Businesses are increasingly taking advantage of the economic and political benefits of setting up operations in Malaysia, whether to gain access to a highly skilled but lower-cost workforce to support global operations, or as a stepping stone to high-growth economies in the region.
BP is expanding its IT and business process work in Malaysia to take advantage of the large skills pool and freedom to bring key staff to the country from other locations.
The Malaysian IT Initiative, known as the Multimedia Super Corridor (MSC), was set up in 1996 by the Malaysian government as part of its economic transformation. Malaysia wants to be a high-income nation by 2020, and IT services and business process centres will be a major part of its economy.
BP in Kuala Lumpur
BP has been in Malaysia’s capital Kuala Lumpur for over a decade, but in recent years has accelerated the growth of its business services centre in the city. This captive centre currently has 150 IT professionals and is expected to grow.
Kevin James, vice-president global business services at BP, said the company initially set up a finance business process centre to cater for its South East Asia business. This has grown from fewer than 100 people with finance expertise to about 550 with finance, procurement and IT expertise.
“Initially, we put a finance centre of expertise in Malaysia, but in mid-2009 we started to build up a business services sector in Kuala Lumpur,” said James.
Some of the advantages for MSC companies
- Freedom of ownership
- Unrestricted entry for foreign workers with specific knowledge
- No income tax for 10 years
- Competitive telecommunications tariffs
- Intellectual property and cyber laws
Continued expansion of the Kuala Lumpur centre is expected, he said: “We see the centre growing to between 800 and 900 people in the near term.”
BP has large offshore captive centres in Budapest and Chicago, as well as Kuala Lumpur, which all support global operations, with smaller captives in Melbourne and Cape Town.
The Malaysia business centre's IT component supports global enterprise systems. This involves support and application development for SAP systems. The centre is supporting SAP deployments in Europe, the Middle East and Australia.
James said BP is growing the Kuala Lumpur centre as part of a strategy to centralise and automate its business services: “We decided that one of the ways to do this was to bring it all together in larger centres.”
He added that the IT skills base in Malaysia is high and changes introduced by the government to relax normally tight immigration rules for businesses in Malaysia as part of the MSC initiative have helped. The MSC programme means that companies involved can bring unlimited staff they need from outside Malaysia.
Frost and Sullivan expanding in Malaysia
Another company utilising Malaysia's infrastructure is business consultancy Frost and Sullivan. Gary Jeffery, director of operations at the company, said Frost and Sullivan has been operating in Kuala Lumpur for 12 years, but has remained small with 150 staff. But he said the company is opening a second centre in another part of Malaysia, Iskandar, and the company’s workforce is expected to grow to about 800 over the next seven years.
Tax breaks, the ability to bring staff in from overseas and the good communications and IT infrastructure are key reasons for setting up in Malaysia
He said the company set up in Malaysia because it wanted to do business there and in the Asia-Pacific (Apac) region: “Our reason for investing in Malaysia is a growth strategy, rather than offshoring or a low-cost alternative.”
But Jeffery said the company is investing in a regional hub in Iskander which will support other Apac countries. He said Malaysia is an easier [place] to set up operations than neighbouring Japan or China.
Tax breaks, the ability to bring staff in from overseas and the good communications and IT infrastructure are key reasons for setting up in Malaysia, he said.
Jeffery added that the access to a multilingual gradate workforce that is less expensive than Western equivalents is a big draw: “Payroll is our biggest expense, so the salary levels are attractive to us.” He said they are not as low as other regions, such as India and China, but the combination of other benefits make Malaysia “a good place to do business”.
Malaysia is a place for big business. Apart from the Facebook IPO this year, the top two IPOs in the world were both Malaysian firms – palm oil firm Felda and Asian hospital operator Integrated Healthcare Holdings.
Other large western corporates using Malaysia to deliver IT include: HSBC, DHL, Prudential, Dell, AIG, IBM, Ericsson, Shell, Exxon, Nokia and Standard Chartered. IT service providers such as Wipro, HCL, IBM, HP and Atos Origin have IT delivery centres in the country.