The business relationship between the United Kingdom and Malaysia faces several challenges:
Bribery and Corruption
Overseas companies investing in Malaysia encounter risks related to bribery and corruption. In 2023, Malaysia ranked 57th out of 180 countries in Transparency International’s Corruption Perceptions Index, with a score of 50, an improvement from 61st in 2022. Despite initiatives by the Malaysian Anti-Corruption Commission and the government, corruption remains a concern. Foreign companies are advised to implement robust anti-corruption policies, conduct due diligence on partners, and provide regular training to employees to mitigate these risks. 
Regulatory and Taxation Challenges
Malaysia’s regulatory framework and tax requirements, including Goods and Services Tax (GST), corporate tax, and withholding tax, can be complex and challenging for foreign businesses. Navigating these regulations requires careful planning and local expertise to ensure compliance and optimize business operations. 
Malaysia faces several challenges in its regulatory and taxation framework that could impact foreign investment. Key issues include:
- Complexity of Regulations: Malaysia’s regulatory framework is often seen as complex and difficult for foreign investors to navigate, particularly in areas related to business compliance and obtaining necessary licenses and approvals. The process can be time-consuming and cumbersome.
- Burden of Tax Requirements: Tax requirements in Malaysia, including corporate tax, withholding tax, and the previously implemented Goods and Services Tax (GST), can add to the burden on foreign businesses. Changes in tax policies and uncertainty over the implementation of new taxes can lead to financial instability for businesses in their planning and operations.
- Bureaucracy and Corruption: Despite efforts to tackle corruption, concerns about bureaucracy and corruption persist, which can complicate business dealings. This can make foreign investors more cautious and may push them to consider other markets that offer a more stable and business-friendly environment.
- Policy Uncertainty: Uncertainty surrounding economic policies and ever-changing regulations can cause foreign investors to hesitate when making long-term investments. Investors need to consider how shifts in government policy, especially in strategic sectors, could affect profitability and operations.
These factors collectively present challenges for foreign investment in Malaysia, requiring investors to plan carefully and rely on local expertise to ensure successful business operations.
Labor Practices and Legal Challenges
In December 2024, the UK Court of Appeal revived a lawsuit brought by 24 migrant workers from Nepal and Bangladesh against Dyson Technology Ltd and its Malaysian subsidiary. The workers allege forced labor conditions, including unlawful wage deductions and physical abuse, at a Malaysian factory manufacturing Dyson parts. Dyson denies the allegations and is reviewing legal options following the appeal decision.
The revival of the lawsuit by 24 migrant workers against Dyson Technology Ltd and its Malaysian subsidiary could have significant implications for foreign investors in Malaysia. The allegations of forced labor, unlawful wage deductions, and physical abuse at a Malaysian factory could tarnish Malaysia’s reputation as a destination for ethical and responsible investment.
For investors, this case highlights the risks associated with supply chain practices, particularly in relation to labor conditions. There could be growing concerns about the ethical standards of Malaysian businesses, which may prompt companies to reconsider their partnerships or investments in the country. Additionally, the potential legal and financial ramifications for companies involved in similar cases could lead to more cautious investment strategies.
The case may also influence the regulatory landscape in Malaysia, prompting further scrutiny of labor practices, which could result in stricter enforcement of labor laws and higher compliance costs for businesses operating in the country. Investors will need to closely monitor the developments of this case, as its outcome could shape the perception of Malaysia’s business environment, particularly in relation to labor rights and corporate responsibility.
Economic Nationalism and Historical Context
The historical context of economic nationalism in Malaysia, exemplified by events like the 1981 “Dawn Raid” to reclaim control of British-owned plantation company Guthrie Corporation, continues to influence UK-Malaysia business relations. This history underscores the importance of understanding Malaysia’s economic policies and national interests when engaging in business activities. 
These challenges highlight the importance of thorough due diligence, cultural understanding, and strategic planning for UK businesses operating in Malaysia.
