w w w.m i d a .g o v.m y The 2011 Global Services Location Index (GSLI) by AT Kearney measures the attractiveness of offshore locations in 50 countries against 39 measures across three major categories; financial attractiveness, people skills and availability, and business environment. Asia makes a particularly strong showing in this year’s Index, with India, China and Malaysia claiming the top three spots. The Malaysian government has identified the services sector as an area that offers numerous opportunities for growth and the sector is being actively promoted. Regional establishments, which include Operational Headquarters (OHQs), International Procurement Centres (IPCs), Regional Distribution Centres (RDCs), Regional Offices (ROs) and Representative Offices (REs) are among those activities promoted. Malaysia’s world class infrastructure, good connectivity and strategic location within ASEAN are some of the main reasons why MNCs continue to choose Malaysia to locate their regional establishments. Attractive investment incentive packages including tax incentives and liberal policies on foreign equity participation and employment of expatriates are other factors cited by these MNCs for the establishment of these operations in Malaysia. Malaysia is also being promoted as a regional centre for shared services. Most of these establishments in Malaysia are engaged in business process outsourcing (BPO) activities, including provision of shared services such as data entry, transaction processing and document management, customer contacts such as call centres, telemarketing and customer service, common corporate functions such as finance/accounting, human resource, IT, and technical support as well as R&D services to support their operations in the Asia Pacific region. Regional Establishments Approved Attractive investment incentive packages, including tax incentives and a liberal policy on foreign equity participation and employment of expatriates are granted to encourage the establishment of these Regional Establishments. Number of Regional Establishments Approved as at 31st December 2012 RO O 870 70 0 (27.5%) RE 1,807 (57%) OHQ HQ 231 1 (7.3%) (7.3 3%) IP IPC PC 232 32 (7.3%) R C RDC 28 8 (0.9% (0.9%) 0 9% %) Source : MIDA 1 Malaysia-Your Ideal Location for Regional Establishments Some of the world renowned MNCs which have established Regional Operations in Malaysia: IPC OHQ USA - Japan - Germany - Australia - UK - Switzerland - France - Netherlands - Sweden Norway Singapore - Hong Kong Belgium - General Electric, Du Pont, Dow Chemicals, PepsiCo, Grey Communications, Hess Oil & Gas, Air Products, Henry Schein, Kellogg’s, Freudenberg-Nok, Spansion, Schlumberger, Baker Hughes, Intel, Transocean, Agilent, IBM, Mars Foods, Hewlett-Packard, E-Storm, Harman, United Brands Sharp Electronics, Japan Tobacco International, Bridgestone, NGK Spark plugs, NEC Infrontia, Sumitomo. Nippon Electric Glass, Nippon Menard, Oji Paper Asia BASF, Muehlbauer, Eppendorf, Arvato, Siemens, Nordenia, Bayer, Binder, A. Hartrodt IBA Health, IEV Group, Leighton, Linfox, Wagners, Worley Parsons, Execujet, Paradigm, Ansell, Dome, Delta Asia, Cochlear, Avanser RMC Industries, British-American Tobacco, Diagonal Consulting Group, Fosroc Asia, Ikon Science, Avocet Mining, OHM Surveys, Fitness First, G4S Management, Velosi Novartis Corporation, SBM Group, Omya Group, Tetra Pak Lafarge, Thales International, Monier, Bionersis S.A Flexsys, Prometric, Friesland Foods, Dow Corning, Barry Callebaut, Organon, Mammoet, Subsea, Core, Acision Volvo, UCB Group, Ascom Aker Kvaerner, Wilhelmsen, AGR NOL Global, ACE Asia Pacific, Global Footware, International SOS Aramis, OMG, DBC, Promat Oleon Japan - USA - Germany Taiwan France Hong Kong Netherlands Singapore - Matsushita, Sharp, Sony, Kenwood, TDK Corporation, Canon Opto, Murata, Sumiden, Katolec, Nifco, Ohshima, G-Tech, Hitachi, JVC Electronics, NEC Electronics, Brother Engineering, Sharp-Roxy, Nitto Denko, Mitsumi, Mitsubishi, Nippon Wiper Blade, Nidec Dell, Knowles, Darden, Smart Modular Technologies, Jabil Robert Bosch, Henkel, B. Braun Acer, Inventec Electronics, Titan Mapa Spontex, Safic-Alcan Lee Kum Kee Flextronics, Benchmark