major macro economic indicators
|2019||2020||2021 (e)||2022 (f)|
|GDP growth (%)||4.4||-5.6||3.3||5.8|
|Inflation (yearly average, %)||0.7||-1.1||2.5||2.0|
|Budget balance (% GDP)||-2.2||-5.1||-5.9||-4.1|
|Current account balance (% GDP)||3.5||4.2||3.8||3.7|
|Public debt (% GDP)*||57.0||67.4||70.7||69.9|
(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 gain momentum
Growth is expected to accelerate in 2022, supported by continued robust external demand and an active vaccination campaign, which should shield the economy from major COVID-19 outbreaks and containment measures. The recovery was held back in 2021 due to virus resurgences and the re-imposition of movement control order (MCO) that curbed mobility and weighed on private consumption (55% of GDP). In 2022, private consumption should be robust, supported by the fiscal budget for 2022, with an improvement in cash assistance, welfare payments and social security system, the expansion of sales tax exemption and personal tax reliefs on passenger vehicles purchases. The recovery in key markets such the U.S. and Japan should continue to support exports (70% of GDP). Robust external demand, particularly for petroleum products, electronics, rubber gloves and chemicals, should boost investment from exporting companies. However, rising commodity prices and the ongoing chip shortage could constrain production. Public investment is expected to recover in 2022 and contribute to growth through investments in transport, infrastructure and education. While no new infrastructure project is expected in the 2022 budget, the government is set to reiterate commitment to complete ongoing infrastructure projects, such as the East Coast Rail Link, the Central Spine Road or the Pan Borneo Highway. Moderate increases in energy prices and domestic demand should ease inflation in 2022, after it rebounded in 2021 from a low base. Bank Negara should keep policy rates on hold until the U.S. Fed tapering, which could increase risks of capital outflows.
Fiscal deficit will remain high to support the recovery and set the stone for long-term reforms
The fiscal deficit is likely to remain high in 2022 to support the recovery of the economy and long-term reform efforts under the12th Malaysia Plan (12MP), the new five-year development plan that ensures sustainable economic growth, aims to make Malaysia a high-income country by improving the average household income (RM 10,000 per month), and ensure environmental sustainability.
The 2022 budget should support the resilience of banks in order to facilitate funding access to businesses and households hit by the pandemic. For instance, the BNM will enhance its fund for SMEs by raising allocations for two existing facilities - Targeted Relief and Recovery Facility (RM 8 billion) and Agrofood Facility (RM 2 billion), both increased by 30%. This is expected to support private consumption and improve business confidence. A better economic outlook and high oil prices should support revenue collection (estimated at 10% of GDP for FY2022) and outweigh spending, as petroleum-related receipts remain a major contributor to the federal government’s revenue (15-20%). Public debt, of which the ceiling was increased to 60% of GDP, will remain high but manageable, as residents hold most of it in local currency.
The current account is set to remain in surplus as a favourable performance in the goods trade surplus will continue to offset the services deficit – mainly led by the Travel and Transport segments. The goods balance surplus is driven by a robust performance in exports, supported by high commodity prices. External debt is high (67.5% of GDP) but manageable, since 33% of it is denominated in local currency. Companies (both private and public) and banks owe the bulk of external debt. International reserves, fed by the current account surplus and foreign investment, remain adequate and cover 7.7 months of imports (as of December 2021).
The political uncertainty to remain
Following the resignation of the eighth Prime Minister of Malaysia, Muhyiddin Yassin, and his cabinet that served for over a year, Ismail Sabri Yaakob, a veteran politician from the country’s longest-ruling party United Malays National Organisation (UMNO), was named Prime Minister in August 2021. This party ruled Malaysia for six decades before losing the elections in 2018 following the multibillion-dollar corruption scandal involving state fund 1MDB. Several UMNO lawmakers are currently facing corruption charges.
While awaiting new elections (which have been 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 members of parliament (111 required for the majority), who are not always loyal to their party. They are therefore likely to face challenges ahead to pass reforms. However, a pact signed with the main opposition block, the People’s Justice Party (PKR) led by Anwar Ibrahim, to not dissolve parliament before the end of July 2022, should offer some relative stability and confidence over the first half of the year to the ruling party to pass crucial reforms. Despite an improving relationship with China, notably during the pandemic, the South China Sea dispute remains a sovereignty concern for Malaysia, as Chinese vessels have recently been seen breaching into its exclusive economic zone near the coasts of its Bornean states.
Last updated: February 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.