Enhancing National Policies
This section describes the most recent investment-specific and investment-related measures per ASEAN member state.
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Malaysia
Year Category Sub Category Description 2013 Reforms Underway Investment Policy Peer Review (IPPR) Malaysia has also undertaken the Investment Policy Peer Review (IPPR) by the Investment Committee of OECD in 6 areas: Investment Policy, Investment Promotion and Facilitation, Corporate Governance, Responsible Business Conduct, Infrastructure and Financial Sector Development and Green Growth. The review aims to serve as an independent assessment and identify gaps in policy areas for improvement. The report of the IPPR is expected to be published by end 2013. 2014 DEVELOPMENT IN INVESTMENT REGIME OR BUSINESS ENVIRONMENT Goods and Services Tax (GST) Malaysia has announced the abolishment of the sales tax and services tax and these two taxes will be replaced by a single tax known as the Goods and Services Tax (GST) beginning 1 April 2015. GST is a value added tax that is based on multilevel tax based on consumption.
Any type of businesses with more than RM500,000 taxable sales are required to register for GST in order to claim GST refund or to pass the GST tax to consumer. The GST rate is fixed at 6 per cent.National Automotive Policy (NAP) 2014 Malaysia recently unveiled the National Automotive Policy (NAP) 2014. NAP 2014 outlines key directions and strategies in preparing the local automotive players towards the liberalisation of the industry.
There are 6 roadmaps and action plans developed to complement the implementation of the NAP 2014. These roadmaps also serve as guidelines for the transformation of the local automotive industry.Liberalisation in Financial Markets To further promote investment in the financial markets, Malaysia has announced liberalisation measures by removing the mandatory requirement for credit ratings, effective 1st January 2017. This will broaden the corporate bond market, and enable investors to further diversify their portfolios.
From 1st January 2015, flexibilities will be accorded with regards to credit ratings and the tradability of unrated bonds and sukuk.
The equity shareholding for credit rating agencies will also be liberalised, and international credit rating agencies with full foreign ownership will be allowed in the Malaysian market from 1st January 2017.
In the spirit of the ASEAN Economic Community (AEC), and to further encourage growth and competition within the unit trust industry, foreign corporations will be allowed to own 100 per cent of shares in unit trust management companies, and there will be no barrier to entry for new foreign unit trust management companies coming into Malaysia.Invesment Policy Review The OECD Investment Policy The OECD Investment Policy Review of Malaysia was launched on 27 November 2013, acknowledges the good track record of the country in investment promotion and recognises the country’s achievements in building global competitiveness in high-end manufacturing and pushing out its technology frontier.
This review assesses the investment climate in Malaysia, including the institutional and legislative framework for investment. It focuses on policy options in the area of investment, infrastructure, finance, responsible business conduct, corporate governance, and green investment and discusses measures to help revive both foreign and domestic investment.2015 DEVELOPMENT IN INVESTMENT REGIME OR BUSINESS ENVIRONMENT Goods and Services Tax (GST) •Malaysia has implemented the Goods and Services Tax (GST) or also known as Value Added Tax (VAT) in other parts of the world on 1 April 2015. It is aimed to streamline the country’s tax system to be more effective, efficient, transparent and business friendly.
• Any type of businesses with annual turnover of taxable supply of more than RM500,000 are required to register for GST. The GST rate is fixed at 6 per cent.The 11th Malaysia Plan (11MP) The 11th Malaysia Plan (11MP) launched on 21 May 2015, aims to realise the transformation of Malaysia into a high-income nation in 2020. It charts Malaysia’s direction for the next five years to achieve this goal. This will be the final lap before Malaysia achieves developed nation status, which is what Vision 2020 aims for. The 11MP focuses on achieving the high-income national target set out in the Economic Transformation Programme. The ecosystem approach will continue to be adopted and enhanced for both the manufacturing and services sectors to strengthen investments in these sectors. In this regard. The Government will continue to assume a pivotal role in bridging the human capital needs of individual potential investors. Among the new strategies in the next five years is to strengthen investments in the manufacturing and services sectors that have high Gross National Income (GNI) impact and have strong linkages with domestic industries. Malaysia has been adopting a more focused and targeted approach in attracting quality investments i.e. in high technology; skills, capital, knowledge, design and R&D intensive; export oriented and high value-
added industries as well as in new growth areas.Other new investment strategies include positioning Malaysia as a high-tech hub for manufacturing and services activities and transforming the domestic investment landscape. Moving forward, focus areas for the 11MP on Re-Engineering Economic Growth for Greater Prosperity encompass:
- Transforming services sector;
- Energising manufacturing;
- Modernising agriculture;
- Transforming construction;
- Growing dynamic SMEs;
- Translating Innovation to wealth; and
- Investing in competitive cities and regional economic corridors.Several big ticket public goods or infrastructure projects funded both by the private and
public sectors to boost growth have been announced in the 11MP. These projects include additional Mass Rapid Transit (MRT) and Light Rail Transit (LRT) rail lines. It is hoped that such initiatives would push GDP and GNI annually so that Malaysia reaches the RM55,695 GNI per capita target by 2020 which has been set by the Government.The Malaysian National Development Strategy (MyNDS) A new approach known as the Malaysian National Development Strategy (MyNDS) is being formulated. MyNDS will be a key basis to planning and preparation of programmes and projects under 11MP. The emphasis is on using limited resources optimally, with focus on high-impact projects and programmes at low cost as well as efficient and rapid implementation.
Strengthening Islamic Financial Market
• The Malaysian Islamic finance accounts for 25% of total assets in the banking system.
Internationally, Malaysia remains as the largest sukuk market accounting for 60% of
the global sukuk market.
• The Government will introduce a new shariah-compliant investment product in 2015
called the Investment Account Platform (IAP) and scheduled to be effective from 1
September 2015 to 31 August 2018. IAP will provide opportunities to investors in
financing entrepreneurial activities and developing viable SMEs. At the
same time, IAP will be a platform to attract institutional and individual investors
including high net worth individuals to invest in the Islamic financial market. Initially,
IAP will be implemented with a startup fund of RM150 million as announced in the
2015 Budget.Skills Training Programmes • The Government will increase skills training programmes in institutes under the
Department of Labour. The training programme is for students with Malaysia Skills
Certificate, university or college graduates as well as industrial workers particularly
semi-skilled workers. In order to optimise the 32 training institutes under the Department
of Labour, the Government will leverage on the double shift training capacity for full-time
programmes comprising 176 courses with high demand in the labour market. With
intake of two times per year, an estimated 48,000 students will be trained in the five
year period of implementation with an allocation of RM570 million.