Electronics Ghim Li, Woleco, Jackspeed Leather, World Kitchen, Om Materials RDC Germany - Japan UK Belgium France Finland Spain Canada India Hong Kong - Osram Opto Semiconductors, BMW, EPCOS AG, Siteco Group, BD Agriculture, Siteco Group, BD Agriculture UMW Toyota Scapa Group Agfa Sidel Group Amer Acerinox International Merchandising Inc BEML CPM Sdn. Bhd. RE/RO Australia Norway USA - Korea - Singapore - UK Thailand - Australian Aviation Training College Westard Industri AS Hobsons, International Metals, Nextech Solution Hyundai Rotem Company, Korean Register of Shipping, SK Energy Co. Ltd Imago Production, Userx Ptye. Ltd., IMI Inpro Tec Cambridge Education Group Limited Bangkok Airways Malaysia-Your Ideal Location for Regional Establishments 2 An OHQ generally refers to a locally incorporated company that provides qualifying support services to its offices or related companies regionally and globally. Incentives An approved OHQ company is eligible for: • Full tax exemption for a period of 10 years for income derived from the following sources:Business Income Income arising from services rendered by an OHQ company to its offices or to related companies outside Malaysia Interest Income derived from interest on foreign currency loans extended by an OHQ company to its offices or to related companies outside Malaysia Royalties Royalties received from R&D work carried out in Malaysia by an OHQ company on behalf of its offices or related companies outside Malaysia • Dividends paid from the exempt income will be exempted from tax in the hands of its shareholders 3 Malaysia-Your Ideal Location for Regional Establishments • The income generated by an OHQ company in providing qualifying services to its related companies in Malaysia will not be taxed during its tax-exempt period, provided such income does not exceed 20% of its overall income derived by providing qualifying services Eligibility Criteria Companies that meet the following criteria can apply for OHQ status and incentive:• Locally incorporated under the Companies Act, 1965 • A minimum paid-up capital of RM0.5 million • A minimum total business spending (operating expenditure) of RM1.5 million per year • Appoint at least three senior professional/management personnel • Serve at least three related companies outside Malaysia • Have a sizeable network of companies outside Malaysia for its related companies • Have a well-established network of companies that employ a significant and substantial number of qualified professionals, technical and supporting personnel. • Carry out a minimum of three qualifying services such as general management and administration; business planning and coordination; procurement of raw materials, components and finished products, technical support and maintenance, marketing control and sales promotion planning, data/information management and processing, R&D work carried out in Malaysia on behalf of its offices or related companies within or outside Malaysia, training and personnel management to its offices or related companies within and outside Malaysia and treasury and fund management services to its offices and related companies outside Malaysia. Other Benefits An approved OHQ company can also enjoy the following benefits:• Open foreign currency accounts with licensed onshore banks to retain any amount of export proceeds in foreign currency. • Open foreign currency accounts with licensed onshore banks, licensed offshore banks in Labuan or overseas banks for crediting foreign currency receivables, other than export proceeds, with no limit imposed on the overnight balances. • Obtain any amount of domestic credit facilities in ringgit. • Obtain any amount of foreign currency credit facilities from licensed onshore banks and licensed merchant banks in Malaysia, and from any non-resident, provided the OHQ does not on-lend to, or raise the funds on behalf of, any resident. • Invest abroad any amount, including extension of credit facilities to its related companies, to be funded with foreign currency funds or borrowing. It may also convert any amount of ringgit for investment abroad if it does not have domestic credit facilities or up to RM10 million