Capitalise on additional RA to reinvest now — MIDA
27 May 2022
Malaysian companies should seize the opportunity to reinvest in the country, riding on the additional reinvestment allowance (RA) offered for assessment years 2020-2024.
Malaysian Investment Development Authority (MIDA) deputy chief executive officer for investment promotion and facilitation, Sivasuriyamoorthy Sundara Raja, said the additional RA initiative was announced under the National Economic Recovery Plan.
The RA is an incentive to encourage companies to reinvest and expand their businesses.
A resident company in operation for not less than 36 months that incurs capital expenditure to expand, modernise, automate, or diversify its existing manufacturing business or approved agricultural project is entitled to the RA.
The allowance is given for 15 years, starting from the first year of claim, based on 60% of capital expenditure incurred for the qualifying project.
Speaking at the “How to Revive Domestic Direct Investment?” forum by the National Chamber of Commerce and Industry of Malaysia, Sivasuriyamoorthy said there has been a misconception among companies that the government is overfocusing and incentivising foreign investors rather than local players.
He said that domestic players enjoy more investment incentives compared with foreign investors, and emphasised that domestic investments have been a major contributor to approved investments in the economy.
According to him, from 2012 to 2021, approved domestic investments accounted for RM1.3 trillion or 64% of total approved investments.
Sivasuriyamoorthy said during the period, domestic direct investments (DDIs) dominated the service sector at 84.2% or about RM1.01 trillion, while foreign direct investments (FDIs) accounted for 15.8% or RM190.4 billion.
Conversely, the manufacturing sector was mainly dominated by FDIs at 64.5% or RM527.6 billion, while DDIs stood at 35.5% or RM290.8 billion.
“We acknowledge that we need to do more in this area. We need to get more Malaysian companies to invest in the manufacturing sector.
“In the service sector, a lot of the investments go to real estate and other service activities,” he said.
He added that MIDA has also requested additional funds for the Smart Automation Grant, Automation Capital Allowance and Industry4WRD Intervention Fund allocated for local companies.