• Besides this, there are also various other training/capability building programmes by
various institutions such as Malaysia Automotive Institute (MAI), Centre for Instructor
and Advanced Skill Training (CIAST), IKRAM Training and Infrastructure Development
Institute (ITIDI), Institute For Health Management (IHM), Institute of Diplomacy And
Foreign Relations (IDFR) and Institute of Medical Research Malaysia (IMR).2016 DEVELOPMENT IN INVESTMENT REGIME OR BUSINESS ENVIRONMENT Increase in Minimum Wage • In the on-going effort to increase the standard of living as well as reduce
dependency on cheap labour, effective from 1 July 2016, the manufacturing and
services sector’s minimum wage will be increased to RM1,000/month (for
Peninsular) and RM920/month (for East Malaysia).
• The new minimum wage is expected to boost productivity through more equitable
distribution of income between capital owners and workers, whilst ensuring
Malaysia achieves its goal of high income nation by year 2020.INCENTIVES Incentives for Waste Eco Parks (WEPs) This new incentive is divided into three categories:
a) Incentive for WEP Developers (Companies)
b) Incentive for WEP Managers (Companies)
c) Incentive for WEP Operators (Companies)
The objective of this incentive is to encourage the development of
infrastructure within Waste Eco Parks such as:
- Basic infrastructure such as roads, drainage system, utilities and
sewerage;
- Building & facility for waste receiving and separation;
- Waste water treatment facility;
- Recycling / recovery / treatment facility; and
- Education & awareness centre; and/or Disposal facilityIncentive for Shipbuilding and Ship Repair Industry This incentive encompasses ship construction, repair, conversion, upgrading,
maintenance, repair & overhaul (MRO) and also corresponding services such
as components maintenance, repair and overhaul.
The activities covered under this incentive include:
- Building of all types of ships;
- Ship yards that provide facilities and services;
- Conversion /modification of tankers and all other type of Oil & Gas
support vessels
- Services provided for ship’s main and auxiliary
equipment/component/systems.Incentive for Green Technology The scope of this incentive which was introduced in 2014 has been expanded
to include more services that would be eligible for tax incentives. This is in line
with the evolving nature of the industry. Among the additional qualifying
activities are green building, green data centre, waste management, services
related to electric vehicle (EV), green certification and verification, and green
townshipIncentive for Independent Conformity Assessment Bodies (ICAB) The incentive for ICAB is intended to strengthen the ecosystem of testing,
inspection, validation and certification processes led by SIRIM in which the
proposed activities are critical to the industry but may not available in
Malaysia.
The incentive will complement Government’s effort to transform
manufacturing sector towards becoming more high-value, diverse and
complex product. At present, it is estimated that there are more than 600
laboratory tests in Malaysia, in which more than 80% of the labs are small and
unable to provide testing services to proposed sectors.2017 DEVELOPMENT IN INVESTMENT REGIME OR BUSINESS ENVIRONMENT Companies Act 2016 (CA 2016) The Companies Act, 2016 (CA 2016) will be implemented on a staggered basis with the first phase being effective from 31 January 2017. With the enforcement of the first phase of the CA 2016, the Companies Act, 1965 is repealed. The objective of the reform is to provide a regulatory framework and to accord protection to corporate directors and other stakeholders of a company The reform will modernise the Companies Act as follows:
Enhance internal control, corporate governance and corporate responsibility
Facilitate starting a business and reduce the costs of doing business
Simplify the compliance in the provisions
Provide flexibility in managing the affairs of companiesAmong the improvements are:
Introduction of single member/director company
Beginning from the date the CA 2016 becomes effective, a company may be incorporated by or have only one member and that single member can also be the sole director of the company. However, for public companies, the CA 2016 still retains the minimum requirement of 2 directors.
Change of “certificate of registration” to “notice of registration”
Effective from the enforcement of the CA 2016, The Suruhanjaya Syarikat Malaysia (SSM) will issue a notice of registration for the incorporation of a new company to confirm that provisions relating to the requirements for registration have been complied with in line with the requirements of the law.
Abolition of the authorised capital concept
Under the CA 2016, a company is no longer required to state its authorised capital. Instead, a company is required to notify its issued share capital and paid up capital and the related changes through the return of allotments.
Abolition of concept of shares with nominal value
With effect from 31 January 2017, any newly issued share will no longer be tied with the nominal value when the company was incorporated. A company may issue shares at a price depending on the factors affecting the current circumstances and needs of the company.
