“Business Opportunities in Malaysia”2 Ahmad Tajudin Omar Director . MIDA Munich . 14th June, 2012, Thursday . Prague

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“Business Opportunities in Malaysia”

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Ahmad Tajudin Omar Director

MIDA Munich

14th June, 2012, Thursday Prague

CONTENT OUTLINE • Functions • Malaysian Economy • Investment Trends • Investment Opportunities in Malaysia • Investment Policies & Incentives • Development Corridors • International Rankings

Content Outline

MIDA’s Function in The Promotion of The

Manufacturing and Services Sectors in Malaysia

Established in 1967 under Act of Parliament, 1965

The principal Malaysian Government agency responsible for the promotion and coordination of industrial development in the country

First point of contact for investors who intend to set up projects in the manufacturing and services sectors in Malaysia

On 27 March 2004, the Government mandated MIDA to promote investments in the services sector

Milestones

Foreign Direct Investment Domestic Investment Business matching through E-Connect Manufacturing Services

Promotion

Manufacturing licenses Tax incentives Expatriate posts Duty exemption OHQ, RDC, IPC and R&D status

Evaluation

Follow-up / Monitoring

Planning

Planning for industrial development Recommend policies and strategies on industrial promotion and development Formulation of strategies, programmes and initiatives for

international economic cooperation

Assist companies in the implementation and operation of their projects

Facilitate exchange & co-ordination among institutions engaged in or connected with industrial development

Advisory Services

Functions of MIDA

Based In MIDA • Immigration Department

• Royal Malaysian Customs

• Department of Environment

• Tenaga Nasional Berhad

• Telekom Malaysia Berhad

• Labour Department

Based outside of MIDA • Department of Occupational Safety and Health (DOSH)

• Ministry of Finance

• Ministry of Health

• Ministry of Tourism

• Ministry of Human Resource

• Ministry of Higher Education

• Multimedia Development Corp. (MDeC)

• Construction Industry Development

Board of Malaysia (CIDB)

MIDA “One Stop Centre”

San Jose

Los Angeles New York

Boston

Stockholm

Frankfurt Munich

Milan Paris

London

Dubai Mumbai

Guangzhou Taipei

Shanghai Seoul

Osaka Tokyo

Sydney

24 Overseas Centres

Chicago

Houston

Singapore

Bangkok

Johannesburg

MIDA Worldwide Network

MIDA’s 12 State Offices

MALAYSIAN INDUSTRIAL DEVELOPMENT AUTHORITY Malaysian Economy

1960s – Import substitution industries

1970s – Labour intensive industries

1980s – Export-oriented manufacturing and high-tech industries

1990s to date – Capital and technology intensive industries, high value added and skill intensive

Malaysia Development Activities

Source: Central Bank of Malaysia/Department of Statistics Malaysia/MATRADE

2009 2010 2011

Real GDP (%) - 1.7 7.2 5.1

Inflation (%) 0.6 1.7 3.4

Per Capita Income (US$) 6,764 8,140 9,204f

Unemployment (%) 3.7 3.2 3.1

Trade Surplus (US$ bil) 33.6 34.2 29.6

International Reserves (US$ bil) 96.7 106.5 133.7

Retained Imports Equivalent (months) 9.7 8.5 9.6

Malaysia’s Key Economic Indicators

Investment Trends

Year No. of Projects

No. of Employment

Proposed Investment (US$ billion)

Domestic Foreign Total

2008 919 101,173 4.8 13.3 18.1

2009 766 64,330 3.0 6.5 9.5

2010 910 97,319 5.9 9.4 15.3

2011 846 100,533 6.9 10.8 17.7

TOTAL 3,441 363,355 20.6 40.0 60.6

Source: MIDA

TOTAL APPROVED MANUFACTURING PROJECTS (2008 –2011)

Industry No. of Projects

Employment Investment (US$ billion)

Electronics & Electrical Products 3,515 689,827 40.55

Petroleum Products (Inc. Petrochemicals)

