Franchising Development in Malaysia

In the late1980’s ex-Prime Minister Tun Dr Mahathir Mohammed in order to spur entrepreneurship activities amongst Bumiputeras initated the franchising concept in Malaysia.

However,to date of writing,the Malaysian government has not been able to give much oomph to encourage the franchise industry’s growth.

A little bit of background:

• In Malaysia,the franchise sector comes under the Ministry of Entrepreneur and Cooperative Development (MECD) and is complemented by the private sector through the Malaysia Franchising Association (MFA).

• The Malaysia Franchising Association (MFA) was established in 1992 to assist the industry followed by the implementation of Franchising Act 1998 to provide   clearer direction for the sector.

• Over the last eight years,MFA together with Ministry of Entrepreneur,Cooperative and Development (MECD) provide ongoing training,financial assistance and organize seminars and exhibitions;

• The franchising scheme under PNS was introduced in 2004 under two schemes –the Franchise Investment Scheme and Franchise Funding Scheme. It offers wide range of dedicated schemes now such as Franchise Executive Scheme,Youth Franchise Scheme and Women Franchise Scheme;

• MFA chairman is Datuk Mukhriz Mahathir. Recently in the NST Datuk Mukhriz revealed the following statistics:

·there is still low participation in franchising activities,

especially among Bumiputeras;

·MFA has registered 260 locally-developed franchise

systems,out of which only 63 are

Bumiputera-owned. It is estimated that there are

800 franchisees in Malaysia,including foreign-owned

ones.

• Under the Eighth Malaysia Plan (8MP),the Government had targeted to create 1,000 franchisees and 50 franchisors. So far,there are only 532 local franchisees and 28 franchisors.

• Under the Ninth Malaysia Plan (9MP),Perbadanan Nasional Bhd (PNS) has been tasked as the sole agency to oversee all franchise activities in the country. RM12 million is allocated under the 9MP for PNS to boost the industry. Over the period,it aims to create 50 franchisors and 1,000 franchisees.

• PNS managing director Rusdi Ibrahim who joined PNS in Sept 2004 said the agency plans to acquire foreign franchises and develop an affordable system for aspiring entrepreneurs. PNS has allocated RM300 million over the next five years to assist about 200 franchisees per year. Last year,the agency approved a total of RM2.8 million loans,and the figure is expected to reach RM12.4 million this year.

• Financial assistance is a critical component in the franchise business and its absence can stifle potential growth. The slow loan approval was highlighted in the National Audit Report 2005. Up to December 31 2004,a total of 33 potential companies had applied for investment franchise loans. However,when the National Audit Report was released,none of the applications had been approved yet.

• Malaysia ’s franchise industry contributed less than 5 per cent to the country’s gross domestic product last year compared with 15 per cent in a country like Australia,which has some 700 franchise systems.

• Malaysian Franchising Business:Useful Links
• Franchise What Are The Initial Set Up Costs and Recurring Costs
• Malaysia Moving Forward – Abolishment of Real Property Gains Tax &Special Incentive Area –Iskandar Development Region
• What Are The Advantages Of Franchising
• IPO Development In Malaysia
• MALAYSIA TAX BUDGET 2010 BUSINESS HIGHLIGHTS
• Further Details Of The Iskandar Development Region