1 Incentives for IBS

26 March 2019 at Wisma REHDA Kelana Jaya

IBS Conference

Vision The best partner to investors distinguished by the integrity and professionalism of its people

CONTENTS

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PHASES OF INDUSTRIAL DEVELOPMENT INVESTMENT POLICY IBS INCENTIVES MIDA PROFILE &

INVESTMENT PERFORMANCE

Phases of Industrial

Development

Malaysia’s Economic Development Journey

Import Substitution

Export Oriented & Labour Intensive

Resource-based & heavy industries

Technology Intensive

Economic Corridors & Services

Innovation, ETP & High Income

SECTOR GDP CONTRIBUTION (%)

1970 2018

Agriculture 33.6 7.3

Mining 7.2 7.9

Construction 3.8 4.5

Manufacturing 12.8 23.6

Services 42.6 55.3

Malaysia has successfully transformed from a predominantly agriculture-based economy in the 1970s, to a more diversified economic structure.

4

Source : Department of Statistic Malaysia, BNM 1960s

1970s

1980s

1990s

2000s

2010s

2018 Digital Economy, Industry 4.0 & E-Commerce

5

Tun Dr. Mahathir Mohamad launched the National Policy on Industry 4.0, known as

Dig

Digital transformation of the

manufacturing sector

Malaysia as strategic partner for smart

manufacturing, primary destination for high-

technology industries

Enhanced productivity, job creation and

high-skilled talent pool

Industry4WRD

31 OCTOBER 2018

DIGITALISING CONSTRUCTION VS DIGITAL MANUFACTURING

Source : Frost & Sullivan

Industrie 4.0

(2011)

Industry Value

Chain Initiative

(2015) Smart Manufacturing

Leadership Coalition

(2012)

Made in

China 2025

(2015)

Make in India

(2014)

Future of

Manufacturing

(2015)

Innovation in

Manufacturing 3.0

(2014)

Factories of

the Future

(2013)

Many countries, Different Names, Similar Goals Source : IDC, Frost & Sullivan

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USA

European

Union (EU)

India China

Germany South

Korea

Japan

Singapore

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Enhance Global Competitiveness

Strengthen growth and productivity of

manufacturing industry

Create new generation jobs and reduce dependency on

foreign labours

Sustaining high levels of Foreign and Domestic

Investments

Industry 4.0 Policy Framework

Autonomous robots

Augmented Reality

Cloud computing

System integration

Simulation

Additive

manufacturing

Internet of Things

Big data and analytics

Cyber Security

Artificial Intelligence

Industry 4.0 Key Technologies

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Targeted Technology Drivers

MoU MIDA – CIDB Areas of Co-Operation

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“manufacturing activity” means - 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

- LAWS OF MALAYSIA Act 156, INDUSTRIAL CO-ORDINATION ACT 1975

INDUSTRIAL CO-ORDINATION ACT 1975,

LAW OF MALAYSIA, ACT 156

3. (1) No person shall engage in any manufacturing activity

unless he is issued a licence in respect of such

manufacturing activity.

(2) Any person who fails to comply with subsection is

guilty of an offence and is liable on conviction to a fine not exceeding RM2,000 or to a term of

imprisonment not exceeding 6 months and to a

further fine not exceeding RM1,000 for every day

during which such default continues.

Licence required for manufacturing activity

ICA JA1/ ICA JA2 : Manufacturing Licence

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A company with shareholders’ funds of RM2.5 million and

above or employing 75 or more full-time paid employees to

obtain a Manufacturing Licence.

• "Shareholders' funds" - a company's paid-up

capital, reserves, balance of share premium account

and balance of profit and loss appropriation account

• "Full-time paid employees" - persons 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.

Forms can be downloaded from:

http://www.mida.gov.my/home/forms-&-guidelines-for-manufacturing-sector/posts/

A company with shareholders’

funds below RM2.5 million or

employing less than 75 full-

time paid employees to obtain

an exempted company status

ICA 10 – Exempted Company

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Forms can be downloaded from:

http://www.mida.gov.my/home/forms-&-guidelines-for-manufacturing-sector/posts/

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Intellectual Property Protection

Malaysia’s IP laws are in

conformance with

international standards

- Member of the World

Intellectual Property

Protection Organisation

(WIPO)

- Signatory of the Paris

Convention and Berne

Convention which govern IP

rights

- Signatory of the Agreement

on Trade-Related Aspects

of IP Rights (TRIPS) under

the WTO

Business Friendly Policies

Investment Guarantee Agreements (IGAs)