197 10,462 14.13

Basic Metal Products 699 54,348 12.81

Chemical & Chemical Products 1,077 44,698 9.76

Non-Metallic Mineral Products 766 55,129 8.57

Transport Equipment 1,041 103,818 6.85

Food Manufacturing 1,194 79,186 5.63

Fabricated Metal Products 1,445 100,437 5.15

Machinery & Equipment 1,268 84,357 4.53

IMPLEMENTED MANUFACTURING PROJECTS BY MAJOR INDUSTRIES, as at JUNE 2011

Source: MIDA

Rank Country No. of Projects Investment

(US$ Billion) 1. Japan 2,377 18.97 2. USA 705 15.98 3. Singapore 2,679 7.08 4. Germany 343 5.22 5. Netherlands 186 4.30 6. Taiwan 1,538 5.02 7. Korea, Rep. 299 2.72 8. United Kingdom 396 1.70 9. Spain 6 1.22

10. India 108 1.13

IMPLEMENTED MANUFACTURING PROJECTS BY COUNTRY, as at JUNE 2011 (Top 10)

Source: MIDA

Type of Establishment No. of Approvals

Regional Offices (RO) 28

Representatives Offices (RE) 54

Regional Distribution Centres (RDC) 1

International Procurement Centre (IPC) 6

Operational Headquarters (OHQ) 16

TOTAL 105

APPROVED REGIONAL ESTABLISHMENT FROM JAN-NOV 2011

Source: MIDA

INVESTMENT OPPORTUNITIES IN MALAYSIA

High technology, capital intensive & knowledge driven industries:

Resourced-based industries:

Industries manufacturing intermediate goods:

•Advance Electronics

• ICT

• Solar

• Silicon / Substrates

• Aerospace

• Petrochemicals

• Pharmaceuticals

• Medical devices

• Biotechnology

• Machinery & equipment • Components & parts • Moulds and dies

• Oil & Gas •Food Products • Wood-based products • Rubber-based products • Halal Products

INVESTMENT OPPORTUNITIES IN THE MANUFACTURING SECTOR

Tourism

• Hotels

• Tourist projects

• Recreational centre

• Convention facilities

INVESTMENT OPPORTUNITIES IN THE SERVICES SECTOR

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Eligible Criteria

• Companies intending to generate energy using renewable energy resources for sale to other companies or for own consumption are eligible to be considered for incentives under the Promotion of Investments Act, 1986.

• The incentives are applicable for applications received until 31 December, 2015.

• The project must be implemented within 1 year from the date of approval of incentive.

RENEWABLE ENERGY

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CRITERIA

• The company must be locally incorporated under the Companies Act 1965

• The company must generate the following energy forms:-

(i) Electricity (ii) Steam (iii) Chilled water (iv) Heat

• The company must use renewable energy resources

RENEWABLE ENERGY

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RENEWABLE RESOURCES i. Palm oil mill / estate waste ii. Rice mill waste iii. Sugar cane mill waste iv. Timber / sawmill waste v. Paper recycling mill waste vi. Municipal waste vii. Biogas (from landfill, palm oil mill effluent, animal waste and others) viii. Hydro power (not exceeding 10 MW) ix. Solar power

RENEWABLE ENERGY

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CRITERIA

• Companies that provide consultancy and advisory services as well as project management relating to the conservation of energy or company which incur capital expenditure for conserving energy for own consumption.

• The incentives are applicable for applications received until 31 December, 2015.

• The project must be implemented within 1 year from date of approval of incentive.

ENERGY CONSERVATION / EFFICIENCY

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ELIGIBLE COMPANIES (a) Companies Providing Energy Conservation / Efficiency

Services

PS with tax exemption of 100% of statutory income for 10 years; or

ITA of 100% on qualifying capital

expenditure incurred within a period of 5 years to be utilised against 100% of the statutory income for each year of assessment.


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(b) Companies which incur capital expenditure for

conserving energy for own consumption

ITA of 100% on qualifying capital expenditure incurred within a period of 5 years to be utilised against 100% of the statutory income for each year of assessment.


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CRITERIA

• The company must be locally incorporated under the Companies Act 1965

• Companies which provide EC/EE services must carry out performance contracting services activities to conserve the usage of energy

Performance Contracting Services

Undertake the EC/EE project on behalf of the client (including financing), on the basis of recovery of all costs from agreed sharing of

EC/EE savings over a specified period based on performance contract


Classified into: Electrical Industrial Equipment Sub-sector. i.e. apparatus

for switching/signaling/distribution, industrial lighting, office and other equipment

Electrical Component Sub-sector. i.e. wires, cables, conductors

Electrical consumer sub-sector. i.e. household appliances and others (bulbs and lightings)

