A Brief Historical Overview

A BRIEF HISTORICAL OVERVIEW OF THE COUNTRY Malaysia has been colonized by Britain in 18th centuries. It was occupied by Japan from 1942 to 1945. In 1948, the British ruled territories on the Malay Peninsula formed the Federation of the Malaya, which became independent in 1957. Malaysia was formed in 1963, when the former British colonies of Singapore and the East Malaysian states of Sabah and Sarawak on the northern coast of Borneo joined the federation. The first several years of the country’s history were marred by a Communist insurgency. From 1981-2003, Prime Minister Mahathir Bin Mohammad ruled Malaysia. He attributed the success of the Asian Tiger economics to the “Asian Values”. Malaysia was successful in diversifying its economy from dependence on efforts of raw materials to expansion in manufacturing, services and tourism After 22 years of Mahathir,Deputy Prime Minister Abdullah Ahmad Badawi was elected and promoted the concept of “Islam Hadhari” or “Civilizational Islam”. He emphasized the importance of education, social harmony, and economic progress. The opposition alliance lost control of 13 states through defections of its assembly members to the National Front. Prime Minister Abdullah stepped down as Minister and transfer the power to Najab Tun Razak on April 2009.

II. COUNTRY ANALYSIS DATA REQUIRED POLITICAL/LEGAL ENVIRONMENT A. GENERAL POLITICAL/LEGAL CONDITIONS LEGAL REQUIREMENTS FOR IMPORT/EXPORT a. Full

exemption from import duty on raw materials used in the manufacture of finished products for export; exemption is granted on provision that the raw material in not manufactured locally or the local manufactured raw material is of unacceptable quality and price.

b. Full import duty exemption for companies located in Sabah, Sarawak and

designated areas in Peninsular Malaysia’s Eastern Corrigor, regardless of whether the product is for export or domestic consumption.

c. Drawback of excise duty on parts, ingredients or packaging materials used in the manufacture of final products for export. d. Drawback on sales tax for duty-paid goods used in the manufacture of final products for export. e. Exemption from import duty and sales tax on machinery and equipment. f. Drawback of import duty on all duty-paid goods used as part or ingredients or packaging materials in the manufacture of goods for export LEGAL PROTECTION FOR BRANDS, PRODUCTS AND PATENTS Malaysia is wide ranging and currently comprises trademarks, patents, copyright, industrial designs, geographical indications and layout designs of integrated circuits.

a. Trademark -the nature of protection that may be accorded to a trademark will be determined whether or not the trademark is registered. Upon registration, no one other than the registered proprietor or registered user is allowed to use the trademark. In the event of any unauthorized used of trademark, the proprietor may take civil action against the purported infringing party. b. Patents -an invention is patentable if it is universally novel involves a non-obvious step and is capable of industrial application. Once granted the protection, a patent owner will be entitled to fully exploit the patent, which includes the power to transmit or assign the patent. c. Copyright -the protection on afforded by copyright is not dependent on registration. Copyright law in Malaysia is governed by the Copyright Act 1987. d. Industrial Designs -Malaysia also provides for the protection of industrial designs by virtue of the Industrial Designs Act 1996 and Industrial Designs Regulations 1999. A design can only be registered if it is new, and does not merely involve a method of construction nor is it dictated solely by function. e. Geographical Indications

-The Geographical Indications Act 2000 is also a fairly new piece of legislation in Malaysia, which basically accords protection to goods which are named after the region or locality in which the goods are produced. RESTRICTION ON MONETARY TRANSFER Cash threshold reporting (ctr) requirement of RM 50,000 and above in a day was invoked in September 2006. The invocation of the ctr complements the mandatory legal obligation imposed on banking institution and other categories of reporting institution to submit suspicious transaction reports (str) to the financial intelligence conducted by Bank Negara Malaysia LEGAL REQUIREMENTS FOR ENVIRONMENTAL PROTECTION With the Malaysian government’s application of the concept of sustainable forest management. Tax incentives are also being introduced to spur the development of forest plantations and replanting schemes. Key wood based products are furniture, plywood, veneers and wood-based panels (FIREBOARDS) with Malaysian furniture fetching a total export value of RM 3.78 million in 2001. B.POLITICAL RISK ANALYSIS Malaysia is a constitutional monarchy and a parliamentary democracy. The country is divided into 13 states and the federal territory of Malaysia.