Companies are no longer required to have constitution or memorandum & articles of association
For a company which is incorporated beginning from 31 January 2017, the company has the option whether to adopt a constitution or otherwise. For a company which was incorporated before the CA 2016 came into effect, the existing constitution (memorandum & articles of association) will continue to be applicable to such companies until the companies resolve otherwise. However, it is still mandatory for a company limited by guarantee to have a constitution.Invesment Facilitation Malaysian Investment Development Authority (MIDA) Malaysian Investment Development Authority (MIDA), formerly known as Malaysian Industrial Development Authority, was set up in 1967 as the Government’s principal agency to promote, facilitate and coordinate all activities in the manufacturing sector, and since 2004, the services sector; and to advise the Minister of International Trade and Industry (MITI) on industry matters including the formulation of related policies. MIDA is the focal point and coordinator for all projects related to investment in the manufacturing and selected services sectors. The agency also coordinates all investment promotion activities through the Task Force on Investment which streamlines promotional programmes and collation of investment figures in the manufacturing and services sectors. As the central investment promotion agency and a key driver for Malaysia’s high income status, MIDA has established two new Divisions to facilitate investors as follows:
- Industry Talent Management and Expatriate Division
- Advanced Technology and Research & Development Division (ATRD)The Industry Talent Management and Expatriate Division’s main task is to facilitate investors in a more holistic manner and to address the missing link in facilitating the human capital needs of investors. The Division’s functions include:
- compilation of a comprehensive database on talent development programmes; and
- continue partnering TalentCorp in identifying sectors requiring skilled manpower.The Advanced Technology and Research & Development Division (ATRD) was established in MIDA to identify trends, new & emerging technologies and businesses. This is in line with the Government’s strategic move to lead the way in spearheading the adoption of smart manufacturing and Industry 4.0 in Malaysia, and to transition the industry players towards the adoption of automation and smart manufacturing concepts and technologies. By employing automation and the smarter way of manufacturing, it would enhance business productivity, efficiency and quality. In the larger scheme of things, it would eventually open new markets and drive economic growth, and provide high income jobs for the country. MIDA was also recently tasked to handle the “Government Regional Electronic Advancement Transformation (Great) Project”. GREAT was developed for establishing a focal point for investment attraction into the regional corridors and improve service delivery system at every Regional Corridor Authority (RDA). The handover of ownership of GREAT project to MIDA bodes well in strengthening the role and functions of MIDA as the main investment coordination agency and reference point for information on investments for all economic sectors. The two products under GREAT project support the initiatives proposed in the National Investment Coordination Lab organised by MITI and PEMANDU in March 2015:
- myCorridor Portal as a portal for collaboration between MIDA and the RDA allows MIDA to constantly update the value propositions in attracting investments in these corridors. Some features in the portal can be further enhanced.
- The Investors Management System (IMS) which is an online reporting system can be an effective monitoring platform on investment leads and approved projects as well as follow-through on projects to ensure implementation.Current Initiatives to Facilitate Investment Direct Cooperation between MIDA and Agencies at Federal and State levels in:
i. Securing infrastructural facilities, including land, factory sites, electricity and water supplies, telecommunications and others;
ii. Expediting approvals relating to Building Plans, Certificate of Fitness and Business Licences; and
iii. Handholding and assisting investors in obtaining all necessary approvals for projects until they are operational.MIDA’s dedicated Division, Post-Investment & Infrastructure Support, assists and facilitates existing investors in their investment projects with regards to post implementation issues such as utilities, Good and Services Tax (GST), security, etc. Setting up of the Industry Advisory Panels (IAPs) under MIDA for 6 Industries:
i. Electrical and electronics;
ii. Machinery and Equipment;
iii. Chemical;
iv. Aerospace;
v. Medical Devices; and
vi. Pharmaceutical.Key agencies stationed at MIDA's headquarters in Kuala Lumpur to advise investors on government policies and procedures
Department of Labour, Immigration Department, Royal Customs Malaysia, Department of Environment, Tenaga Nasional Berhad and Telekom Malaysia Berhad.Regular dialogues and consultation sessions with the business community including Chambers of Commerce, Industry Associations on Malaysia’s investment policies are undertaken by various Ministries and agencies before changes to laws, regulations and policies are made. An annual dialogue is also conducted by the Ministry of International Trade and Industry (MITI Annual Dialogue) with investors and business community through Chambers of Commerce, Industry associations to obtain feedback from the private sector on issues they face while operating in Malaysia. It also provides a platform for these parties to raise issues that affect their members. 2018 INVESTMENT REGIME OR BUSINESS ENVIRONMENT National Economic Advisory Council, eight Strategic Reform Initiatives (SRIs) i. reforming the complex array of incentives made available to the private sector which the Government is determined to create a dynamic ecosystem for entrepreneurship and innovation, where priorities for incentives will focus on firms developing high-value activities with spill-over benefits to the rest of the economy. ii. boosting private investment through improving the business environment by removing distortions and the high costs of doing business, which the Government empowered Malaysian Industrial Development Authority (MIDA) to take decisions and coordinate among the many government departments to facilitate start-ups and licensing; and iii. rebalancing the roles of the public and private sectors, giving greater prominence to private firms by reversing the trend of having public investment through Government-linked Companies (GLCs) larger than private investment, in which GLCs will be privatised in sectors where the private sector is operating effectively. Foreign Direct Investment (FDI) and Domestic Direct Investment (DDI) i. continuously improving national policies which include liberalizing investment related policies to further thrive investment, particularly the quality investments lured in the country leading to creation of more employment opportunities for Malaysians; ii. put emphasis to escalade productivity level covering the manufacturing and services sectors to achieve the annual productivity growth target of 3.7% by 2020 to ensure that Malaysia continues to be competitive with other countries, particularly within the region; and iii. pursuing new growth areas in the services sector by promoting activities to attract more highly value-added and knowledge-intensive investments that will enhance export of services and also creating high-income jobs in line with the government’s aspiration to become a developed nation. Invesment Facilitation Strategic Reform Initiatives i. strengthened access to credit through the new Companies Act 2016 that establishes a modern collateral registry; ii. strengthened minority investor protection by requiring greater corporate transparency, placing Malaysia as the 4th best country for protection of minority investors; and iii. improved infrastructure facilities to ease the handling processes at port terminal and facilitated import and export processes. Ministry of International Trade and Industry (MITI) Ministry of International Trade and Industry (MITI) has taken a proactive step in trying to address this issue by establishing a Task Force on US-China Trade Conflict in July 2018 to monitor and address the developments of the US-China trade conflict, as well as to coordinate inputs, access impact and feedback arising from these developments. Companies operating in Malaysia are encouraged to reach out to this Task Force on any challenges they are facing due to the on-going trade tension which the Task Force can be reached at taskforce.tc@miti.gov.my.
