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The Professional Services Sector in Malaysia

Potential for EU SMEs in the

Malaysian Professional

Services Sector

Potential for EU SMEs in the Malaysian

Professional Service Sector

Market Research Report

August

2016

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Ex-post evaluation of the impact of restructuring aid decisions on the

viability of aided (non-financial) firms

Proposal for an

Analytical Study

Potential for EU SMEs in the Malaysian Professional Services Sector Market Research Report

Publisher:

EU-Malaysia Chamber of Commerce and Industry (EUMCCI)

Suite 10.01, Level 10, Menara Atlan,

161B Jalan Ampang,

50450 Kuala Lumpur.

Malaysia

Telephone: +603-2162 6298

Fax: +603-2162 6198

E-mail: [email protected]

Homepage: http://www.eumcci.com/

Authors:

Status:

August 2016

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Proposal for an

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Disclaimer:

‘This publication has been produced with the assistance of the European

Union. The contents of this publication are the sole responsibility of the EU-

Malaysia Chamber of Commerce and Industry (EU-MCCI) and can in no way

be taken to reflect the views of the European Union’.

Copyright©2016 EU-Malaysia Chamber of Commerce and Industry. All Rights

Reserved. EUMCCI is a Non-Profit Organization registered in Malaysia with

number 263470-U. Privacy Policy

TABLE OF CONTENTS

SEBSEAM-M SECTOR REPORT: PROFESSIONAL SERVICES ................................................... 2

EXECUTIVE SUMMARY .......................................................................................................... 4

1. MALAYSIA’S POTENTIALS FOR EU SME’S ....................................................................... 8

1.1 COUNTRY PROFILE ........................................................................................................... 8

1.2 CONNECTOR BETWEEN EUROPE AND ASIA ....................................................................... 13

1.2.1 Association of South East Asian Nations (ASEAN) and its Economic

Community (AEC) ........................................................................................................13

1.2.2 Relations to the European Union ...................................................................13

1.3 POTENTIAL FOR EU’S SME’S ............................................................................................ 18

2. PROFESSIONAL SERVICES SECTOR IN MALAYSIA ....................................................... 21

2.1 MARKET STRUCTURE ........................................................................................................ 21

2.1.1 Market in Digits of the specific service, as market share growth rate ........19

2.1.2 Malaysia’s trade flows imports from EU and exports to ASEAN) .................21

2.1.3 The Malaysia trade flows with the European Union .....................................21

2.1.4 Malaysian export to ASEAN countries ...........................................................22

2.1.5 Mapping the relevant Market Players, theirs market share and USP .........22

2.1.6 Distribution channels, its major players and the challenges .......................23

2.2 ENGINEERING SERVICES .................................................................................................. 23

2.3 ARCHITECTURE, LANDSCAPE AND URBAN PLANNING SERVICES ......................................... 24

2.4 ACCOUNTING SERVICES ................................................................................................. 25

2.5 LEGAL SERVICES ............................................................................................................. 25

2.6 REGULATORY ENVIRONMENT FOR SME’S ......................................................................... 26

2.6.1 Regulations in Engineering Services and Proposed Measures ....................27

2.6.2 Regulations in Architecture, Landscape and Urban Planning Services and

Proposed Measures .....................................................................................................27

2.6.3 Regulations in Accounting Services and Proposed Measures ....................28

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2.6.4 Regulations in Legal Services and Proposed Measures ...............................29

3. KEY OPPORTUNITIES & CHALLENGES FOR EU SME’S ................................................... 31

3.1 OVERVIEW ..................................................................................................................... 31

3.2 INITIATIVES OPEN TO EU SMES ........................................................................................ 34

3.3 SWOT ANALYSIS ............................................................................................................ 35

3.3.1 Strengths ..........................................................................................................35

3.3.2 Weaknesses .....................................................................................................37

3.3.3 Opportunities ...................................................................................................37

3.3.4 Threats ..............................................................................................................38

4. CONCLUSIONS ............................................................................................................ 51

5. CONTACT POINTS ........................................................................................................ 54

6. REFERENCES ................................................................................................................. 59

7. APPENDIX..................................................................................................................... 65

7.1 LIST OF EU INCENTIVES .................................................................................................... 65

7.2 LIST OF MALAYSIAN INCENTIVES ....................................................................................... 68

LIST OF TABLES

TABLE 1: TRADE IN GOODS AND SERVICES BETWEEN EU – MALAYSIA ................................................ 17

TABLE 2: EU ENTERPRISES BY SIZE (2012) ........................................................................................ 19

TABLE 3: MAJOR INDICATORS OF THE SERVICES SECTOR (2010-2020) ............................................ 20

TABLE 4: NUMBER OF EMPLOYEES IN THE MALAYSIA ARCHITECTURAL SERVICES ................................. 24

TABLE 5: AVERAGE MONTHLY SALARY COMPARISON BY COUNTRY ................................................. 33

LIST OF FIGURES

FIGURE 1: MALAYSIA IN THE WORLD MAP ........................................................................................ 8

FIGURE 2: MALAYSIA’S GROWTH AND INFLATION OVER THE LAST YEARS .............................................. 9

FIGURE 3: ASEAN MEMBERS ........................................................................................................ 13

FIGURE 4: EU-ASEAN TRADE FLOWS AND BALANCE, ANNUAL DATA 2005 - 2015 ........................... 14

FIGURE 5: SECTORAL ANALYSIS OF THE ENTERPRISE POPULATION AND EMPLOYMENT IN SMES ............. 20

FIGURE 6: SIZE OF LEGAL SERVICE FIRMS ........................................................................................ 25

FIGURE 7: SWOT ANALYSIS OF MALAYSIAN PROFESSIONAL SERVICE SECTOR ................................... 39

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Potential for EU SMEs in the Malaysian Professional Services Sector


SEBSEAM-M Sector Report: Professional Services

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Proposal for an

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SEBSEAM-M Sector Report: Professional Services

Malaysia’s recent 2015 liberalisation of the professional services sector opens

up channels for direct foreign investments and business expansion. It presents

a valuable opportunity for EU firms’ involvement in Malaysia’s fast tracked

economic development period towards the year 2020.

This sector report focuses on Malaysia’s strategic position within ASEAN and its

inherent potential as the most preferred destination for EU investment in the

professional services sector. The chapters expound on Malaysia’s

background and role in the region, its relations with the European Union, its

current development and outlook on on-going progress in major sector-

related development hotspots.

This report is composed with a focus on the style of mainstream market reports

and draws its sources from official publications of Malaysian governmental

authorities and agencies, mainstream Malaysian news portals, and

authoritative sector-related research journals. EUMCCI and its partners are

committed to the goal of providing one-stop authoritative and effective

reference publication for EU firms seeking investment and business

opportunities in multicultural and global Malaysia.

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Executive Summary

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Executive Summary

Malaysia is centrally located in Southeast Asia and was the EU's 22nd largest

trading partner in goods (2015), with bilateral trade between the EU and

Malaysia being dominated by industrial products. Although Malaysia has not

been a major EU trading partner in services to date, there are increasing

opportunities due to the country’s liberalisation policies, which will be further

advanced with the full enactment of the EU-Malaysia Free Trade Agreement

(FTA).

Professional Services have been identified as a focus area in the 12 National

Key Economic Areas (NKEAs). The Economic Transformation Programme has

identified key Professional Service sectors that could be liberalised in order to

improve the Professional Services industry and attract foreign investment in

such as Accounting services, Legal services, Engineering services and

Architectural, Landscape and Urban Planning services.

In the past years, numerous actions were taken by the Malaysian

government to mitigate the challenges posed by different sectors for the EU

SMEs that wanted to enter the Professional Services Market in Malaysia. Efforts

were made mainly to ease the regulations and reduce the cultural

differences in business etiquette between European and Malaysian partners.

Besides, the Professional Services sector is dominated by small firms that lack

the capacity to compete on a bigger scale and there are still regulations that

obstruct the entry of foreign players.

One of the largest opportunities for EU SMEs in the Professional Services sector

in Malaysia relates to the effort that is being undertaken by the Malaysian

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Proposal for an

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government to liberalise the market, which will create new business

opportunities for foreign companies. The Economic Transformation

Programme identified key services sectors that could be liberalised, focusing

on measures to revise existing legislation as well as impose new regulations.

These efforts aim to remove restrictions for the entry of foreign companies in

the Professional Services sector in Malaysia. A streamline legal requirement

that companies operating in this sector must fulfil is to simplify taxation

requirements; and in general, to improve the ease of doing business in the

country.

The Malaysian Government has been implementing actions to attract foreign

investment and foreign companies to work in the country, in order to promote

foreign direct investment and the development of the economy. This has

mainly been performed by The Malaysian Investment Development Authority

(MIDA). Local authorities align their development strategies on several

components which include liberalisation, human capital development and

regulatory reforms.

The services sector was autonomously liberalised and its competitiveness

enhanced in an effort to attract foreign investments. Therefore, in 2012, 18

services subsectors such as wholesale and retail trade services, healthcare,

professional service, environmental service, telecommunications, courier and

education were liberalised allowing up to 100% foreign equity. This was

followed by the subsequent major subsectors such as engineering,

architecture, accounting, and legal services. The business-friendly

environment was created with the enforcement of the Competition Act in

2012 underlying a series of regulatory reforms and business process

improvement.

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The liberalisation in 2012 involved architecture, engineering, surveying,

specialised medical, and dental care. The Legal Profession Act

(Amendment) 1976 and the Legal Profession Rules 2014 (Licensing of

International Partnerships and Qualified Foreign Law Firms and Registration of

Foreign Lawyers) was also enforced in 2014. The amendment of ‘fly-in fly-out’,

allowed the foreign lawyer, advising on non-Malaysian law, to be able to

come to Malaysia and work on a project for up to 60 days in a calendar year,

subject to approval by the Department of Immigration. In addition,

amendments were also made to the Registration of Engineers Act 1967 and

Architects Act 1967.

Finally, the report includes contact points and authorised institutions for the

categorised Professional Service Sector which can be accessed by the EU

SMEs aiming to enter the Malaysian Professional Services Sector.

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Malaysia’s Potentials for EU SME’s

01.