Malaysia has signed IGAs with more than 60 countries

Investment Policies

Equity Ownership

Foreigners are allowed

to hold 100% equity

ownership in the

manufacturing and

selected services

sectors

Repatriation of

Income

Freedom to

repatriate capital,

interest, dividends

and profits. No

restrictions

IBS Policy Implementation

Circular from Ministry of Housing & Local Government dated 10 January 2018

*50,000 sqm Gross Floor Area

70 IBS Score

50 IBS Score

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IBS INCENTIVES

6 TYPES OF IBS SYSTEM

Precast Concrete

Formwork System

Steel Framing System

BlockworksSystem

Timber Framing System

Innovative System

Modular PPVC Prefab Bathroom

60% or 100% on

qualifying

capital

expenditure for 5

years

60% on qualifying

capital

expenditure for 15

consecutive years

For raw

materials /

components and

machinery and

equipment

Income tax

exemption

ranging from 70%

or 100% for a

period of 5 or 10

years

Import Duty

Exemption Reinvestment

Allowance Investment Tax

Allowance Pioneer

Status

Major Tax Incentives

Less

Developed

Area

Expatriate Post

column

beam,

slab,

wall

roof truss

1. PARTIAL (70%)

-at least three (3)

2. FULL (100%)

-Four (4) and above 5 b

asic

IBS c

om

po

ne

nts

Industrialised Building System (IBS)

Section 127, Income Tax 1967

(10 Sept 2015 - 31 Dec 2020)

Mandatory Conditions for IBS Incentive

Wall Panel

Column

Beam

Roof Truss

IBS COMPONENTS

Slab

Technology, usage of local raw materials, investment and economic benefit to Malaysia Company must obtain IBS

certification from CIDB within

two (2) years after the project

has commenced production

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The Automation Capital Allowance was introduced to encourage swift adoption of automation among

manufacturing companies in undertaking innovative and productive activities. It is divided into two (2)

categories, namely;

For IBS companies - Automation CA of 200% will be provided on the first RM2 million

expenditure incurred within 5 years of assessment from 2015 to 2020; and

For high labour-intensive industries (rubber products, plastics, wood, furniture and textiles), an

Automation CA of 200% will be provided on the first RM4 million expenditure incurred within 5

years of assessment from 2015 to 2020

151 Applications

Approved as at 8 March 2019

3 IBS companies

Existing company -At least 36 months in operation

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Automation Capital Allowance (ACA)

Domestic Investment Strategic Fund (DISF)

Domestic Investment Strategic Fund (DISF) provides matching

grants (1:1) for expenditures incurred for the upgrading the

company’s technological capabilities to be more competitive

internationally, move-up the company’s value chain and enable

the company to be active participants in the global ecosystem.

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DISF Grant

Digital Transformation Acceleration Programme

(DTAP) Grant (MIDA and MDEC)

A matching grant, with the objective of assisting companies to leverage on Digital Transformation Lab’s (DTL) expertise and assistance in addressing pain points or exploit opportunities in the digital space, while adopting emerging digital technologies.

Increased Productivity Reduced Dependency on Foreign Labour

New Sources of Growth / Business Models

DTL • Delloite • Digital/McKinsey • Rainmaking • Roland Berger • Bosch

Malaysian companies are still lagging behind in adopting digital technologies due to: • The perception that it seems fast-paced

and complex; • Budget limitations as digital adoption may

not be part of their overall strategy; and • Shortage of digital professionals.

• The Soft Loan Scheme for Automation & Modernisation (SLSAM) was launched in

February 2017

• The SLSAM assists manufacturing companies to:

o modernise and automate manufacturing process

o upgrade production capability and capacity

o minimize dependence on labor-intensive activities and foreign labour

o diversify into higher value added activities

o rationalize and streamline operations including through merger and acquisitions

• The fund for this Scheme is channeled by the Government of Malaysia via MITI to

MIDF for the implementation of the Scheme

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PERFORMANCE

MIDA PROFILE

• Foreign Direct Investment

• Domestic Investment

• Manufacturing & Selected Services

• Manufacturing Licenses

• Tax Incentives

• Expatriate Posts

• Duty Exemption

• Principal Hub & selected services

• Assist companies in the implementation & operation of their projects

• Facilitate exchange & coordination among institutions engage in or connected with

industrial development

• Advisory Services

• Planning for industrial development

• Recommend policies & strategies on industrial promotion and

development

• Formulation of strategies, programmes and initiatives for

international economic cooperation

Core functions

The principal Malaysian

Government agency responsible

for the promotion of investments

and coordination of industrial

development and selected

services sectors in the country

Established in 1967 under Act of

Parliament, 1965.