To ensure continuous effort towards this direction, MIDA is embarking on a new initiative to provide an investment coordination platform for Malaysian Companies in particular, to explore, connect and forge synergistic business opportunities. A dedicated team was established in MIDA to drive and foresee the potential successful collaboration in this initiative. This initiative will act as one of the enablers in supporting MIDA’s role in promoting investment and as a new strategy, moving forward. This initiative is a platform to gauge the companies’ interests in executing corporate exercises as a means to raise funds to propel expansionary growth aspirations.2019 DEVELOPMENT IN INVESTMENT REGIME OR BUSINESS ENVIRONMENT 11th Malaysia Plan, 2016-2020 (MTR-11MP) i. Driving productivity at the national,sector and enterprise levels to ensure sustainable and inclusive growth; ii. Promoting quality investment to spearhead economic growth; Embarking on initiatives to move up the value chain; iii. Strengthening exports and managing imports to improve the balance of payments; and iv. Emphasising a fiscal consolidation path to ensure sustainability in the medium-term. Strategy in MTR-11MP Undertake a comprehensive review of investment policies including and tax structure; Improve the management of existing investment incentives to optimise resources; and Encourage investment in Industry 4.0-related technology to reduce the gaps in the manufacturing sector. National policy on Industry 4.0, or Industry4WRD Malaysia has taken into account the challenging external environment and set a new target of average growth for real private investments for 2018 to 2020 at 6.1% (9.4% in 11MP). Average private investments have also been adjusted to RM252 billion in current prices (RM291 billion in 11MP).
In 2018, realised private investments, measured in terms of Gross Fixed Capital Formation (GFCF), totalled RM245.7 billion, an increase of 4.8% from the previous year (2017:RM234.5 billion). Malaysia is on track to achieve the MTR-11MP’s revised target of 6.1% of average growth of real private investment by the year 2020 based on the incremental total growth from 2017 to 2018.
Technological advancement has become an integral part of Malaysia’s growth as an industrialised nation. The Government is steadfast in technology adoption to provide for the requirements of investors based in the country. Malaysia is one of the most technologically developed countries amongst industrialising nations in the Association of Southeast Asian Nations (ASEAN) region.
Malaysia’s persistent drive to engage technological megatrend proves to be a great advantage to the industries in Malaysia. In response to digital transformation of the manufacturing sector and manufacturing related services, the National policy on Industry 4.0, or Industry4WRD was launched in 2018.
The Industry4WRD envisions Malaysia as a strategic partner for industries by facilitating companies to embrace smart manufacturing, primary destination for high-technology industries and total solutions provider for manufacturing sector and related services in the region.
The policy enhanced the country’s value propositions to investors, particularly in areas such as artificial intelligence, big data analytics, the Internet of Things (IoT), cloud computing and cyber security. Moving into digital innovation especially in products, processes and business models are the impetus of Industry 4.0, which will increase productivity and efficiency and significantly reduse product time to market.
The 2019 budget announced in November 2018 further supported the implementation of the Industry4WRD policy with allocation of RM210 million for 2019 to 2021 to assist the industry to adopt Industry 4.0Invesment Facilitation Malaysia Investment Development Authority (MIDA) MIDA will handhold companies until successful implementation. MIDA offers the following assistance to investors:
i. Direct consultation and co-operation with relevant agencies at both the Federal and states levels in matters such as:
- Securing infrastructural facilities, including land, factory sites, electricity and water supplies telecommunication and others; and
- Expediting approvals relating to Building Plans, Certificate of Fitness and Business Licences.
ii. To handhold and assist investors in obtaining all necessary approvals until the project is operational;
iii. To extend support to existing companies in planning expansion, diversification and other reinvestment projects; and
iv. To facilitatevisit and site investigations and supply chain infrastructures.Post implementation concerns are also acted upon swiftly by MIDA together with the relevant Ministries and institutions. Among the assistance offered are:
i. Assist companies in the implementation and operation of new projects (including electricity, communication, land matters);
ii. Extend support to existing companies in their expansion, diversification and re-investment projects; and
iii. Undertake periodic reviews of issues and formulate appropriate measures for the smooth implementation and operation of industrial projects.In order to assist investors, the senior representative of the following agencies are stationed in MIDA as follows:
i. Department of Immigration;
ii. Royal Malaysia Customs Deaprtments;
iii. Tenaga National Berhad (electric utility company);
iv. Telekom Malaysia Berhad (telecommunication company); and
v. Department of Labour.Designated Liaison Officers have been appointed from various Ministries/ Agencies as follows to assist investors with sectors other than manufacturing:
i. Department of Environment;
ii. Department of Safety and Health;
iii. Multimedia Development Corporation (MDeC);
iv. Ministry of Health;
v. Ministry of Tourism; and
vi. Ministry of Higher Education.2020 INVESTMENT REGIME OR BUSINESS ENVIRONMENT Malaysia's Shared Prosperity Vision 2030 (SPV 2030) Malaysia has implemented several overarching reforms to ensure that long-term economic growth is both more equitable and sustainable. Aligned with the World Bank’s Shared Prosperity agenda and the United Nations’ Sustainable Development Goals is Malaysia’s Shared Prosperity Vision 2030 (SPV 2030) which was launched on 5 October 2019.
SPV 2030 offers a new development narrative that primarily aims to provide a decent standard of living by holistically addressing income and wealth inequality in shifting from a low-skill labour-intensive economy to a knowledge-based economy. In addition, Malaysia has recently revised the Poverty Line Income (PLI) from RM980 to RM2,208 to ensure a better standard of living.These macro plans As the Eleventh Malaysia Plan/ 11MP (2016-2020) comes to a close, the Government is currently undergoing the process of reformulating the Twelfth Malaysia Plan (2021–2025), as well as the New Industrial Master Plan (2021–2030). These macro plans are being revised to take into account the myriad of challenges posed by the COVID-19 pandemic and will be launched by the first quarter of 2021.
COVID-19 has triggered a synchronized collapse in global economic activity. In particular, the retail, travel, leisure and manufacturing sectors were heavily affected by the government's imposition of the MCO to curb the spread of the virus from 18 March until 4 May 2020.
This means that realized private investments, measured in terms of Gross Fixed Capital Formation (GFCF), contracted for the fifth consecutive quarter. GFCF deteriorated by -4.6% in Q1 2020 (Q4 2019: -0.7%), resulting in the first period of negative growth in private investment in approximately 10 years.PRIHATIN Rakyat Economic Stimulus Package (PRIHATIN) To bolster business confidence, the government announced a series of stimulus packages to sustain high-quality investments. On 28 February 2020, a stimulus package valued at RM20 billion was announced, which indicated the commitment to sustaining public investments and accelerating planned investment projects for 2020.