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1. Malaysia’s Potentials for EU SMEs

1.1 Country Profile

Malaysia is centrally located in Southeast Asia and includes two regions

separated by the South China Sea: Peninsular Malaysia, where the economic

and political centre is located; East Malaysia (consisting of the states of

Sabah and Sarawak), which shares the island of Borneo with Indonesia and

Brunei. Malaysia has a total land mass of 329,847 square kilometres (127,350

square miles), about the same size as Germany and is a federation of 13

states and three federal territories. The capital city is Kuala Lumpur, whereas

Putrajaya is the federal administrative centre . The official language of

Malaysia is Bahasa Melayu (Malay). However, English and Chinese are also

widely spoken.

Figure 1: Malaysia in the world map1

As of March 2016, the country had a total population of just over 31 million2.

Malaysia is a multi-ethnic, multicultural and multilingual society. The Malaysian

constitution guarantees freedom of religion, with Islam being the official

religion and having the largest population. 61.3% of the population practice

1Atlas of Malaysia (2016)

2Department of statistics Malaysia (2016)

https://commons.wikimedia.org/wiki/Atlas_of_Malaysia#/media/File:LocationMalaysia.png

https://www.statistics.gov.my/

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Islam, 19.8% Buddhism, 9.2% Christianity, 6.3% Hinduism, and 2.6% practice

Confucianism and other traditional beliefs and religions3.

Malaysia’s economy has presented strong growth and low inflation over the

past years, with annual GDP growth figures above 4% for all years in the past

decade (except for 2009). The country is expected to continue growing at

over 4% per annum in the following years4.

The Consumer Price Index (CPI) which measures changes over time in retail

prices of goods and services and representative of consumption expenditure

by resident households in Malaysia, showed increase in 2014 (3.2%) compared

to the previous year 2013 (2.1%).

Figure 2: Malaysia’s growth and inflation over the last years5

Since Independence, Malaysia has adopted the political system of a

parliamentary democracy with a constitutional monarch. The position is

rotated every five years among each of the nine hereditary state rulers. The

3EUMCCI (2016)

4The World Bank (2016)

5Malaysia's Transformation (2016)

http://www.eumcci.com/documents/13347/87588/Professional+Services+Sector+2015+Market+Report/19cf71d8-b12a-4a1f-9534-b56e875fba4e

http://data.worldbank.org/country/malaysia

http://etp.pemandu.gov.my/Invest_In_Malaysia-@-Malaysia's_Transformation.aspx

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political scene has been characterised by an extraordinary degree of

political stability and continuity through an encompassing national coalition

of political parties6. The country offers a safe, stable, and comfortable lifestyle

for expats because of well-developed infrastructures and a population with a

high degree of proficiency In the English language

Infrastructure in Malaysia, being one of the best in Southeast Asia, is designed

to serve the business community. Telecommunications network served by

digital and fibre optic technology, five international airports (all with air-cargo

facilities), well-maintained highways and seven international seaports make

Malaysia an ideal springboard to the Asia-Pacific market.

During the 10th Malaysia Plan, 2011-2015, the services sector remained the

largest contributor to the Gross Domestic Product (GDP) at 53% and grew

6.3% annually. To improve the ease of doing business the government

embarked on liberalisation of 18 subsectors. Malaysia was ranked second in

the Association of Southeast Asian Nations (ASEAN) in terms of ratio of trade in

services to GDP as well as among the top 30 largest services exporters in the

world7.

In 2010, the Malaysian Government announced the “New Economic Model”

and the 10th Malaysian Economic Plan8 with the aims to promote Malaysia’s

shift to a high-income economy by 2020. This was intended to be achieved

through the implementation of an Economic Transformation Programme. The

aim was to enhance the role of the private sector and re-focus the

Government's role in the economy as a facilitator and enabler. The country

planned to leverage its competitive advantages by prioritising investment

and policy support behind a limited number of key growth engines. Hence,

6EUMCCI A (2016)

7Malaysian Investment Development Authority A (2016)

8Tenth Malaysia Plan (2016)


http://www.mida.gov.my/home/developed-infrastructure/posts/

http://www.epu.gov.my/en/rmk/tenth-malaysia-plan-10th-mp

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the Economic Transformation Programme 9 focused on 12 National Key

Economic Areas (NKEAs) which received prioritised government support

including funding, top talent search, and Prime Ministerial attention. The 12

National Key Economic Areas (NKEAs) are: Oil, Gas & Energy, Palm Oil,

Wholesale & Retail, Financial Services, Tourism, Electronics & Electrical,

Business Services, Communications, Content & Infrastructure, Education,

Agriculture, and Healthcare. In the 11th Malaysia Plan, 2016-2020, the service

sector will continue to be the primary driver of the economic growth. Greater

focus will be given to the modern and knowledge-intensive industries,

including halal certification , ecotourism and information, communications

and technology (ICT)10.

The Malaysian Government is committed to the ongoing support of growth in

the non-NKEA sectors. However, it will focus its efforts on the NKEAs due to the

significance of the contribution of these parts of the economy.

The programme also identified six Strategic Reform Initiatives (SRIs) made up

of supportive policies that will drive Malaysia’s global competitiveness,

namely:

1. Competition, Standards & Liberalisation

2. Public Finances Reform

3. Public Service Delivery

4. Narrowing Disparities

5. Government’s Role in Business

6. Human Capital Development

9Overview of ETP (2016)

10Malaysia's liberalised market and strong economy brings European opportunity (2015)

http://etp.pemandu.gov.my/About_ETP-@-Overview_of_ETP.aspx

http://www.infrastructure-intelligence.com/article/apr-2015/malaysia’s-liberalised-market-and-strong-economy-brings-european-opportunity

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The main thrust of the SRIs is to create an efficient, competitive, and business-

friendly environment in Malaysia. This will allow world-class local champions to

thrive as well as attract valuable foreign investment. The first results of these

reforms are already having an impact with the market liberalisation of

Malaysia service sectors, whereby, engineering and architectural services

are allowing foreign businesses to more easily register foreign professional

staff and legally have local subsidiaries11.

11Malaysia's liberalised market and strong economy brings European opportunity (2015)



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1.2 Connector between Europe and Asia

1.2.1 Association of South East Asian Nations (ASEAN) and its Economic Community (AEC)

Malaysia has a privileged location in the heart of Southeast Asia, representing

a gateway to the region and providing a link between China and India, in

addition to being an English-speaking hub alternative to Singapore 12 .

Malaysia is a founding member of the Association of South East Asian Nations

(ASEAN). ASEAN is a political and economic organisation of Southeast Asian

countries that was created in 1967 with the aim of promoting commerce and

accelerating growth among its members and increasing regional stability.

Current ASEAN membership is composed of 10 members (Brunei Darussalam,

Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore,

Thailand, and Vietnam) and 1 observer (Papua New Guinea).

Figure 3: ASEAN members13

ASEAN is an important trade partner of the EU with EU countries exporting

more than €80,000 million in goods and services to ASEAN countries, as of

2015, and importing close to €120,000 million, as can be seen in Figure 4.

12Atlas of Malaysia B (2016)

13European Commission A (2016)

https://upload.wikimedia.org/wikipedia/commons/thumb/0/03/ASEAN_members.svg/500px-ASEAN_members.svg.png

http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_113471.pdf

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Figure 4: EU-ASEAN Trade flows and balance, annual data 2005 - 201514

The establishment of the ASEAN Economic Community (AEC) in 2015 was a

major milestone in the regional economic integration agenda in ASEAN,

offering opportunities in the form of a huge market of €2,322.32 million and

over 622 million people. In 2014, AEC was collectively the third largest

economy in Asia and the seventh largest in the world15.

The AEC Blueprint 2025 was adopted by the ASEAN Leaders at the 27th

ASEAN Summit on 22nd November 2015. Kuala Lumpur is aiming at achieving

the vision by 2025 of having an AEC that is highly integrated and cohesive,

competitive, innovative, and dynamic with enhanced connectivity and

sectoral cooperation and a more resilient, inclusive, people-oriented, people-

centred community, integrated with the global economy. This Blueprint will

not only ensure that the 10 ASEAN Member States are economically

integrated but are also sustainably and lucratively in the global economy,

thus contributing to the goal of shared prosperity.

14European Commission A (2016)

15Association of Southeast ASIAN Nations (2016)


http://asean.org/asean-economic-community/

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Malaysia is also a partner of the Trans-Pacific Partnership (TPP), having signed

the agreement on 4th February 2016. The TPP is a trade agreement among 12

Pacific Rim countries but it has not yet been instated. The TPP is intended to

boost economic growth, support higher-paying jobs, enhance innovation,

productivity and competitiveness, raise the living standards and promote

transparency, good governance, strong labour, and environmental

protection.

In terms of trade regulations, it is important to acknowledge that Malaysia is a

member of the following Treaties and has signed the Agreements identified

below.

• Asia-Pacific Economic Cooperation (APEC)

• Association of Southeast Asian Nations (ASEAN)

The Association of Southeast Asian Nation (ASEAN) is a regional

organisation comprising ten Southeast Asian states which promotes

intergovernmental cooperation and facilitates economic integration

amongst its members since its formation on August 8, 1967 by

Indonesia, Malaysia, the Philippines, Singapore, and Thailand.

• ASEAN Free Trade Area (AFTA)

Under AFTA, six members of the Association of Southeast Asian Nations

(ASEAN) cut tariffs on nearly 8,000 items. The six countries include

Malaysia, Indonesia, Singapore, the Philippines, Brunei, and Thailand.

Four of the less developed ASEAN nations such as Cambodia, Laos,

Burma, and Vietnam will have a further period to phase in the tariff cuts.

The elimination of tariffs should result in product price reductions

throughout ASEAN and consumers will benefit from cheaper prices of

goods.

• Customs Convention on the Temporary Admission of Goods (A.T.A.

Convention)

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• Economic and Social Commission for Asia and the Pacific (ESCAP)

• Indian Ocean Rim Association for Regional Cooperation (IOR-ARC)

1.2.2 Relations to the European Union

In accordance with the Delegation of the EU to Malaysia, cooperation on

trade and economic issues has been the driving force for closer ties between

the EU and Malaysia. In October 2010, the Malaysian Prime Minister Najib

Razak and the EU leaders launched two major EU-Malaysia bilateral initiatives,

the negotiations for:

• the Free Trade Agreement (FTA) and

• the Partnership and Cooperation Agreement (PCA).

These two initiatives are respectively aimed at boosting bilateral trade and

investment and at creating a new strategic dimension for the EU-Malaysia

political dialogue and economic cooperation. Seven rounds of the FTA

negotiations have taken place so far. Technical work is currently still ongoing.

However, no new negotiating rounds have been planned yet16.

