Kuala Lumpur: The Ministry of Domestic Trade and Cost of Living (KPDN) is improving the Foreign Participation Guidelines (GPPA) to ensure foreign-based companies acquire KPDN’s approval to run their businesses in the country and to make them more responsive to current industry developments.
Its Minister Datuk Armizan Mohd Ali said the move was aimed at ensuring the guidelines remain relevant amid changes in the retail landscape and evolving government policy priorities.
He said the improvements take into account feedback from stakeholders as well as current best practices, including considerations for the sustainability of local Micro, Small and Medium Enterprises (MSMEs).
“Under the GPPA for the Distributive Trade Sector, foreign-owned companies intending to operate are required to obtain approval from KPDN.
“These guidelines ensure that every application is assessed in an orderly and transparent manner, and in line with domestic economic interests,” said Armizan, who is also Papar Member of Parliament, during his winding-up speech on the Motion of Thanks for the Royal Address at Dewan Negara on Tuesday.
He said the requirements under the guidelines are crucial to maintaining a balance between market openness and the protection of local traders.
He said these matters fall under KPDN’s responsibility through the Companies Commission of Malaysia (SSM) as the regulatory body for business registration, company incorporation and limited liability partnerships.
On proposals to set a paid-up capital threshold of RM1 million for foreign entities, he clarified that there is no specific provision on the matter under existing laws.
Armizan added that proposals to mandate 51 per cent local ownership in sensitive sectors are also not provided for under current legal provisions.
Similarly, he said suggestions to introduce local procurement and employment quota requirements to safeguard MSMEs are not stipulated, as the business registration of foreign entities is subject to several existing acts and guidelines.
“Under the Registration of Businesses Act 1956 (Act 197), only citizens and permanent residents are allowed to register sole proprietorships or partnerships.
“Foreign nationals without permanent resident status are not eligible to register businesses under the Act. However, under the Companies Act 2016 (Act 777), foreign nationals are allowed to incorporate companies either as Sdn Bhd or Bhd.
“There is no specific provision prescribing a minimum capital requirement for company incorporation, and the amount of capital is determined by the directors or shareholders,” he said.
Armizan said the approach is in line with the principle of Ease of Doing Business, a World Bank ranking covering more than 180 countries, aimed to encourage company incorporation and facilitating business activities, as well as for investment and corporate growth.
He added that foreign companies may also operate as shareholders or directors in local companies or register as foreign companies under Section 562 of Act 777.
“In addition, under the Limited Liability Partnerships Act 2012 (Act 743), there are no restrictions on foreign nationals becoming partners. However, companies and LLPs remain subject to the laws and additional conditions set by regulatory agencies for certain sectors,” Armizan said.
For foreign nationals wishing to establish a local company, he said the basic requirements are clear:
- For a private limited company — at least one director ordinarily resident in Malaysia;
- For a public company — at least two directors ordinarily resident in Malaysia.
He said this measure serves as a regulatory mechanism to ensure that foreign investment entering the country is orderly, lawful and beneficial to national economic growth and local employment opportunities.
“The Cabinet’s decision on Feb 6 to establish a Special Task Force led by the Ministry of Finance (MOF) to address this issue is a timely step in tackling related concerns raised, including those highlighted by the Honourable Member.
“The function of the task force is to identify improvements in policy, legal frameworks, monitoring and enforcement to address concerns over the risk of an influx of foreign goods in the local market.
“The task force comprises KPDN, the Ministry of Investment, Trade and Industry (Miti), the Ministry of Home Affairs (KDN), the Ministry of Entrepreneur Development and Cooperatives (Kuskop) and the Ministry of Housing and Local Government (KPKT),” he said.
