major macro economic indicators
|2020||2021||2022 (e)||2023 (f)|
|GDP growth (%)||-5.5||3.1||8.7||4.3|
|Inflation (yearly average, %)||-1.1||2.5||3.4||3.0|
|Budget balance (% GDP)||-4.6||-5.5||-5.8||-5.6|
|Current account balance (% GDP)||4.2||3.8||1.7||2.3|
|Public debt (% GDP)||67.7||69.0||69.9||71.4|
(e): Estimate (f): Forecast *Excluding 1MDB and state-owned enterprises
- Diversified exports
- Large domestic demand mitigates external headwinds
- Dynamic services sector
- High R&D
- Investment supported by the expansion of the local financial market and access to FDIs
- Exchange rate flexibility
- High per capita income
- Travel hub
- Budget income highly dependent on performances in the oil and gas sector (16% of revenues)
- Low fiscal revenues (15.9%), lack of transparency in budget spending
- Very high household debt levels (80% of GDP)
- Erosion of price competitiveness due to increasing labour costs
- Persistent regional disparities
- Ethnic and religious disputes
- Political uncertainties and instability
Growth will strengthen but remain erratic
Growth is expected to accelerate in 2022, supported by sustained robust external demand and pent-up domestic demand following the progress of the vaccination campaign and the low likelihood of further travel restrictions, which had previously weighed on private consumption (55% of GDP) and thus slowed the recovery in 2021 following the resurgence of the virus. The 2022 budget, which includes improvements in cash transfers, social benefits and the social security system, will support private consumption. Furthermore, the recovery in key markets such as the United States and Japan should continue supporting exports (70% of GDP), despite the fact that these figures were recently revised downwards due to the war in Ukraine. Robust external demand, particularly for oil products, electronics, rubber gloves and chemicals, should stimulate investments by exporting companies. However, rising commodity prices and the current shortage of electronic chips could limit production. Although Malaysia is not heavily exposed to the Russian and Ukrainian economies, the ongoing conflict raises an additional risk due to the economic impacts on major trading partners such as European countries, especially due to volatile food and energy prices. The public investments planned in 2022 in transport, infrastructure and education will contribute to growth. While headline inflation remains subdued, increasing food prices, led by higher costs for meat, have contributed to the government’s decision to ban chicken exports for an indefinite period of time, from June 2022. Besides, faced with aggressive monetary tightening by the Fed, Bank Negara began its rate hike cycle in May, mentioning the firmer recovery of the Malaysian economy.
Fiscal deficit should remain high to support the recovery and lay the foundation for long-term reforms
The fiscal deficit is expected to remain high in 2022 to support the economy's recovery and long-term structural reform efforts under the 12th Malaysia Plan (12MP), the new five-year development plan aimed at ensuring sustainable economic growth.
A prolonged conflict in Ukraine could lead to a sharp increase in global risk aversion and tighter financial conditions in Malaysia, as in other emerging countries. Nevertheless, the 2022 budget will support bank resilience in order to facilitate access to financing for businesses and households already affected by the pandemic, thereby continuing to promote financial stability. For instance, the BNM will make additional funds available for SMEs through new allocations (e.g. Targeted Relief and Recovery Facility and Agrofood Facility) and the creation of two new funds. The improving economic outlook and high oil prices are expected to boost revenue collection (estimated at 10% of GDP in FY2022). The rise in public revenue should outweigh the one in spending, as oil revenues remain a major source of federal government income (15-20%). Public debt, for which the ceiling has been increased to 65% of GDP, will remain high but manageable, as most of it is held by residents in local currency.
The current account is expected to remain in surplus, as the favourable development of the goods surplus will continue to offset the deficit in services - mainly due to the tourism and transport segments. The goods surplus is linked to robust export performance, supported by high commodity prices. External debt is high (68.9% of GDP) but manageable as one third of it is denominated in local currency. The majority of this debt is owed by companies (private and public) and banks. Foreign exchange reserves, fuelled by the current account surplus and foreign investment, remain sufficient and covered 7.7 months of imports (in December 2021).
Political uncertainty remains
Following the resignation of Malaysian Prime Minister Muhyiddin Yassin and his government, Ismail Sabri Yaakob was appointed to succeed him in August 2021. Yaakob belongs to the historic United Malays National Organisation (UMNO) party, which had ruled Malaysia for six decades before losing the 2018 elections following a corruption scandal involving the state fund (1MDB). Pending new elections (delayed due to the health situation), Ismail Sabri Yaakob and his cabinet do not have a clear parliamentary majority with the support of only 114 MPs (111 required for the majority), who are not always loyal to their party. They may therefore face difficulties in pushing through reforms. However, a pact signed with the main opposition bloc, the People's Justice Party (PKR) led by Anwar Ibrahim, which ensures that the parliament will not be dissolved before the end of July 2022, should provide some stability to ensure the national recovery. Following the ruling coalition's significant victory in the Johor state elections, winning 40 of 56 seats, UMNO is calling for an early general election to re-establish itself as the predominant ruling party, although it is not expected to take place until July 2023. Despite improved relations with China, maritime territorial disputes persist and remain a sovereignty issue for Malaysia, as Chinese vessels continue to enter its exclusive economic zone near the coast of its Borneo states.
Last updated: May 2022
Bank transfers, cash, and cheques are all popular means of payment in Malaysia. The well-developed banking network allows for online payments. Letters of Credit are also commonly used. As of 2017, the Central Bank requires that 75% of payments in foreign currencies are converted into the Malaysian ringgit (MYR) automatically upon receipt. Payments for transactions within Malaysia are required to be made in ringgit.