The EU is also gradually establishing cooperation with Malaysia in areas falling

under the Common Foreign and Security Policy (CFSP) such as maritime

security, export control and Chemical, Biological, and Radiological & Nuclear

risk. Under the Migration EU Expertise ll(MIEUX II) facility, European experts are

providing training to Malaysian authorities to effectively manage migration

through improved border management practices and procedures and to

control irregular migration with regards to human rights practices. To further

foster relations, the EU and Malaysia set up a joint Inter-Parliamentary Union

16European Commission B (2016)

http://ec.europa.eu/trade/policy/countries-and-regions/countries/malaysia/

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caucus in November 2010. It has 42 members representing both the

government and opposition coalitions. (SEBSEAM Report, 201517).

In 2011, Malaysia was the EU's 23rd largest trading partner in goods. Bilateral

trade between the EU and Malaysia is dominated by industrial products. The

EU mainly imports machinery and appliances and mainly exports electrical

equipment and machinery (both ways industrial products account for more

than 90% of trade). Other sectors of relevance in terms of EU imports from

Malaysia are plastics, rubber, animal, vegetable fats, and oils. In terms of

exports, mechanical products. EU imports from Malaysia have gradually

increased since 2003, although experiencing a significant decrease in 2008-

2009 (16% fall). Apart from fisheries, EU exports have also seen a growing trend

since 2000, but with an 18% decrease in 2008-2009 due to the economic

downturn.

Table 1: Trade in goods and services between EU – Malaysia

Year Trade in goods EU – Malaysia Trade in services EU – Malaysia

EU

imports

EU

exports

Balance EU

imports

EU

exports

Balance

2012 18,800 14,500 -4200 3,000 3,900 800

2013 18,400 14,300 -4100 3,000 4,800 1,600

2014 19,600 14,000 -5700 3,200 4,700 1,400

In million €

Source: European Commission

Although Malaysia has not been a major trading partner in services so far,

opportunities are increasing due to the country’s liberalisation policies and

17EUMCCI (2016)


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they will further advance with the full enactment of the FTA. In 2009, Foreign

Direct Investment inflows to Malaysia were €1.1 billion18.

In terms of trade regulations, it is important to acknowledge that Malaysia is a

member of the following Treaties and has signed the Agreements identified

below

• International Convention on the Harmonized Commodity Description

and Coding System (HS Convention)

• International Convention on the Simplification and Harmonization of

Customs Procedures (as amended) (Revised Kyoto Convention)

• World Customs Organization (WCO)

• World Trade Organization (WTO).

The WTO is an intergovernmental organisation which regulates

international trade. The WTO commenced on 1 January 1995 under the

Marrakesh Agreement, signed by 123 nations on 15 April 1994. The WTO

deals with regulation of trade between participating countries by

providing a framework for negotiating trade agreements and a dispute

resolution process aimed at enforcing participants' adherence to WTO

agreements, which are signed by representatives of member

governments.

1.3 Potential for EU SMEs SMEs are often referred to as the backbone of the European economy

providing a potential source for jobs and economic growth. The EU is home to

a vast number of SMEs including many companies working in the professional

services sector. Among these SMEs there is a growing number of them that

are internationalising and seeking new markets, with the Malaysian market



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representing potential internationalisation opportunities for EU professional

services SMEs looking to expand and internationalise their activities.

SMEs are defined by the European Commission as having less than 250

employees. They should also have an annual turnover of up to €50 million or

a balance sheet total of no more than €43 million (European Commission

Recommendation of 6 May 2003). These definitions are important when

assessing which enterprises may benefit from EU funding programmes aimed

at promoting SMEs as well as in relation to certain policies such as SME-

specific competition rules.

Table 2: EU enterprises by size (2012)

Number of

enterprises

Number of

employees Value added

thousands € millions

All enterprises 22.347 133.767 6.184.825

SMEs 22.303 89.690 3.557.448

Large enterprises 44 44.078 2.627.377

Source: European Commission19

As can be seen in Table 2, SMEs represent over 50% of the employment and

value added of all enterprises in the EU, operating in a variety of sectors,

including professional services, as observed in Figure 5.



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Figure 5: Sectoral analysis of the enterprise population and employment in SMEs20

Although Malaysia has not been a major EU trading partner in services so far

(services exports from the EU to Malaysia totalled €4,7 million in 2014, as seen

in Error! Reference source not found.), opportunities have been increasing

due to its liberalisation policies and will further advance with a Free Trade

Agreement.

The liberalisation policies being implemented in Malaysia are creating new

opportunities in the service sector. Namely, for EU professional services SMEs,

the Malaysian market represents an important potential for expansion either

by exporting directly to the country, or by setting up their operations in

Malaysia and exploring the market using a local base. There are several EU

incentives designed to support European SMEs entering new markets such as

Malaysia. These incentives are described in the Appendix section.

20Eurostat Statistics Explained (2016)

http://ec.europa.eu/eurostat/statistics-explained/index.php/Business_economy_-_size_class_analysis

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2. Professional Services Sector in Malaysia

2.1 Market Structure

The services sector in Malaysia in which Professional Services are included has

been accounting for an increasing share of the Malaysian economy and

contributing close to 50% of GDP21, as Malaysia moves towards becoming a

developed nation. A greater emphasis is being targeted on the development

of the services sector to propel and sustain the economy. Professional

Services include a wide range of occupations which provide support to

businesses of all sizes in different areas of activity. They cover activities which

require a high degree of training and make specialised knowledge and skills

available to users. The Malaysian Standard Industrial Classification (MSIC)

under Section M classifies Professional Services as follows22:

a) legal and accounting activities,

b) activities of head offices,

c) management consultancy activities,

d) architecture and engineering activities,

e) technical testing and analysis,

f) scientific research and development,

g) advertising and market research,

h) other professional, scientific and technical activities, and

i) veterinary activities

The Professional Services sector in Malaysia is expanding and has gained the

government’s support for its development as it can be a major contributor to

the growth of the Malaysian economy23. The sector assumes an important

intermediary role in supporting businesses and trade in all sectors of the

21MPC (2016)

22Royal Malaysian Customs Department (2016)

23DSD (2016)

http://www.mpc.gov.my/wp-content/uploads/2016/04/Productivity-Report-201415.pdf

http://gst.customs.gov.my/

http://www.dsd.gov.my/images/analisis-bidang-pekerjaan-oa/Bussiness_JD129509.pdf

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economy and generates a large number of employment and business

opportunities. Generally, the Professional Services industry in Malaysia is

dominated by small firms that lack the capacity to compete on a bigger

scale.

Professional services have been identified as a focus area in the NKEAs as it is

one of the sub-sectors with the potential to move Malaysia towards high-

income nation status by 2020. The Malaysian Government Economic

Transformation Programme identified key professional service sectors that

could be liberalised in order to improve the Professional Services industry and

attract foreign investment as follows :

1. Engineering services - Engineering activities and related technical

consultancy include the provision of engineering services, building

inspection services, as well as the performance of physical, chemical,

and other analytical testing services, engineering activities and related

technical consultancy;

2. Architectural, Landscape, and Urban Planning services –

Architectural, Landscape and Urban Planning activities and related

technical consultancy include the provision of architectural services,

drafting services, surveying and mapping services, as well as

architectural related technical consultancy.

3. Accounting services - Accounting activities include services such as

auditing of accounting records, preparing financial statements, and

bookkeeping;

4. Legal services – Legal practitioners specialise in one or more areas of

law, including probate, matrimonial, employment, company,

commercial, litigation and, conveyance law.

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Proposal for an

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2.1.1 Market in Digits of the specific service, as market share growth rate

Malaysia was ranked second in the Association of Southeast Asian Nations

(ASEAN) in terms of ratio of trade in services to GDP and was amongst the top

30 largest services exporters in the world. Small and medium enterprises (SMEs)

in the service sector constituted 90% of total SMEs and contributed 20% of

GDP24.

It is planned that by 2020 the Service value added will increase to € 796.722

from the €5 5571.825 in 2015. The average annual growth rate planned with

the 10th Malaysia Plan was achieved and was 6.3 %. It is planned that this

value will be increased with the 11th Malaysia Plan and the target value is

6.9%25.

There was a growth in the services sector share of the GDP from 2011 until

2014. It was noted that there was on average 6.7% growth in the wholesale

and retail trade subsectors26. On the other hand, in the same time-period the

communication subsector expanded to values of 8.8% annually, driven

mainly by the strong demand for the communication services. The

transportation and the storage subsectors had a growth of 5%. As a result of

the vibrant financing activities and capital market, the finance and insurance

subsector grew at 4.7%. The highest productivity growth was recorded in the

ICT subsector which increased by 14.3%. The utilities, ICT and finance and

insurance subsectors continuously surpassed the overall productivity level in

the services sector.

In 2012 the Malaysian government liberalised 18 subsectors which allowed up

to 100% foreign equity in wholesale and retail trade services, healthcare,


25Transforming Services Sector (2016)

26Malaysia’s Transformation (2016)


http://rmk11.epu.gov.my/pdf/strategy-paper/Strategy%20Paper%2018.pdf


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Proposal for an

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professional services, environmental services, telecommunications, courier,

and education. The liberalisation initiative was completed by the

Government enforcing the “Competition Act” and undertaking the series of

regulatory reforms and business process improvements.

Table 3: Major Indicators of the Services Sector (2010-2020)

e: Estimate; f: Target

Source: Economic Planning Unit, Malaysia Productivity Corporation, and

Department of Statistics Malaysia27

It was realised that the key challenges in the services sector was the

insufficient skilled human capital and skills mismatch, low export capabilities,

complex regulatory framework, weak institutions, inadequate access to

27Malaysia’s Transformation (2016)


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Proposal for an

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financing, and low technology adoption. The skills mismatch is reflected by

the relatively high unemployment among graduates which was 25% in 2013.

The services exports are concentrated mainly in the travel and tourism service

while exports in ICT professional health and business services remain relatively

low. Based on the Economic Census 2011, only 66 firms from 560456 services

firms were found to be exporting services. The major constrains in exports were

identified as lack of understanding of exports market particularly for SMEs, as

well as limited collaboration and access to export financing. The professional

services subsector grew 9.8% annually from 2011 to 2013. It is important to

emphasise that there was an increase in the professional services firms from

19,215 in 2010 to 20,372 in 2012.

