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CORONAVIRUS – The situation in Malaysia

1. General situation

Malaysia reopened its borders on 1st April 2022 as part of the national move to transition into the Endemic Phase. All economic sectors in Malaysia have been normal, and almost 99% of the new detected COVID-19 cases are in Categories One and Two, showing no or mild symptoms. From 1st August 2022, all travellers are allowed to enter Malaysia regardless of their COVID-19 vaccination status and do not require a pre-departure or on-arrival COVID-19 test. The Malaysian government enforced no quarantine orders related to COVID-19 upon arrival. As of 9th August 2022, Malaysia recorded 4,714,498 total COVID-19 cases: 42,717 active cases, 4,635,737 recovered and 36,044 deaths.

Malaysia’s economy is on an upwards track to recovery from the pandemic following a successful vaccination effort and the full lifting of movement restrictions. 84.1% of Malaysia’s total population has been vaccinated with at least two doses, and 49.6% completed one booster shot. Vaccine brands include Cansino, AstraZeneca-Oxford, Sinovac and Pfizer-BioNTech. Pfizer-BioNTech is the main COVID-19 booster option, regardless of the first two-doses vaccine type, unless contraindicated; AstraZeneca-Oxford is recommended as an alternative booster to Pfizer’s mRNA and AstraZeneca-Oxford two-doses vaccine recipient.

2. Preventive measures

The Malaysian government implemented the Movement Control Order (MCO) on 18th March 2020 to combat the COVID-19 pandemic, which was then extended or switched between the Conditional Movement Control Order (CMCO), the Recovery Movement Control Order (RMCO), and the Enhanced Movement Control Order (EMCO), depending on the country's pandemic situation from time to time. The government remains committed to the National Recovery Plan (NRP) enforced on 1st June 2021.

Under the Prevention and Control of Infectious Diseases Act 1988 (Act 342), individuals who violate SOPs stipulated for the pandemic management can be fined up to RM10,000, and enterprises or corporations can be fined up to RM1 million, starting on 11th March 2021.

For more information:

COVID-19 SOPs in Malaysia (Updated on 1st May 2022)

  • Wearing a face mask is mandatory indoors, including on public transport and e-hailing rides. Optional when outdoors but encouraged in crowded places. High-risk individuals are also encouraged to wear a mask.
  • Physical distancing is no longer required but encouraged when not wearing a mask.
  • MySejahtera check-in is no longer required. However, premises still need to check the risk status of visitors on MySejahtera.
  • Entry to premises is allowed regardless of vaccination status, except for those with ‘High Risk’ status or under Home Surveillance Order.
  • By default, COVID-19 positive cases are required to quarantine for 7 days. However, under Test and Release, they will have an option to undergo a supervised RTK-Ag test on the 4th day. If tested negative, they may be released from quarantine.
  • Fully vaccinated travellers and children aged 12 and below are exempted from pre-departure and on-arrival tests. However, partially or not vaccinated travellers must take an RT-PCR test 2 days before departure and a supervised RTK-Ag test within 24 hours of arrival. They will also have to quarantine for 5 days.
  • COVID-19 insurance is no longer required for all travellers entering Malaysia.
  • The National Security Council’s negative list is no longer applicable.

General Travel Protocols (Updated on 1st August 2022)

From 1st August 2022, all travellers are allowed to enter Malaysia regardless of their COVID-19 vaccination status and do not require a traveller card, pre-departure or on-arrival COVID-19 test. The Malaysian government enforces no quarantine orders related to COVID-19 upon arrival.

  1. Travellers can download and activate the  MySejahtera app a week before departure to Malaysia – Guidelines. The COVID-19 risk status in MySejahtera may be checked upon entering the premises.
  2. Travellers who develop COVID-19 symptoms in Malaysia should get tested and, if found positive, are subject to the current protocol for positive COVID-19 cases as below.
  3. Individuals who test positive for COVID-19 must undergo isolation via a Home Surveillance Order (HSO) for seven (7) days. Individuals can be released from isolation on the 4th, 5th or 6th day when they are asymptomatic, and the result of an RTK Ag test supervised by a registered medical practitioner is negative. Discharge on the 7th day does not require any COVID-19 detection test.
  4. Please continue to practice COVID-19 preventive measures while in Malaysia.

Please note that travel restrictions and advisories may change at short notice. Kindly refer to the link below for more information:

3. Economy

Economic impact

Malaysia’s economy is expected to be on the recovery path in 2022. The Malaysian economy contracted by 4.5% in the 3Q2021 (2Q2021: +16.1%), mainly caused by the full lockdown imposed in July 2021 under Phase 1 of the NRP. However, economic activity has picked up as all states transitioned into Phase 4 with less restrictive measures in business operation and further expedited as the border has reopened in April 2022.

