How To Set Up Your Factories’ Operation In Malaysia?

Malaysia has always been touted as one of the preferred manufacturing destinations for companies worldwide. According to the Malaysian Investment Development Authority (MIDA), Malaysia’s manufacturing sector continued to be resilient throughout the year despite the various headwinds in its way. For instance, of the RM98.7 billion worth of approved investments in the first quarter of 2021, the manufacturing sector accounted for RM59.4 billion, or a noteworthy 60.2% of the total. Foreign Direct Investment (FDI) inflows remained strong at 89.1% of total investments into the sector.

In fact, to accelerate the adoption of automation in 2021, the government has allocated RM100 million for the Smart Automation Grant (SAG) under the PENJANA stimulus package and RM50 million under the PEMERKASA aid package. The SAG encourages small- to medium-sized enterprises and mid-tier businesses to adopt automation and digitalisation in their production processes and operations.

So, how does a foreign investor set up a factory’s operation here? Firstly, you need to set up a Malaysian Incorporated Private Limited Company (or Sendirian Berhad – Sdn. Bhd. in Malay) of which the registration can be done via Suruhanjaya Syarikat Malaysia (SSM) in compliance with the Companies Act 2016.

Ensure that you have a proper bank account set up, before proceeding to apply for the manufacturing license. According to MIDA, the eligibility for a manufacturing license includes some policies but is not limited to:

• Companies with shareholders’ funds of RM2.5 million and above or engaging 75 or more full-time paid employees;
• Project’s Capital Investment Per Employee (CIPE) is at least RM140,000.00;
• The total full-time workforce of the company comprises at least 80% Malaysians. Employment of foreign workers, including outsourced workers, is subject to current policies;
• At least 25% of the company’s full time workforce are managerial, technical, and supervisory (MTS) staff with degree and/or diploma/certificate, and the product’s value added is at least 40%;

For the full list of requirements, please find out more in www.mida.gov.my.

Subsequently, you would also need to obtain your Certificate of Origin which is a document that certifies the country of origin of a particular product. Among the criteria to be met for obtaining this certificate are that the products be manufactured in Malaysia and use 100% local materials; or be manufactured in Malaysia through a transformation process that alters the six-digit tariff code classification, or contain at least 25% local materials.

As such, do engage with Hartamas Industrial Property on the steps and procedures to setting up your operations here in Malaysia.