TRENDS & INVESTMENT TRENDS & INVESTMENT OPPORTUNITIES IN THE OPPORTUNITIES IN THE MANUFACTURING & MANUFACTURING & SERVICES SECTOR IN SERVICES SECTOR IN MALAYSIAMALAYSIA
WORLD SME CONFERENCE13th DECEMBER 2007
TRENDSTRENDS•GLOBALGLOBAL•MALAYSIAMALAYSIA
MALAYSIAN MALAYSIAN OPPORTUNITIESOPPORTUNITIES•MANUFACTURINGMANUFACTURING•SERVICESSERVICES
WORLD SME CONFERENCE13th DECEMBER 2007
MALAYSIA INTERNATIONAL TRADE & INDUSTRY’S MALAYSIA INTERNATIONAL TRADE & INDUSTRY’S AGENCIESAGENCIES
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Small and Medium Enterprises (SMEs)
are increasingly becoming the backbone of the Malaysian economy
as well as that of many other developing countries.
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If a nation wants to achieve sustainable economic growth,
developing a group of diverse and competitive SMEs is the way to go
in future, as evidenced by the experience of the developed
countries of the world.
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SMEs have become a force to be reckoned with, both locally and globally. According to the 2005 Census of Establishment and Enterprise, a whopping 99.2% of Malaysian business establishments is made up of SMEs, of which about 80% are micro enterprises.
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The census results further showed that SMEs are a major source of employment, providing jobs for over 5.6 million workers, which accounts for 56% of total employment, and contributed 32% of the country’s gross domestic product (GDP).
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The Malaysian Government has extended substantial support to domestic SMEs by pursuing policies, initiatives and programs that focus on strengthening the enabling business infrastructure, building the business capacity of SMEs and enhancing access to financing.
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The SMI Association of Malaysia was established in 1995 to promote and provide support to Small and Medium industries, enterprises and businesses in Malaysia to nurture growth.
It does so by organizing large-scale conferences, exhibitions, awards, road shows and trade missions, among others.
It also engages itself with dialogues with the relevant authorities in Malaysia to provide feedback to initiate better avenues, facilities and infrastructure for SMEs to grow their businesses and ensure their sustainability.
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SMI Association of Malaysia
Vision:To transform SMEs into an economic
powerhouse of the country by 2020
Mission:To instill and eventually ingrain deeply the
concept of “learning organisation” into SMEs and encourage them to be export-oriented
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Objectives of SMI Association of Malaysia
1) To advocate the interests and needs of the small medium scale industries in Malaysia.
To help promote and develop SMEs in Malaysia.
To organise SMEs into a more cohesive group with a greater voice.
To improve the efficiency, effectiveness, productivity and performance of SMEs through a series of well-planned resources development programmes and road shows.
MALAYSIAN ECONOMY
GDP Growth 5.7 % (*2nd quarter 2007)
Per Capita Income US$5,388 Inflation 2.5%Unemployment 3.5% Trade Surplus US$30.9 billion (*June 07) International Reserves US$96.8 billion (*30 Aug 07) Manufactured Exports to 80.8%Total Exports
Malaysia is the 19th largest trading nation in the world
Source: Bank Negara /Economic Report 2006/2007, Ministry of Finance
MALAYSIA’S GROSS DOMESTIC MALAYSIA’S GROSS DOMESTIC PRODUCT IN 2006PRODUCT IN 2006
Services58%
Manufacturing31.7%
Agriculture7.9%
Mining 6.6%
Construction2.5%
30.2 30.1
30.931.6 31.5 31.7
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30
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32
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Sh
are
of
Man
ufa
ctu
rin
g S
ecto
r to
GD
P (%
)
2001 2002 2003 2004 2005 2006
Year
Contribution of the Manufacturing Sector Contribution of the Manufacturing Sector
to the GDP (2001 – 2006)to the GDP (2001 – 2006)
of the Manufacturing &Services Sector