per calendar year if it has domestic credit facilities. • Expatriates posts will be approved based on the requirements of the OHQ. And the expatriates will be taxed only on the portion of their chargeable income attributable to the number of days that they are in Malaysia. Equity Requirements A company granted OHQ status and incentive is allowed 100% foreign equity ownership. Malaysia-Your Ideal Location for Regional Establishments 4 International Procurement Centres An IPC is a locally incorporated company which carries on a business in Malaysia to undertake the procurement and sales of raw materials, components and finished products for its group of related and unrelated companies in Malaysia and abroad. This would include procurement from, and sales made to, local sources and third countries. Regional Distribution Centres An RDC is a collection and consolidation centre for finished goods, components and spare parts produced by its own group of companies for its own brand to be distributed to dealers, importers or its subsidiaries or other unrelated companies within or outside the country. Among the value-added activities involved are bulk breaking, re-packaging and labeling. 5 Malaysia-Your Ideal Location for Regional Establishments Incentives An approved IPC/RDC status company can be considered for: • Full tax exemption of its statutory income for 10 years; and • Dividends paid from the exempt income will be exempted from tax in the hands of its shareholders. Eligibility Criteria Companies that meet the following criteria can apply for IPC/RDC status and incentive:• Incorporated under the Companies Act, 1965 • A minimum paid-up capital of RM0.5 million • A minimum total business spending (operating expenditure) of RM1.5 million per year • Utilisation of Malaysian ports and airports • A minimum annual sales turnover of RM50 million by the third year of operation for IPC/RDC status or RM100 million for tax incentive • Direct export at least 80% of the total annual sales value, including 30% via drop shipment arrangement and domestic sales of not more than 20% of total annual sales value. Other Benefits An approved IPC/RDC status company will be able to enjoy the following facilities and benefits: • Enter into foreign exchange forward contracts with licensed commercial banks to sell forward export proceeds based on its projected sales • Bring in raw materials, components or finished products with customs duty exemption into free commercial zones (FCZs), licensed manufacturing warehouses (LMWs) and bonded warehouses for re-packaging, cargo consolidation and integration before distribution to its final consumers. Equity Requirements A company granted IPC/RDC status and incentive is allowed 100% foreign equity ownership. • Expatriate posts based on the requirements of the IPC/RDC • Open one (1) or more foreign currency accounts with licensed commercial banks to retain its export proceeds without any limit Malaysia-Your Ideal Location for Regional Establishments 6 A Representative Office/Regional Office of a foreign company based in Malaysia performs permissible activities for its headquarters/ principal. Such offices should be totally funded from sources outside Malaysia and are not required to be incorporated or registered under the Companies Act, 1965 or be registered with the Companies Commission of Malaysia (CCM). A Representative Office collects relevant information regarding investment and business opportunities to develop bilateral trade relations and promote the export of Malaysian goods and products. A Regional Office serves as the coordination centre for its affiliates, subsidiaries and agents within the Asia Pacific region. It is responsible for conducting designated activities within the region it operates. 