PETALING JAYA: Tougher action against illegal foreign-run operations will provide respite for local businesses as such activities are squeezing small and medium enterprises (SMEs) and creating an uneven playing field in the market.
Small and Medium Enterprises Association president Datuk William Ng said illegal foreign-run businesses are eating into the margins of local SMEs.
“The association has been receiving complaints that Chinese nationals are coming to Malaysia on social visit or tourist passes to operate restaurants and retail outlets and to provide professional services such as wedding photography, shop and home renovations, and electrical works illegally.
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“This trend has escalated significantly alongside US-China trade tensions. Many traders from China are bypassing local partners and traditional SME channels to sell directly to Malaysians to offload stocks and escape competition back home,” he said, adding that for unauthorised foreign businesses to service Malaysian customers without local entities, they employ “technician batching”.
This means they are sending waves of technical personnel from their home countries to Malaysia on social visit passes for a month at a time to handle delivery, installation, repair, and training, Ng said.
The situation is made worse by cross-border digital financial integration, he added.
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“The digital economy has allowed illegal operators to move from physical stalls into the digital space, making them much harder to track.
“Many local transfers are tied to Chinese payment providers, allowing Malaysians to pay directly without a local invoice, but local business owners who must follow rules on licensing, insurance, taxes and compliance costs,” he said, adding that in the physical realm, these foreigners encroach into retail, wholesale trading, grocery stores, and mobile phone repair stalls.
Ng urged the government to go after their local, Malaysian enablers.
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“Don’t just stop at targeting the foreign players through visa enforcement or following their money trail.
“Those who rent out business licenses or act as a front must face heavier financial penalties.
“Blacklist them from holding any business permits,” he said, while calling for e-commerce platforms to enforce stricter “know your customer” checks to hold illegal operators accountable.
“The local councils should link licensing data to the immigration authorities and Inland Revenue Board.
“Money trails must be tracked under the Anti-Money Laundering Act, and licence ownership has to be audited,” he said.
Kuala Lumpur and Selangor Indian Chamber of Commerce and Industry president Nivas Ragavan said these illegal businesses undermine the integrity of legitimate local and foreign operators.
“Unlike us, illegal operators are able to offer lower prices because they don’t have to pay for things like licensing fees and taxes,” he said.
Nivas said most illegal foreign-owned micro or small businesses are in the service and retail sectors, which are usually operated by nationals from Bangladesh, Pakistan, India, Sri Lanka and Nepal, while those in the construction, renovation and interior design sectors are run by Chinese nationals.
“The rise of e-commerce has worsened the problem, with illegal operators trading online without proper registration.
“Enforcement should focus on nominee arrangements, suspicious online activity and stronger verification,” he said, adding that enforcement must focus on compliance and fair competition to sustain foreign investment.
Its president Dr Chin Chee Seong said SME Association of Malaysia members have been severely affected by these illegal traders.
Local photographers charge RM3,000 to RM4,000, but their counterparts from China come here on visas, take jobs, and charge RM300 to RM400.
“Many restaurants hire cheap foreign contractors for renovations and equipment installation, but they offer no guarantee.
“SMEs cannot operate like that,” he said, adding that when these foreigners return home, locals are left without recourse when things go wrong.
Students who come here on visa, he added, also sell items from their home country and don’t pay tax.
Calling for a direct channel for associations to lodge complaints, Chin said fast action is required or the culprits would not be traceable.
“There should also be better enforcement in neighbouring countries to assess visa validity and the purpose of entry,” he said.