The system of government in Malaysia is closely modeled on that of Westminster parliamentary system, a legacy of British colonial rule. In practice however, more power is vested in the executive branch of government than in the legislative, and the judiciary has been weakened by sustained attacks by the government during the Mahathir era. Since independence in 1957, Malaysia has been governed by a multi-party coalition known as the Barisan Nasional (formerly known as the Alliance).

FLEXIBILITY/STABILITY OF LAW AND LEGAL CHANGES The federal court of Malaysia is the highest judicial authority and the final court of appeal in Malaysia. The country although federally constituted has a single structural judicial system consisting of two parts-the superior courts and subordinate courts. The subordinate courts are Magistrate courts and the session courts while the superior courts are two high courts of peninsular malaysia and states of sabah and Sarawak. The special court shall hear all civil cases.

The court shall be chaired by the chief justice of the federal court and shall be assisted by four other members namely the two chief judges of the respective high courts and two other persons appointed by the conference rulers who hold office as judge.

GOVERNMENT ATTITUDES TOWARDS BUSINESS/FOREIGN BUSINESS Some new measures were introduced to further encourage foreign direct investment participation in the economy. These includes the following: a. allowing 100% manufacturing.

foreign

ownership

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new

investment

in

domestic

b. increasing the foreign ownership share in the telecommunication projects from 30% to 69%. c. increasing the foreign ownership share in stock broking companies and insurance sector from a previous uniform level of 30% to 49% and 51% respectively. d. permitting real estate investment by foreigner on new or less than 50% completed projects subject to a minimum investment limit of RM 250,000.

BUREAUCRATIC DELAYS New ruling to deter hiring of foreign workers. Human Resource Minister Fong Chan Ong disclosed that employers would soon be required to seek permission from the Labor Department before they can hire foreign workers. The move is part of government efforts to impose more red tape on employers in order to discourage them hiring foreign workers for job that can be filled by Malaysians NUMBER OF EXPROPRIATIONS Malaysia has 10 to 20% foreign workers with the uncertainty due in part to the large number of illegal workers. There are a million legal foreign workers and perhaps another million unauthorized foreigners. The state of Sabah alone has nearly 25% of its 2.7 million population listed as illegal foreign workers in the last census. However, this figure of 25% is thought to be less than half the figure speculated by NGO. According to the World Refugee Survey 2008, published by the U.S. Committee for Refugees and Immigrants, Malaysia hosts a population of refugees and asylum seekers numbering approximately 155,700. Of this population, approximately 70,500 refugees and asylum seekers are from the Philippines, 69,700 from Burma, and 21,800 from Indonesia. The U.S.

Committee for Refugees and Immigrants named Malaysia as one of the Ten Worst Places for Refugees on account of the country's discriminatory practices toward refugees. Malaysian officials are reported to have turned deportees directly over to human smugglers in 2007, and Malaysia employs the RELA, a volunteer militia, to enforce its immigration law.

NUMBER OF RIOTS/ASSASINATIONS A. Malaysia has experienced little political violence since ethnic rioting in 1969. B. the fall of 2007 witnessed a series of anti-government street protests, conducted variously by civil society groups, opposition parties and ethnic Indians. C.30,000 opposition members and civil society activists intended to urge electoral reforms represented the largest anti-government political demonstration .The government used tear gas and water cannons to break the demonstration. d. Violent clashes between Indians and Malays resulted in dozens of arrest. The most powerful political organization in Malays is an alliance called the national front, The largest party in the alliance is the united Malays national organization. Two major opposition parties a. Democratic action party-members Chinese b. Islamic party of Malaysia- represents muslim interests Communalism has always been the salient feature of the Malaysian political system. Reciprocal mistrust and fear are quite general between them. Each community feels that it has been deprived by the other. The Malay’s sense of deprivation is primarily economic. Many feels that Chinese unfairly control the economy and enjoy higher living standards. The Chinese regard their deprivation as primarily political; Many believe that Malays unjustly enjoy a near monopoly of political power. This resulted to racial riots in kuala lumpur. GOVERNMENT INTERVENTION – a. Strict laws against illegal immigration were enacted to stem the rising number of illegal aliens. b. The new laws mandated severe punishment for violators, prompting the large scale emigration of foreign workers.

