1 Introduction
Malaysia and the Netherlands are vastly different countries, both with their own (distinct) culture and environment. For companies that are interested in expanding their business to the other country, these differences can pose unforeseen situations. This report is a partial PESTLE-analysis, which is used in business to identify risks and opportunities in a different country. This report focuses on the three parts of PESTLE-analysis that are listed below.
• Political
• Law
• Environment
This report contains detailed explanation of each of these three subjects, covering both, the situation in the Netherlands and the situation in Malaysia. Additional emphasis is placed on the differences between the two. Furthermore, insight in these differences can greatly help developing ones’ cultural intelligence. Cultural Intelligence reflects a persons adaptivity in different cultures, this can be helpful while travelling and visiting businesses in Malaysia.
2 Political
In this section we will compare the political factors of the Netherlands and Malaysia. The political factors influence the cost of doing business in a country. We also give a short overview of the different parties in the country and the interests the parties in power have.
2.1 The Netherlands
The politics of the Netherlands consists of a parliamentary democracy, a constitutional monarchy and a decentralized unitary state [Rijksoverheid, 2016]. Political parties strive towards find a consensus on important issues.
2.1.1 Monarchy
The Netherlands have a King, Willem Alexander, who succeeded his mother Beatrix on the 30th of April in 2013 [Hoedeman and Meijer, 2013]. The King is head of state and has the following tasks: signing laws to make them valid, being office of chair of the council of state, help forming the cabinet and read the throne speech.
2.1.2 The Government
The government of the Netherlands consists of the King and the cabinet ministers. The ministers can discuss freely about issues and new laws behind the closed doors of the Trˆeveszaal at the Binnenhof. The ministers try to make decisions based on a consensus and can vote on decisions to make. When a decision is made all ministers must support the policy publicly. The ministers are responsible for their actions as a collective and must gain the trust of the States General. The prime minister is the head of the cabinet, currently this is Mark Rutte of the VVD. The States General, Dutch Parliament, consists of the Second Chamber (Lower House) and the First Chamber (Upper House). The Second Chamber contains 150 seats, 3 which are filled to ratio by the votes of the people during the election. The members of the Second Chamber has the right to initiate new ideas or changes. Elections for the Second and First Chamber are once every 4 year, if the cabinet does not fall. The largest parties together form the government and the cabinet. The other parties form the opposition. The First Chamber has fewer rights than the Second Chamber. They mainly check the correctness of laws and decisions made by the Second Chamber. Elections for the First Chamber are also once every 4 year.
2.1.3 Political Parties
The Netherlands has 11 political parties either in the Second or First Chamber. The largest parties in the Second Chamber are the VVD (People’s Party for Freedom and Democracy) (41 seats) and PvdA (Labour Party) (38 seats), they also form the cabinet and the government. The largest opposition parties are SP (Socialist Party) (15 seats), PVV (Party for Freedom) (15 seats), CDA (Christian Democratic Appeal) (13 seats) and D66 (Democrats 66) (12 seats) [Nederland, 2012].
2.1.4 Scandals and Corruption
The politics on the Netherlands have not been free of scandals. The citizen of the Netherlands have the lower trust in the government compared to other European countries [vrij nederland, 2013]. Most scandals involve embezzling of money, abuse of power, but also minor things like watching porn. The corruption index in the Netherlands is according to International [2015b] 87.
2.1.5 Political Ideas
The Dutch politics are currently controlled by the PvdA and the VDD who are together in the cabinet. This means that the focal points are among other thing improving infrastructure, less state interference, improving education and improving military. 4
2.2 Malaysia
The Malaysian politics consists of a federal representative democratic constitutional monarchy. This means thats every of Malaysias 13 states has its own government with one federal government. The governments are chosen by the people of Malaysia. The head of state of Malaysia is Yang di-Pertuen Agong. The prime minister is the head of the government.
2.2.1 Monarchy
The monarch of Malaysia, Yang di-Pertuen Agong (YDPA), also referred to as Supreme King of Malaysia. He has the power to exercise based on advise of the government, exercise based on his own judgement and to pardon, reprieves and respites of sentences. YDPA is one of the few selected monarchs. Of the 13 states in Malaysia, 9 have hereditary royal rulers. These 9 rulers decide, based on rotation, once every 5 years who will be the YDPA.
