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MIDA e-Newsletter : Highlights

 

HIGHLIGHTS
MIDA Newsletter - May 2018 Issue

MALAYSIA: EMBRACING CHANGE

There are three constants in life… change, choice and principles - Stephen Covey

MNL May2018 highlights

Change is inevitable and it was a leaping change for Malaysia, when a new government was elected replacing a 60 year old ruling party. While the world lauded Malaysia for her democracy and the peaceful transition of power, many, particularly investors were skeptical with the new government's policy directions. However, the newly elected Honourable Prime Minister Tun Mahathir Bin Mohamad has given his assurance that Malaysia continues to adopt business friendly policies and will not curtail freedom of businesses. It was emphasised that the Government is keen to have a seamless businesses environment where both domestic and foreign investors are welcomed to invest in Malaysia.

The Government through its Buku Harapan manifesto (Book of Hope) pledged to invigorate the country's economy emphasising on research and development (R&D), spur a sharing economy and strengthen the protection of intellectual property to allow increased innovation. Malaysian's participation in the regional and global negotiations shall continue in a coordinated manner should it prove to be beneficial to the nation and the business owners. 

Book of Hope


The aim is not to simply attract any investment, but to have a productive and innovation led investment. The manifesto indicates the new Government's efforts to improve economy enablers such as education, technical/ vocational trainings and innovation while encouraging commercialisation of intellectual property. These efforts are structured strategies to facilitate the induction of technology which will moot companies into adopting the latest technology and automation. Ultimately, this approach is expected to indirectly reduce the cost of doing business in Malaysia and increase Malaysia's comparative advantages.


In the context of reducing the cost of doing business, the Book of Hope also contained the  Government's pledge to review the country's taxation in a holistic manner making it competitive compared to peer countries in the ASEAN region. Malaysia's corporate tax rate is currently 24% compared to Singapore; 17%, Thailand; 20% and Indonesia; 25%. In addition, The Malaysia Productivity Corporation's (MPC) authority will be reinforced to ensure far-reaching Good Regulatory Practices and reduction of unnecessary regulatory burden to increase the country's productivity.


The manifesto also emphasised the importance of the Small and Medium Enterprises (SMEs) which contributes at least 40% to the country's GDP providing jobs to almost 65% Malaysians. The aim is to elevate SMEs onto the global value chain thus enabling them to compete in the ASEAN market. It is through this added boost that will also create opportunities for SMEs to integrate into the Industry 4.0 ecosystem.


Sustainable development continues to be an important agenda. Environmental laws and policies will be reviewed to align with International Best Practices and environmental protection standards. The Government will continue to support the United Nation's Sustainable Development Goals by prioritising carbon emission reduction by 40% in year 2020. Emphasis will be given to green and renewable technology which has high potential for growth particularly since the Government targets to increase generation of renewable energy from the current 2% to 20% by year 2025.


At a glance, businesses owners and potential investors can anticipate more positive changes and growth in Malaysia. It is after all a Government of the people, by the people and for the people.

MIDA NEWSLETTER APRIL 2018

Immigration Unit at MIDA, Facilitating Businesses Since 2007


Many may not be aware that an on-site Immigration Unit has been established in MIDA HQ since 3 December 2007. The unit, with a staff strength of 10 officers, aims to improve the Government delivery system relating to the issuance of work permits and visas of related applications approved by MIDA. The Unit also assists and advises MIDA in terms of immigration matters.

Its scope of function covers the following:

highlights april 2018

From 2015 – 2017, the Immigration Unit has approved a total of 14,823 applications of which 48% were for Employment Passes, 40% were for Dependent Passes and the rest were Social Visit Passes, Visit Passes (Temporary Employment) and Student Pass/Permission to Study. Processing fee ranges from RM60 to RM300 depending on the type of passes. The breakdown is as follows:

Type of Passes

FEES

Passes
(Per Year) RM

Visa

Levi

Process
(Per Aplication) RM

Employment Pass
i) Key Post
ii) Term Post

 

i) 300
ii) 200

According to the Country

-

125

Dependent Pass

90

According to the Country

-

50

Social Visit Pass

600

According to the Country

-

50

Visit Pass
(Temporary Employment)
First Maid
Second Maid

 

60
60

According to the Country

 

410
590

125

In considering applications for expatriate posts, the representative from the Department of Labour provides feedback on the availability of relevant skilled Malaysian personnel to fill the posts applied for by companies. This is a proactive measure undertaken by MIDA to match supply and demand of skilled personnel in the labour market.

Besides the Immigration Department, other representatives stationed at MIDA are from the Department of Labour, Tenaga Nasional Berhad (TNB), Royal Malaysian Customs, Telekom Malaysia Berhad and Department of Environment. This gives businesses convenient access to the relevant agencies and authorities that would be involved in the implementation of their projects. The presence of these representatives in MIDA ensures that enquiries of investors are addressed quickly and efficiently.