ELECTRICAL INDUSTRY

Performance Approved – More than 440 projects In Operation – More than 320 companies Accounted for 51.8% of the total investment

approved in the E&E sector amounting to RM3.8 billion

ELECTRICAL INDUSTRY

Promoted Activities Uninterruptible power supplies Batteries excluding manganese dioxide, dry cells and

lead acid batteries Solar panels/modules Discharge tubes and products thereof Heat shrinkable cable joints and terminations Transformers or coils* Electrical household appliances and parts thereof* Electrical industrial equipment or parts thereof* Additional promoted activities and products for

promoted ares (other than Labuan).i.e. Sabah, Sarawak, Kelantan, Terengganu, Pahang and District of Mersing in Johor)

ELECTRICAL INDUSTRY

Incentives Pioneer Status or Investment Tax Allowance Pioneer Status – exemption of 70% for 5 years (100%

in the case of Eastern Corridor of Peninsular Malaysia, Sabah and Sarawak)

Invest Tax Allowance (ITA) – exemption of 60% of qualifying expenditure (100% in case of Eastern Corridor)

ELECTRONICS INDUSTRY

Performance More than 1,500 companies in production Output value – US$ 53.9 billion Registered strong output growth of 3.0% per annum Export – 3.4% growth rate Major export destinations – USA, Singapore, China,

Hong Kong and Japan

Classified into: Electronic component. i.e. semiconductor devices such as

wafers, integrated circuits, memories and microprocessors, optoelectronics, discrete devices, hybrids, arrays and high-reliabilility military products, capacitors, relays, switches, PCB

Consumer Electronics. i.e. home theater systems, TV receivers, AV products, DVD/VCD players, digital video games console.

Industrial Electronics. i.e. Telephone sets, mobile phones, digital transmission equipment, satellite receivers, computers, disk drives, monitors, DVD/CD-ROM drives, keyboard, printers, telecommunication equipment, data storage, professional and scientific equipment.


Promoted Products/Activities: Nanotechnology. i.e. carbon nanotube, biosensor, solar cell,

super high speed transistors/high capacity memory chips Semiconductors. i.e. silicon ingots, IC design, wafer

fabrication, advanced semiconductor packages. Electronics Components. i.e. Micro-Electro-Mechanical

Systems (MEMS), multi layer PCB, Flat panel display, surface mount components, substrates for ICs

Consumer Electronics. i.e. digital AV products, electronics games/games consoles, multimedia products, digital cameras.

Industrial Electronics. i.e. parts/accessories for automatic data processing, mechatronics and robotics, professional scientific, test and measuring equipment, biometrics






Incentives for High Technology Industries Incentives for Strategic Projects

PLASTIC PRODUCTS INDUSTRY

Performance More than 1,450 companies in production 80% are SMEs Turnover in 2012 – RM 16.1 billion Registered strong turnover growth of 19.8% Export – 34.2% growth rate Major export destination - the USA, Europe, Australia

and Japan

Classified into: Plastic packaging i.e. bags, films, bottles, containers E&E and automotive components fabrication i.e. Consumer and industrial products Bio-degradable plastics Other specialized plastic for medical and special purpose

use


Promoted Products/Activities Inflatable plastic products Specialised plastic films/sheets Geosystems products [Cellular Confinement System (CCS) and Porous Pavement System (PPS)] Plastic products for engineering use Precision engineering plastic products Multiwall pipes Expanded polystyrene foam* * Additional promoted activities and products for promoted areas (other than the Federal Territory of Labuan) i.e. Sabah, Sarawak, Perlis, Kelantan, Terengganu, Pahang and the district of Mersing in Johor.






RUBBER PRODUCTS INDUSTRY

Performance More than 500 companies in production Total export value – more than RM15.0 billion World’s leading producer and exporter of rubber

products

Classified into Latex products – more than 150 companies – major

producer and exporter of latex products i.e. catheters, latex thread and medical gloves

Tyres and tyre-related products – more than 120 companies with 10 companies producing tyre while remaining companies producing tyre retreads, inner tubes and other accessories.