2.2.2 The Government
The government of Malaysia looks a lot like the Westminster parliament system [FITA, 2006]. The party’s leader that gains the majority of the seats in the Lower House of the parliament during the elections becomes the prime minister. The prime minister is confirmed by the YDPA and has to serve a term of 5 years. Prime Minister holds the executive powers which include implementation of the law and day-to-day affairs of the country. The cabinet is appointed by the prime minister from the members of the parliament. The Lower House or Dewan Rakyat contains 222 seats, and the Upper House or Dewan Negara 70 seats [commissionar of law revision Malaysia, 2006]. Based on advise by the prime minister, 44 Senators, Upper House members, are chosen by the King and 26 by state legislative assemblies. Senators may only be reappointed once and the maximum term is 3 years. The Dewan Negara serves mostly to check the Dewan Rakyat. However, its powers have been limited 5 to only delaying a bill for a maximum of a year. Members of the Dewan Rakyat can remain for as long as the member wins a seat during the elections. The maximum term of office is 5 years, after that there will be elections. Parliament is responsible for passing, amending and repealing acts of law.
2.2.3 Political Parties
Since the independence of Malaysia in 1957 the United Malays National Organization (UMNO) is the largest party in the country under the coalition known as Barisan Nasional. The prime minister has always been from the UMNO. Opposition parties are: People’s Justice Party (Parti Keadilan Rakyat in Malay, PKR), Pan-Malaysian Islamic Party (Parti Islam se-Malaysia, PAS) and the Democratic Action Party (DAP). Barison Nasional has always controlled a large amount of seats in parliament, with its top in 2004 when they controller 92%. Currently they control 130 of 222 seats.
2.2.4 Scandals and Corruption
Malaysian politics have also seen corruption scandals. In 1998 the Prime Minister Mahathir bin Mohamad accused Deputy Prime Minister Anwar Ibrahim of immoral and corrupt conduct. Anwar was later that year convicted and sentenced 6 years in prison. His conviction was seen by the international community as an act to silence the political opponent of Mahathir. Also the judiciary is theoretically independent of the executive and legislative. However, executives have some influence in appointing the judges for the courts. The corruption index of Malaysia is according to the International [2015a] 50.
2.2.5 Political Ideas
Barison Nasional, the largest party, has its focus in developing the country. Improving the living standards of citizens by improving 6 living. There are ideas to build a national system for health care. Also public transport and infrastructure are important [man]. 7
3 Law
In this section we compare the legislation in the Netherlands and Malaysia.
3.1 The Netherlands
The foundation of Dutch law was first introduced by the French, when Napoleon conquered the Batavian Republic and forged the Kingdom of Holland. With this kingdom, they introduced their own legislative system: the Code Civil. When Napoleon was defeated, the Dutch created a new (civil) law based on the Code Civil, complemented with small parts of the old Roman law [Cliteur, 2005].
3.1.1 Religious laws
Besides the regular Dutch law, there is a small part left for some form of religious law in the Netherlands. However, this law can only concern cases that deal with internal issues that have not otherwise been regulated by the regular law, such as testing the validity of a christian marriage.
3.1.2 Europe
Furthermore, The Netherlands is a member of the European Union, whose purpose is to regulate several matters on an international level. This means that the European Union can introduce laws to the Netherlands. If those laws interfere with national legislation, the European law will be more important than the (possibly older) Dutch law. Besides these laws, the European Union can also introduce guidelines on certain subjects. These guidelines are not enforced immediately, but have to be implemented by the Netherlands, within two years, as a law that covers those guidelines [Rijksoverheid, 2014]. 8
3.1.3 Labour laws
In 2015, the Dutch government replaced the labour law to make it easier for companies to fire their employees. However, the Dutch law does still not allow dismissals without a valid reason. Each involuntary dismissal of an employee is evaluated by a specific government institution, to check whether it was done with valid reasoning. Examples of this valid reasoning include: serious misbehaviour (such as theft) and a not functioning employee. It is, however, the responsibility of the company to try and educate, guide, or (if possible) even relocate the not functioning employee. Even if a company needs to let employees go because of their financial situation, this should first be evaluated by a qualified judge [NationaleAdviesbalie]. Furthermore, if the employee did not leave voluntarily and did not misbehave seriously, he or she is entitled to a compensation up to his or her annual salary [Rijksoverheid, 2015]. When an employee gets sick, this cannot immediately be a reason to fire this employee. He or she is the first two years of illness entitled to his or her salary. If, after those two years, there is still no change of the employee returning within half a year and the employer has done everything it can to help the employee get back, the employer is entitled to fire this employee [JuridischLoket]. Working overtime is most often not mandatory, but optional (with exceptions). These exceptions are branch-specific and are described within the collective employment agreement. This collective employment agreement also specifies the reward or compensation that should be awarded to the employee. This compensation can be the usual hourly wage, an increased hourly wage, hours off on other days or simply nothing (like in branches where someone is being paid for the work done, not for the hours worked) [Loonwijzer.nl].