On 27 March 2020, the PRIHATIN Rakyat Economic Stimulus Package (PRIHATIN), was issued with a value of RM260 billion. This enhances the existing financing facilities of the first package and aims to support businesses, especially Micro, Small and Medium Enterprises (MSMEs).National Economic Recovery Plan (PENJANA) Meanwhile, the National Economic Recovery Plan (PENJANA), was announced on 5 June 2020 and is further proof of the government’s determination to attract foreign companies to relocate to Malaysia by providing among others:
i. 0% tax rate for 10 years for new investments in manufacturing sectors with capital investment valued between RM300 million - RM500 million;
ii. 0% tax rate for 15 years for new investments in manufacturing sectors with capital investment valued above RM500 million;
iii. 100% Investment Tax Allowance for 3 years for existing companies in Malaysia relocating overseas facilities into Malaysia with capital investment above RM300 million;
iv. Special Reinvestment Allowance for manufacturing and selected agriculture activities from YA 2020 to YA 2021; and
v. facilitation of Manufacturing License approval for non-sensitive industries within 2 working days.Overnight Policy Rate (OPR) In the first seven (7) months of 2020, Bank Negara Malaysia (BNM) lowered the Overnight Policy Rate (OPR) by a total of 1.25%, with the rate declining from 3.0% to 1.75% over this period. This will enable the financial sector to remain resilient despite heightened uncertainty and significant outflows from domestic equity and bond markets.
To date, Malaysia’s containment of the spread of COVID-19 through various government measures has shown to be effective. The added combination of Malaysia’s stimulus packages and related initiatives may lead to increased consumer demand, greater investor confidence and consequently a more robust recovery in domestic activity from H2 2020 onwards.Invesment Facilitation Malaysia Investment Development Authority (MIDA) MIDA will handhold companies until successful implementation. MIDA offers the following assistance to investors:
i. direct consultation and co-operation with relevant agencies at both the Federal and State government in matters such as:
a. securing infrastructural facilities, including land, factory sites, electricity and water supplies telecommunication and others; and
b. expediting approvals relating to Building Plans, Certificate of Fitness and Business Licences.
ii. to handhold and assist investors in obtaining all necessary approvals until the project is operational;
iii. to extend support to existing companies in planning expansion, diversification and other reinvestment projects; and
iv. to facilitate site investigations and establish supply chain infrastructure.Post-implementation concerns are also acted upon swiftly by MIDA together
with the relevant Ministries and institutions. Among the assistance offered are:
i. assist companies in the implementation and operation of new projects (including electricity, communication, land matters);
ii. extend support to existing companies in their expansion, diversification and re-investment projects; and
iii. undertake periodic reviews of issues and formulate appropriate measures for the smooth implementation and operation of industrial projects.National Committee on Investment (NCI) Furthermore, the Malaysian Government has also empowered the National Committee on Investment (NCI) as the ‘Sole Approving Committee for Investments’. NCI is a single platform to deliberate on investment project proposals in the manufacturing sector and selected industries in the services sector. With real-time decision making, NCI ensures that investors may apply
for licensing and investment initiatives in a transparent and expedient manner.2021 INVESTMENT REGIME The National Economic Recovery Plan (PENJANA) The National Economic Recovery Plan (PENJANA) was announced on 5 June 2020 with multifaceted objectives: first, empowering the rakyat (people); second, propelling businesses; and third, stimulating the economy. Among the key achievements of PENJANA are:
i. a Domestic Investment Strategic Fund (DISF), which facilitates companies to upgrade technology, access global markets through outsourcing and enhances exports. In 2020, a total of 49 projects were approved under the DISF, encompassing various industries;
ii. expediting approvals for Manufacturing Licence for non-sensitive industries to within two working days. In 2020, this has enabled 456 projects from a wide range of industries to commence operations in Malaysia;
iii. as of 18 June 2021, local financial institutions have approved Small and Medium Enterprise (SME) Soft Loans Funds amounting to RM12.14 billion, which will benefit 25,711 SMEs. This is inclusive of the Special Relief Facility (SRF), Automation and Digitalisation Facility (ADF), All-Economic Sector Facility (AES) and Agrofood Facility (AF) funds;
iv. introduce initiatives to stimulate the commodity sector and growth of its export value. The value of export duty exemption utilised by the commodity sector, which includes palm oil-based industries amounts to RM593.9 million;
v. introduce initiatives to support the tourism sector, including individual income tax relief of up to RM1,000 on travel expenses, as well as full tourism tax exemption; and
vi. sales tax exemption for passenger vehicles, which includes a 100% exemption for locally-assembled models and a 50% reduction for fully-imported cars. As of 18 June 2021, there has been a utilisation of RM232.96 million in sales tax relief, with the Government agreeing to extend this incentive until 31 December 2021.Ministry of International Trade and Industry (MITI) While acknowledging the alteration in the global investment landscape caused by the COVID-19 pandemic, geopolitical tensions, growing sentiments of protectionism, and the emergence of disruptive megatrends, the Ministry of International Trade and Industry (MITI) plans to revive economic recovery and facilitate investment flows through mechanisms such as:
i. reforming investment-related legislation in collaboration with the Ministry of Finance. This is comprised of a review of the Promotion of Investments Act 1986, and the Special Incentives Package and incentives under the Income Tax Act 1967, with a view to ensuring investment incentives remain relevant and provide equal opportunities to all stakeholders;
ii. reviewing the Industrial Co-ordination Act 1975, to simplify bureaucratic processes and procedures for the application of a Manufacturing Licence;
iii. updating and designing a new generation of the promoted list, and realigning activities of Investment Promotion Agencies (IPAs) to attract investments in dynamic and emerging sectors;
iv. holistically revolutionising Malaysia’s New Investment Agenda towards a competitive regional investment hub. Consequently, the National Investment Aspirations (NIA) seeks to review, recalibrate and reform Malaysia’s approach towards attracting high-value investments through the following five (5) elements:
a. increase economic complexity through the development of sophisticated products and services; with high local R&D and innovation intensity;
b. create high-value jobs;
c. extend domestic linkages by using domestic inputs and expand domestic supply chain;
d. develop new and existing clusters through the development of high productivity sectors, and development of local products and services; and
e. improve inclusivity across areas and communities.
v. forming the National Investment Council, chaired by the Prime Minister, to drive Malaysia’s unique investment proposition, formulate overarching investment policies, and resolve key implementation issues. To this end, the Malaysian Investment Development Authority (MIDA) has been empowered as:
a. the principal Investment Promotion Agency (IPA) responsible for coordinating, managing investments and incentive approvals for the country; and
b. the main secretariat for the National Committee on Investment (NCI). With real-time decision making, NCI is a single platform to deliberate investment project proposals across various sectors.Invesment Facilitation Malaysia Investment Development Authority (MIDA) MIDA is cognisant of the need to make quick adjustments to provide an all-inclusive assistance and support to business communities in the country. Various efforts have been undertaken to further enhance existing guidelines by simplifying business processes and inculcating digitalisation for speedy approval and project implementation.