PERFORMANCE
Source : MITI
TOTAL APPROVED MANUFACTURING PROJECTS
2006 –2007 (Jan-Sept)
YearNo. of
projects
Approved Investments
(US$ billion)
Domestic Foreign Total
2006 1,077 7.0 5.5 12.5
2007
(Jan-Sept)702 5.1 6.2 11.3
Total 1,779 12.1 11.7 23.8
Approved Investments In The Manufacturing Sector by Major Country
2006 – September 2007Country No. Of
ProjectsPotential
EmploymentApproved
Investments (US$Million)
Japan 123 16,784 2,823
Netherlands 17 6505 1,360
Singapore 213 21,645 1,240
USA 61 6672 1,005
Germany 37 5164 568
United Kingdom
32 1955 266
China 29 2138 50
Approved Investments In The Manufacturing Sector by Major Industry
2006 – September 2007Country No. Of
ProjectsPotential Employ
ment
Domestic Investment(US$Million)
Foreign Investment (US$Million)
Electrical & Electronic Products
286 51,002 748 5,269
Chemicals & Chemical Products
209 8,276 2,216 1,376
Plastic Products 148 10,595 208 336
Machinery Manufacturing
174 7,427 287 290
Rubber Products 59 7,493 184 213
Fabricated Metal Products
192 8,456 247 182
Transport Equipment
102 7,754 496 143
Source : MITI
TOTAL IMPLEMENTED MANUFACTURING PROJECTS
( As at 31 December 2006)
No. of projects
Implemented Investments
(USD billion)
Domestic Foreign Total
13,808 38.0 42.8 80.8
FOREIGN INVESTMENT IN MANUFACTURING PROJECTS IMPLEMENTED BY MAJOR
COUNTRY ( as at 31 Dec 2006 )
CountryNo of
ProjectsTotal Investments
(USD bil)
Japan 2,155 10.5
USA 601 9.3
Singapore 2,292 4.4
Taiwan 1,397 4.3
Germany 278 3.3
Netherlands 125 2.4
Korea 252 1.6
United Kingdom 327 1.02
Hong Kong 388 562 mil
Switzerland 95 502 mil
E & E58%
Petroleum & Petrolum Products
9%
Food 3%
Chemicals8%
Transport Equipment
7%
Basic Metal6%
Non-metallic Mineral
6%
MANUFACTURING PROJECTS IMPLEMENTEDMANUFACTURING PROJECTS IMPLEMENTEDWITH FOREIGN PARTICIPATIONWITH FOREIGN PARTICIPATION
BY MAJOR INDUSTRY, BY MAJOR INDUSTRY, (as at 31 Dec (as at 31 Dec
2006)2006)
Manufacturing Projects Approved With Participation From China,
2006 - September 2007
Source : MITI
No of ProjectsTotal Investment
(US$)
29 50.2 million
Manufacturing Projects Implemented With Participation From China
( as at 31 Dec 2006 )
Source : MITI
No of ProjectsTotal Investment
(US$)
70 138.8 million
Projects Implemented With Participation From China By Major Industry,
As At December 2006
Source : MITI
IndustryTotal Investments
(US$ Million)
Basic Metal Products 73.6
Rubber Products 12.5
Wood & Wood Products 11.4
Chemical & Chemical Products
9.8
Transport Equipment 8.9
Plastic Products 7.9
Electronics & Electrical Products
4.4
Machinery & Equipment 4.0
Major Implemented Manufacturing Projects with Participation From China,
(as at December 2006)COMPANY ACTIVIES / PRODUCTS
Rexpak Sdn. Bhd. Thermoformed plastic containers
Asia Star Printing Equipment (M) Sdn. Bhd.
Offset printing plates (recycled & new)
Nippon Motor Assemblers Sdn. Bhd.
Manufacture of motorcycles & scooters (125cc & above)
Tatt Win Rubber Industries Sdn. Bhd.
Rubber compound
Chee Kuang Ceramic Trading Sdn. Bhd.
Ceramic tiles
Source : MITI
COMPANY ACTIVIES / PRODUCTS
Ji Kang Dimensi Sdn. Bhd. Steel slabs & steel billets
K-Advance Sdn. Bhd. Veneer, wood chips & sawn timber
Intraco Biopolymer Sdn. Bhd.
Bridgeable starch resin
Kejora Teguh Sdn. Bhd. Composite stainless steel/carbon steel pipes
of the Manufacturing RelatedServices Sector
PERFORMANCE
INVESTMENTS IN APPROVED SERVICES ACTIVITIES (As at September 2007)
Source: MITI
Type of Establishment
No. of Approvals
Estimated Annual Business Spending
(USD million)
Operational Headquarters 145 410.68
International Procurement Centres
201 1,393.52
Regional Distribution Centres 17 74.63
Regional Offices 624 NA
Representatives Offices 1,402 NA
TOTAL 2,389 1,878.83
Investment Policies
• Policy on Equity Ownership• Guidelines on Repatriation of Profits
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
•Equity Guidelines
Liberalisation on Employment of Expatriates
Companies with No. of Post Eligible Duration
Foreign paid-up capital of US$ 2 million and above
Up to 10 posts
(incl. 5 key posts)
Key post-permanent
• Executive post – 10 years
• Non-Exec. post – 5 years
Foreign paid-up capital
> US$200K but <US$ 2 mil.