7 Malaysia-Your Ideal Location for Regional Establishments An approved Representative/ Regional Office is allowed to carry out the following activities:• Planning or coordination of business activities • Gathering and analysing of information or undertaking feasibility studies on investment and business opportunities in Malaysia and the region • Identifying sources of raw materials, components or other industrial products • Research and product development • Act as a coordination centre for the corporation’s affiliates, subsidiaries and agents in the region. An approved Representative/ Regional Office is not allowed to carry out the following activities:• Engage in any trading (including import and export), business or any form of commercial activity • Lease warehousing facilities. Any shipment/transshipment or storage of goods must be carried out through a local agent or distributor • Sign business contracts on behalf of the foreign corporation or provide services for a fee • Participate in the daily management of any of its subsidiaries, affiliates or branches in Malaysia • Conduct any business transaction or derive income from its operations Expatriate Employment Companies applying for OHQ/IPC/RDC status can also request for expatriate posts, namely Key Posts and Time Posts. Key Posts are posts that are permanently filled by foreigners and Time Posts are posts that are filled by foreigners for a specific period of time. An approved Representative/ Regional Office is allowed to employ expatriates at the managerial and technical level. Expatriate posts are usually approved for a period of three (3) years. Expatriates working in Regional Offices are taxed only on the portion of their chargeable income attributable to the number of days they are in Malaysia. Applications for OHQ/IPC/RDC status, incentives and expatriate posts as well as approval for establishment of Representative Offices and Regional Offices should be submitted to MIDA. Malaysia-Your Ideal Location for Regional Establishments 8 Background of Malaysia Malaysia is strategically located in the heart of Southeast Asia – one of the world’s fastest growing regions. Situated between the Indian Ocean and the South China Sea, and at the southernmost tip of the Asian Continent, Malaysia is well serviced by all major air and shipping lines. This easy access to the rest of the world has today made Malaysia an attractive centre for trade, investment and tourism. the Malay, Chinese and Indian civilisations. This has blessed the nation with a rich cultural heritage and has made Malaysia an outstanding example of a harmonious, multi-religions and multi-racial society. In Peninsular Malaysia, the main races are the Malays, Chinese and Indians. In Sabah and Sarawak, the Kadazans and Ibans form the largest ethnic groups respectively. Malaysia lies in the equatorial zone where no seasons mark the passing of the months. The country is generally warm throughout the year with temperatures ranging from 25˚C to 32˚C in the lowlands and between 21˚C to 28˚C in the highlands. The country has a total land area of 329,847 km2 and consist of 13 states and three Federal Territories i.e. Kuala Lumpur, Putrajaya and Labuan. Peninsular Malaysia stretches from Thailand in the north to Singapore in the south, while the states of Sabah and Sarawak straddle the northern and western coasts of Borneo. Malaysia has a stable and fastgrowing economy with a forecasted Gross Domestic Product (GDP) growth of 5.0 – 6.0% for the year 2013. Manufactured goods, especially electrical and electronic products, are the major contributors to the nation’s GDP. The Malaysian economy has performed remarkably well over the years due to the country’s political stability, the sound financial and economic policies adopted by the government, and the efficient management of its natural resources which include oil and gas. Even more impressive is the fact that economic growth in Malaysia was achieved within an environment of relatively low inflation. Malaysia’s cosmopolitan population of 29 million is a unique mix of some of the world’s oldest civilisations – 9 Malaysia-Your Ideal Location for Regional Establishments WHY MALAYSIA Economic Strength • GDP growth : 5.0 - 6.0% (2013f) • Gross national savings : 32.19% of GNI (2013f) • Unemployment rate : 3.3% (2013f) • Inflation (CPI) : 2.5% (2013f) • Natural resources - oil, gas, tin, timber, palm oil, rubber *f = forecast (Source : Central Bank of Malaysia, Department of Statistics & Malaysian Institute of Economic Research, Malaysia) Supportive Government Policies • • • • • • Pro-business