Below are the country’s key economic indicators recorded in 2021:

  • Gross National Income Per Capita at Current Prices: RM 46,051
  • Gross Domestic Product: RM 1,503.8 billion
  • Exports: RM 1.240 trillion 
  • Imports: RM 987.24 billion  

For more information:

Department of Statistics Malaysia – Pocket Stats

b. Trade barriers

On 19 March 2020, Customs (Prohibition of Exports) (Amendment)(No.2) Order 2020 imposed restrictions on the exports of face masks:

  1. Face Mask (Surgical/Medical) 1 Ply (Ear Loop)
  2. Face Mask (Surgical/Medical) 2 Ply (Ear Loop)
  3. Face Mask (Surgical/Medical) 3 Ply (Ear Loop/ Head Loop/Head Tie-On)
  4. Face Mask (Surgical/Medical) N95

Henceforth, face masks can be exported through a letter of approval from the Controller of Supplies, Ministry of Domestic Trade and Consumer Affairs under the Control of Supplies Act, 1961. The Order is applicable from 20 March 2020.

Botst u buiten de EU op handelsbelemmeringen of andere problemen op het vlak van markttoegang? Laat het ons weten via handelsbelemmering@fitagency.be. Wij analyseren uw aangifte en maken die via de geijkte kanalen over aan de bevoegde instanties.

c. Measures for economic relaunch

Malaysian Budget 2022

Budget 2022 themed “A Prosperous Malaysian Family”, with an allocation of RM332.1 billion. Budget 2022 is anchored on three key pillars: Strengthening Recovery, Building Resilience, and Driving Reforms. A total of RM233.5 billion is allocated for operating expenditure (70.3%), RM75.6 billion for development expenditure (22.8%) and RM23 billion under the COVID-19 Fund (6.9%). Below are some key highlights of Budget 2022:

  • Companies will enjoy an extension of Additional Reinvestment Allowance (RA) until the year of assessment 2024, making up the total period of additional RA to 5 years.
  • Companies that invest in Green Technology will enjoy the expanded scope of tax incentives such as Green Investment Tax Allowance (GITA) or Green Technology Income Tax Exemption (GITE). The applications must be received by the Malaysian Investment Development Authority (MIDA) from 1 January 2022 to 31 December 2023.
  • Investors of high-risk oil and gas operations awarded Late-Life Assets (LLA) Production Sharing Contracts between 1 January 2020 and 31 December 2029 will be entitled to further tax incentives.
  • Companies carrying out approved activities under the Multimedia Super Corridor (MSC), such as digital technology and infrastructure provider, which application received by MIDA from 30 October 2021 to 31 December 2025, will enjoy expanded scope of tax incentives.
  • Manufacturing or service companies relocating from overseas to Malaysia are eligible for a 0% to 15% tax incentive. The additional tax incentive is given to the top management post held by non-citizens limited to 5 individuals eligible to get a tax incentive of the fixed tax rate at 15%. The tax incentive will be extended to the end of 2022.
  • Manufacturing and manufacturing-related services companies will receive an extended tax deduction for rental expenses of premises used as housing and accommodation for employees incurred from 1 January 2022 to 31 December 2022.

For more information: Budget 2022 Official Website Ministry of Finance

National Economic Recovery Plan – PENJANA (Pelan Jana Semula Ekonomi Negara)

On 5th June 2020, Prime Minister Tan Sri Dato’ Haji Muhyiddin Yassin announced the Short-term National Economic Recovery Plan – PENJANA amounting to RM35 billion which aimed at reviving the country’s economy. PENJANA will complement the various announced economic stimulus packages. Under the 6-Phase Plan (6Rs): Resolve, Resilience, Restart, Recovery, Revitalise and Reform, Malaysia is currently in the 4th Phase: Recovery. PENJANA has 40 initiatives, focusing on 3 key thrusts - Empower People, Propel Businesses and Stimulate the Economy. For instance, PENJANA’s Wage Subsidy Program 1.0 benefitted over 322,177 employers and 2.64 million employees.

For more information, please refer to the link below:

d. Economic outlook

It is known that the COVID-19 pandemic has impacted the Malaysian economy heavily, more so, the global economies. Below are the country’s key economic indicators recorded in Q3 2021:

  • Malaysia’s economy contracts marginally at -4.5%
  • Gross Domestic Product at current price: RM 376.6 billion
  • Gross National Income: RM 365.4 billion
  • Exports: RM 303.7 billion (Growth YoY: 15.8%)
  • Imports: RM 242.5 billion (Growth YoY: 21.0%)

For more information: Department of Statistics Malaysia – Pocket Stats

e. Short term opportunities

Malaysia remains an attractive investment destination, with the availability of well-educated labour, investor-friendly policies and incentives, well-developed infrastructure and a preferred gateway to enter the ASEAN market. In addition, Malaysia’s technologically-inclined economy is proven by its involvement in advanced industries such as E&E manufacturing, R&D, biotechnology, photonics, logistics, design, innovation, automotive, etc.

The manufacturing sector remains vital to the country’s economic transformation, especially contributions to the nation’s export revenue and job creation. The government prioritises high value-added, diverse and complex products, particularly in the catalytic sub-sectors, namely electrical and electronics (E&E), machinery and equipment (M&E), chemicals and chemical products, aerospace and medical devices. Talent pool development, research and development (R&D) and Industry 4.0 remain the main focus areas of Malaysia’s manufacturing sectors.

