Analyzing the Malaysian Business Environment

Prior to setting up a business or expanding a business to a new environment, it is essential that businesses take note of the environment factors effecting the business operations. Living and studying in Malaysia made me to analyze the environment factors as below.

Political-Legal Environment
Political stability is an important consideration in making investment decisions. Jürgen (2000) in Smith (2005) outlined factors leading to political instability, namely corruption, collusion and nepotism, non-democratic systems of government, inadequate electoral systems, lack of separation of powers and dependency of the judiciary.

Moreover, political risk can be measured in terms of internal strive to conflict between neighboring countries, and other unforeseen dangers such as conflicts, war and terrorism. Thus all generates compiling effects to the businesses invested in the country.

Malaysia as a federal constitution monarchy state which also adopts parliamentary democracy can be considered to have a very stable government. Malaysian government known as National Front consists of UMNO (United Malays National Organization) and parties from other communities such as MCA (Malaysian Chinese Association) and MIC (Malaysian Indian Congress) can work towards common benefits peacefully resulting in democratic elections in the country (Trade Chakra, 2009).

However, internal conflicts due to ethno-religious differences often occur in a complex society like Malaysia, resulting to political unrest in the country. For instant, controversy over use of the word ‘Allah’ resulting in tensions between different beliefs in the society and even the parliament (Mydans, 2010). Hence, a number of high – profile corruption cases involving bribes has made doing business in Malaysia inconvenience (BACP, 2010).

In addition, Malaysian government has numerous legislations in favor of the indigenous people and the Malaysian citizens in form of trade law and investment policies intended to protect the local economy. (Trade Charaka, 2009) Despite having these tensions, Malaysia is still considered politically stabile remained intact for foreign investors to expand their businesses.

Economic Environment

A stable political environment, effective bureaucracy, flexible economic policies, export-oriented industrialization and inflow of foreign direct investments (FDIs) has benefit Malaysia’s economy over the past decade. (Davies, 2009) This brought prosperity and a high level of confidence to the majority of the population in form of their purchasing power.

Malaysia has a healthy rapidly growing economy with a low inflation rate and currency exchange tightly regulated and pegged to the US dollar (Mohamed, 2001). Regardless the government has been criticized for state intervention over economic development and the imposition of capital and currency exchange controls in 1998, (Mohamed, 2001) the government is now reconsidering to liberalize the economy.

In 2008, Malaysia also suffers from the global economic crisis. Gross Domestic Product (GDP) growth significantly drops to 0.1%, compared with an average of 6.3% in the first 9 months of the year (Abdul Razak, 2009).The decline mainly due to contraction in export value of 13.4%. The fall in exports has adversely affected economic growth of the country (Abdul Razak, 2009). Hence, the government promises higher economic development, through stimulus packages offered to aid the local economy in 2010.

Despite the global economical crisis and the increase of taxes and tariffs, Malaysia still remains among top 10 competitive economies in the region benefiting from strong demand in Asia and efficient economical policies the businesses in to invest (Mohamed, 2010). Thus investors are encouraged to devote in businesses to the Malaysian market.

Social Environment

Malaysia is indeed complex having a high level of heterogeneity of cultures, races, religions and beliefs domestically. Islam being the majority constitutes many teachings that affect the socio-cultural perspective of the people (Davies, 2009). For instants, norms and ethical issues in the society are aligned to the Islamic law such as having Halal certifications for all public consumed products in the society. Thus businesses are obliged to follow these norms as well as being socially responsible to the community.
Moreover, with the constantly changing demographics, Malaysia’s socio-cultural factors implies on the trends and buying behaviour of the people, thus purchasing power are also affected due to the nations’ unstable income rate (Davies, 2009). Trends such as technology procurement, healthier lifestyle and more women in the workforce derive Malaysia’s economy to grow rapidly. Therefore, being socially cautious and responsible with aid of the media is the best approach in entering the Malaysian business market.

Technological Environment

Malaysia has the every opportunity to advance the technological development of the country. Technologies for production, transportation and communication have been established as the nation infrastructure after the rise of Petronas and Malaysia’s economy in 2001. (Lai and Yap, 2004) Thus innovations and advancement of technologies are encouraged over research and development as well as through higher education all over the country.

Innovations on green technologies have shown the excellence and the capabilities of Malaysia in producing better methods to answer the global climate change (Matrade, 2010). While advancement in nuclear technology secures Malaysia from shortage of electricity in the long run (Associated Press, 2010) Hence, the nations’ quality of internet connection services has been upgraded to cater the growing population demand for internet (Bernama, 2010)

Although advancement of technologies in Malaysia has rapidly been endorse by the government to cater to the needs of the people as well as the businesses, intellectual property rights and patents would need strengthening to avoid misuse of technologies available. Yet, businesses to operate in Malaysia shall have nothing to worry about the technological development of the country both as infrastructure and procurement.