Key initiatives in investment facilitation to revitalise the economy for a post-pandemic recovery include:
i. the Project Acceleration and Coordination Unit (PACU) as a 360° outreach program, enabling speedy implementation of approved projects, including approvals needed from various technical agencies on the ground;
ii. the Implementation Tracking & Monitoring System (ITMS), which is an initiative launched in November 2020 to track and monitor the implementation progress of approved projects. For the period between January 2019 to December 2020, a total of 1,921 projects have been approved, of which 1,132 projects have been implemented;
iii. online applications through an e-Manufacturing Licence platform (e-ML 2.0). This module allows companies to submit and track the status of their applications for new manufacturing activities, expansion or diversification projects, and issuance of confirmation letters for the exemption from a manufacturing licence (ICA 10);
iv. an online tax incentive application module called the e-Incentive 2.0, to bolster the existing digital transform initiative or Enterprise Transformation System (e-TRANS). Launched by MIDA in November 2020, this platform enables manufacturing companies to submit incentive applications for their new, expansion or diversification manufacturing projects in Malaysia which are listed in the promoted activities and products under the General, Small-scale Companies and High Technology Lists in the Promotion of Investments Act, 1986;
v. a duty exemption online application, or JPC Online Application Module in MIDA, which provides seamless assimilation with the Royal Malaysian Customs Department’s system. This enables companies to submit online applications for new, extensions, additional quantity, amendment and appeal for import duty; and/or sales tax exemption on raw materials or components for activities in the manufacturing sector; as well as import duty and/or sales tax exemption on machinery or equipment for selected activities in the agriculture and services sectors; and
vi. a One Stop Centre (OSC) has been established effective 2 October 2020, to ease the movement of Business Travellers in Malaysia. Represented by MITI, MIDA, the Ministry of Health (MOH) and the Immigration Department of Malaysia (IMI), key personnel are carefully screened to ensure their legitimacy and health status prior to entry into Malaysia. The OSC is comprised of three (3) components:
a. an OSC Committee, comprised of representatives from MITI and MIDA, to evaluate and consider applications for Business Travellers’ entry within three working days;
b. a Business Travellers Centre (BTC) to facilitate the entry of business travellers to Malaysia at the Kuala Lumpur International Airport (KLIA); and
c. a dedicated website, Malaysia Safe Travel Website (https://safetravel.mida.gov.my), comprising of information and advisory services to facilitate the entry of both long-term and short-term business travellers.2022 INVESTMENT REGIME National Investment Aspirations (NIA) i. integrated in tracking of investment outcomes to support these five (5) aspirations:
a. increase economic complexity through the development of sophisticated products and services; with high local R&D and innovation intensity;
b. create high-value jobs with high skills and incomes;
c. extend domestic linkages by using domestic inputs and expand domestic supply chain;
d. develop new and existing economic clusters through the development of high productivity sectors, and development of local products and services; and
e. improve inclusivity across areas and communities.
ii. involved in undertaking extensive engagements with both public and private stakeholders and Malaysia’s competitiveness, priority sectors have been identified in driving high-quality and sustainable investments i.e. digital economy, E&E, pharmaceutical, chemical and aerospace;
iii. streamlined to be consistent with global benchmarks of driving the Environmental, Social and Governance (ESG) agenda forward, the New Investment Policy will be the growth framework in driving and navigating the new opportunities created; and
iv. streamlined to integrate ESG factors into investment. This is a growing imperative that can drive long-term value creation and encourage sustainable business practices across our region.The 2023 Budget Malaysia continues to review the investment regime towards creating an investment ecosystem that is relevant, efficient, and aligned with ever-changing market conditions. These various initiatives will be reflected in the 2023 Budget, which carries the theme “Strengthening Recovery, Facilitating Reforms Towards Sustainable Socio-Economic Resilience of Keluarga Malaysia.” In essence, the 2023 Budget will continue to:
i. elevate the rakyat’s wellbeing, income and social protection;
ii. improve the competitiveness of Malaysian businesses and move up the value chain; and
iii. strengthen the nation’s resilience against future shocks and consolidate the Government’s fiscal position.Invesment Facilitation Government Stimulus in Boosting Investments In boosting investment activities in Malaysia as, a series of stimulus packages including the Strategic Programme to Empower the People and Economy or PEMERKASA and PEMERKASA+ as well as both the 2021 and 2022 Budget were announced to reshape the strategies in reassuring business continuity and building enterprise resilience.
Among those announced include the increase of allocation to expedite the implementation of development projects, incentives for hiring workers, tax incentives for targeted sectors and microcredit facilities. Various financing facilities were also expanded, one of which is an additional fund of RM50 million for the Smart Automation Grant under MIDA to enable more small and medium-sized enterprises (SMEs) and mid-tier companies (MTCs) to improve operational and manufacturing efficiencies through automation and digitalisation.End-to-End Facilitation for Investors MIDA established the Project Acceleration and Coordination Unit (PACU) on 6 June 2020 to proactively provide end-to-end facilitation to all projects approved by the National Committee for Investment (NCI), enabling the speedy and efficient implementation of projects. The team assists all stakeholders, both small businesses and multinational corporations, with issues and challenges faced by companies.
Acting as an intermediary between the business community and relevant stakeholders such as Federal and State government departments, Investment Promotion Agencies (IPAs), technical agencies and related utility service providers; PACU seeks to connect and derive beneficial solutions to investors.