Electrical and Electronics Industry (E&E)

Malaysia is a major global manufacturing hub for the E&E industry, with many multinational companies (MNCs) having a presence in Malaysia as their regional base. Malaysia’s most significant competitive advantage in E&E is semiconductor device production, as the Malaysian-based companies can cope with the demands of emerging and critical semiconductor markets. Opportunities available for the investors include contactless solutions (e.g. touch screens and elevator buttons); assisted-living devices (e.g. sensors); automated logistics solutions for last-mile delivery (e.g. robots and drones); digital work processes, and the Internet of Things (IoT).

Food (Food Processing & Agri-food)

The COVID-19 pandemic highlights the importance of food security, and Malaysia ranked 28th on the Global Food Security Index 2019. Investors are encouraged to explore ways to revamp food production ‘from farm to fork’ to achieve optimal food security levels, increase domestic production, and reduce reliance on food imports, such as modernising the agri-food industry with innovative applications and technologies. Investors may also consider investing in R&D in the areas of strengthening and supporting the food supply chain, crop diversification, food reserves and technological development (e.g. Industry 4.0, Artificial Intelligence, Big Data).

Undeniably, with rich agricultural resources, the Malaysian F&B market has become increasingly sophisticated with both local and imported products. Nowadays, Malaysians look for healthy or high nutrition foods. For example, the demand for plant-based meat in burgers and nuggets and milk substitutes from almonds, oats, cashews, coconuts and others continues to rise. Moreover, Malaysians are also looking for more healthful, convenient, high-quality frozen food products, especially millennials.

Logistics (E-commerce)

In Malaysia, the logistics industry is highly integrated across various sectors and has contributed immensely to production, distribution, and trade facilitation. Malaysia has the 2nd highest e-commerce penetration rate in the ASEAN region and is expected to register a CAGR of 14.3% between 2020 and 2024.

However, the fast-growing e-commerce industry also greatly challenges industry players, especially last mile delivery challenges and digitalisation. Therefore, many opportunities are available for investors to develop logistics service providers' capability and efficiency to cope with the fast-changing industry, such as advanced and cutting-edge technologies such as Warehouse Management Systems (WMS) and smart logistics.

f. Long term opportunities

While Malaysia is concerned about the immediate economic outcomes after the COVID-19 pandemic, TAPiO Management Advisory, a leading advisory company in Malaysia, has an alternative view that Malaysia should be seriously looking into revamping future-ready sectors to stay competitive:

  • Partner with foreign stakeholders and invest in the R&D Sector to diversify and modernise the healthcare sector.  
  • Partner with foreign higher education institutions to promote students’ international perspective and enhance the quality of the education system.
  • Diversify and modernise the food processing and agriculture-related sectors by venturing more into downstream activities.
  • Diversify the Foreign Direct Investments (FDI) into the country, which can be done by introducing more investor-friendly policies and incentives and promoting innovative and advanced technologies in all existing or new industries.
  • Encourage foreign investors to establish or relocate subsidiaries into Malaysia. Malaysia could take advantage of the current disruption in the global supply chain, as several MNCs are looking to relocate their companies from China.
  • Minister of Communications and Multimedia mentioned that reliable and affordable high-speed broadband connectivity is the critical catalyst for bringing FDI into Malaysia. The National Fiberisation and Connectivity Plan (NFCP) 2019-2023 aims to improve broadband quality and coverage, reduce broadband prices and provide Internet access across all spectrums of society. NFCP is also expected to impact Malaysia's Global Business Services (GBS) positively.

Major tax incentives

  • Pioneer status: Income tax exemption ranging from 70% or 100% for a period of 5 or 10 years.
  • Investment tax allowance: 60% or 100% on qualifying capital expenditure incurred within 5 years.
  • Reinvestment incentive: Income tax exemption ranging from 70% for 5 years or 60% on qualifying capital expenditure for 5 years.
  • Reinvestment allowance: 60% on qualifying capital expenditure incurred for 15 consecutive years
  • Automation capital allowance (ACA): For labour-intensive industries (rubber products, plastics, wood, furniture and textiles), ACA of 200% on the first RM4 million expenditure incurred from 2015 to 2023. For other industries, ACA of 200% on the first RM2 million expenditure incurred from 2015 to 2023.
  • Import duty exemption: Exemption from import duty on imported machinery & equipment and raw materials & components.

4. Usefull links

5. Dossier coronavirus

Het coronavirus heeft een wereldwijde impact, niet alleen op de gezondheid maar ook op de economie. Ook uw export kan hiervan gevolgen of zelfs hinder ondervinden.

FIT monitort de risico's dagelijks en ons buitenlands netwerk informeert u over alle implicaties voor Vlaamse exporteurs op hun internationale activiteiten.

In het dossier Coronavirus vindt u een aantal nuttige tips, adviezen en inzichten in de economische impact van de verspreiding van het virus op internationaal ondernemen.

Met vragen over internationaal ondernemen in tijden van Corona, kan u terecht bij exportadvies-corona@fitagency.be.

10 augustus 2022