India and Malaysia have had long-standing commercial links dating to the pre-Christian era. In modern times, Indian industry has been associated for three decades with the transformation of Malaysia from an exporter of primary products into an industrialized and broad-based economy. The first Indian joint venture, Godrej commenced operations in 1968, and in the seventies and early eighties Malaysia hosted the largest number of Indian joint ventures in any country. Indian companies present involvement in Malaysia is in palm oil refining, power, railways, information technology, bio-technology, manufacturing industrial goods, higher education, civil construction, and training.

Legal & Institutional Framework

India and Malaysia signed a landmark Free Trade Agreement in Kuala Lumpur in February 2011 called the Comprehensive Economic Cooperation Agreement (CECA). The CECA is a single undertaking covering goods, services, investment and other areas of cooperation. The new framework provides significant new opportunities for economic collaboration and is expected to lead to stronger commercial and economic ties at the governmental as well as business-to-business levels. The CECA has entered into force from 1 July 2011. Click Here  to view CECA agreement.

In Trade in Goods, key items on which Malaysia has offered market access to India are basmati rice, mangoes, eggs, trucks, motorcycles and cotton garments which are all items of considerable export interest to India. Key items of Malaysia’s interest on which India has offered market access are fruits, cocoa, palm oil products and synthetic textiles. For refined palm oil (RPO) exports by Malaysia into India, as compared to the concessions under the India-ASEAN Trade in Goods (TiG) Agreement, only advancement of timeline from 2019 to 2018 is offered by India, retaining the end-tariff rate of 45%.

In Trade in Services, both sides have exchanged WTO ‘plus’ offers and Malaysia’s offer to India is significantly superior to Malaysia’s revised offers in the WTO both in terms of sectoral coverage as well as depth within each sector/sub-sector.  Malaysia has offered commitments in the categories of Contractual Service Suppliers (CSS) and Independent Professionals (IP) in commercially meaningful sectors including accounting and auditing, architecture, urban planning, engineering services, medical and dental, nursing and pharmacy, Computer and Related Services (CRS), Management Consulting Services, etc.  Malaysia has also removed all requirements relating to economic needs tests/labour market tests for our professionals entering Malaysia.  Malaysia has offered substantive commitments in the area of cross borders supply of services, almost without any restrictions, across the board, which is of immense importance for our Information Technology (IT) and Information Technology Enabled Services (ITES) industry.  Malaysia has also offered comparatively higher levels of FDI in sectors of interest to India like computer and related services, management consulting services, construction services etc.

CECA aim to promote investment and create a liberal, facilitative, transparent and competitive investment regime. The Chapter on Investment serves to strengthen cooperation in investment, improve transparency of investment rules and regulations and provide for protection of investments. It incorporates provisions designed to offer relative standards of treatment i.e. National Treatment, protection against Expropriation or Nationalization, provisions for Minimum Standard of Treatment, provisions for transfer of profit and investments, Subrogation, Reservations, and recourses to dispute settlement (investor-to-state). IMCECA purports to protect, promote and remove barriers to foreign investment flows in order to stimulate new investment flows between India and Malaysia.

The legal framework governing bilateral trade and economic cooperation also includes, inter alia, a bilateral Investment Protection Agreement signed in 1997; a Revised Double Taxation Avoidance Agreement signed in May 2012. And an MoU on Cooperation in Customs Matters in June 2013. The Air Services Agreement between India and Malaysia signed in May 1974 has been revised in April 2017 renewing the respective traffic entitlements. The India International Bank, a joint venture of Bank of Baroda, Indian Overseas Bank and Andhra bank, was launched on July 11, 2012.

Institutional arrangements between India and Malaysia for trade and economic cooperation include an India-Malaysia Joint Commission, chaired by the respective Foreign Ministers, which was established in 1992. The Joint Commission has held five meetings (1992, 2000, 2002, 2007 and May 2011) so far.

India-Malaysia CEO Forum

During Prime Minister Dr. Manmohan Singh's visit to Malaysia from 26 to 28 October 2010, both countries established an India-Malaysia CEOs Forum comprising 18 CEOs from both sides, which was jointly launched on 27 October 2010 by the Prime Ministers of India and Malaysia to develop enhanced partnership and cooperation at the business level. The Forum held its second meeting in Mumbai on 20 May 2011. The third meeting of the Forum was held in Kuala Lumpur on 22 November 2011.The fourth meeting of the Forum was held in Johor Bahru on 08 June 2012. The fifth meeting was held in New Delhi on December 19, 2012.

Re-constitution of CEO Forum

The recent India – Malaysia CEO Forum on March 31, 2017 was held in New Delhi. The meeting coincided with the visit of Dato’ Seri Mohd. Najib bin Tun Abdul Razak, Hon’ble Prime Minister of Malaysia to India from March 31 – April 4, 2017.