Additionally, the team also provides advisory services to start-ups and conglomerates through their One-Stop-Centre concept. Investors are encouraged to discuss the issues and challenges faced while in operations and seek much-needed clarifications and advice on governmental guidelines and procedures.Implementation Tracking & Monitoring System for PACU (PACU2U) The PACU2U is a system to assist PACU by tracking and monitoring in real-time to ensure approved projects are implemented in timely manner from the date of approval. The PACU2U also captures the issues and challenges faced by the investors during the implementation of projects, to be addressed immediately.
Since the establishment of PACU2U until 31 December 2021, a total of 1,752 projects were approved, out of this, 570 projects (33 per cent) have been implemented. While, 1,182 projects (67 per cent) are in active planning stage such as site acquired and discussion/negotiation with relevant authorities. MIDA will constantly monitor the progress and developments until the approved projects can be implemented as stipulated.One-Stop Centre (OSC) for Business Travellers A One-Stop Centre (OSC) was previously established on 2 October 2020 to facilitate the movement of business travellers following the gradual opening of the local economy post Movement Control Order (MCO) period. The OSC aimed to ensure the legitimacy and health status of business travellers before they enter Malaysia, as well as expedite the approval of their entries to do business in Malaysia.
The OSC has been phased out on 1 April 2022, following the recent announcement that the country is transitioning into the endemic phase. The reopening of international borders is a positive step forward to economic recovery and Malaysia’s ability to continue attracting high-value and high-impact investments. Fully vaccinated travellers may enter Malaysia without prior approval from Malaysian authorities and are not subjected to mandatory quarantine upon arrival.Continued Commitment on Increasing Ease of Doing Business and Enhancing Investment Facilitation The Government is relentless in driving our investment promotion and facilitation standards to high levels. Culminating from series of initiatives, Malaysia received global recognitions for its best practices in business and investment regimes, as well as continuous reforms in improving our regulatory environment through trade facilitation efforts, such as the simplification of required paperwork, modernisation of procedures, and harmonisation of customs requirements.
Notably, Malaysia ranked at 25th position among 64 economies in global competitiveness in the Institute of Management Development (IMD) World Competitiveness Yearbook (WCY) 2021. Malaysia was also ranked as the 8th most innovative nation among Asian economies in the World Intellectual Property Organisation’s Global Innovation Index 2021, and 34th among 134 countries in the Global Talent Competitiveness Index 2021, a report jointly produced by INSEAD University, Google, and Adecco to track and measure talent performance.
The COVID-19 pandemic has brought an unprecedented economic impact globally. As businesses resume operations, it is crucial to optimize productivity to ensure business sustainability. However, unnecessary regulatory burdens can slow down recovery and growth. Acknowledging how
serious this is, the government is committed in minimising the economic impact by assisting businesses burdened by unnecessary regulations, with the #MyMudah initiative which was launched on 21 July 2020 and spearheaded by the Malaysia Productivity Corporation (MPC).
MPC's signature programme, Malaysia Mudah or #MyMudah, which collates and analyses data from the industry to find solutions has been proven successful and soon will be expanded to all ministries, government agencies and business associations with the establishment of #MyMudah unit. The unit aims to reduce the unnecessary regulatory burdens to shape a more conducive business environment. Through the Whole-of-Government approach, public-private engagements and consultations, and analysis, #MyMudah uses an evidence-based methodology to find the best collective solution, which will present a win-win situation for the involved parties.Introducing the InvestMalaysia Portal The InvestMalaysia Portal, launched in March 2021, is a single gateway portal for investors to submit and manage applications online. The portal optimises processes through automation and is a core element of MIDA’s ongoing digital transformation initiative, which includes seamless data capturing and analysis.
The portal transforms MIDA’s core business functions with improved efficiency and productivity through an integrated technology system stepping up the application and approval process and allowing companies to speed-up project implementation. All modules offered for online application submissions may be accessed at https://investmalaysia.mida.gov.my.
These include applications for manufacturing licence (e-ML), exemption letter from ML, incentive (e-Incentive), expatriate posts and Representative Offices/Regional Offices (REs/ROs) status, Import Duty/Sales Tax Exemption (JPC), MIDA Confirmation Letter [Surat Pengesahan MIDA (SPM)], grants and Domestic Sales incentives. Instructions on how to register and navigate the portal through a PDF document, a video guide and a webinar are also available.
The InvestMalaysia portal is among MIDA’s many initiatives to re-engineer its business processes to raise the efficiency of various functions of the
organisations and adapt to the agile ways of working by providing more online services for a broad spectrum of investors.Digital Investment Office The growing role of digital technology has shown the potential to significantly transform the economic landscape around the world. Malaysia has been very consistent and strategic in its effort to embrace rapid digitalisation, which is envisioned to transform the country into a digitally-enabled and technology-driven high-income nation, as well as becoming a regional leader in the digital economy.
To streamline these efforts, the Digital Investment Office (DIO) was established on 22 April 2021, endorsed by the National Council of Digital Economy and Fourth Industrial Revolution (MED4IR). It is in line with the evolution of the global investment landscape towards digitalisation and Industry 4.0, creating unique and interesting value propositions for digital projects.
DIO also serves as a single cohesive platform entrusted to streamline and coordinate all foreign and domestic digital investments in the country, while providing end-to-end facilitation to investors in the digital space. The DIO will also put forward future-ready policies and guides on talent requirements and digital infrastructure networks, as well as address operational issues faced by businesses during the current pandemic and beyond.