policies Responsive government Liberal investment policies Attractive tax and other incentives Liberal exchange control regime Intellectual property protection An Educated Workforce • Talented, young, educated and productive workforce • Multilingual workforce speaking two or three languages, including English • Comprehensive system of vocational and industrial training, including advanced skills training. • Harmonious industrial relations with minimal trade disputes Developed Infrastructure • Network of well-maintained highways and railways • Well-equipped seaports and airports • High quality telecommunications network and services • Fully developed industrial parks, including free industrial zones, technology parks and Multimedia Super Corridor • Advanced MSC Malaysia Cybercities and Cybercentres A Vibrant Business Environment • Market-oriented economy • Well-developed financial and banking sector, including the Labuan International Offshore Financial Centre • Wide use of English, especially in business • Legal and accounting practice based on the British system • Large local business community with long history in international business • Large foreign business community in all business sectors • Extensive trade links – country’s total trade was valued at RM 96.7 billion (as at February 2013)* • Balance of trade – RM 11.48 million (as forecasted in 2013) *(Source : Department of Statistics Malaysia) Quality of Life • Friendly and hospitable Malaysians • Safe and comfortable living environment • Excellent housing, modern amenities, good healthcare and medical facilities • Excellent educational institutions including international schools for expatriate children • World-class recreational and sports facilities • Excellent shopping with goods from all over the world Malaysia-Your Ideal Location for Regional Establishments 10 MIDA’s Headquarters Malaysian Investment Development Authority, MIDA Sentral, No.5, Jalan Stesen Sentral 5, Kuala Lumpur Sentral, 50470 Kuala Lumpur, Malaysia Tel: (603) 2267 3633 Fax: (603) 2274 7970 E-mail: investmalaysia@mida.gov.my Website: www.mida.gov.my MIDA’s Overseas Offices ASIA-PACIFIC AUSTRALIA Consul-Investment/Director Consulate of Malaysia Malaysian Investment Development Authority Level 6, MAS Building 16 Spring Street Sydney, NSW 2000, Australia (612) 9251 1933 Tel: (612) 9251 4333 Fax: E-mail: midasyd@bigpond.net.au UNITED ARAB EMIRATES Director/Consul Investment Malaysian Investment Development Authority Consulate General of Malaysia (Investment Section) Unit 2205, 22nd Floor, Tower A Business Central Tower, Dubai Media City (P.O. Box: 502876) Dubai United Arab Emirates (9714) 4343 696/4343 697 Tel: (9714) 4343 698 Fax: E-mail: mida@midadubai.ae JAPAN Tokyo Director Malaysian Investment Development Authority 32F, Shiroyama Trust Tower 4-3-1, Toranomon, Minato-ku Tokyo 105-6032, Japan Tel: (813) 5777 8808 (813) 5777 8809 Fax: E-mail: midatokyo@midajapan.or.jp Website: www.midajapan.or.jp INDIA Director/Consul Investment Malaysian Investment Development Authority Consulate General of Malaysia (Investment Section) 81 & 87, 8th Floor, 3rd North Avenue Marker Maxity Bandra Kurla Complex, Bandra (E) Mumbai 400051, India Tel: (9122) 2659 1155/1156 (9122) 2659 1154 Fax: midamumbai@mida.ind.in E-mail: Osaka Director Malaysian Investment Development Authority Mainichi Intecio 18F 3-4-5 Umeda, Kita-ku Osaka 530-0001, Japan Tel: (816) 6451 6661 Fax: (816) 6451 6626 midaosaka@mida.or.jp E-mail: SINGAPORE Director/Consul Investment Malaysian Investment Development Authority No. 7, Temasek Boulevard 26-01, Suntec Tower One Singapore 038987 (65) 6835 9326/9580/7069 Tel: Fax: (65) 6835 7926 E-mail: mida@midasing.sg PEOPLE’S REPUBLIC OF CHINA Shanghai Consul (Investment) Consulate General of Malaysia (Investment Section) Malaysian Investment Development Authority Units 807-809, Level 8 Shanghai Kerry Centre No. 1515, Nanjing Road (West) Shanghai, 200040 People’s Republic of China Tel: (8621) 6289 4547/5298 6335 Fax: (8621) 6279 4009 E-mail: midash@mida.org.cn THAILAND Director/Investment Counsellor Malaysian Investment Development Authority 3601, 36th Floor, Q. House Lumpini Building South Sathorn Road