rating/outlook)

EIUs Sovereign Risk Rating BBB /Negative

Standard & Poors ForeignCurrency Risk Rating

A-/Stable/A-2

Ease of Doing Business Rank(2009)

20

Rigidity of Employment Index

(2009)10

Country Snapshot

1 www.eiu.com, various pages, December 20082 www.outsourcingmalaysia.org.my, December 20083 Gartner, Analysis of Malaysia as an Offshore Services Location, November 2007

4 ICT in Malaysia, The New Economic Engine of the Nation - MGCC Quarterly Sept/Oct 20075 MSC Malaysia Handbook, 2007

Sources: www.eiu.com, www.cia.gov, Gocurrency.com

Sources: www.eiu.com, World Bank, Standard & Poors

Emerging DestinationEstablished Destination

Penang

Kuala Lumpur

Melaka

Johor