Up to 5 posts
(Incl. at least 1 key posts)
• Key post-permanent
• Executive post – 10 years
• Non-Exec. post – 5 years
for the Manufacturing SectorIncentives
Pioneer Status (PS)Income tax exemption, ranging from 70% to 100% of statutory income for a period of 5 to 10 years.
Investment Tax Allowance (ITA)
ITA of 60% to 100% on qualifying capital expenditure incurred for a period of 5 to 10 years.
Reinvestment Allowance (RA) Granted for 15 consecutive years commencing from
the 1st year the investment is made.
Pre-Packaged Incentives
Granted based on request of the company (negotiable) and the merits of each case
Major Incentives Provided
Import Duty and Sales Tax Exemptions
• Exemption from Import Duty on Raw Materials/Components
• Exemption from Import Duty and Sales Tax on Machinery and Equipment
Third Industrial Master Plan (2006-2020)
Malaysia – Towards
Global Competitiveness
Strategic Thrusts
Strengthening Malaysia’s position as major global trading nation
Generating investments in targeted growth areas
Integrating Malaysian companies into regional and global networks
Ensuring sustainable industrialization, with consideration of environmental and regional balance
Sustaining manufacturing sector’s significant contribution to economic growth
Strategic Thrusts
Positioning services sector as major source of growth
Facilitating development and application of technologies
Developing innovative and creative human capital
Strengthening role of private sector institutions
Creating competitive business operating environment
Investment Targets
Average Annual Investments(RM Billion)
Manufacturing
Services
2006 - 2020 27.5 45.8
Targeted Industries in Manufacturing Sectors
Non-Resourced Based Industries
Electrical and electronics Medical devices Textiles and apparel Machinery and equipment Metals Transport equipment
Targeted Industries in Manufacturing Sectors
Resourced Based Industries
Petrochemicals Pharmaceuticals Rubber and rubber
products Wood based products Oil palm-based industry Food processing
Targeted Sub-sectors in Services
• Business and professional services
• Logistics• ICT services• Distributive trade• Education and training• Construction• Health• Tourism
Measures Taken To Enhance Malaysia’sCompetitiveness
• Reduction in Corporate Income Tax- 26% in 2008 and 25% in 2009
• Enhancing the Effectiveness of the Public Delivery System (PEMUDAH)
• Establishment of the Cabinet Committee on High Impact Projects
Cont.
• Establishment of Immigration Offices in all relevant government agencies
• Abolishment of the Real Property Gains Tax ( effective 1 April 2007 )
• Establishment of the Malaysian Logistics Council and the Malaysian Services
Development Council
MALAYSIA’S COMPETITIVENESS RANKINGMALAYSIA’S COMPETITIVENESS RANKING
• 14th PREFERRED DESTINATION FOR FDI – UNCTAD 2007
• 26th MOST COMPETITIVE ECONOMY IN THE WORLD & 9th MOST COMPETITIVE COUNTRY FOR BUSINESS EFFICIENCY
World Economic Forum 2007
• TOP 3 ATTRACTIVE LOCATION FOR OFFSHORING & OUTSOURCING SERVICES
A.T. Kearney’s- Annual Global Services Location Index
(in 2005, 2006 and 2007)
• 12th RANK GLOBALLY FOR CAPITAL ACCESS
Milken Institute, USA- Capital Access Index (CAI) 2006
• 3rd CHEAPEST CITY IN THE WORLD FOR RENT OF PRIME OFFICE SPACE
King Sturge, UK- Global Industrial and Office Rents Survey 2006
• Political & Economic Stability
• Pro-business Government
• Liberal Investment Policies
• Transparent Policies
• Policy of Welcome
• Well Developed Infrastructure
• Harmonious Industrial Relations
• Trainable & Educated
Labour Force
• Quality of Life
• Good Track Record
Why Malaysia ?Why Malaysia ?
