Register a Sdn Bhd Company
The first step to opening a factory in Malaysia is registering a Sendirian Berhad (Sdn Bhd) with the Companies Commission of Malaysia (SSM).
A Sdn Bhd is a private limited company that offers limited liability protection to shareholders and is the most common structure used for manufacturing businesses.
Basic requirements typically include:
- At least one locally residing director
- Minimum paid-up capital
- A unique company name approved by SSM
Once the company is incorporated, it becomes a legal entity that can apply for business licenses, own assets, and conduct manufacturing operations.
Secure a Suitable Factory Location
After registering the company, the next step is finding a suitable factory location or industrial premises.
The proposed site must undergo an Initial Site Assessment (PTA) conducted by the Department of Environment (DOE) to determine whether the location is suitable for the intended manufacturing activities.
If the project has significant environmental impact, the authorities may require an Environmental Impact Assessment (EIA) before approving the factory location.
Once the site is approved, the company can proceed with signing a tenancy agreement or purchasing the factory premises.
Apply for a Local Authority Composite License
Factories operating in Malaysia must obtain a composite license from the local authority (PBT).
A composite license typically includes:
- Premise license
- Signboard license
During the application process, supporting approvals may be required from several regulatory agencies, including:
- Fire and Rescue Department
- Department of Environment (DOE)
- Department of Occupational Safety and Health (DOSH)
These approvals ensure that the manufacturing facility meets safety, environmental, and operational standards.
Apply for a MIDA Manufacturing License
Manufacturing companies in Malaysia may also need a Manufacturing License from the Malaysian Investment Development Authority (MIDA).
A full Manufacturing License is required if the company meets certain thresholds, such as:
- Shareholders’ funds of RM2.5 million or more, or
- 75 or more full-time employees
Companies that do not meet these requirements may instead apply for a Manufacturing License Exemption Letter.
This license allows the company to legally conduct manufacturing activities in Malaysia.
Optional Licenses and Manufacturing Incentives
Depending on the nature of the factory’s operations, businesses may also apply for additional licenses or incentives.
Some examples include:
- Licensed Manufacturing Warehouse (LMW) for import duty exemptions on raw materials
- Certificate of Origin for export documentation
- Pioneer Status tax incentives
- Investment Tax Allowance for capital investments
- Employment Pass for hiring foreign management or specialists
These incentives can help manufacturing companies reduce operational costs and improve competitiveness in international markets.
Timeline and Costs to Start a Factory
Opening a factory in Malaysia involves several steps and regulatory approvals, which may take a few months depending on the complexity of the project.
Typical estimates include:
- Sdn Bhd registration: 1–3 working days
- Local authority license approval: 2–8 weeks
- MIDA manufacturing license approval: 4–8 weeks
In terms of costs, the government incorporation fee for registering a Sdn Bhd is around RM1,010, while licensing costs vary depending on the local authority and type of manufacturing activities.
Proper planning and compliance with regulations can help businesses complete the process more smoothly.
How to Open a Factory in Malaysia: A Complete Guide for Manufacturers