2.1.2 Malaysia’s trade flows imports from EU and exports to ASEAN)

The Malaysian transition towards developed national status as part of the

government Vision 2020 plan is reflected in the profile of exports and imports

over the long term, particularly with emphasis on strengthening the high

value-added industries such as machinery, chemical, and other

manufacturers28 . Trade flows will continue to reflect the transition toward

developed nation status. This is supported by trade liberalisation efforts both

through the recent signing of the Trans-Pacific Partnership as well as further

ASEAN integration under the formation of the ASEAN Economic Community29.

2.1.3 The Malaysia trade flows with the European Union

To establish the trend of the Malaysia trade flows with Europe and the

European Commission, statistics were considered. Malaysia’s total trade with

the European Union in 2015 was €36,117 million; €22,757 million were imports

28Malaysia Trade Forecast Report (2016)

29Ibid.

https://globalconnections.hsbc.com/global/en/tools-data/trade-forecasts/my

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Proposal for an

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and €13,360 million were exports. There was a balance of minus €9,397

million. Malaysia was ranked 14th as an EU import partner and ranked 27th

as an EU export partner30. The top products traded were 9.7 % Agricultural

products, 0.1% Fishery products, and 90.2% Industrial products31.

2.1.4 Malaysian export to ASEAN countries

As of 2011, export of professional services from Malaysia were limited to only

80 professional affiliates operating abroad with 5,946 employees and €82.6

million in value-added generated. Malaysia has committed to opening

Mode Three, which is commercial presence abroad and Mode Four allowing

movement of native persons in selected Free Trade Agreements (FTAs).

Malaysia has signed several MRAs with ASEAN counties involving engineering,

architecture, nursing, dental, medical, accounting, and surveying professions.

2.1.5 Mapping the relevant Market Players, their market share and USP

It is important to map the relevant market players. Therefore, the professional

services firms will be encouraged to build up capability and scaling in niche

areas through partnership with larger corporations or form multi-disciplinary

consortia when bidding for projects. This will enable the professional services

firms to leverage on the thrust, synergy, and share of technical know-how

that are established when venturing abroad.

The Exporter Development Program (EDP) under MATRADE will be enhanced

through a demand-driven tailored program by providing knowledge on

market access, global trade requirements, trade practices, and advisory

services.


31Ibid.


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Proposal for an

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Nearly two-thirds of export growth in the decade 2021-2030 will be

underpinned by growth in three sectors: machinery and transport,

manufacturers and chemicals. This represents an increase of 22% points, up

from just 42% in 2015-20. In contrast, raw materials and mineral fuels will

contribute around one-quarter of export growth in 2021-2030, down from

nearly 50% in 2015-20. It is designed that China will overtake Singapore as the

largest export market for Malaysian goods by 2030. Other major export

destinations will be Singapore, Japan, USA, and India. The composition of

import by origin will also mirror that of the destination of exports. Strong growth

of around 14% p.a. in 2021-2030 will see China leapfrog Singapore as the

largest market of origin for goods imports by 203032.

2.1.6 Distribution channels, its major players and the challenges

Professional services sector in Malaysia is dominated by SMEs which lack

capacity to adopt technology and capability to compete abroad. It is

difficult for the industry to understand and comply with the regulations which

lead to higher cost of doing business. Moreover, the professional services are

short of talent since the graduates lack the required technical skills, soft skills,

and the ability to work across different cultures. The shortage, especially, of

specialised talents in the industries such as oil and gas, aviation,

maintenance, repair and overhaul, and construction is reducing the growth

of these industries.

In the 11th Plan, the design is to transform the subsector by raising quality of

human capital, undertaking regulatory reform, and enhancing exports. In

addition, the plan is that Malaysia will be promoted as an outsourcing centre

for professional services to expand export opportunities in knowledge-

32Malaysia Trade Forecast Report (2016)


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Proposal for an

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intensive areas. Moreover, the good regulatory practices will be enhanced by

simplified and expeditious licensing and accreditation processes to ensure

timely approval and reduce cost of doing business.

2.2 Engineering Services

Professional engineering services include engineering services and advice

related to any feasibility study, planning, survey, design, construction,

commissioning, operation, maintenance and management of engineering

works or projects, and any other services performed by engineers. Apart from

the main activities, professional engineering services also include the design

and construction of:

• residential, commercial and industrial development

• petroleum, petrochemical plant and process

• mining plant and process

• electronic and electrical equipment

• industrial machinery design and microelectronic

• transportation, transportation equipment, and power

• telecommunication, broadcasting, utility, industrial waste, and

construction

• project management, research and development, environmental

consulting, and engineering advisory among others.

There are 30,000 professional engineers registered by the Institution of

Engineers, Malaysia (IEM), with an annual growth rate of 10%. The engineering

profession is regulated by the Registration of Engineers Act 1967. Only

registered graduate and professional engineers are allowed to practice

engineering in Malaysia33.

33The Institution of Engineers Malaysia (2016)

http://www.myiem.org.my/

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Proposal for an

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2.3 Architecture, Landscape and Urban Planning Services

In regards to the architectural services, there are basic services obtainable

such as schematic design work, design development, contract

documentation, contract implementation, and management. In addition,

some supplementary services are included such as survey and investigating,

planning and development, and supplementary design.

Malaysian architectural services are regulated by the Ministry of Works.

Architectural Consultancy Practices must be registered by the Board of

Architects Malaysia.

Table 4: Number of employees in the Malaysia Architectural Services

Profession Number

Professional Architects 1,785

Graduate Architects 1,679

Interior Designers 480

Building Draughtmen 159

APEC Architect 23

ASEAN Architect 35

Architectural Body Corporate 238

Architectural Partnership 91

Architectural Sole Proprietorship 1,062

Multi Disciplinary Practices 38

Interior Design Body Corporate 17

Interior Design Partnership 1

Interior Design Sole Propritorship 16

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Proposal for an

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2.4 Accounting Services

The activities within professional accounting services, mainly, include auditing

of accounting records, preparing financial statements, and bookkeeping. The

list of services offered include:

• Recording of commercial transactions from businesses or others

• Preparation or auditing of financial accounts

• Examination of accounts and certification of their accuracy

• Preparation of personal and business income tax returns, and advisory

activities

• Representation on behalf of clients before tax authorities

By the middle of 2015, there were 1,407 audit firms and 836 non-audit firms

providing other accountancy related services. In 2014, there were 145 new

audit and non-audit firms registered in Malaysia. Apart from the local players,

the main world´s leading professional firms such as EY, KPMG, Deloitte, and

PwC are present and operating in the market. Because of the lack of

expertise and resources many of the Malaysian SMEs experience problems in

accounting functions and outsource these services, in addition to looking for

professional advisory services to help prepare financial reporting.

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Proposal for an

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2.5 Legal Services

Figure 6: Size of Legal Service Firms

The legal services sector in Malaysia is a competitive market with 5,300

players, with the majority of them being small law firms (1 to 5 lawyers),

constituting 4,718 firms, and accounting for almost 90% of all the law firms

operating in the Malaysian market34.

The removal of barriers to enter the legal sector has improved Malaysia´s

professional services sector thereby boosting trade and investments as well

as by giving an opportunity for the local legal firms to build expertise, raise

standards, and increase their competitive offer.

2.6 Regulatory Environment for SME’s

There are a series of regulations in Malaysia that can impede entry of foreign

players together with cumbersome procedures that decrease the efficiency

of doing business and overlapping regulations across Ministries/Agencies/

34The Malaysian Bar (2016)

89%

10%

1%

Size of legal practices (2016)

1-5 Lawyers 6-30 Lawyers >30 Lawyers

http://www.malaysianbar.org.my/general_notices/bc_general_statistics_2013.html

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Proposal for an

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Sectors. Even so, these problems have been identified by the Malaysian

Government which is now implementing strong efforts to liberalise the

Professional Services market and have included this topic in the Economic

Transformation Programme35.

The Programme identified key services sectors that could be liberalised –

accounting, legal, engineering, architectural, landscape and urban

planning -- focusing on measures to revise existing legislation as well as

impose new regulations. These include a set of proposed measures that are

being implemented and that will make the regulatory environment in

Malaysia considerably friendlier to foreign companies: reducing restrictions to

the entry, streamlining legal requirements, simplifying taxation requirements

and generally improving the ease of doing business in the Professional

Services Sector36.

An important breakthrough in the liberalisation of the Professional Services

sector was achieved on 24th February 2015, when the Ministries decided to

remove the requirement of Malaysian citizenship for foreign professionals. This

is a major step in the liberalisation process as it will enable foreign

professionals to register and work in Malaysia and to fully own a company.

Another change is that engineering consultancies no longer need to be 100%

owned by professional engineers. Apart from the required 70% shares owned

by professional engineers, non-engineers can own 30% shares in the firm.

There are no regulations for these 30%. This is intended to solve the problem

of financing and make it easier for those companies to expand

internationally37.

35Professional Services (2016)

36Ibid.

37EUMCCI (2016)

http://etp.pemandu.gov.my/Selected_Sectors-@-Professional_Services.aspx


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Proposal for an

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2.6.1 Regulations in Engineering Services and Proposed Measures

The regulation of Engineering services is defined by the Registration of

Engineers Act 1967 (ACT 138), with the regulator being the Ministry of Works

(Board of Engineers Malaysia38). “Engineering Consultancy Practice” means a

sole proprietorship, partnership, or body corporate providing professional

engineering services. Business registration for an Engineering Consultancy

Practice and application for registration of Body Corporate as an Engineering

Consultancy Practice is the responsibility of the Board of Engineers Malaysia.

The proposed measures in Engineering Services include expediting the

enactment of the proposed Construction Industry Payment and Adjudication

Act (CIPAA), for quick resolution of payment and accelerating the proposed

amendment to the Limitation Act 1953 (Act 254) and ensuring a business-

friendly environment by limiting the liability period of professional engineers to

15 years and making insurance premiums affordable. Also included are

measures expediting the proposed amendments to the Registration of

Engineers Act (Act 138) to remove equity restrictions (i.e. open to any persons

or bodies) and citizenship requirement for Engineering Consultancy Practices

and the implementation of Professional Competency Examination (PCE),

making it mandatory for all engineers.

2.6.2 Regulations in Architecture, Landscape and Urban Planning Services, and Proposed Measures

The regulation of Architecture services is defined by the Architect Act 1967

(ACT 117) and the regulator is the Ministry of Works (Board of Architects

Malaysia39). “Architectural Consultancy Practice” means a sole proprietorship,

partnership, or body corporate incorporated under the Companies Act 1965

38Board of Engineers Malaysia (2016)

39Ibid.

http://www.bem.org.my/v3/index.html

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Proposal for an

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[Act 125] providing architectural consultancy services. Business registration for

an Architects Consultancy Practice and application for registration of Body

Corporate as an Architectural Consultancy Practice is the responsibility of the

Board of Architects Malaysia.

