Malaysia ranks highly of its ease of trading across border in international comparisons. However, it is not a completely free and open market. Government tend to intervene in international trade for some political and economic arguments.Tariff is the main and important instrument used by Malaysia’s government to regulate the importation of goods in Malaysia. Malaysia’s tariffs are generally imposed on an ad valorem basis. Malaysia also charges a standard rate of 6% Malaysia’s Goods and Services Tax (GST) on all imports. Also, goods like alcohol, pork and poultry are subject to specific duties which are very high effective tariff rates. License application and sanitary controls must be conducted to regulate all the imported meat and poultry.
Imports of beef, lamb, and poultry products must be ratified by Malaysian authorities as “halal” for the Muslims to consume. Labeling and marking requirements for pork and pork products are very strict in Malaysia because Muslim make up more than half of the total population. As a dessert cafe, After you only serve dessert, pastries and some beverages and all the ingredients used are halal, they would not face any problem in this particular area. After You cafe is famous of its shibuya honey toast.
However, Malaysia produces only 4% of the local honey consumption as the number of beekeepers is declining over the years. In 2016, Malaysia had imported 3668 metric tonnes of honey. After You cafe might need to import honey from other countries to cater the high demand. According to Federal Government Gazette, the import duty for importing honey into Malaysia is 0%.
Nevertheless there is a 6% sales tax.After You cafe serves several coffee drinks for example cappuccino, latte, and so on. However, production of coffee in Malaysia is small which only contribute 0.16% of the world coffee trading. Malaysia does export coffee bean but the importation of coffee is currently more than exportation. Also, the production of coffee has showed a downward trend over the years.
All these factors have prompted malaysia to increase the importation of coffee beans from other countries. As After You cafe strives to serve the best desserts made from the first-rate ingredients, they might want to import coffee beans from other countries such as Brazil, Vietnam and Indonesia which produce high quality of coffee beans. There is no tariff on importation of coffee bean in Malaysia. Whether or not roasted, the import duty is 0%, as stated in Federal Government Gazette. However, the Federal Agricultural Marketing Authority (FAMA) has issued Import Permit for Raw Coffee Beans under the Customs Act 2008. All importers are required to pay RM30 for the import permit for coffee beans.
Trade blocsTrade blocs that have impact on After You cafe when operating in Malaysia will be ASEAN Free Trade Area (AFTA). AFTA was launched on 1 January 1993. Both Malaysia and Thailand are founding members of ASEAN. AFTA was formed to open up regional economy and reduce each nation’s capacity to control economic affairs.AFTA allows After You Cafe to place facilities in lower cost without incurring duties or tariffs. They are able to access to larger market when they expand their business internationally. A larger and developed market with the help of trade blocs also enable economies of scale.
They are able to source the ingredients at a lower cost because of mass production. When After You cafe operates in Malaysia, it will increase Foreign Direct Investment of Malaysia and create job opportunities. It also increase choice of cafe to consumers. Thus, increase in the well-being of Malaysia as a whole. Although there is a high rate of competition, increased competition is able to raise the efficiency of After You cafe. They are highly motivated to provide a better quality of service in order to stand out from their competitors.