Industrial and general rubber products – more than 180 companies- wide range of products such as anti-vibration mountings, belting, hoses, tubing, seals and sheeting for the automotive, electrical & electronics, machinery, & equipment and construction


Promoted Products/Activities Tyres – earthmover, agricultural, commercial vehicle, motorcycle, aircraft Retreading of aircraft tyres Latex products i.e. gloves, condoms, catheters, fabrics, carper underlay*, swimming caps*, balloons*, toys*, latex thread* Dry rubber products i.e. beltings, hoses, pipes, tubing, rubber profiles, inflatable rubber products, seals, gaskets, washers, anti- vibration, linings, floorings, moulds Reclaimed rubber Rubber support * Additional promoted activities and products for promoted areas (other than the Federal Territory of Labuan) i.e. Sabah, Sarawak, Perlis, Kelantan, Terengganu, Pahang and the district of Mersing in Johor.






www.mida.gov.my 3

AFTA A Potential Market

www.mida.gov.my 4

Integrated domestic ASEAN market of more than 600 million people with total GDP of US$ 1.8 trillion.

Efficient & competitive base for foreign direct investment (FDI).

Access to cost effective source of raw materials & components.

Benefits of locating in Malaysia

In 2010 total intra-ASEAN trade is at US$ 519 billion, which accounted for 25.4% of ASEAN’s global trade (US$ 2,045 billion).

Malaysia – 5th largest contributor to intra-ASEAN trade for 2010, accounted for 18.3% valued at US$ 95.2 billion.

Intra-ASEAN Trade

AFTA

DEVELOPMENT CORRIDORS

IRDA : ISKANDAR MALAYSIA • Tourism Related Services • Healthcare • Education Services • Logistics • Creative Industries • Financial Advisory

NCER : NORTHERN CORRIDOR ECONOMIC REGION • Agriculture • Tourism & Healthcare • Manufacturing • Education

SCORE: SARAWAK CORRIDOR OF RENEWABLE ENERGY

• Agriculture • Tourism • Manufacturing • Oil based sectors

ECER : EAST COAST ECONOMIC REGION • Agriculture • Tourism • Manufacturing • Education • Oil, Gas & Petrochemical

SDC : SABAH DEVELOPMENT CORRIDOR • Agriculture • Tourism • Manufacturing • Logistics

REGIONAL ECONOMIC CORRIDORS IN MALAYSIA

3rd Attractive Location For Outsourcing Destinations – A.T. Kearney Global Services Location Index 2011

10th For FDI Confidence Index 2012

– A.T Kearney

18th For Ease of Doing Business – World Bank’s Doing Business 2012 Report

MALAYSIA’S INTERNATIONAL RANKINGS

• Political & Economic Stability • Pro-business Government • Attractive Investment Incentives • Good Infrastructure / connectivity • Sound Banking System • Harmonious Industrial Relations • Young & Educated Labour Force • Excellent Track Record • Quality of Life

WHY MALAYSIA ?

Please visit us at www.mida.gov.my

[email protected]

MALAYSIAN INVESTMENT DEVELOPMENT AUTHORITY

Regional Establishments • Operational Headquarters (OHQ) • International Procurement Centre (IPC) • Regional Distribution Centre (RDC) • Regional Office/Representative Office

Logistics • Integrated Logistics Services • Cold Chain Facilities


Environmental Management Energy conservation/efficiency Energy generation, using renewable energy sources Storage, treatment and disposal of hazardous waste Recycling of agricultural waste and agricultural by-

products

Business Services Shared services outsourcing Research & Development (R&D) ICT Services Market Support Services Film & Video Production & Post Production


Education

Technical, Vocational & Science Training Healthcare Travel (Medical Tourism)

Private hospitals


• Guidelines on the Manufacturing License • Policy on Equity Ownership • Policy on Employment of Expatriates

INVESTMENT POLICIES

• The Industrial Coordination Act 1975 (ICA) requires manufacturing companies with shareholders’ funds of RM2.5 million and above or engaging 75 or more full-time employees to apply for manufacturing license.

Automatic Approval for Manufacturing License

• Automatic approval of manufacturing license is given for non-sensitive industries.