Proposed new measures in Architectural Landscape and Urban Planning

Services include the amendment of the Architects Act 1967 (Act 117) in order

to ease the entry of foreign architects to allow:

• Foreign architects to practice by registering with the Board of

Architects;

• The Board of Architects to determine the level of foreign equity

participation in joint-venture corporate body and partnership

arrangements;

• Foreign architects to be employed in projects wholly financed by

foreign governments or implemented under any form of arrangement

with the Government of Malaysia with the condition that they must

have temporary registration;

• For public and private projects, foreign architects to practice in

collaboration with local architects registered with the Board of

Architects.

The measures also include the acceleration of the introduction of a new

Landscape Architects Act with no equity restrictions for golf courses and

theme park subsectors and the development of domestic capacity building

to enhance capability of local landscape architects. The negotiation of

Mutual Recognition Arrangements (MRAs) with ASEAN countries to facilitate

market access and the accreditation of tertiary education programs for

urban planning is to be based on International standards to protect and

safeguard public interest.

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Proposal for an

Analytical Study


2.6.3 Regulations in Accounting Services and Proposed Measures

The regulation of Accounting services is defined by the Legal Profession Act

1976 (ACT 1976) with the regulator being the Ministry of Finance. All firms in

public practice are described as firms of Chartered Accountants (CA) or

Licensed Accountants (LA) and are registered as member firms of the

Malaysian Institute of Accountants (MIA)40. Public practice services include

accounting, audit, liquidation, tax, and other related services. Business

registration and application for approval to establish a Chartered

Accountants or Licensed Accountants firm is required from the MIA.

The set of proposed measures around Accounting Services include the

removal of foreign equity restrictions for accountancy services which will

facilitate the entry of foreign companies. In addition, the Malaysian

Government intends to amend the Accountants Act 1967 to allow for other

forms of practices, e.g. body corporate or limited liability partnerships, and

allow co-ownership of accountancy practices with professionals from other

allied disciplines. Further, the proposed measures include the incorporation of

a Competency Assessment Programme (CAP) into the Malaysian Institute of

Accountants' Chartered Accountants Relevant Experience (CARE)

programme to ensure that accounting graduates acquire the appropriate

degree of professional capabilities and competence in order to qualify as

Chartered Accountants. The Malaysian Government is also planning to

introduce a competency assessment on Malaysian business and taxation

laws for foreign accountants to familiarise them with the Malaysian

accountancy system.

2.6.4 Regulations in Legal Services and Proposed Measures

40Malaysian Investment Development Authority B (2016)

http://www.mida.gov.my/home/incentives-in-services-sector/posts/

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Proposal for an

Analytical Study


The regulation of Legal Services is defined by the Legal Profession Act 1976

(ACT 1976) with the regulator being the Malaysian Bar Council 41 . Legal

services include services rendering legal advice and dispensing legal

representation in matters pertaining to international laws. Business registration

for a Law Firm and application for approval to establish a law firm is required

from the Malaysian Bar Council.

The proposed measures in Legal Services include the amendment of the

Legal Profession Act 1976 to relax restrictions on foreign lawyers and to

promote Malaysia as a centre for Islamic finance. Also, it is proposed that

foreign law firms be allowed to practice in Malaysia via International Joint

Law Partnerships and the registration of foreign lawyers be allowed in the

following permitted areas:

• Islamic Finance and/or Shariah-based or Shariah-compliant

transactions

• International debt and equity capital markets

• Asset securitisation

• Derivatives and structured products

• Corporate banking and corporate transactions

41The Malaysian Bar B (2016)

http://www.malaysianbar.org.my/

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Proposal for an

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Key Challenges & Opportunities for EU SME’s

03.

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3. Key Opportunities & Challenges for EU SMEs

3.1 Overview

The Professional Services sector is knowledge-intensive in nature and being

highly differentiated and offering high-value skills and services. Companies

working in this sector can charge a premium for these services which

translates into higher wages and profit margins 42 . In developed nations,

Professional Services continue to drive change, boost economic growth, and

increase efficiency. In the case of Malaysia, Professional Services have been

identified as a focus area in the NKEAs as it is one of the sub-sectors with the

potential to move the country towards high-income nation status by 2020.

The main challenges for EU SMEs who want to enter the Professional Services

Market in Malaysia can be divided into general challenges in doing business

in the country and challenges for this specific sector.

Regarding the general challenges in doing business in Malaysia, it is important

to consider the following constraints43:

• Censorship: Malaysia has a large Muslim population and censorship

laws are amongst the strictest in the world. This may directly impact

marketing activities in Malaysia, requiring changes to the way products

or services are advertised;

• Regulation: New foreign investment in Malaysia often requires licensing

that can involve various regulatory bodies. Prospective investors can

contact the Malaysian Ministry of International Trade as a first step;

42MPC (2016) This does not exist, updated and found

43ANZ (2016)


http://www.anzbusiness.com/countries/malaysia.html#.VucdJPnRjDc

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Proposal for an

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• Sales channels: Establishing direct sales channels can be difficult, costly

and time consuming for foreign companies. A practical solution is to

partner with a local agent or distributor in Malaysia.

• Islamic financial practices: Malaysia is considered the world’s largest

Islamic financial centre and by 2020 it is estimated that over 50% of its

finance and banking sector will be Shariah -compliant. The Quran

prohibits the charging of interest in financial transactions, although

alternative commercial arrangements can be made.

• Translation where appropriate: Although English is widely used as a

language for business transactions, the use of translation services are

advised in formal negotiations to avoid any misunderstandings.

The key challenges for EU SMEs in the Professional Services sector in Malaysia

are connected to the challenges this sector faces in general and include the

following44:

• The sector in Malaysia is dominated by small firms (representing over

97% of all companies, as of 201045) that lack the capacity to compete

on a bigger scale;

• Financial institutions do not consider these small firms to be key client

segments and are rarely prepared to offer them the financial

assistance they need to expand and achieve economies of scale;

• The existence of regulations that impede entry (expansion) of foreign

players, and cumbersome procedures that decrease the efficiency of

doing business;

• Overlapping regulations across Ministries/Agencies/ Sectors.

44Overview of ETP (2016)

45SME Corp (2011)

http://etp.pemandu.gov.my/Liberalization_of_Services-@-Liberalisation_of_Services_Framework.aspx

http://www.smecorp.gov.my/index.php/en/policies/2015-12-21-09-09-49/sme-statistics

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Proposal for an

Analytical Study


Although there are some challenges in the sector of Professional Services in

Malaysia, this is a growing area of the economy with vast potential for

foreign companies. Productivity growth in Malaysia within the Professional

Services sector grew 5.8% in 2014 (compared with 8.5% growth in 2013).

Despite steep declines in productivity growth, the accounting, engineering,

and legal services industries all posted high productivity growth rates of 7.2%,

6.5% and 6.4% respectively in 201446.

To address the challenge posed by the fact that the Professional Services

sector in Malaysia is dominated by small firms and to enhance the

capabilities of small companies, the Malaysian Government has provided an

incentive for mergers and acquisitions of small and medium service providers

named “Incentive for Merger and Acquisition (M&A) of Small and Medium

Service Providers”47. This incentive includes a flat tax rate of 20% on all taxable

income for a period of five years effective from the date of merger and the

exemption of stamp duty on the merger document is aimed at building up

the capacity and enhancing the competitiveness of local service providers in

the global arena. Mergers and acquisitions are meant to create new brands,

open up access to new markets, and unlock economies of scale.

Legal professionals in Malaysia have the highest average monthly salary

(USD2,108) among the professional services but make just a third of what their

counterparts earn in the United States (USD6,443) and Singapore (USD6,300).

Salaries for engineers, architects and financial professionals are also

comparatively higher in these countries.

46 Overview of ETP (2016)

47SME Corp B (2016)

http://etp.pemandu.gov.my/Liberalization_of_Services-@-Liberalisation_of_Services_Framework.aspx

http://www.smecorp.gov.my/index.php/en/resources/2015-12-21-11-03-46/entrepre-news/161-entrepre-news/tahun-2014/356-incentive-for-merger-and-acquisition-for-small-malaysian-services-providers

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Proposal for an

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Table 5: Average Monthly Salary Comparison by Country

Job specialisation United States Malaysia Australia Singapore

Engineering 7,383 1,846 5,711 3,461

Architecture 5,920 1,559 4,167 4,119

Accounting &

Finance 5,737 1,765 5,056 4,871

Legal 6,443 2,108 5,960 6,300

Figures in USD

Source: Malaysia Productivity Corporation (MPC)48

This means that the salaries paid in the Professional Services sector in Malaysia

are very competitive, which, represents an opportunity to European

companies who are looking to enter this market. Even so, the tightening of the

regulatory environment is expected to increase legal and compliance hiring

activity during the following years as companies may need to pay more to

secure the highest-calibre workers. This dynamic is expected to boost the

overall salary scale of professionals within these industries and challenge

companies to increase productivity despite rising labour costs.

One of the biggest opportunities for EU SMEs in the Professional Services sector

in Malaysia is the effort that is being taken by the Malaysian Government to

liberalise this market. This is included in the Economic Transformation

Programme that will create many new business opportunities for foreign

companies. The Programme identified key services sectors that could be

liberalised including accounting, legal, engineering, architecture , landscape

architecture , and urban planning focusing on measures to revise existing

legislation as well as impose new regulations. It also reviewed Integrated

Engineering Services and Multi-Disciplinary Practices in order to provide

48MPC (2016) does not exist anymore, real one now


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Proposal for an

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opportunities for Foreign Service providers without compromising the integrity

and quality of service delivery. These liberalising measures which are detailed

in section 2.6 - “Regulatory Environment for SMEs” aim to remove restrictions

on the entry of foreign companies in the Professional Services sector in

Malaysia ie:

• Streamline the legal requirements companies operating in this sector must

fulfill

• simplify taxation requirements and

• generally improve the ease of doing business in the country.