NUMBER/FREQUENCY OF REGIMES- The United Malays National Organization, the National Font is subject to internal tensions. B. Mahathir Mohammad led court action in 1988 declaring the UMNO an “unlawful society”, Mahathir created new party UMNO baru, and expelled the oppositionist ECONOMIC ENVIRONMENT Malaysia is a prosperous nation with an increasing diversified economy. It’s per capita is one of the highest in southeast asia. At independence, the economy had four distinct components; subsistence food production, agricultural and mineral production for export, commerce and manufacturing. Subsistence food production; rice cultivation, fishing Export agriculture;rubber 3rd Thailand,Singapore. Tin, lumber Commerce; transhipment, banking and insurance Manufacturing; in 1970’s the government shifted its industrial policy from import substitution to an export-oriented strategy. it includes electrical and electronic appliances, industrial chemicals , oil refining and motor vehicles. Malaysia is the world’s largest producer and exporter of palm oil with an estimated 17% share of total world output. Major export markets are japan, china, india and the European union. Palm oil is used in the manufacture of margarine, fats,lubricants, soaps and plastics. A vegetable oil made from the palm tree nuts.malaysia also possesses the most advanced and biggest capacity for the manufacturing of fatty acids and fatty alcohols. With an increasing global demand for natural oleochemical products, particularly food, detergents and cosmetics, the Malaysian government will enhance its support the palm oil undustry in the form of tax breaks and other incentives. Malaysia remains the world’s leading producer and exporter of rubber based downstream products like gloves, threads and catheters. Leading buyers are united states, Britain and japan. Malaysia is currently ranked as the world’s primary producer of rubber based products with control of 60% of the global rubber-glove market. A.MACRO FACTORS FACTOR ENDOWMENT: CAPITAL, LABOR AND LAND Agricultural sectors will serves as springboard for Sabah to leap towards a bio-economy through the application and commercialisation of bio-technology research and development in agriculture.

Labor:service industries which provides services rather than produce goods have become increasingly important to Malaysian economy. They now employ half the labor force. INFRASTRACTURE: ENERGY, COMMUNICATION, AND TRANSPORTATION Malaysia has extensive roads that connect all major cities and towns on the western coast of peninsular Malaysia. Transportation: Airports, railways, roadways, waterways, and merchant marine COMMUNICATION: Telephone – main line in use 4.35 Million Mobile Phone- 23.357 Million

ENERGY: Electricity- Production = 102.9 Billion Kwh Electricity consumption = 95.98 Billion kwh Malaysia is well supplied with energy. Large amount of oil and natural gas come from offshore well near the coasts of Terengganu and Sarawak. The heavy rainfall and rugged terrain of peninsular Malaysia and the borneo states furnish ample amounts of the falling water needed for hydroelectric power. EXTERNAL DEPENDENCY Regional cooperations a cornerstones of Malaysians foreign policy. It was founding member of the association of Southeast Asian Nation (ASEAN).Malaysia is an active member of the ASIA PACIFIC ECONOMIC COOPERTION, the Organization of the Islamic Conference (OIC). Malaysia is a frequent contributor to United Nations and has robust economics with United States of America. The us is the largest foreign investor in Malaysia on a cumulative basis. American companies are particularly active in thee energy, electronics and manufacturing sectors. The us direct investment position in Malaysia for 2007 was $15.7 billion. The us and Malaysia cooperate closely on security matters, including counter terrorism, maritime domain awareness and regional stability. The relationship between the us and Malaysian militaries is also strong with numerous exchange, training, joint exercises and visits. Over 100,000 malaysians have studied in the us. 130 malaysian took part in the us government-sponsored exchange programs for professional development and study. BALANCE OF PAYMENTS