This essentially provides structured governance on investment promotion and facilitation, which supports promotional activities and processes that enable and strengthen the digital ecosystem. The office is committed to assume its role in meeting the targets under the MyDIGITAL initiative; namely to attract digital investments worth RM70 billion while increasing the digital economy's share of Malaysia's GDP to 22.6% by 2025. By unifying various investment strategies among the respective stakeholders, DIO offers a unique value proposition for all upcoming digital investments. The collaborative effort will cater to the rapidly-growing digital industries’ needs, further enhancing Malaysia’s capabilities and the nation’s competitiveness as an ideal business location for companies operating in the digital ecosystem.Digital Ecosystem Acceleration Scheme (DESAC) DESAC was newly introduced in Budget 2022 to support the comprehensive development of the national digital ecosystem. The incentive, effective from 30 October 2021 to 31 December 2025, offers an income tax rate of 0 to 10 per cent for up to 10 years for new digital technology providers and an income tax rate of 10 per cent for up to 10 years for existing digital technology providers undertaking diversification of new services/ new segments. Investment tax allowance of 100 per cent on capital expenditure for qualifying activities for up to 10 years is offered to digital infrastructure providers, whereby allowance can be offset over statutory income. 2023 INVESTMENT REGIME National Investment Aspirations (NIA) Underlying the significance of revitalising the investment regime to remain as a competitive nation of strategic and high-value investments in the region, Malaysia’s new investment policy is premised on the following five (5) pillars of the NIA that will boost the country’s competitiveness as a regional investment hub:
i. Increase economic complexity through the development of sophisticated products and services; with high local research and development, and innovation intensity;
ii. Create high-value jobs with high skills and incomes;
iii. Extend domestic linkages by using domestic inputs and expand domestic supply chain;
iv. Develop new and existing economic clusters through the development of high productivity sectors, and development of local products and services; and
v. Improve inclusivity across areas and communities.Pivotal to this NIA are six (6) strategic thrusts to address headlong economic and investment challenges of a dynamic and fast changing world, namely:
i. Unified investment strategy to drive laser-focused delivery on NIA and Environment, Social and Governance (ESG);
ii. Agile and forward-looking incentive packages that meet the needs of investors;
ii. Investment promotion agencies (IPA) landscape with clear roles and responsibilities to simplify the investor journey;
iii. Accelerated innovation ecosystem to nurture high-quality investments;
iv. Vibrant talent pool that meets the needs of the labour market; and
v. Streamlined business environment for improved ease of d+E505oing business.The NIA looks to address the challenges faced both at an overall national level as well as at the sector level – towards reinvigorating Malaysia’s investment landscape. It is based on clear target outcomes, strategic planning, and actions at the national and sectoral levels, with top-line targets to be achieved by 2027 as follows:
i. to sustain economic growth (4.5 - 5.5% GDP growth per annum);
ii. to sustain national wealth growth (5.5 - 6.5% Gross National Income per capita growth per annum); and
iii. to re-invigorate investment ecosystem (4 - 5% private sector Gross Fixed Capital Formation per annum).Driven by the NIA, Malaysia also seeks to attract strategic and high value investments in key economic areas in primary, manufacturing and services sectors, with specific investment opportunities to go after to best deliver NIA. Citing few examples as below:
i. E&E sector: – IOT sensors and components, modernise Outsourced Semiconductor Assembly and Test (OSAT), solar;
ii. Digital sector: Global Services; development hub for IoT and AI; and data centre and cloud;
iii. Pharmaceutical sector: generics hub; clinical research hub; contract manufacturing of biologics; manufacturing of high-demand niche botanicals;
iv. Aerospace sector: Original Equipment Manufacturer (OEM) partnerships; unmanned aerial vehicle (UAV) ecosystem (Agriculture, Logistics, Surveillance); and astronautics; and
v. Chemical sector: Specialty chemicals.Invesment Facilitation End-to-End Facilitation for Investors Putting in place an existing robust and comprehensive monitoring and facilitation mechanism to monitor and secure commitments on potential investments and exports made through the Trade and Investment Missions, or other means.
Examples of appropriate tracking of potential projects and leads include Malaysian Investment Development Authority’s (MIDA) and online real-time Investment Tracking Mechanism through the Project Implementation and Facilitation Office (TRACK) which facilitates the approval process and speeds up the implementation of investments projects. TRACK seeks to connect and derive beneficial solutions to investors by acting as an intermediary between the business community and relevant stakeholders such as Federal and State government departments, Investment Promotion Agencies (IPAs), technical agencies and related utility service providers.
Moreover, MIDA and InvestKL have established end-to-end facilitation services to handhold each investor during the company’s investment journey, from announced commitment to implementation. There are also appropriate milestone checks and periodic post-investment reviews to ensure that these investments will contribute to a more prosperous, inclusive, and sustainable Malaysia.Digital-driven Initiatives The Digital Investment Office (DIO) was established on 22 April 2021 through a collaboration between MIDA and Malaysia Digital Economic Corporation (MDEC). By conducting engagement sessions with relevant digital stakeholders, the DIO can identify and address digital gaps in accelerating digitalisation efforts in the country.
Such continuous efforts include policy formulation to ensure that Malaysia remains a preferred digital hub in the region. The DIO will also put forward future-ready policies and guides on talent requirements and digital infrastructure networks, as well as address operational issues faced by businesses during the current pandemic and beyond.
Since its inception, the DIO has been on the right track to meet the key performance indicator set, which is RM70 billion investment in digitalisation projects by 2025, in line with the investment targeted in the MyDIGITAL blueprint.
Malaysia recognises that agile policies and regulations are crucial to encourage more digital investments. To further strengthen the country’s digital ecosystem, the Digital Ecosystem Acceleration Scheme (DESAC) was introduced through Budget 2022. DESAC aims to encourage quality digital infrastructure into the country to accelerate the development of the digital economy value chain.Domestic Investment Strategies To strengthen and deepen domestic investments, MIDA continually undertakes targeted strategies, including a focus on Industry 4.0 (IR4.0) technologies to assist local companies to adopt new technologies and achieve Industry 4.0 status through facilitation of various incentives and assistance provided by the Government.
In addition, domestic linkage enhancements to encourage the use of domestic inputs to expand and grow domestic supply chains, and to develop unique, high-value products and services to equip companies through triple helix collaborations between the Government, industries and universities or technical institutes.SME Investment Desk The programme aims to provide an advisory service on Government facilities in a 'One Stop Centre' to small and medium-sized enterprises (SMEs). Through this initiative, local companies, especially SMEs, will have the opportunity to seek guidance and advice on investment initiatives and facilities provided by the Government. This will further facilitate the company's investment proposals and form a sustainable business partnership between the Government and the private sector.
To date, the programme has managed to create awareness and assist SMEs to obtain the appropriate licenses, and in generating better productivity in the manufacturing and services activities using assistance such as grants for technology adoption, tax incentives and tax exemption for the importation of raw materials, machinery and equipment.
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