3.2 Initiatives Open to EU SMEs

The Malaysian Government has been taking actions to attract foreign

investment and foreign companies to work in the country in order to promote

foreign direct investment and the development of the economy. In the

services sector, this promotion is mainly performed by The Malaysian

Investment Development Authority (MIDA) 49 which is the government's

principal agency for the promotion of the manufacturing and services sectors

in Malaysia as well as supporting business and science parks that host

multinational and local companies, such as the Kulim Hi-Tech Park50. MIDA is

involved in the liberalisation and opening effort taken by the Malaysian

Government in the Professional Services sector by being responsible for

facilitating foreign investments into the services sector through a National

Committee for Approval of Investments in the Services Sector. This Committee

acts as a focal point to receive and process applications for investments in

the services sector excluding investments in financial services, air travel,

utilities, Economic Development Corridors, Multimedia Super Corridor (MSC)

and Bio-nexus status companies, and distributive trade.

49Malaysia Productivity Corporation (2016)

50Malaysia Kulim Hi-Tech Park (2016)

http://www.mpc.gov.my/

http://www.khtp.com.my/

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Proposal for an

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MSC Malaysia through the Malaysia Digital Economy Corporation (MDEC)

facilitates the ICT and ICT-facilitated businesses. It provides a set of Incentives

to enhance their products and services.

1. Incentives for Investments - In Malaysia, tax incentives both direct and

indirect are provided for in the Promotion of Investments Act 1986,

Income Tax Act 1967, Customs Act 1967, Sales Tax Act 1972, Excise Act

1976, and Free Zones Act 1990. These Acts cover investments in the

manufacturing, agriculture, tourism (including hotel) and approved

services sectors as well as R&D, training, and environmental protection

activities.

2. Pioneer Status - Providing competitive financial incentives including

Pioneer Status (100% tax exemption) for up to 10 years of the investment

Tax Allowance for 5 years and no duties on the import of multimedia

equipment51.

3. Investment Tax Allowance - As an alternative to Pioneer Status, a

company may apply for Investment Tax Allowance (ITA). A company

granted ITA is entitled to an allowance of 60% on its qualifying capital

expenditure (factory, plant, machinery, or other equipment used for the

approved project) incurred within five years from the date the first

qualifying capital expenditure is incurred.

4. Allowing unrestricted development of local and foreign knowledge

workers.

5. Ensuring freedom of ownership by exempting companies with ASC

Status from local ownership requirements.

6. Affording the freedom to source capital globally for MSC infrastructure

and the right to borrow funds globally.

51MSC Malaysia (2016)

http://www.mscmalaysia.my/duty_exemptions

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Proposal for an

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3.3 SWOT analysis

This section presents a SWOT analysis of the Malaysian Professional Services

main strengths, weaknesses, opportunities, and threats. Much of the analysis

draws on the points already described in this report, however, this SWOT

analysis thus intends to provide a synopsis and enable European companies

to better evaluate the Malaysian Professional Services market and weigh the

most important pros and cons in relation to their business.

3.3.1 Strengths

Government policies aimed at attracting foreign companies and workers – As

explored in more detail in section 3, the Malaysian Government has been

taking actions to attract foreign investment and foreign companies. In the

services sector, this promotion is mainly performed by The Malaysian

Investment Development Authority (MIDA) 52 which is the government's

principal agency for the promotion of the manufacturing and services sectors

in Malaysia.

Incentives for mergers and acquisitions of small and medium service

providers - The Malaysian Government has provided an incentive for mergers

and acquisitions of small and medium service providers aimed at building up

the capacity and enhancing the competitiveness of local service providers in

the global market. Mergers and acquisitions are meant to create new brands,

open up access to new markets, unlock economies of scale, and they can

be used by foreign companies to acquire local companies and enter the

market.

Incentives to attract foreign investment – MIDA is responsible for facilitating

foreign investments into the services sector through a National Committee for

52Malaysian Investment Development Authority C (2016)

http://www.mida.gov.my/

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Proposal for an

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Approval of Investments in the Services Sector. This Committee acts as a focal

point to receive and process applications for investments in the services

sector excluding investments in financial services, air travel, utilities, Economic

Development Corridors, Multimedia Super Corridor (MSC) and Bio-nexus status

companies, and distributive trade.

Talented working force – The Malaysian government has introduced a

national transformation framework which aims to drive the country toward

being an advanced nation by 2020. Presently the workforce of Malaysia has

straggled behind the standard of high-income nations. The country suffers

from shortage of skilled workers and weak productivity growth arising from a

lack of creativity and innovation in the workforce, inclusive of an overall

dependency on unskilled and low wage migrant workers53. In 2010, 58% of the

Malaysia labour force had only a secondary level education; 13.2% had

primary level of education and 2.6% had no formal education. This implies

that nearly 73.8% of the Malaysian labour force in 2010 was low-skilled.

Therefore, the government of Malaysia recognised the need for drastic

measures to improve the country’s human capital weaknesses to develop a

workforce talent base that can be compared to the standards of regional

peers and high-income countries.

Low price level in Professional Services – Malaysian salaries are quite low

when compared with that in developed countries with an English-speaking

population. A positive outlook is also that the majority of people are fluent in

English. Legal professionals in Malaysia, who have the highest average

monthly salary among the professional services (USD2,108) are paid just a third

of what their counterparts earn in the United States (USD6,443) and Singapore

53Structural Policy Country Notes Malaysia (2016)

https://www.oecd.org/dev/asia-pacific/Malaysia.pdf

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Proposal for an

Analytical Study


(USD6,300). Salaries for engineers, architects, and financial professionals are

also comparatively lower in Malaysia than in developed countries54.

Strong economic growth - Malaysia’s economy has presented strong growth

over the past years with annual GDP growth figures above 4% for all years in

the last decade (except for 2009). The country is expected to continue

growing at over 4% per year in the following years55.

Use of English as a business language - Although the country’s official

language is Malay (Bahasa Melayu), most Malaysians have a high English

language level proficiency.

3.3.2 Weaknesses

Lack of transparency – The legal requirements and the way public institutions

work in Malaysia are not always transparent which may create difficulties for

foreign investors.

Policies and regulations are not always strictly followed – The policies and

regulations defined in law are not always strictly followed by the public

services which adds uncertainty to the bureaucratic processes, especially to

foreign companies which are not well familiarised with legal proceedings as

local companies are.

Excessive number of regulations – Although the Malaysian Government is

taking efforts to streamline regulations there are still an excessive number of

regulations which may be cumbersome to new market entrants.

Islamic financial practices which may not be familiar to foreign companies –

Malaysia is considered the world’s largest Islamic financial centre and by 2020

it is estimated that over 50% of its finance and banking sector will be Shariah

54MPC (2016)

55The World Bank (2016)



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Proposal for an

Analytical Study


compliant56. Islamic finance has some restrictions such as the prohibition of

charging of interest in financial transactions, although alternative commercial

arrangements can be made.

3.3.3 Opportunities

Growing Professional Services sector – The Professional Services sector in

Malaysia is expanding as part of the service sector and has gained the

government’s attention to support its development as it is a major contributor

to the growth of the Malaysian economy57.

Liberalisation of the Professional Services sector - The Malaysian Government

is making an effort to liberalise the Professional Services market, having

included this topic in the Economic Transformation Programme58, aiming to

create many new business opportunities for foreign companies.

Streamlining and simplifying business procedures - The liberalisation of the

Professional Services market in the Economic Transformation Programme also

includes a set of measures to streamline legal requirements, simplify taxation

requirements, and generally improve the ease of doing business in the

Professional Services Sector59.

Increasing demand for high-quality professional services – The development

of the Malaysian Professional Services sector, which is growing and getting

more sophisticated; it is creating demand for an increased number of higher

quality professional services.

56ANZ (2016)

57DSD (2016)

58Professional Services (2016)

59Ibid.




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Proposal for an

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Talent drain and lack of proven know-how in certain areas forces Malaysia to

get professional services from outside the countries – The fact that the

Professional Services sector in Malaysia is still not as complete as in leading

developed countries coupled with the fact that the salaries are considerably

lower is leading to some talent drain and the need to obtain professional

services from foreign companies.

3.3.4 Threats

Foreseeable high level of competition – With the liberalisation of the

Professional Services market in Malaysia and the increased openness to

foreign companies, it is expected that there will be higher levels of

competition in this area in the future.

Tightening of the regulatory environment which may raise salaries – The

Malaysian Government is tightening the regulatory environment for hiring

professionals in the Professional Services sector which is expected to increase

legal and compliance hiring activity during the following years. Companies

may need to pay more to secure the highest-calibre workers60. This dynamic is

expected to boost the overall salary scale of professionals within these

industries and challenge companies to increase productivity despite rising

labour costs.

60MPC (2016)


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Proposal for an

Analytical Study


SWOT ANALYSIS

STRENGTHS

• Government policies aimed at

attracting foreign companies

and workers

• Incentives for mergers and

acquisitions of small and

medium service providers

• Incentives to attract foreign

investment

• Talented working force

• Low price level in Professional

Services

• Strong economic growth

• Use of English as a business

language

WEAKNESSES

• Lack of transparency

• Policies and regulations are not

always strictly adhered to

• Excessive number of regulations

• Islamic financial practices

which may not be familiar to

foreign companies

OPPORTUNITIES

• Growing Professional Services

sector

• Liberalisation of the Professional

Services sector

• Streamlining and simplifying

business procedures

• Increasing demand for high-

quality professional services

• Talent drain and lack of proven

know-how in certain areas

forces Malaysia to get

professional services from

outside the countries

THREATS

• Foreseeable high level of

competition

• Tightening of regulatory

environment which may raise

salaries

Figure 7: SWOT Analysis of Malaysian Professional Service Sector

Page | 50



Proposal for an

Analytical Study


Conclusions

04.

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Proposal for an

Analytical Study


4. Conclusion

The Professional Services sector in Malaysia offers opportunities for EU SMEs

adept at dealing with the existing regulations and with ability to differentiate

themselves so as to compete with the domestic and international players in

the market. However, there are several factors which should be taken into

consideration before entering the market. The Porter´s Five Forces Analysis

and SWOT analysis are intended to help European companies to better

evaluate the Malaysian Professional Services market and weigh the most

important pros and cons in relation to their business.

The main challenges for EU SMEs who want to enter the Professional Services

Market in Malaysia include the existence of strict censorship, cumbersome

regulation, Islamic financial practices, and cultural differences in business

etiquette. Also, the Professional Services sector is dominated by small firms

that lack the capacity to compete on a bigger scale and there are still

regulations that impede the entry of foreign players.