Bilateral Trade

Malaysia is our third largest trading partner in ASEAN other than Indonesia and Singapore and India is the largest trading partner for Malaysia from among the countries of the South Asia other than Singapore and China. India-Malaysia bilateral trade in 2016 was US$ 11.72 billion (RM 48.62 billion). Malaysia’s exports to India were worth US$ 7.72 billion and imports from India were valued at US$ 4.00 billion in 2016. In 2016, Malaysia – India total trade grew by 3.58% to RM 48.62 billion from RM 46.94 billion in 2015 and India was Malaysia’s 10^th largest trading partner in the world, 7th largest export destination and 11th largest source of imports for FY 2016-17 moving 3 places up from 14th position in 2015-16. India-Malaysia bilateral trade stood at US$ 8.0 billion from April to October 2017 during which India’s exports to Malaysia were valued at US$ 2.8 billion and imports from Malaysia stood at US$ 5.2 billion as per Department of Commerce, Government of India. According to the Department of Statistics Malaysia, total bilateral trade in 2017 stood at US$ 14.287 billion while the total export recorded US$ 8.035 billion and total import, US$ 6.252 billion.

Malaysia – India Bilateral Trade (1998 – Sep 2017)

Source: Department of Statistics, Malaysia

Malaysia's top 10 exports of commodities to India in 2017

(RM 4.3004 = USD 1) Source: Department of Statistics, Malaysia

Malaysia's top 10 import of commodities from India in 2017

(RM 4.3004 = USD 1) Source: Department of Statistics, Malaysia

INVESTMENT SCENARIO

(I) Malaysian Investment in India
Malaysia is emerging as a major investor in India in various sectors. Notable among these are investments by companies like Maxis Communications in Aircel, Axiata in IDEA Cellular Ltd., Khazanah in Apollo, Air Asia and several other investments. There are about 68 Malaysian companies including Joint Ventures companies operating in India which includes prominent entity like IJM (India) Infrastructure Limited, GMR Hyderabad International Airport Limited, Malaysia Airline System (MAS), Khazanah India Advisors Private Limited, AirAsia (India) Private Limited, Petronas Lubricants (India) Private Limited, Eversendai Construction Private Limited, Genting Lanco Power (India) Private Limited, Sunway Opus International Private Limited, etc. Malaysian Foreign Direct Investment in India is primarily focused on Roads and Highways, Telecommunications, Oil & Gas, Power plants, Tourism and Human Resources. The highest investment proposals have been in the Telecommunications, followed by Power Sectors, Oil Refining and Roads & Highways. There has been a surge in Malaysian private sector initiatives in India, particularly in the infrastructure sector. According to Malaysia’s Construction Industry Development Board (CIDB), as in December 2016, Malaysian companies have completed 98 highway & road projects worth around US$ 4.64 billion in India. In addition, there are 13 projects valued at US$ 1.42 billion, which are still under construction.

Malaysia is currently 25th largest investor in India with FDI inflows from April 2000 to June 2017 standing at US$ 859.12 million, as per the statistics of the DIPP.
Malaysian Foreign Direct Investment in India is primarily focused on roads and highways, telecommunications, oil & gas, power plants, tourism and human resources.  The highest investment proposals have been in the telecommunications, followed by Fuels (power and oil refinery) sector and Roads and Highways. 

According to the Construction Industry Development Board (CIDB) of Malaysia, Malaysian companies have so far completed 72 construction projects worth US$ 3.27 billion in India, while 17 projects valued at US$ 2.376 billion are currently under various stages of implementation.

II) Indian Investment in Malaysia

As per official figures (DIPP), Malaysia is currently the 25^th largest investor in India with FDI inflows of US$ 863.05 million from April 2000 to September 2017. In addition to the investments, Malaysia has also undertaken US$ 6 billion worth of projects in India. As per the data available, 87 Malaysian companies including joint venture companies are operating in India. According to the latest details obtained from Construction Industry Development Board (CIDB), a statutory agency under the Ministry of Works, Government of Malaysia, as at December 2017, Malaysian companies have completed 106 highway & road projects worth US $ 5.11 billion in India. In addition, there are 12 ongoing projects valued at US$ 0.50 billion being undertaken by IJM Corporation Bhd and Eversendai Energia Sdn Bhd in various states in India. At present, there are over 150 major Indian companies including more than 60 IT ventures and 7 Indian Public-Sector Undertakings operating in Malaysia.

Their areas of operation are manufacture of Textiles and Yarn, Drugs and Pharmaceuticals, Glass Containers; Automobile associated activities, Specialty Chemicals, Steel Furniture, Rubber Products, Services in Information Technologies, Education, Biotechnology, Healthcare, etc. Recron Malaysia Sdn Bhd (owned by the Reliance group) is the largest Indian company in Malaysia, which is one of the largest Synthetic and Textile integrated plants in the world. Ballarpur Industries Limited of the Avantha Group-owned Sabah Forest Industries and Larsen & Toubro Group’s Tamco Switchgear are other major Indian companies in Malaysia. There are around 60 Indian IT companies in Malaysia including Tech-Mahindra and TCS which are major private sector investment in IT sector. Under its expansion plan Melaka Manipal Medical College has established a university campus in Negeri Sembilan with an estimated investment of RM 659 million (US$ 215.4 million) and capacity of 12,500 students by 2021. Veeda Clinical Research Organization, Ahmedabad set up its advanced research unit at Ampang Hospital in Kuala Lumpur. Biocon India made an investment worth US$ 250 million to set up its first overseas manufacturing and research facility in Malaysia in partnership with Biotech Corporation of Malaysia. Indian public-sector undertakings particularly IRCON, HMT, EIL, BHEL, IOC have been engaged with the Malaysian industrial sector since the 1970s.