April 12, 2023 www.mida.gov.my
PERFORMANCE OF MANUFACTURING AND SERVICES SECTORS
2006
GDP (RM billion) 277.3
Contribution to GDP (%)• Manufacturing • Services
32.058.2
Share of manufactured exports (%) 76.7
Share to total employment (%)• Manufacturing• Services
29.151.3
The International Positioning for IDR
Competitive Advantage
• Political Stability• English Speaking• Proximity to Singapore• Well located for geographical diversification
Mega Trends
• Globalisation• Global Supply Chains• Push for Diversity• High Financial Liquidity
Regional Trends
• Tap into Growth of China & India
• Increased South East Asia integration (AFTA)
Fast Facts on IDR
SingaporeArea – 690 km2. Population – 4.1 mDensity – 6003
Dubai Area – 3,885 km2. Population – 1.4 m Density – 360
Hong Kong Area – 1,095 km2. Population – 6.9 m Density – 6301
ISKANDAR DEVELOPMENT REGIONArea – 2,217 km2
Population – 1.4 m Density – 631Estimated Population 2025: 3 mEstimated Density 2025: 1353
Opportunities for Arbitrage
5IDR
15S ing apore – J urong *
US D per s q. ft.
Indus trial – Averag e P ric es
5IDR
15S ing apore – J urong *
US D per s q. ft.
Indus trial – Averag e P ric es
10IDR
400S ing apore
US D per s q. ft. R es idential – Averag e P ric es
10IDR
400S ing apore
US D per s q. ft. R es idential – Averag e P ric es
Note: Figures are for 2005, sources include World Bank, MoF’s Economic Report and Khazanah’s estimates* Based on 30 year lease
4,772J ohor
9,625K uala L umpur
4,997Malays ia
26,870S ing apore
US DG DP P er C apita
4,772J ohor
9,625K uala L umpur
4,997Malays ia
26,870S ing apore
US DG DP P er C apita
** Detached house / Bungalow – Land Only
**
Present and Future Structure of South Johor Economic Region (SJER) Economy
EXISTING SECTORS Electrical and Electronics Petrochemicals and Oleo Chemicals Food and Agro Processing Logistics Services Tourism Related Services
TARGETED GROWTH SECTORS Creative Industries (ICT and Multimedia) Educational Services Financial Advisory and Consulting Services Healthcare Services
Incentives Offered- IDR for Priority Sectors
Exemption from the Foreign Investment Committee Rules;
Freedom to source capital globally; Employment of expatriates; Exemption from corporate tax for a period
of
10 years ( commence operations before end of 2015) and
Exemption from withholding tax on royalty and technical fee payments to non-
residents for a period of 10 years
Northern Corridor Economic Region The Northern Corridor Economic Regiondevelopment programme is aGovernment initiative to accelerateeconomic growth and elevate income levels in the north of Peninsular Malaysia – encompassing the states of
Perlis, Kedah, Pulau Pinang and
the north of Perak.
* The NCER initiative will span from 2007 to the end of the 12th Malaysia Plan period, i.e. 2025.
Northern Corridor Economic Region Promoted Sub-Sectors in NCER
•Paddy Farming
•Fisheries and Aquaculture
•Animal Husbandry
•Fruit & Vegetables
•Herbs, Horticulture and Premium Specialty Food
•Commercial Crops: Rubber and Oil Palm
PROMOTION• Foreign Direct Investment• Domestic Investment• Cross Border Investment• Business matching through • Enterprise Connect• Manufacturing Services
EVALUATION• Manufacturing licences
• Tax Incentives (including for R&D,
Hotel & Tourism, Training &
Manufacturing related services)• Expatriate posts • Duty Exemption• OHQ, RDC & IPC status
PLANNING Planning for industrial development• Recommend policies and strategies on industrial promotion and development• Formulation of strategies, programmes and initiatives for international economic cooperation
FOLLOW-UP/MONITORING• 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
OUR FUNCTIONS OUR FUNCTIONS
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The SME International Trade Fair 2008, organized by the
SMI Association of Malaysia,
is all set to propel local Small and Medium-scale Industries, Enterprises and Businesses in Malaysia into global arena.
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The inaugural trade fair, which is to be made an annual event of SMI Association of Malaysia, is an open invitation to all SMEs and SMIs in Malaysia as well as the fast-growing ASEAN region to join forces and share access to the expertise and resources throughout the region.
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Taking into account such important facts and figures, the SME International Trade Fair 2008 is indeed a relevant platform for local and regional SMEs to showcase their products and services, to grow together on a regional as well as global basis for the benefit of all.
OUR GLOBAL NETWORK
STATE BRANCHES
SELANGOR
NEGERI SEMBILAN
Thank You
www.smisme.com
for your kind attention