TRADE AND DEVELOPMENT BOARD
COMMISSION ON ENTERPRISE, BUSINESS FACILITATION
AND DEVELOPMENT
EXPERT MEETING ON BEST PRACTICES AND POLICY
OPTIONS IN THE PROMOTION OF SME-TNC LINKAGES
GENEVA, 6-8 NOVEMBER 2006
PAPER SUBMITTED TO THE EXPERT MEETING*
THE MALAYSIAN EXPERIENCE
by:
Mr. M. Singh
________________
*
This paper is reproduced by the UNCTAD secretariat in the form and language in
which it has been received.
Malaysian Industrial Development Authority
UNCTAD Intergovernmental Expert Meeting on
Best Practices and Policy Options in the
Promotion of SME-TNC Business Linkages
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Geneva,
6-8 November 2006
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Second level
THE MALAYSIAN
EXPERIENCE
Third level
Fourth level
Fifth level
Manmohan Singh
Senior Deputy Director
Strategic Planning & International Cooperation Division
Malaysian Industrial Development Authority (MIDA)
www.mida.gov.my
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Malaysian Industrial Development Authority
MIDA
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Established in 1967
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Principal Government agency responsible for
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styles of industrial
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coordination
development in Malaysia
Second level
• First
point of contact for investors, both
Third
level
foreign and local, in the manufacturing and
Fourth
level
related
services sectors in Malaysia
Fifth level
•
Since 2004, also responsible for promotion of
the services sector (excluding financial &
utilities)
www.mida.gov.my
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Malaysian Industrial Development Authority
Development Philosophy
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Systemtoofedit
free enterprise
but with
active
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government support and direction.
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• Government
Second
level provides the broad thrusts
and sets direction for the whole economy
Third level
to achieve socio-economic goals.
Fourth level
Fifth
levelsector is free to operate and given
• Private
appropriate policy, institutional
infrastructural support.
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and
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Malaysian Industrial Development Authority
Complementarities of FDI and
Domestic Investments
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Malaysian Government recognises the importance
of FDI
Malaysia’s
development.
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Second
level also recognises that domestic
• Government
investments are equally important and that the
Third
leveland capabilities of Malaysian firms in the
capacity
manufacturing
Fourth
level sector need to be developed.
Fifth
level
• Need
to develop both FDI and domestic
investments to complement each other.
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Malaysian Industrial Development Authority
Nurturing A Strong Network of
Domestic Firms
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• Need to nurture a strong network of
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domestic
firms
(SMEs)
able
to serve MNCs .
Strengthening
•• Second
level of linkages between MNCs
and local suppliers can increase productivity
• Third
level
and efficiency
of domestic firms through:
- MNCs
assisting prospective suppliers to
• Fourth
level
set up production facilities.
• Fifth level
- MNCs requiring reliable and high quality
products from suppliers while providing
technical assistance to them.
www.mida.gov.my
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Malaysian Industrial Development Authority
Domestic Investments in Malaysia
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Malaysian-owned
accounted
for 43% of
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the total value of approved investments during the
IMP2 period (1996-2005).
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A majority
of the Malaysian-owned projects (68%)
• •Second
level
involved investments of less than US$2.6 million
each, level
mainly in electrical and electronics,
• Third
machinery, fabricated metal products, transport
• Fourth
level
equipment
and furniture & fixtures industries.
• •Fifth
level
These
companies supply parts and components to
MNCS, reflecting their capabilities in meeting the
stringent specifications set by MNCs.
www.mida.gov.my
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Malaysian Industrial Development Authority
Outsourcing by MNCs in the
Electronics Industry in Malaysia
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Significant outsourcing in the electronics
industry
in Malaysia.
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Contributed
Second level to the development of
successful
Malaysian-owned
CMS/EMS
Third level in semiconductor, consumer
companies
electronics,
Fourth level telecommunications and PCB
assemblies.
Fifth level
More than 50 companies operating as
CMS/EMS companies in Malaysia.
www.mida.gov.my
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Malaysian Industrial Development Authority
Outsourcing in the Automotive
Industry in Malaysia
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Over
590
automotive
component
manufacturers
supplying
parts
&
• components
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to domestic
and overseas
manufacturers & assemblers.
• automotive
Second level
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Third
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More than 70% of these are Malaysianowned.
Fourth level
Fifth
level
Industry is capable of manufacturing a wide
range of products from engines to electronic
and plastic parts.
www.mida.gov.my
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Malaysian Industrial Development Authority
Engineering Supporting Industries
• Evolved from servicing of equipment for
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resource-based industries to key support
role for E&E, telecommunication and
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automotive industries.
•• Second
Catering level
for MNCs, domestic firms and
exportlevel
markets in mould & die, machining,
• Third
metal stamping, metal surface treatment,
• Fourth
level etc.
heat treatment
•• Fifth
Strong
engineering supporting industry
level
encourages MNCs to locate and expand
operations.
www.mida.gov.my
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Malaysian Industrial Development Authority
Government Initiatives to Increase
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Investments
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High level of domestic investments can
Second
level to initiatives by Malaysian
be attributed
Government
to increase domestic
Third level
investments.
