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Shipbuilding sector needs a boost to enhance competitiveness, says assoc

Shipbuilding sector needs a boost to enhance competitiveness, says assoc

01 Mar 2023

The shipbuilding and ship repair industry in the country needs more incentives to enhance its competitiveness, says Sarawak Association of Marine Industries (Samin) president Dr Renco Yong.

In welcoming the attention given by the federal government to this sector, he also says with more incentives, the local shipyards can be up on par with, if not better than, the established shipyards in the region.

“With greater incentives, they (local shipyards) should be able to bid for bigger international projects to boost their revenues,” he said in a statement.

Adding on, Yong said Samin had, in the past, lobbied for the extension of tax incentives for the shipbuilding and ship repair industry and in this regard, he believed that the government ‘had listened to them’.

“The government had announced in the recent re-tabling of Budget 2023 that the bona fide tax incentives for shipyards would be extended to five years to Dec 31, 2027.

“In addition, the government granted those in this industry to continue to enjoy pioneer status and Investment Tax Allowance (ITA),” he said.

Highlighting shipbuilding and ship repair industry as the pillar of marine economic activities such as offshore oil and gas, fisheries and marine tourism, he said this reflected its significance to the nation’s economy.

“New companies in this industry are entitled for pioneer status, with income tax exemption of 70 per cent of statutory income for a period of five years.

“In addition, they and the established shipyards are also eligible for ITA of 60 per cent on qualifying capital expenditure incurred within five years of their establishment.

“This can be set off against up to 70 per cent of the statutory income for each year of assessment.”

However, Yong acknowledged that the sector was still plagued by issues such as the rising prices of raw materials, components and equipment imported by local shipyards and also the rising cost involved in automation, as well as developing highly skilled human capital.

“While the present incentives have gone a long way towards promoting the growth of this industry in Malaysia and helping local shipyards to compete on equal footing with their foreign counterparts, better support is definitely needed from the government to match the aggressive and continuous assistance given by the governments of major shipbuilding countries to their respective shipyards.

“The examples of Korea, China and Japan – together, they command around 90 per cent of the world’s total shipbuilding orderbook – are telling and instructive.

“It is not a coincidence that they have emerged as the Top 3 shipbuilding nations. Their shipyards have greatly benefited from the all-out support and attractive tax incentives provided by their respective governments, meant to boost the market shares and competitiveness of their local shipyards.”

According to Yong, Malaysia also has what it takes to become a competitive shipbuilding nation.

He added: “To this end, Samin would like to propose for the government to consider extending the tax incentives slated for the shipbuilding and ship repair industry for another five years – and this should apply to applications received by Mida (Malaysian Investment Development Authority) from Jan 1, 2023 until Dec 31, 2027.

“Strong and consistent support is crucial towards enhancing the competitiveness of local shipyards, which lack economies of scale enjoyed by powerhouse shipbuilding nations such as China, Korea and Japan; and also crucial in helping to realise Malaysia’s ambition of becoming a regional hub for this industry.”

Source: Borneo Post