3.2 Malaysia
The law of Malaysia is based on the common law legal system which was introduced during the British colonisation. Later, in the post 9 colonial era, Malaysia adopted the common law system in the law system but also adopted the Islamic law into the law system.
3.2.1 Syariah courts
The constitution of Malaysia states that the federation has no jurisdiction in respect of any matter within the jurisdiction of the Syariah courts . This provides the basis of the dual justice system cite in the country. The Syariah court system practices the Islamic law known as the sharia law and applies to Muslims only. The Syariah court is limited in what punishments they can issue, any offence can be punished with at most three years of imprisonment, a fine of at most five thousand ringgit or at most six strokes from the whip [sya, 2006].
3.2.2 Common law
Apart from the written laws, there are also unwritten laws that can only be found in case decisions. These laws are known as the common law or case law. These laws apply in situations when there are no laws governing that particular situation. First Malaysian case law is applied and when no suitable Malaysian case law can be applied, British case law is applied . cite
3.2.3 Government policies
The Malaysian government is aiming to become a global leader in the tech-industry. For this reason, they have introduced the so-called MSC Malaysia status. This status is awarded to tech-companies that comply to some requirements which are easy-to-match for foreign companies, such as proximity to a research centre and infrastructurereadiness. Companies with a MSC Malaysia status acquire benefits, such as tax-exemption for 10 years and easy ways to hire foreign talent [MDEC]. 10
3.2.4 Consumer laws
The Consumer Protection Act 1999 is an act which provides legislation for strict protection for consumer. Under the act, consumers are protected from products, services, and manufacturing processes that may cause harm to health and life. The Ministry of Domestic Trade and Consumer Affairs has the right to make the manufacturer recall unsafe products, prohibit sale and marketing, and disclose all information related to the unsafe product to purchasers. Manufacturers can be imposed to repair or replace the product or to refund. The act also imposes that consumers have the right to claim damages for unfair practises of the distributor or manufacturer.
3.2.5 Labour laws
Working hour laws are strict in Malaysia. An employee may not work more than 8 hours per day and a maximum of 48 hours per week. Employees have the right on a half hour break each 5 hours. Also the laws on overtime are strict, an employer cannot require an employee to work overtime, although, there are a few exceptions. When it is agreed to work overtime, the employee is paid at least 1.5 times the normal pay. Each employee has right on paid annual leave in addition to regular holidays and off days, eight days every twelve months if the employee has been employed for less than two years, twelve days every twelve months if the employee has been employed more than two years but less than five. If the employee has been employed for more than five years, he has the right on sixteen days paid leave every twelve months. Employees have also the right on paid sick leave, when no hospitalisation is required, fourteen days, eighteen days and twenty-two days for the same employment durations as paid annual leave. When hospitalisation is necessary, the sick leave may be up to 60 days every year. It is relatively easy for both the employer and employee to terminate a contract of service. Either party has to give notice that 11 he intents to terminate the contract of service. The time of notice depends on the length of the employment. The time is four weeks if the employee has been employed for less than two years, six weeks if the employee has been employed between two and five years and eight weeks if the employee has been employed for over five years. There are special cases in which the time of notice does not hold. Such cases include not appearing at work for several days without notice.
3.2.6 Cyber laws
Like other countries, the Internet usage has grown rapidly in Malaysia in the past decades. In 1999 the Communications and Multimedia Act 1998 act was in acted in order to provider a regulatory framework for telecommunications and computing companies with in mind to make Malaysia a global hub for digital services. The country also has also thorough laws to prevent copyright infringement. It is illegal to transmit copyrighted material over the Internet without authorisation. It is also illegal to circumvent technological measures aimed at restricting access to copyrighted material. 12
4 Environmental
There are large environmental differences between The Netherlands and Malaysia, in this section these differences are identified and investigated. Things that are considered here are the geographical location, the climate, waste disposal laws, energy consumption regulation and people’s attitude towards the environment.