The Professional Services sector in Malaysia is dynamic. One of the largest

opportunities for EU SMEs in the sector is the effort that is being taken by the

Malaysian Government to liberalise this market which can create many new

business opportunities for foreign companies. The Economic Transformation

Programme identified key services sectors that could be liberalised, including

accounting, legal, engineering, architecture , landscape architecture , and

urban planning, and are focusing on measures to revise existing legislation as

well as impose new regulations. These efforts aim to:

• remove restrictions on the entry of foreign companies in the Professional

Services sector in Malaysia,

• streamline the legal requirements companies operating in this sector must

fulfill,

Page | 52



Proposal for an

Analytical Study


• simplify taxation requirements and

• generally improve the ease of doing business in the country.

Small-scale manufacturing companies incorporated in Malaysia with

shareholders’ funds not exceeding €110.005 and having at least 60%

Malaysian equity are eligible for the following incentives:

1. Pioneer status with an income tax exemption of 100% of the statutory

income for a period of five years or

2. Investment Tax Allowance of 60% on the qualifying capital expenditure

incurred within five years.

3. Industrial Building Allowance is granted to companies incurring capital

expenditure on the construction or purchase of a building that is used

for specific purposes including manufacturing, agriculture, mining,

infrastructure facilities, and, research etc. Such companies are eligible

for an initial allowance of 10% and an annual allowance of 3%. As such

the expenditure can be written off in 30 years.

4. Exemption from import duty on raw materials / components: full

exemption from import duty can be considered for raw

materials/components, regardless of whether the finished products

are meant for the export or domestic market.

The ongoing liberalisation process of the Professional Services sector can be

assessed as a positive signal for the EU SMEs. By easing the tight regulations,

foreign professionals can enter untapped opportunities of less explored

Malaysian market.

Page | 53



Proposal for an

Analytical Study


Contact Points

05.

Page | 54



Proposal for an

Analytical Study


5. Contact Points

EU SME Helpdesk

URL: http://www.eu-sme.com.my/sebseam-

m/homePage.do?action=init&preLogin=1

Contact Number: +60321626298

Summary: The EU SMEs looking for business opportunities in Malaysia can

access the EU SME Helpdesk to get relevant information and professional

advice from qualified experts. The EU SME Helpdesk is a project co-funded by

the European Commission and led by the EU-Malaysia Chamber of

Commerce & Industry (EUMCCI). It aims at promoting Malaysia as a direct

trade market and as an easy, cost-effective gateway to the ASEAN market of

600 million consumers.

IPR SME Helpdesk

Ministry of Works (Board of Engineers Malaysia) European IPR Helpdesk:

URL: https://www.iprhelpdesk.eu/


Summary: EU SMEs involved in transnational partnership agreements can get

a free of charge support on Intellectual Property (IP) and Intellectual Property

Rights (IPR) matters on the European IPR Helpdesk.

East Asia Business Exchange:

URL: http://www.eabex.org/


Summary: To be updated regarding the regional initiatives in the East Asia

region, interested entities may join the East Asia Business Exchange (EABEX),

aimed at enhancing the competitiveness of the SMEs in the region. This

business matching portal provides access to buyers and sellers from 13 Asian

countries and valuable business tools.

EU-Malaysian Chamber of Commerce and Industry (EUMCCI)

URL: www.eumcci.com

Contact Number: +603-2162 6298

Summary: EUMCCI offers business support for EU companies in Malaysia and

ASEAN. With its Smart Technology Committee and broad network to urban

development stakeholders, it is the first touchpoint for provider of smart city

solutions.

http://www.eu-sme.com.my/sebseam-m/homePage.do?action=init&preLogin=1

http://www.eu-sme.com.my/sebseam-m/homePage.do?action=init&preLogin=1

https://www.iprhelpdesk.eu/

http://www.eabex.org/

www.eumcci.com

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Proposal for an

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For details on the contact points and authorised institutions on the

categorised Professional Service Sector, please refer to the following links.

• Accounting Services:

http://myservices.miti.gov.my/documents/10180/fef3a047-e779-4dca-

9dd0-b9efb428a45b

• Legal Services:

http://myservices.miti.gov.my/documents/10180/fd07a086-c887-4ffd-

8caf-c9bdf2c23b42

• Engineering Services:

http://myservices.miti.gov.my/documents/10180/80e88dc2-b4f6-4560-

8e02-13030323d101

• Architectural Services:

http://myservices.miti.gov.my/documents/10180/5f33c23a-f84a-4211-

beba-5d23e554dd86

http://myservices.miti.gov.my/documents/10180/fef3a047-e779-4dca-9dd0-b9efb428a45b

http://myservices.miti.gov.my/documents/10180/fef3a047-e779-4dca-9dd0-b9efb428a45b

http://myservices.miti.gov.my/documents/10180/fd07a086-c887-4ffd-8caf-c9bdf2c23b42

http://myservices.miti.gov.my/documents/10180/fd07a086-c887-4ffd-8caf-c9bdf2c23b42

http://myservices.miti.gov.my/documents/10180/80e88dc2-b4f6-4560-8e02-13030323d101

http://myservices.miti.gov.my/documents/10180/80e88dc2-b4f6-4560-8e02-13030323d101

http://myservices.miti.gov.my/documents/10180/5f33c23a-f84a-4211-beba-5d23e554dd86

http://myservices.miti.gov.my/documents/10180/5f33c23a-f84a-4211-beba-5d23e554dd86

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Proposal for an

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General Malaysian Contact Points:

Malaysian Investment Development Authority (MIDA)

URL: http://www.mida.gov.my


Summary: Malaysia’s principal agency promoting investments in the nation and has

dedicated departments promoting green technology procurement; another primary

contact point for EUES-related incentives

Malaysia Digital Economy Corporation Sdn. Bhd. (MDEC)

URL: http://msc.mdec.my/


Summary: MDEC has been given the mandate for implementing the national digital

transformation and leads the Multimedia Super Corridor (MSC).

Malaysian Industry-Government Group for High Technology (MIGHT)

URL: http://www.might.org.my/

Contact Number: +603 8315 7888

Summary: MIGHT is a platform organized under the Prime Minister’s office bringing

together private, governmental and academic stakeholders.

InvestKL

URL: http://www.investkl.gov.my/default.aspx

Contact Number: +603 2260 2270

Summary: InvestKL is a Government entity under the Ministry of International Trade

and Industry (MITI), Ministry of Federal Territories and PEMANDU, the Performance

Management and Delivery Unit under the Prime Minister’s Department. It works with

other government ministries, entities and agencies to formulate attractive fiscal

packages, and help corporations identify business opportunities while strengthening

their competitiveness regionally and globally. Also, InvestKL is a general contact

point for investments in the Greater Kuala Lumpur area.

Malaysian Global Innovation & Creativity Centre (MaGIC) URL: http://mymagic.my/en/


Summary: Centre for local Malaysian entrepreneurship cultivation; the centre

presents opportunities for cooperation with Malaysian start-ups.

http://www.mida.gov.my/

http://msc.mdec.my/

http://www.might.org.my/

http://www.investkl.gov.my/default.aspx

http://mymagic.my/en/

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Proposal for an

Analytical Study


Sector-Specific Malaysian Contact Points:

Malaysian Institute of Accountants

URL: http://www.mia.org.my


Summary: MIA is an umbrella body for the accountancy profession in Malaysia and is

under Ministry of Finance through the Accounting Generals Department. MIA

responsibilities include education and quality assurance as well as enforcement as

well as a contact point for accounting business registrations.

Bar Council of Malaysia

URL: http://www.malaysianbar.org.my/


Summary: The Malaysian Bar aims to uphold the rule of law and he cause of justice

and to protect the interest of the legal profession as well as that of the public. It is a

contact point for legal business registrations, application for principal and

operational approvals, and taxation matters.

Ministry of Works (Board of Engineers Malaysia)

URL: http://www.bem.gov.my


Summary: BEM role is to facilitate the registration of engineers and regulate the

professional conduct and practice of registered engineers in order to safeguard the

safety and interest of the public. BEM is the contact point for engineering business

registrations, principal and operational approvals.

Ministry of Works (Board of Architects Malaysia)

URL: http://www.lam.gov.my


Summary: Board of Architects Malaysia is a statutory authority for the enforcement

of Architects. The function of the board is: registration of architects, registration of

architectural consultancy practices, registration of their conduct and ethics,

conducting examinations for admission to the profession, accreditation of

architectural programmes etc. It is a contact point architecture-related business

registrations, principal and operational approvals.

Inland Revenue Board / Lembaga Hasil Dalam Negeri (HASIL)

URL: http://www.hasil.gov.my/


Summary: Inland Revenue Board of Malaysia is a government body of the Ministry of

Finance, which is the country’s responsible institute for taxation.

http://www.mia.org.my/


http://www.bem.gov.my/

http://www.lam.gov.my/

http://www.hasil.gov.my/

Page | 58



Proposal for an

Analytical Study


References

06.

Page | 59



Proposal for an

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6. References

1. Atlas of Malaysia. (2016). Retrieved December 23, 2016, from

https://commons.wikimedia.org/wiki/Atlas_of_Malaysia#/media/File:LocationMal

aysia.png

2. Department of Statistics Malaysia. (2016). Retrieved December 23, 2016, from


3. EUMCCI. (2016). The Professional Services Sector In Malaysia. Retrieved

December 23, 2016, from

http://www.eumcci.com/documents/13347/87588/Professional Services Sector

2015 Market Report/19cf71d8-b12a-4a1f-9534-b56e875fba4e

4. The world Bank. (2016). Retrieved December 23, 2016, from


5. Malaysia's Transformation. (2016). Retrieved December 23, 2016, from

http://etp.pemandu.gov.my/Invest_In_Malaysia-@-

Malaysia's_Transformation.aspx





7. Malaysian Investment Development Authority A. (2016). Retrieved December 23,

2016, from http://www.mida.gov.my/home/developed-infrastructure/posts/

8. Tenth Malaysia Plan (10th MP). (2016). Retrieved December 23, 2016, from


9. Overview of ETP. (2016). Retrieved December 23, 2016, from


10. Malaysia's liberalised market and strong economy brings European opportunity.

(2015, April 15). Retrieved December 23, 2016, from http://www.infrastructure-

intelligence.com/article/apr-2015/malaysia%E2%80%99s-liberalised-market-and-

strong-economy-brings-european-opportunity

11. Malaysia's liberalised market and strong economy brings European opportunity.

(2015, April 15). Retrieved December 23, 2016, from http://www.infrastructure-

intelligence.com/article/apr-2015/malaysia%E2%80%99s-liberalised-market-and-

strong-economy-brings-european-opportunity

12. Atlas of Malaysia. (2016). Retrieved December 23, 2016, from

https://upload.wikimedia.org/wikipedia/commons/thumb/0/03/ASEAN_members




http://www.eumcci.com/documents/13347/87588/Professional%20Services%20Sector%202015%20Market%20Report/19cf71d8-b12a-4a1f-9534-b56e875fba4e







http://www.mida.gov.my/home/developed-infrastructure/posts/



http://www.infrastructure-intelligence.com/article/apr-2015/malaysia%E2%80%99s-liberalised-market-and-strong-economy-brings-european-opportunity







