Human Resource

Opening a foreign-owned departmental store in Malaysia is subject to specific regulatory, licensing, and operational controls under the Distributive Trade Services Guidelines issued by the Ministry of Domestic Trade (KPDNHEP). This guide outlines the key requirements foreign investors must comply with before establishing or expanding a departmental store in Malaysia.

Definition of ‘departmental store’

In Malaysia, a departmental store is defined as a distribution retail store with a sales floor area of varying size, engaged in retailing a wide assortment of consumer goods that are departmentalised by gender, age, or lifestyle, either through self-service or with sales assistance, and generally operating under a single common store management.

A departmental store may include a supermarket component of not more than 2,000 square metres.

Requirements

Any foreign participation in departmental store operations is regulated, and compliance with the following requirements is mandatory.

Local incorporation

• All departmental store businesses with foreign equity must be locally incorporated under the Companies Act 2016.
• This requirement also applies to businesses currently operating as foreign branches.

Minimum capital requirement

• The minimum capital investment is RM20 million.
• This refers to shareholders’ funds, which include:
  • Paid-up capital
  • Reserves
• This requirement is subject to review every three (3) years.

Equity policy

• The Government encourages joint ventures between Malaysian and foreign investors to increase local participation.
• Departmental stores are among the services sub-sectors liberalised by the Government as announced on 7 October 2011.
• Further details on liberalisation can be obtained from MITI.

Operational conditions

Branch expansion planning

Indicative plans for additional departmental store branches must be submitted to KPDNHEP at least two (2) years in advance before an application is considered.

Commencement of operations

Approved departmental stores must commence operations within two (2) years from the date of approval by KPDNHEP.

Store size and format

• Any increase or reduction in sales floor area requires prior approval from KPDNHEP.

Approval for additional branches

• All additional branches are subject to KPDNHEP approval.

Bumiputera SME product allocation

At least 30% of total Stock Keeping Units (SKU) displayed on shelf space must be allocated to Bumiputera SME goods and products in each outlet, to be fulfilled within three (3) years of operation.

Supplier access rules

Departmental store operators must formulate and provide clear rules and criteria for suppliers to market their products and goods.

Environmental and public interest requirements

Parking facilities

Operators must comply with local authority or town council requirements, subject to a minimum of:

• 50 parking lots per 1,000 square metres of business floor area, or
• The higher requirement imposed by the local authority

Ancillary businesses

Departmental store operators must provide business space for ancillary businesses at a reasonable rental rate.

Location restrictions

• Departmental stores are not allowed to operate within a 3.5 km radius of residential areas.

Impact and community studies

Prior to approval and operation, the following studies may be required:

• An impact study on existing local retailers, where the departmental store operates in a standalone building or has a business floor area of 5,000 square metres or more
• An early indicative study incorporating the views of:
  • Local traders
  • Nearby residents

Environmental responsibility

Departmental store operators are expected to ensure a safe and clean environment, including proper garbage disposal, recycling facilities, and efficient use of energy.

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