FIRST POINT OF CONTACT

1. PROMOTION

3. POST INVESTMENT

5. PLANNING

• Licensing & Incentive Compliance and

Monitoring

• Determination of effective date of incentives

• Issuance of Pioneer Certificate

4. MONITORING

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2. EVALUATION

• New York • San Jose • Chicago

• London • Stockholm • Munich • Frankfurt • Milan • Paris

• Tokyo • Osaka

Sydney Singapore

Mumbai

Dubai

12 state offices

20 overseas offices and 12 state offices

• Beijing • Guangzhou • Shanghai • Taiwan

Seoul

Truly International

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One Stop Centre

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Immigration

Department

Royal Malaysian

Customs

Telekom Malaysia

Berhad

Labour

Department MIDA as a One

Stop Centre

Based in MIDA

Based Outside MIDA

MALAYSIA INVESTMENT PERFORMANCE REPORT 2018

TOTAL APPROVED INVESTMENTS IN 2018

RM201.7 bil

2017: RM200.6 bil

4,887 projects

2017: 5,608 projects

129,780 2017: 139,511

RM201.7

billion DDI RM121.1 bil (60.1%)

FDI RM80.5 bil (39.9%)

2017: RM54.4 bil (27.1%)

2017: RM146.2 bil (72.9%)

Source: MIDA

0.5%

12.9%

7.0%

48%

17.1%

Jan – June : RM86.1 bil July – Dec : RM115.6 bil

MALAYSIA INVESTMENT PERFORMANCE REPORT 2018

Approved investments increased by 37.2% year-on-year, supported by a number of capital intensive projects.

APPROVED INVESTMENTS IN THE MANUFACTURING SECTOR IN 2018

RM87.4 bil*

2017: RM63.7 bil

721 projects

2017: 687 projects

Jan – Apr : RM16.2 bil May – Dec : RM71.2 bil

2017: 56,431

RM87.4 billion

DDI RM29.4 bil (33.6%)

FDI RM58.0 bil (66.4%)

Manufacturing

No. of approved projects increased by 4.9% and employment increased by 5.1%.

2017: RM21.6 bil

(33.8%)

2017: RM42.1bil (66.2%)

Source: MIDA

5.1%

37.2%

4.9%

169.3%

30.3%

59,294

MALAYSIA INVESTMENT PERFORMANCE REPORT 2018

Manufacturing

INVESTMENTS BY COUNTRIES

Source: MIDA

19.7

9.0 8.3

4.1 3.2 2.8

2.5 1.8 1.3 0.9

China Indonesia Netherlands Japan USA BVI Korea,Rep. Singapore Hong Kong Panama

RM

billio

n

China, Indonesia, the Netherlands, Japan and the USA were the largest contributors accounting for 76.4% of total foreign investments approved

MALAYSIA INVESTMENT PERFORMANCE REPORT 2018

The lion’s share came from the petroleum products (including petrochemicals) industry.

(14%)

(9%)

(10%)

(8%)

Manufacturing

INVESTMENTS BY INDUSTRY

32.9

13.1

11.2

5.4

5.0

4.6

2.4

2.4

1.9

8.5

Petroleum Products (inc. Petrochemicals)

Basic Metal Products

Electrical & Electronic Products

Paper, Printing & Publishing

Chemical & Chemical Products

Rubber Products

Non-Metallic Mineral Products

Machinery & Equipment

Transport Equipment

Natural Gas

Others

2018 RM87.4 bil.

16.7

9.7

4.1 7.7

2.2

4.8

9.3

7.5

0.2

0.3

1.2

RM billion

2017 RM63.7 bil.

Source: MIDA

39 IBS projects RM2.44 Bil 45 IBS projects

RM7.65 Bil

Market Access

• 3rd largest market in the world with 622 million people (behind only China and India)

• Already zero tariffs for 99% of products • Attracts 11% of global FDI

INDIA

PAKISTAN CHINA KOREA

JAPAN

AUSTRALIA

NEW ZEALAND

CHILE

TURKEY

ASEAN

13 Free Trade Agreements

MARKET 2.7 Billion Population

Most attractive investment destination (Baseline Profitability Index (BPI) 2015)

Most competitive economy in overall performance (IMD's World Competitiveness Yearbook 2018)

Manufacturing Value Added (Bloomberg Innovation Index 2017) Global offshoring destination

(A.T. Kearney Global Services Location Index™ 2016)

Protecting investors (World Bank Doing Business 2017 Report)

The Most Developed Islam Economy (Thomson Reuters November. 2017)

Dominant position in Islamic

Finance Development Indicator

(ICD- Thomson Reuters)

Most attractive emerging market in the World (Bloomberg 2018)

“Destination of the Year” (International Medical Travel Journal (IMTJ) 2017)

KL – Most visited city in the World (Euromonitor International 2017)

Best countries to invest (BAV Consulting and the Wharton School of the University of Pennsylvania. 2017)

Doing Business Report

2019

(Ease of doing

business)

World Bank

Malaysia‘s Ranking

Ms Najihah Abas

Director

Building Technology & Lifestyle

Division

MIDA Sentral

No. 5 Jalan Stesen Sentral 5

KL Sentral

50470 Kuala Lumpur

Tel: 603 – 2267 3633

Fax: 603 – 2274 7970

Email: najihah @mida.gov.my

www.mida.gov.my

Malaysia is a vibrant economy. Talk to MIDA and discover how Malaysia can be your Profit Centre in Asia

For more information, please visit www.mida.gov.my or email to investmalaysia@mida.gov.my

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Contact

us URL https://www.facebook.com/OfficialMIDA

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