NOTE: External links to other Internet sites should not be construed as an endorsement of the views contained therein.
| The State Department web site below is a permanent electronic archive of information released prior to January 20, 2001. Please see www.state.gov for material released since President George W. Bush took office on that date. This site is not updated so external links may no longer function. Contact us with any questions about finding information. NOTE: External links to other Internet sites should not be construed as an endorsement of the views contained therein. |
|
FY 1999: Malaysia |
CHAPTER IV: MARKETING U.S. PRODUCTS AND SERVICESU.S. firms active in the Malaysian market range from large multinationals such as Boeing, General Electric, R.J. Reynolds and Bechtel to numerous small and medium size firms that have discovered the opportunities that exist in this growing market. U.S. exports to Malaysia move in a wide variety of sales channels depending on the product or service. For example, U.S. electronic components are purchased directly by major U.S. and other multi- national companies with manufacturing facilities in Malaysia. Much of that business is intra-firm. Similarly, oil and gas production equipment is purchased directly from suppliers by a relatively few major U.S. and third-country companies and the Malaysian national oil company, Petronas.
Major U.S. exporters of computer software are present in Malaysia with offices and joint ventures. Software is also handled by a large number of retail outlets and local and international consulting companies. Capital equipment is almost always handled by in-country representation, either through locally hired firms or by the placing of a corporate representative in Malaysia. Food and other consumer goods are typically sold by U.S. export wholesalers to Malaysian general import houses, which handle distribution to supermarkets and other outlets. U.S. fast food and other franchises (Kentucky Fried Chicken, McDonald's, Kenny Rogers, Chili's, Baskin-Robbins, TCBY, Domino's Pizza, Coffee Bean and Tea Leaf, Starbucks, etc.) involving local partners have proliferated very rapidly in recent years, reflecting life-style changes as Malaysia's per capita income rises and urbanization accelerates. U.S. firms in the retail sector include Avon, Toys R Us, Hallmark and Levi's, among others. U.S. food and other consumer goods are primarily marketed to the rapidly growing urban middle class, and as such tend to occupy the upper end of the local retail price spectrum.
Sales to the government require a local agent. Moreover, for contracts of significant size, direct involvement and visits by the U.S. company, including its senior leadership, are also typically required. Offsets and technology transfer are usually an important part of the deal. Prices on major government projects and sales tend to be negotiated, often after a bidding process has narrowed the range of potential candidate suppliers.
Major equipment sales to corporations in both the private and public sector also require local agents, usually a local presence, and the active engagement of senior corporate leadership. This has paid off, for example, in the sale by G.E. of gas turbines for one of the first independent power plants in Malaysia, and the sale by Otis elevator of more than US$80 million worth of elevators and escalators for the twin 88story towers of the Kuala Lumpur City Center (KLCC). It should be noted that Bumiputera (ethnic Malay) firms may be given preference in securing government contracts.
Many exporters designate an existing Malaysian-based trading company as their local sales agent, responsible for handling customs clearance of imported goods, dealing with established wholesalers and/or retailers, marketing the product directly to major corporations or the government, and handling aftersales service.
In other cases, some exporters have found it advantageous to establish their own subsidiary company in Malaysia to directly handle sales, distribution, and service. While this provides more direct control, it requires a commitment of capital and the identifi- cation of suitable local joint venture partners to establish such a company in Malaysia. The selection of a joint venture partner is perhaps the single most important decision made by a potential investor in Malaysia. The Government of Malaysia, for its part, is working to attract companies to establish offices in Malaysia, both to deal with the local market and the regional market. Because of this, there appears to be a government preference for companies with a local presence when considering bids on major items. For example, the Multimedia Development Corporation has publicly announced that bids from firms investing in the supercorridor will receive priority consideration when the government awards major contracts associated with development of the corridor (i.e., flagship applications). Companies which are only represented from offices outside Malaysia are often at a disadvantage in such major com- petitions, or in establishing long-term markets with major private sector firms, especially in the architecture, construction management, and engineering sectors. In addition, a local presence usually ensures that the customer will have access to aftersales service and follow-up, very much valued by Malaysians.
A number of Malaysian and international advertising, accounting and consulting firms are present in Kuala Lumpur and can provide market survey services and advice on potential agents or partners for an interested exporter.
Advertising approaches differ depending on market sectors. Consumer goods advertising techniques include the full range of television, radio, newspaper, outdoor and other approaches. However, due to health/religious concerns, there are prohibitions on most types of advertising for tobacco and alcoholic beverages.
Danish brewer Carlsberg, for example, was recently forced to pull its sponsorship of the Commonwealth Games.
Any firm intending to establish a local office should secure the services of a local attorney. As a former British colony, Malaysia's legal system is based on British common law, making it more familiar to U.S. firms than legal systems based on European continental models. The Malaysian legal system is, moreover, relatively transparent. There is a wide range of highly pro- fessional legal firms available.
Malaysia has a relatively strong intellectual property (IPR) regime which provides for a strong patent law, and a copyright law that explicitly protects computer software. The enforcement of IPR regulations in general has been adequate, and has been stepped up in recent years. In 1997, the government passed a new set of "cyber laws" designed to provide state-of-the-art protection for information technology industries. These include the Digital Signature Act, the Computer Crimes Act, the Telemedicine Act and amendments to the Copyright Act of 1987. Malaysia acceded to the Berne Convention in 1990. While trademark infringement has been a problem for some US companies, patent protection remains good. Piracy rates for videos and software remain high but have been coming down as a result of better enforcement. In 1997, statistics released by the Business Software Alliance show that Malaysia's piracy rate stood at 70%, which compares very favorably to rates in neighboring countries. The government's commitment to the success of the Multimedia Super Corridor has led to an enhancement of its anti-piracy efforts.
Sales of equipment and materials to particular industries, e.g. electronics, depend heavily on specialized trade fairs, publi- cations, and visits by company representatives. Sales to the government or for large-scale projects involving major equipment require extensive high level contact by local representatives and visiting company representatives. Major companies with investments in Malaysia or interest in significant export sales often also engage in continuing programs of company image building through articles and advertising in local business journals, sponsorship of conferences and other events, and participation in public-private sector consultative bodies.
Malaysia currently has four nationwide TV channels, two government (TV1 and TV2) and two private (TV3 and the recently-initiated ntv7). An additional private television station, MetroVision, operates only in the Klang Valley.
Most television channels broadcast programs in the local language, Bahasa Malaysia, as well as English, Mandarin and Tamil. Astro, a direct-to-viewer satellite service, and MEGA TV, a cable network, are also available in the country.
Malaysia has a number of English language papers, the largest being the New Straits Times and the Star.
The primary business-oriented paper is the Business Times, published by the New Straits Times group. The major Malay-language newspapers are Utusan Malaysia and Berita Harian, while the largest Chinese papers are Sin Chew Pit Poh and Nanyang Siang Pau. There are also Tamil and other language newspapers. There are a number of business-oriented magazines, including Malaysian Business, Malaysian Industry and the Malaysian Investor.
Several companies publish reports and gather information on the performance and health of Malaysian companies, including Rating Agency Malaysia, United Management Services and D&B Information Services. For major corporate transactions, financial advisors and lawyers can and will perform due diligence prior to purchase. Publicly-listed companies are required to publish audited financial results, which can be checked prior to entering into any business agreements. In smaller arrangements, letters of credit are a standard requirement of potential customers, while bank references and track records can be checked prior to appointing agents.
[end of document]Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title 17, United States Code.