MALAYSIA Trends and Developments Contributed by: Stephanie Phua, Wong & Partners
The following key industries are or may be subject to FDI restrictions in the future. • Healthcare – demand for private healthcare in Malaysia is driven by an ageing population, increased life expectancy, an increase in non- communicable diseases, changes in technology and an expanding middle class, making it one of the most resilient industries, even in periods of uncertainty. Existing PE involvement in the health - care industry in Malaysia is significant, with recent notable investments into Straits Orthopaedics, Columbia Asia and Sunway Healthcare. Apart from the services sector, there is also increasing inter - est in sub-sectors such as life sciences, medical devices, pharma/biotech and medtech. While the sector is largely liberalised, it should be noted that the Malaysian Ministry of Health is currently formu - lating formal guidelines to regulate foreign partici - pation in the private healthcare sector, and new equity caps may be imposed in certain sub-sectors of the sector. • Education – investment activity in Malaysian private education has surged, primarily in K-12 education and specialised tertiary institutions. The trend will likely continue unabated, given the national growth in the student population and increasing consumer preference for private education. Recent notable PE investments in this sector include investments into Asia Pacific University and Asia Pacific Insti - tute of Information Technology, International Medi - cal University and International Medical College, and Taylor’s Education Group. Investments in the sector continue to be subject to foreign invest - ment restrictions, with caps on foreign participa - tion in certain segments of the industry, such as K-12 national curriculum schools, private colleges, language centres and kindergartens. • Consumer and retail – notwithstanding subdued consumer sentiment from inflationary pressures, deal flow in retail and consumer-focused deals remains consistent, driven by demographic char - acteristics such as the burgeoning middle class and the increase in disposable household income. Relatively smaller deal sizes, competition for quality targets and continued foreign investment restrictions are expected to remain key challenges for foreign private equity entities looking to gain a
foothold in this sector. Recent notable transactions include investments in Zus Coffee and East Malay - sia’s Everrise supermarkets. Foreign participation in the sector remains subject to equity and opera - tional restrictions, as set out in the Guidelines on Foreign Participation in Distributive Trade Services in Malaysia 2020 issued by the Ministry of Domes - tic Trade and Cost of Living. Introduction of merger control filings The Malaysian Competition Commission (“MyCC”) is seeking to introduce a new cross-sector mandatory merger control regime, which will prohibit mergers that may result in a substantial reduction in competition. At present, Malaysia is the only ASEAN country that does not yet have a merger control regime. The legislative amendments are expected to be debated in parlia - ment by the end of 2025, and will come into effect after a one-year grace period. The proposed notification regime is a hybrid of man - datory and voluntary notifications (ie, notification is mandatory if the anticipated merger exceeds the pre - scribed thresholds, but enterprises can also voluntar - ily notify MyCC when the prescribed thresholds have not been exceeded). The notification threshold has not been published. Deal timelines for future PE deals across all sectors will need to take into account the potential timeline for MyCC to process a merger notification, which could be between 40 and 120 working days. Introduction of capital gains tax on the disposal of unlisted companies A new capital gains tax (CGT) regime was introduced from 1 January 2024 on any gains or profits from the disposal of a capital asset situated in Malaysia, which includes the disposal of unlisted shares of a Malay - sian company or the shares of a controlled company incorporated outside Malaysia where more than 75% of the value of the foreign company’s total tangible assets comprise real property situated in Malaysia or shares of another controlled company. The CGT rate for capital assets acquired prior to 1 January 2024 is either 10% of the chargeable income from the dis - posal of the capital asset or 2% of the gross on the disposal price of the capital asset. For capital assets
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