For the period of January –March 2009 the current amount balance of RM 31.4 Billion (equating to 20.20 % of CDP. TOTAL GNP/GDP GDP (purchasing power parity) $386.6 Billion (2008)$367 Billion (2007)$346 Billon (2006) PER CAPITA GNP/GDP $15,300 (2008) $ 14,800 (2007) 14, 200 (2006) ECONOMIC GROWTH 5.1 % (2008) 6.3% (2007) 5.8 % (2006) PERSONAL OR HOUSEHOLD DISPOSABLE INCOME LOWEST 10%:1.4% HIGHEST 10%:39.2% INCOME DISTRIBUTION 46.1% (2002) Country comparison to the world:38 ACCESSIBLITYOF DOMESTIC CAPITAL MARKET Infrastructure development on the issuance, trading, information dissemination and settlement system have also been improved to encourage new issuance and sustain existing instruments. In addition, the regular issuance of Government securities in both conventional and Islamic instruments with different maturities has facilitated the creation of a benchmark yield curve. To meet investors' demand and diversify further Islamic financial instruments, the Government has recently issued shorter-term Islamic Treasury Bills and longer-term Islamic bonds with a maturity of 10 years.

GEOGRAPHIC ENVIRONMENT A.SIZE OF THE COUNTRY IN TERMS OF GEOGRAPHIC AREA The total land area of Malaysia is 330, 434 km2, about the size of Japan. Malaysia comprises 14 states including the 3 federal territories – Kuala Lumpur. Putrajaya and Labuan. The 14 states in Peninsular Malaysia are Perlis, Kedah, Penang, Perak, Selangor, Negri, Sembilan, Malacca, Johor, Pahang, Terengganu, Kelantan, and Federal territories of Kuala Lumpur and Putrajaya, Sabah and Sarawak.

B.CLIMATE CONDITION Malaysia’s tropical climate is the result of it’s proximity to the equator. Annual Southeast monsoon from April to October and Northeast monsoon from October to February. A. TOPOGRAPHIC CONDITIONS About 4/5 of Malaysia is covered by tropical rainforests DEMOGRAPHIC ENVIRONMENT A. TOTAL POPULATION : 25, 715.819 as of July 2009 B. POPULATION GROWTH: 1.723% estimated as of 2009 C. AGE OF DISTRIBUTION AND SEX DISTRIBUTION 0.14 % -31.4% (Male 4,153,621/ Female 3,914,962) 15.64 -63.6 % ( Male 8,210,373/female 8,143,043) 65 years and over -5 % (Male 569,245/ Female 724, 575) estimates as of 2009 D. POPULATION DENSITY 65.6 persons per sq m E. GEOGRAPHIC DISTRIBUTION OF THE POPULATION Malay 50.4 %, Chinese 23.7 %, indigenous 11 % , Indians 7.1 % and others 7.8 %. F. URBANIZATION Urban population – 70 % of total population G. SIZE OF HOUSEHOLD Average household size 1980 1991 1994 Total households 5.2 4.8 4.7 Urban 5.1 4.8 4.6 Rural 5.2 4.8 4.9 Nuclear family households 4.9 4.8 .. Extended family households 7.1 6.5 .. Rate ( percent ) Nuclear family households 55.2 59.9 68.0 Urban 50.4 58.7 67.0

Rural 57.7 61.1 69.0 Extended family households 27.8 26.4 26 Urban 29.3 27.2 26 Rural 27.0 25.7 27

EDUCATION A.LITERACY LEVEL Malaysian ages 15 and over can read and write Male 90 % and female 85.4% A. SPECIALIZED VOCATIONAL TRAINING Skilled and semi-skilled workers B. HIGHER EDUCATION –postgraduate such as Master of Business Administration(MBA) and Doctor of Business Administration (DBA) are becoming popular and offered by both public universities and private colleges.

SPECIAL MANAGEMENT TRAINING The government of Malaysia decided on May 19, 2004 to implement the National dual training system (NDTS) commencing on 2005 to produce 31,000 skilled workers by 2010. CULTURAL/SOCIAL ENVIRONMENT

A. LANGUAGE = Bahasa Malaysia is the official language while English is widely spoken and is deemed unooficial second language which is used on commerce and industry. B. RELIGION= Islam 60.4 %, Buddhism 19.2 %, Christianity 9.1 %, Hinduism 6.3 % and Chinese 2.6 %. C. ATTITUDE TOWARD FOREIGN foreign products are receptive.