It is common for disputes and or debt to be settled amiably after negotiations. If there is no response from the buyer, a site visit and online searches are conducted to ascertain the operating status and legal status of the buyer. If the buyer continues to ignore and or neglect to settle the matter amicably, the supplier may begin legal proceedings to recover payments for goods sold and delivered. However, due diligence should be done to ensure that the buyer has sufficient assets to satisfy the debt before proceedings are initiated.
The Malaysian legal system is based upon the English common law system. The hierarchy of courts in Malaysia starts with the Magistrates’ Court at the first level, followed by the Sessions Court, High Court, Court of Appeal and the Federal Court of Malaysia. The High Court, Court of Appeal and the Federal Court are superior courts, while the Magistrates’ Court and the Sessions Courts are subordinate courts. There are also various other courts outside of this hierarchy, e.g. Employment Admiralty, Shariah or Muslim matters.
Claims in Magistrates’ court are limited up to MYR 100,000, whilst a Sessions Court may hear any civil matters where the amount in dispute does not exceed MYR 1,000,000. Where the amount claimed does not exceed MYR 5,000, a claim should be filed with the small claims division of the Magistrates’ Court. However, legal representation is not permitted. The High Court has the jurisdiction to try all civil matters and monetary claims exceeding MYR 1 million.
An unpaid debt normally has a six-year statute of limitation period. The creditor commences a writ action and serves the writ on the debtor within six months from the issue of the writ. When defendants are served with a writ, they have 14 days after service of the writ (or 21 days if the writ was served outside Malaysia) to file a Memorandum of Appearance with the court to indicate their intention to appear in court and defend the suit.
Before a writ can be issued, it must be endorsed with a statement of claim or, with a general endorsement consisting of a concise statement of the nature of the claim made and the requisite relief or remedy. When the writ only has a general endorsement, the statement of claim must be served before the expiration of 14 days after the defendant enters an appearance.
When the defendant has entered appearance, he is required to file and serve his defence on the plaintiff 14 days after the time limit for entering an appearance, or after service of the statement of claim, whichever is later. A defendant may make a counterclaim in the same action brought by the plaintiff. A plaintiff must serve on the defendant his reply and defence to a counterclaim, if any, within 14 days after the defence (and counterclaim) has been served on him.
Proceedings may be resolved and/or otherwise summarily terminated and/or determined and/or disposed of at an early stage before the trial of the action.
Failure to enter an appearance may result in a plaintiff proceeding to enter a judgment-in-default against a defendant. Ordinarily, when a defendant has filed an appearance and also a statement of defence subsequent to other procedures of filing of documents in support, the matter would be set for trial. If the defendant has entered an appearance and filed a defence, but it is clear that the defendant has no real defence to the claim, the plaintiff may apply to court for summary judgment against the defendant. To avoid summary judgment being entered, the defendant has to show that the dispute concerns a triable issue or that there is some other reason for trial.
Enforcement of a court decision
Writ of Seizure and Sale (WSS)
A WSS may be enforced against both movable and immovable property as well as against securities. When the property to be seized consists of immovable property or any registered interest, the seizure shall be made by an order prohibiting the judgment debtor from transferring, charging or leasing the property.
A Judgment Creditor may garnish monies a Judgment Debtor is supposed to receive from a third party. If the garnishee does not attend court, then the order is made absolute. If the garnishee does attend, the court can either decide the matter summarily or fix the matter for trial.
Judgment Debtor Summons
The objective of this summons is to give the judgment debtor an opportunity to pay the judgment debt in instalments to commensurate his means. Debtors themselves can apply for such a procedure. Alternatively, under Order 14 the defendant can admit the plaintiff’s claim and propose to pay by instalments, which the court can subsequently order if the plaintiff accepts the proposal.
If the total judgment of debt exceeds MYR 30,000, bankruptcy proceedings can be triggered if the judgment debtor has not complied with the judgment or order made against him. Once a debtor has been adjudged bankrupt, other creditors are also entitled to file the Proof of Debt form and Proxy in order to be entitled to share in any distribution from the estate of the bankrupt. The distribution of the estate is according to the priority of the creditors’ claim.
Any decision rendered by a foreign country must be recognized as a domestic judgment in order to become enforceable through an exequatur procedure. Malaysia has reciprocal Recognition and Enforcement Agreements with some countries, including Hong Kong, India, and New Zealand.
There are several insolvency and restructuring procedures available. Under the Companies Act, the available insolvency proceedings include:
- compulsory and voluntary winding-up of companies;
- appointment of receivers and managers;
- restructuring mechanisms.
In a compulsory winding-up, the court can wind up a company on a number of grounds under the Companies Act. The most common of these is the company’s inability to pay its debts. The creditor initiates this process by filing a winding-up petition with the court. If an order is made, the court will appoint a liquidator to oversee the liquidation process.
Court-appointed receivers will either manage the company’s operations as normal, or take custody and possession of the assets of the company. Alternatively, receivers appointed by debenture holders based on the terms of the debenture agreement (privately-appointed receivers), may take possession of the company’s assets subject to the floating charge that has since crystallized in the debenture.
Restructuring mechanisms include:
- scheme of arrangement: a company can enter into a scheme of arrangement with the approval of 75% of the creditors in value and a simple majority. After creditors approve the scheme, the court must sanction it before it can be implemented. Debtors can apply for an order restraining all proceedings against it while it develops its scheme;
- special administration: it involves the appointment of a special administrator. The appointment must serve the public interest;
- conservatorship: the Malaysia Deposit Insurance Corporation takes control of a non-viable financial institution or acquires and takes control of non-performing loans that are outstanding between the financial institution, borrowers and security providers.