Malaysia’s tariffs are ad valorem based.They charged 6.1% average on industrial goods like machinery and raw materials like timber.As Malaysia’s official religion is Islam”,alcohol and pork is taboo and has a high import tariffs rate.Milk and cream”,Porks and poultry meat will incur tariffs as high as 168%.Other meats should have a halal certification to not have a high import tariff.This high tariffs for poultry meat would lead to higher import goods prices.This results in it being more costly for MOS burger to import its meat and dairy from Japan as MOS burger is not halal certified and uses pork products.
Subsidies benefits domestic producers which helps them compete against foreign import.It will bring down the cost of production of producing goods and services so they could price their goods more competitively.
In 2018″,Malaysian government spends up to RM 2 billion to subsidies goods like rice”,sugar and flour.They have also had a 280.25 RM billion for food”,agriculture and halal industries.The budget for this subsidies are expected to rise for 2019.This puts MOS burger at a disadvantage as they would be importing their food items from Japan which is not certified halal”,having to compete against food businesses that benefit from the subsidies as they are mostly a halal industry.When local producers price their goods more competitively”,MOS burger would be at a cost disadvantage which may affect its profit.This is crucial as when MOS burger just started in Malaysia, it should gain as much consumers, but if the local competitor price their goods more competitively”,it will dilute MOS burger’s profit and hence it would be difficult to expand.
Voluntary export restraints
Japan does not have a voluntary export restraint on Malaysia.Both countries are a member country of WTO that strives to maintain voluntary export restraints by having members to not implement any new restraints and to remove any existing ones but keep restraints only with exceptions.
Local content requirement
Malaysia has local content policies to focus on oil and gas sector.Malaysia encourages the employment of local nationals”,foreign workers will only be permitted to work if local candidates are deemed unsuitable for the job.As MOS burger is a food industry, they do not have to worry about local content requirements as they are not under the gas and oil industry which has a lot of strict local content requirements.MOS burger only has to worry about giving priority for locals.
Malaysia has imposed anti-dumping policies mainly for environmental dumping for steel products to safeguard its domestic producers.This will affect industries that will be setting up businesses that sells steel items.Malaysia is also considering to file an anti dumping petition for chilli.If this petition is enforced, exporters will not be able to export a product at a lower price than normal home market price which affects demand in the country they export to.
However”,MOS burger is impacted by this policy as they will not be exporting steel products in Malaysia.Japan would only export steel products for MOS burger operations.If anti-dumping duty for chilli is enforced, it will also not really affect MOS burger as even though MOS burger is a food chain industry”,their main ingredients does not consist of chilli but meats, flour, sugar.The only key ingredient they use chilli for is for the condiment chilli sauce that could be outsourced from Malaysia local producers.MOS burger would not be dumping chilli and stainless steel products”,these items are only exported to help set up and run MOS burger joint in Malaysia.
Malaysia policies are becoming more flexible.Products like heavy machinery or steel items are required to be licenced and approved.This would include MOS burger’s cooking appliances like ovens and fryer.Applications can be done through an electronic permit which takes 3 to 7 working days and will be valid for 6 months once permitted.This could be convenient for MOS burger as they will only be needing the permit once to import their home appliances for their store.Another import of such items will only be required if the machinery needs to be replaced or MOS burger has expanded in Malaysia and needs more machinery.
Trade blocs that have impact on MOS Burger in Malaysia
Mos burger’s country of origin is Japan.As it is going to operate in Malaysia”,it will be beneficial to be in the same trade bloc as Malaysia as it be easier to trade.
WTO is an organization that enables trade blocs like, ASEAN Free Trade Area(AFTA) which Malaysia is in.Japan is a member of WTO. Although Japan is not a member country of AFTA, Japan has an agreement with ASEAN countries that have Malaysia as a member country.This regional trade agreement with ASEAN countries which includes Malaysia.The goods and services under this agreement includes food items that includes animal meat”,dairy products, machineries for agriculture and cooking like oven.These goods are key for MOS burger as it is a food chain which needs food items and cooking equipment.This agreement would lead to ease in trading, make it easier for Japan to gain access from Malaysia’s resource and a potential market to do business in Malaysia. It will be easier to trade equipment for cooking and food items.
Other than ASEAN-Japan Free Trade Area”,Malaysia and Japan does not have a trade bloc together.This may disadvantage Japan if this agreement comes to an end which would lead to trading becoming more difficult and expensive.This would lead to MOS burger’s expense to increase if they import Japanese goods for their operations.If the agreement ends after MOS burger has settled in Malaysia”,the sudden change in expenses might lead to the change of decisions to cut costs or changing from importing goods from Japan to outsourcing in Malaysia to maintain expenses.
However”,there have been negotiations for a trade bloc that includes countries like Australia”,Japan”,Malaysia”,Singapore”,China”,Korea”,Philippines called Regional Comprehensive Economic Partnership.The negotiations for this trade bloc have been successful.This trade bloc have been receiving positive support from member countries that will be signing it.
If this trade bloc is signed and enforced, Japan and Malaysia will have a common trade bloc.This would lead to it being easy to trade and would benefit MOS burger as it will be cost efficient to import goods from Japan for their operations.This will help MOS burger to price competitively and maximise profit which will make it easier to expand in Malaysia its successful.