Foreign exchange control in Malaysia is governed by the
Exchange Control Act, 1953, under which the Controller of
Foreign Exchange, who is also the Governor of Bank Negara
Malaysia, the central bank, is empowered to regulate foreign
exchange dealings in Malaysia.
The Act imposes general restrictions on foreign exchange
dealings by residents and non-residents. The Act's basic
premise is that no person is allowed, among others, to buy or
borrow foreign currency from, or sell or lend foreign currency
to, any person; to make any payment in Malaysian ringgit to a
non-resident in and outside Malaysia; or to deal in ringgit
assets in Malaysia; save with the prior permission of the
The Controller then publishes Exchange Control Notices of
Malaysia (ECMs) from time to time pursuant to which permissions
(general and specific), and the rules and parameters under
which they apply, are prescribed.
A resident is defined as (i) a Malaysian citizen; (ii) a
non-citizen with permanent resident status and ordinarily
residing in Malaysia; (iii) a Malaysian-incorporated body
corporate; (iv) a Malaysian-registered unincorporated body; and
(v) the Malaysian government (federal and state). A
"non-resident" is anyone who is not a resident, and includes
(i) overseas branches or representative offices of resident
companies; (ii) embassies, consulates, high commissions, and
international organisations; and (iii) Malaysians who are
permanent residents of another country and reside outside
Presently, residents without domestic ringgit borrowings are
free to invest any amount outside Malaysia. Resident companies
with domestic ringgit borrowings are also not subject to any
investment limit, if the investment abroad is funded from its
own foreign currency funds, or proceeds from an initial public
But if it is funded through a conversion of ringgit, the
Controller's permission is required if the investment exceeds
RM50 million ($16.3 million) in aggregate on a corporate group
basis per calendar year. However, if the investment is funded
through foreign currency borrowings, resident companies may
invest abroad up to the full amount of their foreign currency
There is no restriction for non-residents to invest in
Malaysia to purchase ringgit assets, such as landed property
and securities. There is also no restriction for non-residents
to transfer abroad, in foreign currency, all profits, returns
and divestment proceeds from their investments in Malaysia.
Settlement for investments in ringgit assets by
non-residents can, among others, be sourced from their own
ringgit funds held in Malaysia; sale of foreign currency with
licensed onshore banks or their appointed overseas branches; or
borrowings obtained from licensed onshore banks to finance real
sector activities in Malaysia. These activities include
agriculture, mining, manufacturing, construction, and wholesale
and retail trade.
Resident companies are free to borrow any amount in foreign
currency from licensed onshore banks, other resident related
companies, and their non-resident non-bank related companies.
If resident companies borrow from other non-residents, or
through the issuance of foreign currency bonds, the permitted
limit is RM100 million in aggregate on a corporate group basis.
Larger amounts require the Controller's prior permission.
Resident companies are free to issue ordinary shares,
irredeemable preference shares, and private debt securities to
non-residents. The Controller's prior permission is required
for issuances of other forms of securities to
Non-resident multilateral development banks and multilateral
financial institutions, foreign sovereigns, foreign
quasi-sovereign agencies, and foreign multinational companies
may issue private debt securities in ringgit or any foreign
currency in Malaysia.
Also, residents are allowed to make payments to, and receive
payments from, non-residents in ringgit as settlement for goods
or services. Residents are also allowed to invoice in ringgit
for their exports, or accept invoices in ringgit for their
imports, of goods or services with non-residents. Additionally,
non-residents are allowed to receive or make payments in
ringgit using their ringgit held in Malaysia as settlement for
goods or services with residents, if certain prescribed
conditions are met.
The rules applicable to Labuan companies incorporated under
the Labuan Companies Act, 1990, have also become more liberal.
In a 2010 revamp, Labuan companies (which are non-residents)
are now allowed to hold shares, debt obligations and securities
(including controlling stakes) in Malaysian companies. Hence,
residents with foreign assets and non-residents with ringgit
assets would now be able to structure and develop their
investments in Malaysia via the Labuan International Business
and Financial Centre.
Malaysian foreign exchange control regulations today are
still subject to relatively detailed conditions and parameters,
requiring careful consideration. In our view, the approach to
exchange control regulation in Malaysia will, for now, remain
cautious, but in support of overall macroeconomic growth
objectives, they should over time become more permissive as
Malaysia seeks to enhance its competitiveness.