4.1 The Netherlands
4.1.1 Geographical location
The name of this country in West-Europe literally means ’lower countries’, this is because of its low and flat geography, with only 50% of its land exceeding one meter above sea level. The capital of the Netherlands is Amsterdam with a population of 900 thousand. The Netherlands has around 17 million inhabitants in total and a land mass of almost 42 thousand square kilometres, therefore the country has a large population density (410.5 per km2 ). The Netherlands are part of the Kingdom of the Netherlands that also includes three island territories in the Caribbean. Because large parts of the country (26%) are below sea-level the changing environment and its effects are posing real threats. After the devastating North Sea flood of 1953, The Netherlands began on a large project to protect the country from the sea. The Delta Works were born, the project consists of dams, sluices, and storm surge barriers that shorten the Dutch coastline, so fewer dikes had to be raised. The largest and most famous storm barrier is the Oosterscheldekering which is 9 kilometres long. The Dutch are internationally seen as experts on the area of water management, helping other governments around the world against the dangers of the changing environment.
4.1.2 Climate and weather
The main climate in the Netherlands is a moderate maritime climate, with cool summers and mild winters, and typically high humidity 13 along the coastline. The differences in temperature are therefore much smaller along the coastline than in the southeast of the country. Ice days usually occur from December until February.
4.1.3 Waste
The waste disposal regulations in the Netherlands are on of the best of the European Union as stated in a recently published report [EU, 2015]. But they can still improve the situation by intensifying the decoupling of waste from consumption and the usage of pay-as-youthrow (PAYT) systems for municipal waste.
4.1.4 Energy consumption
The Netherlands rely heavily on natural gas for heating, 40% of the energy consumption in the Netherlands is from natural gas. The country itself also has gas fields, primarily in the North, but because of earthquakes the production has been reduced. As part of an European Union wide plan to reduce the greenhouse gasses The Netherlands need to reduce their greenhouse gasses by 20% in 2020. But because of the lower production of natural gas, electricity production became more reliant on the more polluting coal. In 2015 The Netherlands even reported a 5% rise in greenhouse gasses, this makes the goals for 2020 even more complicated. In a recently published report the Dutch Government also acknowledges the fact that coal energy plants are not part of the future energy supply and they see a lot of opportunities for wind, solar and water renewable energy sources.
4.1.5 Attitude towards the environment
As a country with more bikes than people and to the outside world the Netherlands is generally assumed to be one of the most ecoconscious countries in Europe. However, compared to other European countries, the Dutch are not very green at all. The Dutch 14 people have great intentions to buy environmentally friendly products and with good schools people are also more likely to become ‘green’ customers. People in the Netherlands believe that the environment is an important factor for the quality of life. The Dutch people trust scientists and environmental protection organisations as sources of environmental information [EU, 2008].
4.2 Malaysia
4.2.1 Geographical location
Malaysia is a tropical country located in Southeast Asia and is divided by two similar sized regions separated by the South China Sea. The first region is called Peninsular Malaysia and it shares its land borders with Thailand and Singapore. The second region is called East Malaysia and it shares its borders with Indonesia and Brunei. With a land mass of around 331 thousand square kilometres, Malaysia is almost 8 times larger than the Netherlands. But with a population of 31 million inhabitants the population density is much lower at only 92 per km2 . The capital city of Malaysia is Kuala Lumpur, which is located in Peninsular Malaysia and has around 1,6 million inhabitants.
4.2.2 Climate and weather
The two parts of Malaysia share a similar landscape with both regions feature coastal plains rising to hills and mountains. The main climate in Malaysia is a tropical rain forest climate that lasts the entire year. But what is really astonishing is the huge biodiversity of Malaysia which is estimated to contain 20% of the world’s animal species. Deforestation is a large problem in Malaysia, for example over 80% of the Sarawak’s rain forest has been cleared. Floods in the country have been worsened by the loss of trees. With the current rates of deforestation the forests are predicted to be extinct by 2020! The Malaysian government has been accused of favouring large businesses over the environment. 15
4.2.3 Waste
The rapid economic development of Malaysia and the population growth makes the management of municipal solid waste become one of Malaysia’s most critical environmental issues [Agamuthu and Fauziah, 2010]. Recently a new institutional and legislation framework has been structured with the objective to create a holistic, integrated, and cost-effective solid waste management system, with an emphasis on environmental protection and public health. In 2015, Malaysia reported an recycling rate of 17.5%, Singapore and Thailand for example have a recycling rate of around 60%. Even though Malaysia has a long way to go for environmental sustainability, new legislation improves the situation each year. With the new promotion of solid waste management plan Malaysia not only en- Cite hances social, economic and environmental efficiency, and promotes sustainable development, but it can also help resolve the dual crisis of nonrenewable resources and environmental degradation. The main goal of Malayasia’s Vision 2020 [Mohamad, 2001] is to modernize and develop the country based on its own model and develop that nation economically, politically, socially, spiritually, psychologically and culturally. The main goals of Vision 2020 is to modernize and develop our country based on its own model and develop that nation economically, politically, socially, spiritually, psychologically and culturally.