PRODUCTS/BRANDS-

Malaysians

towards

D. SOCIAL CLASSES-A. Rural life: Most people in the rural areas of Peninsular Malaysia are Malays who farm or fish. They live in villages called Kampongs. B. City life: Wealthy Malaysians live in large, comfortable homes with yards and servants. Kuala Lumpur is a bustling, modern city with with lofty skyscrapers; including Petronas Tower.

E. LIFESTYLES-Most Malaysian earn the lowest average monthly income than any other countries, but then the cost of living in Malaysia are not as high.

F. NEW PRODUCT ACCEPTANCE –a. Inadequate demand for product or service, b. Compatibility of the company’s marketing experience c. Current production expertise does not necessarily guarantee good quality production of product. D. New product launches do not receive financial support as existing brands. E. Insufficient management time is spent, it takes longer time to be launched the new product.

A BRIEF HISORICAL OVERVIEW OF THE COUNTRY A. WHAT HAS THE RECENT HISTORY OF THE COUNTRY BEEN? Prime Minister Najib Tun Razak was elected on April 3, 2009. He gave importance on two sectors of Malaysia on his first 100 days; service sector and financial sector. B. WHAT RECENT EVENTS HAVE SIGNIFICANTLY AFFECTED THE STRUCTURE OF THE COUNTRY, SUCH AS CHANGES IN GOVERNMENT REGULATION, ETC? -Global financial crisis, ballooning numbers of illegal immigrants C. HOW WELL HAS THE COUNTRY RECENTLY PERFORMED? Malaysia is now very significant nation in Southeast Asia even though it is smallest nation. It is now leading producer of tin, natural rubber, palm oil and tropical lumber. II. COUNTRY ANALYSIS A. ASSESS THE LEGAL/REGULATORY, POLITICAL, SOCIAL, ECONOMIC, AND CULTURAL FORCES TO EVALUATE THE COUNTRY. -as to legal force, the creation of Anti Money Laundering Act helps banking institution to determine suspicious depositor. The benefits given to states of Sabah

and Sarawak for the full exemption of import and export duties which is beneficiary among businessmen. -as to political force, regardless of races in Malaysia as to Malays, Hindus, Indians the Federal Court act in honest and fair justice. -as to social force, Malaysian women are powerful in making decision for family preference and business affairs. -as to economy force, the availability and accessibility of roads can provide businessmen to bring manufactured goods to major market cities. Malaysia will continue to rise in export industry. -as to cultural force, Malaysia’s people are combination of rich culture from India, China and neighbouring countries, they must act in unity and in camaraderie to build the vision of Malaysia 2020. b. WHAT FACTORS OR EVENTS HAVE RECENTLY INFLUENCED THE STRENGTH OF EACH OF THE FIVE FORCES? Malaysia’s independence, the government began to implement economic five year plans that brought Malaysia into Asian Tiger economy along with Thailand, South Korea, Hongkong and Singapore. c. HOW ARE CHANGES IN THE STRENGTH OF THE FIVE FORCES RELATED TO ONE ANOTHER AND TO THE INTERNATIONAL BUSINESS CLIMATE OF THE COUNTRY? Strict implementation of import-export policies, receptive acceptance of foreign products, greater contribution of gross domestic products to the economy as leading contributory to palm oil, rubber based products and lumber. The cooperation of government body as policy maker in Malaysian government.

d. EVALUATE HOW THE CHANGES IN THE FIVE FORCES AFFECT INTERNATIONAL BUSINESS OPPORTUNITIES IN THE COUNTRY The consideration of five forces will serves as guide among future investors. The country analysis will enlighten the investors as to what kind of business will hit the economy, how to introduce the product, if it acceptable or not to the culture. e. EVALUATE HOW THE CHANGES IN THE FIVE FORCES PORTEND RISKS TO INTERNATIONAL BUSINESS IN THE COUNTRY Drastic financial crisis and terrorism are some risky factors in Malaysian investment.

III. THE FUTURE OF THE COUNTRY A.

GIVEN YOUR COUNTRY ANALYSIS, WHAT DO YOU THINK THE FUTURE HOLDS FOR THE COUNTRY? WHAT APPEARS TO BE LIKELY FUTURE TRENDS IN THE COUNTRY? -Malaysia will be one of the developed country in Asia. Mineral resources as reservoirs, nearby countries will seek assistance from Malaysia. -The entry of foreign products will continue to rise because of the benefits given by Malaysian government. -The future trend in Malaysia will serve as exit country of foreign workers from Singapore, Thailand and other neighbouring countries. Many illegal foreign workers will flock in the Malaysia because of rising demand in tourism, high technology industries and pharmaceutical industry.