MIDA NEWSLETTER MARCH 2018

Requirements for Manufacturing Licence


The Economic Census 2016 on Establishment Statistics by the Department of Statistics revealed that the number of business establishments in Malaysia increased from 662,939 in 2010 to 903,818 in 2015 with an average annual growth rate of 6.4 per cent. The number of establishments in the manufacturing sector totaled 48,806 or 5.4 per cent of the total establishment in 2015.


Despite the smaller number of establishments in the manufacturing sector, its contribution to the economy is significant. In the third quarter of 2017, as the Malaysian economy grew at 6.2 per cent with a Gross Domestic Product (GDP) of RM296.6 billion (at constant 2010 prices), the manufacturing sector contributed to 22.8 per cent to the GDP.
As part of the role of MIDA in assisting investors, all projects with manufacturing licence are offered hand-holding facilitation to ensure that the projects are implemented in a timely manner. MIDA also requires manufacturers to provide their manufacturing licence for the consideration of import duty exemption on raw materials and components used in the production of finished products.


What is considered as manufacturing activity?
The ICA defines "manufacturing activity" as the making, altering, blending, ornamenting, finishing or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal; and includes the assembly of parts and ship repairing but shall not include any activity normally associated with retail or wholesale trade.
There are however, activities that are exempted from ICA. These are milling of oil palm fresh fruits into crude palm oil; the production and processing of raw natural rubber of all types including latex, skim, sheets, scrap, technically-specified rubbers, non-standard and modified rubber or any other unvulcanised form of natural rubber prepared by any patented or technically specified procedure; and the milling of paddy into rice.


Who is required to apply for Manufacturing Licence?
Manufacturing companies with shareholders' funds of RM2.5 million and above or engaging 75 or more full-time paid employees are required to apply for a manufacturing licence for approval by the Ministry of International Trade and Industry (MITI).


A manufacturer is required by law to obtain a manufacturing licence from MIDA if it meets a certain threshold. The Industrial Coordination Act (ICA), 1975 requires person(s) engaging in any manufacturing activity to obtain a license from the Licensing Officer in respect of the manufacturing activity. The ICA was introduced to ensure an orderly development and growth of the country's manufacturing sector.


In its effort to reduce labour intensive and nurture technology intensive industries, approval of manufacturing projects in Malaysia are subject to Capital Investment per Employee (CIPE) Ratio and employment of local personnel. The CIPE Ratio must be at least RM140,000 and the project employs at least 80% Malaysian personnel from its total manpower.


In addition, the proposed project is required to fulfill at least one of the following criteria.
  • Manufactured product's value-added is 40% or more; or
  • The Managerial, Technical and Supervisory (MTS) ratio of at least 25%.


"Shareholders' funds" is defined as the aggregate amount of a company's paid-up capital, reserves, balance of share premium account and balance of profit and loss appropriation account.


"Full-time paid employees" is defined as all persons normally working in the establishment for at least six hours a day and at least 20 days a month for 12 months during the
year and who receive a salary.


What if the company has less than 75 workers and the shareholders' fund has not reached RM 2.5 million?
A company with a paid up capital/shareholder's fund not exceeding RM2.5 million or manpower less than 75 people may apply for a confirmation letter that the company is exempted from manufacturing licence approval. The applicant should submit ICA 10 form to MIDA. The letter, however, can only indicate that the company is exempted from manufacturing licence and does not carry the same weigh as a manufacturing licence. Once companies reached the threshold of RM2.5 million of shareholders' funds or employing 75 workers or more, they should immediately apply for manufacturing licence.


Do I require a Manufacturing Licence to expand my operation?
An existing licensed company which proposes to undertake an expansion of production capacity of its approved products or a diversification to manufacture additional products is required to submit an application for the manufacturing licence to MIDA for the expansion or diversification project.


Where can I obtain the application form?
Application forms can be downloaded from MIDA's website at www.mida.gov.my/home/forms-&-guidelines-for-manuf...


What is the expected duration to obtain the manufacturing licence?
Based on MIDA's Client Charter, the interim approval letter will be issued to the applicant within 4 weeks of full information received.
Once the interim approval letter is issued, the applicant company is required to provide the necessary documents specified before the manufacturing licence certificate is issued.

MIDA NEWSLETTER FEBRUARY 2018

Approved Investments in 2017 Recorded RM197.1 Billion

Created 139,520 Additional Job Opportunities in Malaysia

Last year, the global economy proved fairly resilient in the face of challenges. Despite being affected by inward looking policies by major economies, the year turned out to be better than expected with these economies growing in sync for the first time since the global financial crisis in 2010. According to a new finding by Grant Thornton's quarterly business survey, global business confidence improved at its highest ever level of 58% in Q4 2017. This was also the case for Malaysia as its economy exceeded all expectations and recorded a strong growth of 5.9% as at the end of 2017. This performance is above the GDP registered in the preceding years of 4.2% and 5.0% in 2016 and 2015, respectively.