Page | 60



Proposal for an

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.svg/500px-ASEAN_members.svg.png

13. European Commission A. (2016). Retrieved December 23, 2016, from


14. European Commission A. (2016). Retrieved December 23, 2016, from


15. Association of Southeast Asian Nations. (2016). Retrieved December 23, 2016,

from http://asean.org/asean-economic-community/

16. European Commission B. (2016). Retrieved December 23, 2016, from








19. Ibid.

20. Eurostat Statistics Explained. (2016). Retrieved December 23, 2016, from

http://ec.europa.eu/eurostat/statistics-explained/index.php/Business_economy_-

_size_class_analysis

21. MPC. (2016). Retrieved December 23, 2016, from http://www.mpc.gov.my/wp-

content/uploads/2016/04/Productivity-Report-201415.pdf

22. Royal Malaysian Customs Department. (2016). Retrieved December 23, 2016, from

http://gst.customs.gov.my/front.html

23. DSD. (2016). Retrieved December 23, 2016, from

http://www.dsd.gov.my/images/analisis-bidang-pekerjaan-

oa/Bussiness_JD129509.pdf



25. Transforming Services Sector. (2016). Retrieved December 23, 2016, from


26. Malaysia's Transformation. (2016). Retrieved December 23, 2016, from

http://etp.pemandu.gov.my/Invest_In_Malaysia-@-

Malaysia's_Transformation.aspx




http://asean.org/asean-economic-community/









http://gst.customs.gov.my/front.html







Page | 61



Proposal for an

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27. Ibid.

28. Malaysia Trade Forecast Report. (2016). Retrieved December 23, 2016, from


29. Ibid.



31. Ibid.

32. Malaysia Trade Forecast Report. (2016). Retrieved December 23, 2016, from


33. The Institution of Engineers Malaysia. (2016). Retrieved December 23, 2016, from

http://www.myiem.org.my

34. The Malaysian Bar. (2016). Retrieved December 23, 2016, from

http://www.malaysianbar.org.my/general_notices/bc_general_statistics_2013.ht

ml

35. Professional Services. (2016). Retrieved December 23, 2016, from


36. Ibid.





38. Board of Engineers Malaysia. (2016). Retrieved December 23, 2016, from


39. Ibid.

40. Malaysian Investment Development Authority B. (2016). Retrieved December 23,

2016, from http://www.mida.gov.my/home/incentives-in-services-sector/posts/

41. The Malaysian Bar B. (2016). Retrieved December 23, 2016, from

http://www.malaysianbar.org.my






http://www.myiem.org.my/







http://www.mida.gov.my/home/incentives-in-services-sector/posts/




Page | 62



Proposal for an

Analytical Study


43. ANZ. (2016). Retrieved December 23, 2016, from




45. SME Corp. (2016). Retrieved December 23, 2016, from

http://www.smecorp.gov.my/index.php/en/policies/2015-12-21-09-09-49/sme-

statistics



47. SME Corp B. (2016). Retrieved December 23, 2016, from

http://www.smecorp.gov.my/index.php/en/resources/2015-12-21-11-03-

46/entrepre-news/161-entrepre-news/tahun-2014/356-incentive-for-merger-and-

acquisition-for-small-malaysian-services-providers



49. Malaysian Productivity Corporation. (2016). Retrieved December 23, 2016, from

http://www.mpc.gov.my

50. Kulim Hi-Tech Park. (2016). Retrieved December 23, 2016, from

http://www.khtp.com.my

51. MSC. (2016). Retrieved December 23, 2016, from


52. Malaysian Investment Development Authority C. (2016). Retrieved December 23,

2016, from http://www.mida.gov.my/home/

53. Structural Policy Country Notes Malaysia. (2016). Retrieved December 23, 2016,

from https://www.oecd.org/dev/asia-pacific/Malaysia.pdf



55. The world Bank. (2016). Retrieved December 23, 2016, from


56. ANZ. (2016). Retrieved December 23, 2016, from


57. DSD. (2016). Retrieved December 23, 2016, from

http://www.dsd.gov.my/images/analisis-bidang-pekerjaan-











http://www.mpc.gov.my/

http://www.khtp.com.my/


https://www.oecd.org/dev/asia-pacific/Malaysia.pdf






Page | 63



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oa/Bussiness_JD129509.pdf












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Appendix

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61. Appendix

7.1 List of EU Incentives

As SME owner, it is possible to benefit from EU funding through grants, loans or,

guarantees. Support is available either directly (with EU grants) or through

programmes managed at national level. SMEs can also benefit from a series

of non-financial assistance measures in the form of programmes and business

support services.

Small businesses and start-ups are the major beneficiaries from the

Competitiveness and Innovation framework programme which runs between

2014 and 2020. More than 1.1 billion euros of EU funding will be directed to

loans and risk capital investments to help 350,000 SMEs start up, grow and

innovate. In addition to that, 2.6 billion euros will fund actions to help SMEs

bring innovative ideas to the market, to apply ICT and renewable energy

technologies, and benefit even more from the internal market.

Structural Funds Direct aid to SMEs in order to co-finance their investments is

only possible in the economically less developed regions (the so-called

'convergence' regions). In other regions, priority has been given to actions

having a high leverage effect (e.g. entrepreneurship training, support

services, business incubators, technology transfer mechanisms, networking,

etc.), as opposed to direct aid to individual SMEs.

Page | 66



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Num. Providing Agency Incentive

1 European Investment

Fund (EIF)

COSME Loan Guarantee Facility (LGF)

The COSME Loan Guarantee Facility (LGF) is a

window of the Single EU Debt Financial

Instrument which supports European

enterprises' growth and research and

innovation (R&I). LGF is part of COSME

(Programme for the Competitiveness of

Enterprises and Small and Medium-sized

Enterprises), an initiative launched by the

European Commission and managed by EIF.

Through COSME LGF, EIF offers guarantees

and counter-guarantees, including

securitisation of SME debt finance portfolios, to

selected financial intermediaries (e.g.

guarantee institutions, banks, leasing

companies, etc.) to help them to provide

more loans and leases to SMEs. By sharing the

risk, COSME guarantees allow the financial

intermediaries to expand the range of SMEs

they can finance, facilitating access to debt

finance for many SMEs who might be having

difficulties in accessing the traditional banking

system.

http://www.eif.org/what_we_do/guarantees/s

ingle_eu_debt_instrument/cosme-loan-facility-

growth/index.htm

http://www.eif.org/what_we_do/guarantees/single_eu_debt_instrument/cosme-loan-facility-growth/index.htm



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2 European Investment

Fund (EIF)

InnovFin SME Guarantee Facility

The InnovFin SME Guarantee Facility will be

deployed by eligible local banks, leasing

companies, guarantee institutions, etc. which

are selected after a due diligence process

following the launch of a Call for Expression of

Interest. Once selected by EIF, these local

partners act as financial intermediaries.

EIF, acting for both EIF and the EU as the

implementing body, covers a portion of the

losses incurred by the financial intermediaries

on loans, leases and guarantees between EUR

25 000 and EUR 7.5 million which they provide

under the InnovFin SME Guarantee Facility. In

this way, the EU and EIF allow the provision of

more debt financing to innovative SMEs and

Small Mid-caps (up to 499 employees)

http://www.eif.org/what_we_do/guarantees/s

ingle_eu_debt_instrument/innovfin-guarantee-

facility/

http://www.eif.org/what_we_do/guarantees/single_eu_debt_instrument/innovfin-guarantee-facility/



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7.2 List of Malaysian Incentives

Num. Providing Agency Incentive

1 Malaysian

Investment

Development

Authority (MIDA)

I-incentives (One Stop Centre for Incentives)

URL:

https://incentives.mida.gov.my/Incentives/Mo

dules/Public/IncentiveList.aspx

Summary:

• One-Stop online portal for Malaysian

Federal Government offered incentives.

• Notable PS-related incentives:

o Incentive for Industrial Design

Services Providers (Engineering-

related)

o Principal Hub Incentive (General –

suitable for firms providing strategic

services)

o Independent Accredited

Conformity Assessment Body (ICAB)

(Accounting-related; suitable for

certification-service firms)

2 Multimedia Super

Corridor (MSC)

MSC Status

URL:

http://www.mscmalaysia.my/what_is_msc_ma

laysia_status

http://msc.mdec.my/

Summary:

Potentials for

• Eligible for foreign and local ICT-based

and ICT-facilitated business.

• 100% exemption from statutory income.

• 100% Investment Tax Allowance (ITA)

• Eligibility for R&D Status.

• IT-capable/IT-integrated professional

services firms.

https://incentives.mida.gov.my/Incentives/Modules/Public/IncentiveList.aspx



https://incentives.mida.gov.my/Incentives/Modules/Public/IncentiveDetail.aspx?ACTION=yYzTQklUkd6XiejoM8Uhuw--&ID=zha0lswnLWImVdIbNiX4Cw--

https://incentives.mida.gov.my/Incentives/Modules/Public/IncentiveDetail.aspx?ACTION=yYzTQklUkd6XiejoM8Uhuw--&ID=zha0lswnLWImVdIbNiX4Cw--

https://incentives.mida.gov.my/Incentives/Modules/Public/IncentiveDetail.aspx?ACTION=yYzTQklUkd6XiejoM8Uhuw--&ID=MoIyA627SXi.HdRNxoUyAg--

https://incentives.mida.gov.my/Incentives/Modules/Public/IncentiveDetail.aspx?ACTION=yYzTQklUkd6XiejoM8Uhuw--&ID=0B4.rholu_k9cdLDvol9JQ--

https://incentives.mida.gov.my/Incentives/Modules/Public/IncentiveDetail.aspx?ACTION=yYzTQklUkd6XiejoM8Uhuw--&ID=0B4.rholu_k9cdLDvol9JQ--

http://www.mscmalaysia.my/what_is_msc_malaysia_status

http://www.mscmalaysia.my/what_is_msc_malaysia_status

http://msc.mdec.my/

potential for eu smes in the malaysian ... - business malaysia for... · malaysia has a total land...

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