Guidelines on Manufacturing License

INVESTMENT POLICIES

Equity Guidelines • 100% foreign equity ownership is allowed,

irrespective of the level of exports

Guidelines on Repatriation of Profits • No restriction imposed to foreign companies investing in Malaysia on: - Repatriation of capital

- Interest - Profits - Dividends

INVESTMENT POLICIES

Companies No. Of Post Eligible Duration

Foreign paid-up capital of US$2 million and above

Up to 10 posts (including 5 key posts)

• Key post – permanent • Exec. post – 10 years • Non-exec. post – 5 years

Foreign paid-up capital of more than US$200,000 but less than US$2 million

Up to 5 posts (including at least 1 key posts)

• Key post – permanent • Exec. post – 10 years • Non-exec. Post – 5 years

Guidelines on Employment of Expatriate Personnel

Automatic Approval:

INVESTMENT POLICIES

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INCENTIVES FOR THE MANUFACTURING SECTOR

1. Pioneer Status (PS) Income tax exemption, ranging from 70% to 100% of statutory

income for a period of 5 to 10 years 2. Investment Tax Allowance (ITA)

ITA of 60% to 100% on qualifying capital expenditure incurred for a period of 5 to 10 years. The allowance can be offset against 70% to 100% of the statutory income for each year of assessment.

3. Reinvestment Allowance (RA) RA of 60% on qualifying capital expenditure for 15 consecutive years commencing from the 1st year the investment is made.

MAJOR INCENTIVES

Exemption from Import Duty on Raw Materials / Components Exemption from Import Duty and Sales Tax on Machinery and Equipment

IMPORT DUTY AND SALES TAX EXEMPTIONS

Classified into Two Major Sectors Manufacture/assembly of motor vehicles Component parts manufacturers

National Projects (4) Perusahaan Otomobil Nasional Bhd. (PROTON) Perusahaan Otomobil Kedua Nasional (PERODUA) Industri Otomotif Komersial (INOKOM) Malaysian Truck and Bus (MTB) (Isuzu Malaysia Sdn. Bhd.)

AUTOMOTIVE INDUSTRY

Assemblers - 9

Composite Body Sports Car Makers – 3

At Present about 50 franchise holders who have rights to assemble various makes and models of passenger and commercial vehicles

Total Installed Capacity – 963,300 units per year

AUTOMOTIVE INDUSTRY

Performance Production - 526,194 unit (484,237 units passenger vehicles

and 41,957 units commercial vehicles) Sales – 550,391 units (494,264 units passenger vehicles and

56,127 units commercial vehicles)

Component Industry About 700 component manufacturers (226 PROTON

Vendors and 161 Perodua vendors) Most of component manufacturers are locally owned Major foreign companies are VDO, Robert Bosch, Delphi, ZF

Steering, Sumitomo Electric, TRW Steering and Toyota Auto Body.

AUTOMOTIVE INDUSTRY

New Automotive Policy (NAP) – 1.1.2010 New license for: - luxury passenger vehicles 1800 c.c and above and on the road price not less than RM 150,000.00 (Approx. EUR 37,500.00) - Hybrid and electric vehicles - Pickup trucks - Commercial vehicles, and - Motocycles with engine of 200 c.c. and above Import duty and Excise Duty for CBU and CKD maintained. Gazetted price of imported used CBU units Better incentives for manufacture of brake, transmission, airbag

and steering Manufacture of hybrid/electric vehicles will be granted 100% ITA or

PS for 10 years, training and R&D grants

AUTOMOTIVE INDUSTRY

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MACHINERY INDUSTRY

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Sub sector RM million

No. of project

Power Generating M&E 77 5 Metalworking Machinery 8.7 2

Specialized M&E for Specific Industry 734.3 28

General Industrial M&E, Components and Parts 1,095 57

TOTAL 1,915 92

INVESTMENTS APPROVED IN 2010 BY SUB-SECTOR

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IMPORTS OF MACHINERY & EQUIPMENT

Source: MATRADE

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EXPORTS OF MACHINERY & EQUIPMENT

Source: MATRADE

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1. Specialised/process machinery or equipment for specific industry

2. Robotics and factory automation equipment

3. Machine tools

4. Material handling equipment

5. Packaging machinery

6. Plastic injection machines

7. Plastic extrusion machines

8. Modules for the above M&E

TARGETED MACHINERY & EQUIPMENT

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Pioneer Status up to 10 years full income tax exemption for targeted high tech and specialized M&E; or

Investment Tax Allowance up to 100% of qualifying capital

expenditure incurred within 5 years for income tax exemption

Criteria:- − Targeted Machinery & Equipment − Level of Investment − Level of Technology and R&D − Transfer of Technology − Spin off/ Outsourcing

SPECIAL INCENTIVES FOR M&E

Documents

“Business Opportunities in Malaysia”2 Ahmad Tajudin Omar Director . MIDA Munich . 14th June, 2012, Thursday . Prague