Tungmahamek, Sathorn Bangkok 10120, Thailand (66) 2677 7487 Tel: Fax: (66) 2677 7488 E-mail: midabangkok@mida.truemail.co.th Guangzhou Director Malaysian Investment Development Authority Unit 1804B-05 CITIC Plaza Office Tower 233 Tianhe Be Road Guangzhou, 510610 People’s Republic of China Tel: (8620) 8752 0739 Fax: (8620) 8752 0753 E-mail: midagz@mida.org.cn TAIWAN Director (Investment Section) Malaysian Friendship & Trade Centre Malaysian Investment Development Authority 12F Suite A, Hung Kuo Building No. 167, Tun Hua North Road Taipei 105, Taiwan Tel: (8862) 2713 5020/2718 6094 Fax: (8862) 2514 7581 E-mail: midatpe@ms18.hinet.net KOREA, REPUBLIC OF Counsellor (Investment) Embassy of Malaysia (Investment Section) Malaysian Investment Development Authority 17th Floor, SC First Bank Building 100, Gongpyung-dong, Jongro-gu Seoul 110-702, Republic of Korea Tel: (822) 733 6130/6131 Fax: (822) 733 6132 E-mail: midasel@chollian.net EUROPE SWEDEN Economic Counsellor Embassy of Malaysia Karlavägen 37, P.O. Box 26053 S-10041 Stockholm, Sweden Tel: (468) 791 7942/440 8400 Fax: (468) 791 8761 E-mail: mida@malemb.se UNITED KINGDOM Director Malaysian Investment Development Authority 17 Curzon Street London W1J 5HR, United Kingdom Tel: (4420) 7493 0616 Fax: (4420) 7493 8804 E-mail: midalon@btconnect.com GERMANY, FEDERAL REPUBLIC OF Frankfurt Director/Consul Investment Malaysian Investment Development Authority Consulate General of Malaysia (Investment Section) 17th Floor, Frankfurt Kastor Platz der Einheit 1 60327 Frankfurt am Main, Germany Tel: (4969) 7680 7080 Fax: (4969) 7680 708-20 E-mail: mida.frankfurt@t-online.de Munich Director Malaysian Investment Development Authority 6th Floor, Burkleinhaus Burkleinstrasse 10 80538 Munich, Germany Tel: (4989) 2030 0430 Fax: (4989) 2030 4315 E-mail: midamunich@aol.de For more information, please contact: Regional Establishment & Supply Chain Management Division Level 27, MIDA Sentral No. 5, Jalan Stesen Sentral 5, Kuala Lumpur Sentral, 50470 Kuala Lumpur, Malaysia Tel: 603-2267 3633 (ext. 6676) Fax: 603-2274 5483 E-mail: investmalaysia@mida.gov.my Website: www.mida.gov.my FRANCE Director Malaysian Investment Development Authority 42, Avenue Kleber 75116 Paris, France Tel: (331) 4727 3689/6696 (331) 4755 6375 Fax: mida.paris@wanadoo.fr E-mail: ITALY Consul-Investment Consulate of Malaysia (Investment Section) Malaysian Investment Development Authority 5th Floor, Piazza Missori 3 20123 Milan (MI), Italy Tel: (3902) 3046 521 (3902) 3046 5242 Fax: midamln@tin.it E-mail: NORTH AMERICA LOS ANGELES Consul (Investment) Consulate General of Malaysia (Investment Section) 550, South Hope Street, Suite 400 Los Angeles, California 90071 United States of America Tel: (1213) 955 9183/9877 Fax: (1213) 955 9878 mida@midala.org E-mail: SAN JOSE Director Malaysian Investment Development Authority 226, Airport Parkway, Suite 480 San Jose, California 95110 United States of America (1408) 392 0617/8 Tel: Fax: (1408) 392 0619 E-mail: midasanjose@aol.com NEW YORK Consul (Investment) Consulate General of Malaysia (Investment Section) 313 East, 43rd Street, New York New York 10017 United States of America Tel: (1212) 687 2491 Fax: (1212) 490 8450 E-mail: mida@midany.org BOSTON Director Malaysian Investment Development Authority One International Place, Floor 8 Boston, MA 02110 United States of America Tel: (1617) 338 1128/338 1129 Fax: (1617) 338 6667 E-mail: midaboston@aol.com CHICAGO Director Malaysian Investment Development Authority John Hancock Center, Suite 1515 875, North Michigan Avenue Chicago, Illinois 60611 United States of America Tel: (1312) 787 4532 Fax: (1312) 787 4769 E-mail: mida@midachicago.org HOUSTON Director Malaysian Investment Development Authority 6th Floor, Suite 630 Lakes on Post Oak 3050 Post Oak Boulevard Houston, TX 77056 United States of America Tel: (1713) 979 5170 Fax: (1713) 979 5177/78 E-mail: mida@midahouston.org AFRICA REPUBLIC OF SOUTH AFRICA Economic Counsellor High Commission of Malaysia Ground Floor, Building 5 Commerce Square Office Park 39 Rivonia Road Sandhurst, Sandton Johannesburg, Republic of South Africa Tel: (2711) 268 2307/268 2314 Fax: (2711) 268 2204 E-mail: midajhb@telkomsa.net