Fourth level
Target
of 60 % domestic investments in
Fifth level
manufacturing.
www.mida.gov.my
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Malaysian Industrial Development Authority
Incentives
Click to measures
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• Various
taken
include
enhancement of existing incentives and
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introduction
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incentives to
promotelevelinvestments
in
specific
• Second
sectors
such as:
• Third
level
- Machinery and equipment
• Fourth level
- Food
• Fifth level
- Hotels and tourism projects
- Cold chain facilities and services
www.mida.gov.my
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Malaysian Industrial Development Authority
Industrial Linkage Programme
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¾ Integrating SMEs into the supply chain of the MNCs and LSIs
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¾ Facilitating access to market
Second level
¾ Promoting competitive and capable SMEs to become
Third
level
suppliers
to MNCs/LSIs
Fourth
level
¾
Providing
opportunities to increase domestic value-added
Fifth level
www.mida.gov.my
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Malaysian Industrial Development Authority
Incentives to Strengthen
Industrial Linkages
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To encourage large companies to
participate
in an text
Industrial
Linkage
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Programme
Second level (ILP), expenditure incurred
in the training of employees, product
Third level
development and testing, and factory
Fourth levelto ensure the quality of
auditing
Fifth level products, are allowed as a
vendors'
deduction in the computation of
income tax.
www.mida.gov.my
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Malaysian Industrial Development Authority
Incentives to Strengthen Industrial
Linkages
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•-
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Vendors, including SME companies that propose to
manufacture promoted products or participate in
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textILP
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promoted
activities
in an
are eligible for the
following incentives:
Second level
Third level
Pioneer
Status with a tax exemption of 100% of the
statutory
income for a period of five years.
Fourth level
Fifth level Tax Allowance of 60% (100% for
Investment
promoted areas) on the qualifying
expenditure incurred within five years.
www.mida.gov.my
capital
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Malaysian Industrial Development Authority
Incentives to Strengthen Industrial
Linkages
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• To encourage vendors to manufacture promoted
products or participate in activities for the
• international
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in an approved ILP
who are capable of achieving world-class standards
• in
Second
terms oflevel
price, quality and capacity, will be eligible
for the following incentives:
• Third level
•- Pioneer
Fourth Status
level with a tax exemption of 100% of
statutory income for a period of ten years.
• Fifth level
the
- Investment Tax Allowance of 100% on the qualifying
capital expenditure incurred within five years.
www.mida.gov.my
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Malaysian Industrial Development Authority
Funding for Technology
Development
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Government provides grants and financing
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facilities to develop SMEs, including:
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An Industrial Technical Assistance Fund
which provides
matching grants to SMEs
Second
level
that
manufacture
promoted
Third
level
products/activities
or participate in the
Industrial
Linkage Programme in the
Fourth
level
following:
Fifth
level and process improvement
¾Product
¾Productivity and quality improvement and
certification
¾Business planning and development
www.mida.gov.my
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Malaysian Industrial Development Authority
Funding for Technology
Development
to edit Master
titleFund
stylewhich
• Click
A Technology
Acquisition
provides
partial
grants
to
Malaysian
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companies to acquire foreign technology for
• Second
level into their manufacturing.
incorporation
A commercialisation
of R&D Fund which
•• Third
level
provides
• Fourth
level partial grants to Malaysian
companies for the commercialisation of R&D .
• Fifth level
www.mida.gov.my
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Malaysian Industrial Development Authority
Other Government Initiatives to
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Increase Domestic Investments
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Domestic Investment Seminars
Second level
Third
levelIndustry Seminars
Specific
Fourth level
Enterprise
Fifth
level Connect
www.mida.gov.my
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Malaysian Industrial Development Authority
Domestic Investment Seminars
• Provide
investors
with the latest
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style on
Government policies, incentives, facilities
and to
support
services
available in the
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country;
• Second level
• Highlight
investment
opportunities
in
• Third
level
manufacturing
and related services sectors;
Serve level
as a forum for local business
•• Fourth
community
to
provide
feedback
to
• Fifth
level on problems and current issues
Government
pertaining to investment .
www.mida.gov.my
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Malaysian Industrial Development Authority
Specific Industry Seminars
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• Enable
participants
to obtain
updates
from invited speakers on latest
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developments in the specific industry
• Second
and takelevel
stock of global trends, issues
facing the industry.
• and
Thirdchallenges
level
•• Opportunities
for
increased
Fourth level
outsourcing for local companies
• Fifth
level networking with foreign
through
companies.
www.mida.gov.my
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Malaysian Industrial Development Authority
Enterprise Connect
• An
online
business
matching
service
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connecting local and foreign businesses.
••
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Assists
local
companies
seeking jointventure partners
and technology to connect
Second
level
with international business partners.
Third level
Registered
members
may
conduct
Fourth
level searches for business partners
customised
based on their specific requirements.
Fifth level
• Company details and project proposals of
registered members are posted in the EConnect Directory free-of-charge.
www.mida.gov.my
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Malaysian Industrial Development Authority
Cross-border Investments
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• Government also encourages Malaysian companies
to undertake cross-border investments, especially in
in which
it is no
longer
competitive.
• industries
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•• Various
Secondincentives
level to facilitate overseas investments
by Malaysian companies e.g. tax abatement on
earned overseas and remitted back to
• income
Third level
Malaysia, tax deduction for pre-operating business
• expenditure
Fourth levelas well as tax incentives for the
acquisition of foreign companies.
• Fifth level
• Outward direct investments from Malaysia have
increased from US$1.4 billion in 2003 to US$3 billion
in 2005.
www.mida.gov.my
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Malaysian Industrial Development Authority
Thank
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for your kind
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attention
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Second level
Third level
Fourth level
Fifth level
www.mida.gov.my
www.mida.gov.my
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