B.

ARE THERE SIGNIFICANT OPPORTUNITIES IN THE COUNTRY’S MARKETS THAT APPEAR TO BE UNTAPPED? The great opportunities that untapped Malaysia’s market will be on agricultural sector and mineral reserves. a. Malaysian government will continue it’s effort to undertake activities in research and development, design initiatives and marketing in wood product industry. b. Rubber based products like gloves, threads and catheters with control of 60% of the global market. c. Petroleum and natural gas discoveries in the oil fields of Sabah, Sarawak and Terengganu have contributed to the Malaysian economy.

C. WHAT MIGHT THE PRESENT GOVERNMENT IN THE COUNTRY DO TO IMPROVE THEIR COMPETITIVE VIS A VIS THE WORLD?

-Malaysia as an active part of ASEAN, APEC, other affiliation in Southeast Asia and in United States of America must continue to strengthen its partnership.

-Malaysian government must continue to protect and maintain the interest of investors. Malaysia as Islam country, terrorism is counterpart that comes to the mind of investors. In order to alleviate the fear of future investors, Malaysian government and investors must create memorandum of agreement and make into Bill in the two parliamentary houses protecting the properties, rights of employees to be free from any untoward incidents.

D. ARE THERE SIGNIFICANT THREATS TO THE COUNTRY’S FUTURE THAT IS LOOMING OVER THE HORIZON?

The continuous report of terrorism in some Islam countries, some existing business in Malaysia might pull out their investments. This negative impact can decreases in sales, closed of stores thus it can kill the economy.

CONCLUSION

1. HOW NATIONAL, REGIONAL AND GLOBAL EVENTS WILL AFFFECT THE COUNTRY IN THE SHORT TO MEDIUM TERM.

As to national, the political and ethnic clashes among Malays, Hindus and Chinese must come together in local forum to arrive friendship treaty.

As to regional, Spratly’s Island issue as to whose territory has one priority of Malaysian government to widen the mineral reserves of the country.

The global financial crisis was felt in Malaysia as evident in electronics industry that led to unemployment of Malays and illegal foreign workers.

2. ANALYSIS OF POLITICAL AND ECONOMIC DEVELOPMENTS AND TRENDS

The opportunities of Malaysia on agriculture especially wood product industry, as producer of rubber based products and palm oil, Malaysia will continue to rise and leading exporter in Southeast Asia.

As to wood industry, Malaysian government has good program for the protection of it’s forest resources. Malays should continue to participate in the activity of government to produce ample, quality woods and for the care of Mother Earth.

The increase of GDP was contributed mainly on the export products, while the decrease rate of economic growth for the year 2008 was created by financial crisis.

Malaysian government takes some measure with the increase of illegal foreign workers. This will lead to competition among Malays and foreign workers as it’s drawback. The good insight will be the foreign workers will contribute to the different fields.

3. DESCRIBE OR IDENTIFY ANY PARTICULAR CULTURE OF THE COUNTRY THAT MAY POSITIVELY OR NEGATIVELY AFFECT ITS COUNTRY’S COMPETITIVENESS IN THE WORLD MARKET.

The business and ethnic clashes of Malays, Chinese and Hindus can lead to interest conflict among races. Presuming Chinese presented excellent idea in the market and hit the market. Some races destroy the reputation of business and duplicate the idea. 4. GIVE THE OVER-ALL EVALUATION OF THE COUNTRY’S PRESENT AND FUTURE POTENTIAL AS AN INVESTMENT PROSPECT.

The current administration of Prime Minister Najib Tun Razak focuses on the liberalization of service sector to attract foreign investment and technology to create higher value employment opportunities that will enhance Malaysian competitiveness. This will have substantial impact on the economy. He also announced the liberalization on financial sector as to rules on investment banks, insurance companies to enter into foreign strategic partnership in order to enhance international linkages and business opportunities. The impact of liberalization will strengthen the economy and there will increase of probable investors. This will lead to increase of employment and income tax generating of Malaysian government.