Approved Investments in 2017

In terms of approved investments, Malaysia recorded RM197.1 billion in the manufacturing, services and primary sectors. These are from 5,466 projects that will generate an additional 139,520 job opportunities for the country. Domestic direct investments (DDI) accounted for the bulk of it or 72.2% at RM142.4 billion, while foreign direct investments (FDI) contributed RM54.7 billion, making up 27.8% of the total.

While the overall investment performance moderated by 7.4% due to a decline of 17.2% in the services sector, it was bolstered by the manufacturing and primary sectors which recorded increases of 8.9% and 51.2% respectively. The qualitative aspects of investments attracted into Malaysia in 2017 were evident on many fronts, such as job and business opportunities as well as the transfer of technology.

More and more global companies are making Malaysia their hub. This includes Osram Opto Semiconductors' world's most advanced LED chip factory, B.Braun's Global Center of Excellence for Intravenous Access products which comprises production and R&D functions, Peugeot's ASEAN manufacturing hub, IKEA's Regional Distribution and Supply Chain Centre for ASEAN, Honeywell's ASEAN Regional Headquarters and Schlumberger which made Malaysia their largest shared services hub in the group in addition to their procurement service centre, human resource hub, financial hub and two regional hubs.

In the manufacturing sector, projects approved last year were more capital intensive. The capital intensity, measured by capital investment per employee (CIPE) ratio of projects approved within the sector last year recorded a notable increase of 23.7% from the CIPE of RM912,239 in 2016 to RM1,128,742 in 2017. There were 9 projects approved with investments of at least RM1 billion, totalling RM34.7 billion (54.5%) of total investments approved in this sector. As for investments of at least RM100 million, 80 projects were approved with total investments of RM52.4 billion (82.3%) of all investments approved in this sector. From the total 687 projects approved, 56,420 job opportunities were created. Of these, 14,155 (25.1%) were in managerial, technical, or supervisory roles, an increase of 21% from 2016. Meanwhile, a total of 9,870 (17.5%) were positions for skilled workers. The E&E industry generated the highest amount of employment opportunities with 10,590 jobs, followed by transport equipment (9,110), and machinery and equipment (6,080).

Meanwhile, the services sector remained as the largest contributor to the total approved investment contributing 61.4% or RM121.0 billion in 2017. The year-on-year approved investment value for the services sector contracted by 17.2% last year but the number of projects recorded an increase of 7.7% from 4,392 approved projects in 2016 to 4,731 in 2017. Domestic investment occupied the lion share of the total in the services sector with RM92.2 billion, while foreign investments made up the rest of RM28.8 billion.

Global establishments approved in 2017 accounted for investments of RM14.0 billion and created 2,030 job opportunities for Malaysia. From the 225 global establishment projects, 9 were Principal Hub (PH) projects, bringing the total to 28 PH projects approved since the scheme was introduced in 2015. Notable companies with global establishments in Malaysia include Nestle, Honeywell, Lazada, Huawei, Ikea, Roland, FM Logistics, Pos Malaysia and Integrated Device Technology. These establishments not only bring in business commitments for the long term, but also utilises Malaysia's banking, financial services and other ancillary services while generating high skilled employment opportunities.

Transformation of the services sector is ongoing with an emphasis on shifting towards one that is knowledge-intensive and innovation-focused. For example, in growing the potential of the country's e-commerce sector, the Government has implemented various initiatives to develop the financial and logistics infrastructure, which forms the backbone of the e-commerce ecosystem. The e-commerce contribution to GDP is expected to grow to 6.4% in 2020.

The approved investments in 2017 for the manufacturing, services and primary sectors was announced by YB Dato' Sri Mustapa Mohamed, Minister of International Trade and Investment on 6 March 2018 at the MIDA HQ. During the event, the Minister also launched the Investment Performance Report (IPR) 2017.

The IPR 2017 highlights the approved investment performance of each industry and sub-sectors for the manufacturing, services as well as primary sectors. It also features key projects highlighted, box articles on current topics such as supply chain and industry 4.0, as well as MIDA's perspective on the way forward. The IPR 2017 is now available for sale at the MIDA Website.

MIDA NEWSLETTER JANUARY 2018

Leverage on ACA to Increase Competitiveness

The Automation Capital Allowance (ACA) incentive which has been introduced by the Government in 2015 is divided into two categories. The first category is for high labour intensive industries namely rubber products, plastics, wood, furniture and textiles. The automation capital allowance of 200% is provided on the first RM4 million expenditure incurred within three years of assessment from 2015 to 2017. Under the 2018 Budget, the incentive for the first category was extended until YA 2020.


The second category caters for other industries where an automation capital allowance of 200% will be provided on the first RM2 million expenditure incurred within five years of assessment from 2015 to 2020. While the number of applications for the incentive was slow in the beginning, it has been increasing as industries are becoming more aware of its existence and attractiveness. To date, MIDA has received more than 100 applications.

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Last Updated : Monday 25th June 2018