“Business Opportunities in ”

1 Ahmad Tajudin Omar Director MIDA Munich

14th June, 2012, Thursday Prague 2

CONTENTContent OutlineOUTLINE

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

MIDA’s Function in The Promotion of The Manufacturing and Services Sectors in Malaysia Milestones

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 Functions of MIDA

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

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

. Planning for industrial development . Recommend policies and strategies on industrial Planning promotion and development . Formulation of strategies, programmes and initiatives for international economic cooperation

. Assist companies in the implementation and operation of their projects Follow-up / . Facilitate exchange & co-ordination among institutions engaged Monitoring in or connected with industrial development . Advisory Services MIDA “One Stop Centre”

Based outside of MIDA • Department of Occupational Based In MIDA Safety and Health (DOSH) • Immigration Department • Ministry of Finance • Royal Malaysian Customs • Ministry of Health • Department of Environment • Ministry of Tourism • Tenaga Nasional Berhad • Ministry of Human Resource • Telekom Malaysia Berhad • Ministry of Higher Education • Labour Department • Multimedia Development Corp. (MDeC) • Construction Industry Development Board of Malaysia (CIDB) MIDA Worldwide Network

Stockholm London Frankfurt Paris Munich San Jose Chicago Boston Tokyo Milan Seoul New York Los Angeles Shanghai Osaka Houston Dubai Guangzhou Taipei Mumbai Bangkok

Singapore

Johannesburg

Sydney

24 Overseas Centres MIDA’s 12 State Offices MALAYSIAN MalaysianINDUSTRIAL DEVELOPMENT Economy AUTHORITY Malaysia Development Activities

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

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

1970s – Labour intensive industries

1960s – Import substitution industries Malaysia’s Key Economic Indicators

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

Source: Central Bank of Malaysia/Department of Statistics Malaysia/MATRADE Investment Trends TOTAL APPROVED MANUFACTURING PROJECTS (2008 –2011)

Proposed Investment No. of No. of (US$ billion) Year Projects Employment 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 IMPLEMENTED MANUFACTURING PROJECTS BY MAJOR INDUSTRIES, as at JUNE 2011

Industry No. of Employment Investment Projects (US$ billion) Electronics & Electrical Products 3,515 689,827 40.55 Petroleum Products 197 10,462 14.13 (Inc. Petrochemicals) 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

Source: MIDA IMPLEMENTED MANUFACTURING PROJECTS BY COUNTRY, as at JUNE 2011 (Top 10) 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 Source: MIDA APPROVED REGIONAL ESTABLISHMENT FROM JAN-NOV 2011

No. of Type of Establishment 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

Source: MIDA INVESTMENT OPPORTUNITIES IN MALAYSIA INVESTMENT OPPORTUNITIES IN THE MANUFACTURING SECTOR

High technology, capital intensive & knowledge driven industries: •Advance Electronics Industries manufacturing • ICT intermediate goods: • Solar • Machinery & equipment • Components & parts • Silicon / Substrates • Moulds and dies • Aerospace Resourced-based industries: • Petrochemicals • Oil & Gas • Pharmaceuticals •Food Products • Medical devices • Wood-based products • Rubber-based products • Biotechnology • Halal Products

INVESTMENT OPPORTUNITIES IN THE SERVICES SECTOR

Tourism • Hotels • Tourist projects • Recreational centre • Convention facilities

RENEWABLE ENERGY 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.

1 RENEWABLE ENERGY

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

2 RENEWABLE ENERGY

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

3 ENERGY CONSERVATION / EFFICIENCY

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.

4 ENERGY CONSERVATION / EFFICIENCY

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.

5 ENERGY CONSERVATION / EFFICIENCY

(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.

6 ENERGY CONSERVATION / EFFICIENCY

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

7 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

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

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 ELECTRONICS INDUSTRY

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.

ELECTRONICS INDUSTRY

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

ELECTRONICS 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) . 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 PLASTIC PRODUCTS INDUSTRY

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

PLASTIC PRODUCTS INDUSTRY

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.

PLASTIC PRODUCTS 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) 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

RUBBER PRODUCTS INDUSTRY

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

RUBBER PRODUCTS INDUSTRY

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.

RUBBER PRODUCTS 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) AFTA A Potential Market

www.mida.gov.my 3 AFTA

Benefits of locating in Malaysia Intra-ASEAN Trade

 Integrated domestic ASEAN market  In 2010 total intra-ASEAN trade is at of more than 600 million people with US$ 519 billion, which accounted for total GDP of US$ 1.8 trillion. 25.4% of ASEAN’s global trade (US$ 2,045 billion).  Efficient & competitive base for foreign direct investment (FDI).  Access to cost effective source of  Malaysia – 5th largest contributor to raw materials & components. intra-ASEAN trade for 2010, accounted for 18.3% valued at US$ 95.2 billion.

www.mida.gov.my 4 DEVELOPMENT CORRIDORS REGIONAL ECONOMIC CORRIDORS IN MALAYSIA

NCER : NORTHERN CORRIDOR ECONOMIC REGION SDC : SABAH DEVELOPMENT CORRIDOR • Agriculture • Agriculture • Tourism & Healthcare • Tourism • Manufacturing • Manufacturing • Education • Logistics

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

IRDA : ISKANDAR MALAYSIA • Tourism Related Services • Healthcare • Education Services SCORE: SARAWAK CORRIDOR OF RENEWABLE • Logistics ENERGY • Creative Industries • Agriculture • Financial Advisory • Tourism • Manufacturing • Oil based sectors

MALAYSIA’S INTERNATIONAL RANKINGS

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

WHY MALAYSIA ?

• 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 MALAYSIAN INVESTMENT DEVELOPMENT AUTHORITY

Please visit us at www.mida.gov.my [email protected] INVESTMENT OPPORTUNITIES IN THE SERVICES SECTOR

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

Logistics • Integrated Logistics Services • Cold Chain Facilities

INVESTMENT OPPORTUNITIES IN THE SERVICES SECTOR

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

INVESTMENT OPPORTUNITIES IN THE SERVICES SECTOR

Education

. Technical, Vocational & Science Training

Healthcare Travel (Medical Tourism)

. Private hospitals INVESTMENT POLICIES

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

INVESTMENT POLICIES

Guidelines on Manufacturing License

• 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. 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

Guidelines on Employment of Expatriate Personnel

Automatic Approval:

Companies No. Of Post Eligible Duration

• Key post – permanent Foreign paid-up capital of Up to 10 posts (including • Exec. post – 10 years US$2 million and above 5 key posts) • Non-exec. post – 5 years

Foreign paid-up capital of • Key post – permanent Up to 5 posts (including more than US$200,000 but • Exec. post – 10 years at least 1 key posts) less than US$2 million • Non-exec. Post – 5 years

INCENTIVES FOR THE MANUFACTURING SECTOR

8 MAJOR INCENTIVES

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.

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

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 () . Industri Otomotif Komersial () . Malaysian Truck and Bus (MTB) ( 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

MACHINERY INDUSTRY

www.mida.gov.my 15 INVESTMENTS APPROVED IN 2010 BY SUB- SECTOR

RM No. of Sub sector million 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 1,095 57 and Parts TOTAL 1,915 92

www.mida.gov.my 16 IMPORTS OF MACHINERY & EQUIPMENT

Source: MATRADE

www.mida.gov.my 17 EXPORTS OF MACHINERY & EQUIPMENT

Source: MATRADE

www.mida.gov.my 18 TARGETED MACHINERY & EQUIPMENT

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

www.mida.gov.my 19 SPECIAL INCENTIVES FOR M&E

. 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

www.mida.gov.my 20