4.2.4 Energy consumption
Almost half of the GDP of Malaysia is generated by the state-owned oil and gas company Petronas (45%). Malaysia therefore is very reliant on fossil fuels but in recent years tourism is becoming more and more important. Because of the rapid growth of the country, the energy consumption per household is rising to values found in developed countries. In 2010 36% of the electricity production came from burning coal. It is estimated that the energy consumption of Malaysia reaches 18,947 MW in 2020 and that renewable energy 16 only accounts for 10% in that year. For a developing country however, Malaysia is an important subscriber to the reduction of climate change and promoting a sustainable environment. In overall we see that Malaysia is aware of its role in formulating national development policies, sensitive towards cause and effect in the country’s development to the environment and utilization of energy resources, as well as conscientious and responsive towards the call for sustainable development not only domestically but also internationally [Chua and Oh, 2010].
4.2.5 Attitude towards the environment
It is often said that Malaysia and its people are more focused on economic growth than on environmental sustainability, for example the construction of new dams that have a huge impact on the environment do not translate into large demonstrations. Because the Malaysian people are on average not very wealthy, it is more understandable that they often choose for cheaper, more polluting products instead of environmentally friendly products. 17
5 Conclusion
The Netherlands and Malaysia both have a democratic constitutional monarchy. The monarch in the Netherlands is defined by heritage and once stepped down its first descendant takes over. In Malaysia there are 9 sultans who take turns in being King of the country. Also in the Netherlands the king has no real power, whereas the King in Malaysia can influence the government by accepting or denying laws. Both the Netherlands and Malaysia have multiple parties. Malaysia has one party, or coalition, who is at power, the Barisan Nasional. In the Netherlands there is always a group of different parties, with different ideas that must work together to have a majority. The government structure in both countries are similar. Both have an Upper and a Lower Chamber. Where the Lower Chamber make the laws and decisions and the Upper Chamber checks if there are no mistakes or contradictions with the constitutional laws for instance. Both countries have a cabinet and a prime minister. The election of the government is also similar. The difference between policy in Malaysia and the Netherlands can be explained by the development of both countries. The Netherlands are further developed than Malaysia. The policy with the Malaysian parties lie more in developing and improving the basic life needs, whereas the policy in the Netherlands is concentrated on improving the existing systems. With very different climates The Netherlands and Malaysia do not have anything in common, this also holds true for their environmental concerns. In The Netherlands the rising sea-level and the fact that 26% of the land mass lies below it is posing a real threat for the future. Meanwhile they fail to reduce their emission of greenhouse gasses and increase the percentage of renewable energy sources to reach the 2020 20% reduction compared to 1990. Both The Netherlands and Malaysia share this problem, the lack of using renewable energy sources. Both countries (compared in 2010) 18 only produce about 1% of their energy in a renewable sustainable manner. The environment of Malaysia is suffering from extreme deforestation and the resulting floods. As almost every country in the World, Malaysia and The Netherlands are struggling to create a sustainable environment that is economically feasible. As a developed country The Netherlands have an almost optimal waste management system whereas Malaysia is struggling with the growth and the waste that it is producing. But also the people and their perspectives are more economically minded instead of environmentally. Interestingly The Netherlands is often marked as an eco-friendly country with its many bikes and wealthy population, but they under perform compared to other to other West-European countries like Germany or France. The Malaysian government on the other hand do value economic growth more than the environmental deprecation. A big difference between the law in The Netherlands and Malaysia is that, besides the regular courts, Malaysia also knows the Syariah courts, a court enforcing Sharia (Islamic laws). The Syariah court can deal with issues that the regular court would usually deal with for non-muslim people. The only religious court in the Netherlands can, on the contrary, only deal with faith-associated issues that have not otherwise been regulated by law. Another big difference is that Malaysian courts can sentence people to caning or even death, besides the ’common’ sentences as imprisonment and fines. A big plus for ICT-companies in Malaysia is the regulating regarding the Malaysian MSC status, which ICT-companies can acquire. This regulation gives companies huge benefits, such as a 10 year tax-exemption, which can certainly boost their performance. This Malaysian MSC status is something that both local and foreign companies can get, and was introduced in order to boost the ICT-industry in Malaysia. labour law